Attorneys Pay Attention: Michigan Courts Direct Parties to Address E-discovery Matters

Last year Michigan joined a number of other states that have added rules to specifically address e-discovery (Click here for a write-up and link to Michigan’s e-discovery amendments and here for a listing of states that have e-discovery rules on the books). E-discovery commonly refers to the preserving, reviewing, and producing digital information that relates to litigation. Just because these rules are on the books, however, doesn’t mean parties, attorneys, and judges are attentive  as they should be  when it comes to addressing e-discovery. For example, a prior post reported on a Michigan Court of Appeals panel affirming a dismissal of a plaintiff’s employment claim because the plaintiff failed to comply with his e-discovery obligations. Click here for that post.

Additionally, I spoke with a federal magistrate at an e-discovery seminar about what is being done in federal courts to encourage e-discovery discussions on the front end of litigation and he candidly responded, “not much.” A survey of court opinions shows that failing to discuss e-discovery at the outset of litigation often forces a party to dig out of a digital hole. See 3M Innovative Props. Co. v. Tomar Elecs., 2006 WL 2670038 (D. Minn. Sept. 18, 2006) (Court affirmed the magistrate’s recommendation for imposing sanctions against defendant  based upon defendant’s failure to carry out a  legal hold, failure to conduct a reasonable search for responsive documents, failure to comply with prior discovery order, and other discovery abuses); Cornwell v. N. Ohio Surgical Ctr., 2009 WL 5174172 (Ohio. Ct. App. Dec. 31, 2009) (Plaintiff believed that defendants had purposefully altered electronically created evidence related to surgeon’s knowledge of decedent’s medical history. Appellate Court affirmed Order allowing Plaintiff’s expert to image Defendants’ hard drives to support claims of spoliation and fraud); TR Investors, LLC v. Genger, 2009 WL 4696062 (Del. Ch. Dec. 9, 2009) (Defendant was held in contempt and found to have intentionally spoliated relevant documents in violation of a court order).

But there are judges who are taking the lead and actively directing parties at the outset of litigation to address e-discovery. In this regard, the Hon. Lisa Gorcyca (Oakland County Circuit Court), has incorporated a provision addressing electronically stored information, i.e., e-discovery, in her court’s scheduling order. This provision directs the parties to discuss e-discovery issues and sets time frames for when such discussions must take place: “Any discovery issue regarding electronically stored information is governed by MCR 2.401(B)(2)(C) and must be brought to the Court’s attention no later than 90 days before the close of discovery; otherwise, those discovery issues will be deemed waived.”

Admittedly there are questions as to what makes up an issue regarding “electronically stored information” as opposed to a general discovery issue. For example, if a party fails to produce an email or information from a database, is that an e-discovery issue or a general discovery issue? Does the answer change depending upon the relief requested, e.g., if a party ask that a forensic inspection of a hard drive should be ordered to obtain that e-mail versus production of the actual e-mail. Or what if the forensic inspection reveals that the party deleted the e-mail after the preservation trigger should have been pulled and an adverse jury instruction is requested? Setting aside these issues, this Order makes clear that parties and their attorneys must be prepared to have the right answers to these questions and know what issues should be addressed. Such attention is especially important for business organizations who are already running lean now and do not have the resources to dig out of a digital hole created by improper planning, which can send litigation costs soaring. So even if Judge Gorcyca does not become an e-discovery “trendsetter” it is still in a business organization’s best interest to have their e-discovery ducks in a row.

I would be interested if you are aware of what other Michigan judges are doing with respect to e-discovery. And, as always, if  you have questions about this post or other e-discovery matters, feel free to contact me.

Any discovery issue regarding electronically stored information is governed by MCR 2.401(B)(2)(C) and must be brought to the Court’s attention no later than 90 days before the close of discovery; otherwise, those discovery issues will be deemed waived.

Another Reason for Employers to be Wary of Social Media – Unfair and Deceptive Acts

The concerns employers face over the use of social media – e.g., blogs, Facebook, MySpace, etc. – has been widely discussed, including here and here. The Federal Trade Commission (FTC) has recently added to those concerns. Specifically, the FTC updated its guidelines about protecting consumers from misleading endorsements and advertising. Under these guidelines an employer may face liability over an an employee’s endorsements of the employer’s products or services on social media websites. Further, liability may exist even where the employer did not authorize or approve the employee’s remarks.

An Overview of the Guidelines

The FTC’s revised Guides Concerning the Use of Endorsements and Testimonials in Advertising (16 C.F.R. Part 255) (the “Guidelines”), address the application of Section 5 of the FTC Act (the “Act”) – which prohibits unfair or deceptive acts or practices and unfair competition in or affecting commerce — to the use of endorsements and testimonials in advertising. An endorsement or testimonial subject to these guidelines is one “that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.” Crystal clear for all, right? Further, the Guidelines require that employees endorsing their employer’s products or services to disclose their relationship to an employer when they give an endorsement or testimonial.

The duty of disclosure applies even when the employee’s endorsement appears on a site that is not maintained by the employer (e.g., Facebook, MySpace) or the employee (bulletin boards) and the statement itself is not misleading. See 16 C.F.R. Part 255.5 (entitled “Disclosure of material connections”). See  example No. 8 under 16 C.F.R. 255.5. And failing to make the required disclosure may expose the employer to liability under the Act. For example, the FTC may bring an enforcement action against an employer if an employee makes a misleading statement about the employer’s products and services that result in injury to consumers. Additionally, if I’m an employer, I would be losing sleep over the preceding example because postings on blogs, MySpace, and Facebook pages may quickly reach wide audiences and, therefore, create the risk of large-scale liability like class-action litigation.

While not the focus of this post, Bloggers should also consider how the Guidelines may apply to their posts. For example, the Guidelines apply to any endorsement of products or services. And any kind of “material connection” between an endorser (like a blogger) and an advertiser must be disclosed to the consumer, e.g., cash payments, free samples, or other benefits to the endorser from the promoter. This is not an endorsement, and even if it was (read with slight sarcasm) I have not received any benefit in connection with writing this post or referencing to the following post and I have no material connection to the brands, products, or services offered by the following post. With that smooth and beautiful literature out of the way, a post bloggers may want to review is provided by Michael Hyatt (click here) (Again – just a suggestion that you may or may not want to follow, and not an endorsement).

The Take Away for Employers

The take-away for employers is to add another item to the “Things that Keep Me Up at Night” list, followed by a note to consider reviewing the company’s technology policies with an eye towards:

1. Determining if you have a policy? You may not. But you should. And if your company has a policy, what does it say about how the use of the company’s name, trademarks, and other proprietary information may be used (if at all) in blogs and other social media;
2. Whether the policies include either prohibitions or proper guidance about references to company products or services. Such prohibitions and guidance should go beyond addressing just criticisms of the employer and its products and services;
3. If endorsements are permitted, employees must understand (and document this understanding) that any endorsement must be limited to truthful and verifiable statements;
4. Whether employees should be required (probably a good idea) to obtain prior approval by management of any proposed endorsement; and
5. A requirement that an employee’s statement of endorsement is accompanied by a written disclosure that the employee is not authorized to make statements on behalf of the employer and a disclosure of the employment relationship so that consumers can weigh the testimonial. This statement should be drafted by the company and made readily available to employees.

Additionally, don’t forget to review your marketing contracts. In light of the widespread adoption of “Word of Mouth Advertising” (there is even a trade group for Word of Mouth Advertising, click here) in the Web 2.0 World (I lost track, but I think we are still on 2.0 … right???) companies should also review their contracts with any marketing professionals. This is because such advertising depends upon leveraging social networks in making a product or service go “viral.” Thus, in addition to assessing company employment policies, companies will want to make sure that their marketing contracts properly address compliance with the FTC’s Guidelines (this is a polite way of saying, make sure your marketing firm is going to defend you or reimburse you if you get sued because of an endorsement. After you do this, make sure the marketing firm has the finances/insurance to cover your defense tab – If you can’t avoid risks, make sure someone else has to cover the bill).

Feel free to contact me with questions about this post, about how your company is responding to the FTC’s Guidelines or leveraging social media in general, or about exorbitantly paying me to endorse your products or services, which I’m not above doing if the price and FTC language is right. I’m just kiddin,’ but seriously, I’m not (a little hat tip to Dodgeball).