Last week, an appeals court in California issued a lengthy opinion in the case Ellis v. Toshiba. This should be a fun one to write about as neither Ellis nor Toshiba are the primary party of interest here. Fair warning: this is going to be a lengthy post – but anyone with an interest in eDiscovery should enjoy reading about this trainwreck of a case.
Way back, in 2005, an attorney named Lori Sklar successfully represented Ellis and others in a class-action suit against Toshiba, based on a faulty cover on certain laptops. The manufacturer agreed to give each class member a warranty extension or either some cash or credit towards a new laptop. None of this matters, though. After the verdict, “Sklar stated that she would seek legal fees of more than $24,700,000 (represented as 25 percent of a settlement value placed at $98,975,862), to be apportioned between Sklar and [co-counsel] Caddell & Chapman, plus expenses of $99,750.” Toshiba called this request “exorbitant”, and sought discovery of Sklar’s timekeeping, and other, records. There followed “protracted litigation and many discovery disputes”, which Justice Johnson refers to, politely, as an “arduous procedural history”. We’ll try and cover some highlights, but you really have to see the full opinion to fully see just how messy this gets.
Here’s the first problem that Toshiba faced when trying to get records from Sklar:
Among other items, Toshiba sought an electronic, searchable, copy of time records Sklar had produced in hard copy. Toshiba characterized those records as showing that Sklar worked on the class action “nearly all day (sometimes as much as 16.75 hours), every day, seven days a week, including holidays, for some 22 months.” Toshiba served subpoenas… which sought computer data and files related to time billed by Sklar… In response, Sklar produced a compact disc (CD) containing Portable Document Format (PDF) copies of the time records, which on appeal she characterizes as “redacted to protect attorney-client and work product privileges.”
A hearing at the time (this is now early 2007) set the tone for the way the case would continue to proceed. Sklar would assert privilege, and not provide searchable or unredacted records, but given the amount of money she was seeking ($24 million), which the trial court called “staggering”, she’d have to produce something more substantive. The next production consisted of “a CD-Rom containing a set of Microsoft Word files of Sklar’s time records which were searchable versions of the time records produced in hard copy, with none of the metadata associated with the original files.”
Next up, as if on cue, come the suspicions of spoliation:
At Sklar’s deposition in March 2007, she testified that before she produced the time records (including around the end of 2006), she had converted the records into Adobe format, deleting the original Word files using a program called “Wipe and Delete.” Sklar had used this program daily to eliminate metadata. As a result, it was not possible to tell when or how often Sklar created time records, among other things.
By this juncture, the trial judge was starting to get a little ticked off with what appeared to be delaying tactics from Sklar, saying: ”I think she’s really misleading me. I’m beginning to get very upset with this.” After yet another order, this time to have a neutral vendor inspect Sklar’s computers, things got worse as Sklar suggested that the trial court lacked jurisdiction. This, too, did not go over too well:
“You’re telling me you’re not going to obey. You’re telling me I don’t have jurisdiction. You’re telling me the order is wrong. You’re telling me all sorts of things, everything other than you intend to comply.”
Sklar canceled a scheduled inspection “hours before one counsel was on a plane and when Toshiba’s experts were about to head to the airport.” The trial court started considering sanctions:
The court then stated that Toshiba’s expert could go to Minnesota and work on the hard drive itself with “free and unfettered access to the hard drive,” and added that as far as an order for inspection goes “I’m beginning to conclude [the problem] lies with [Sklar]. [¶] . . . [¶] I’m going to issue an order to show cause as to why I should not draw a negative inference from the failure of your office to permit any inspection whatsoever of your computer drives by any expert, be it a neutral or Toshiba’s expert. [¶] And the negative inference I would draw is that the hard copy time records . . . are not accurate and that conflicting information and perhaps contradictory information is available on the hard drive of your computer. And I will consider that negative inference in connection with your fee petition.”
At a hearing in April 2009, the judge referred to the “record in this case [as] one of obfuscation and delay by the plaintiff”, and a couple of months later, Sklar was fined $165,000 for ”misuse of the discovery process … including, among other things: “[f]ailing, without substantial justification, to comply with this Court’s … Orders on the forensic inspection of Sklar’s computers”; and “[f]ailing to meet-and-confer in good faith regarding both of the Court-ordered inspections.” By the spring of 2010, the court’s exasperation with Sklar was becoming increasingly evident:
Turning to Sklar’s fee request, the court stated: “I think there’s a basis to deny all fees altogether.” Sklar’s time records seemed “grossly exaggerated,” much of what she did appeared to be work more suited for paralegals, and “the case law justifies a complete denial of fees if a fee request is overinflated.”
The court read from Sklar’s exhibits to the petition for fees and cited her claims that Sklar worked on the case from December 21-27, 2004 and New Year’s Eve, 2004, and New Year’s Day, 2005, every day, for eight, nine, or ten hours a day, stating “at some point it goes over the top,” and suggesting that the claimed hours were not reasonable.
Later that year, the court did accept the fees request on behalf of Sklar’s staff – those records seemed to be in order, and the staff’s fees were awarded as requested. And now, literally one thousand words into the post, we can get to the substance of last week’s opinion. The appeals court upholds the award of sanctions:
Sklar’s conduct, as detailed above, amply supports the sanctions award. There is no question that she disobeyed the court’s August 15, 2007 order that she allow Toshiba’s expert to search her hard drive, and its further order on June 24, 2008 setting the inspection for July 22 and 23, 2008. On the day before the court-ordered inspection was to begin, Sklar indicated she would not allow it to proceed. While the record is rife with evidence supporting a conclusion that Sklar’s disobedience and her misuse of the discovery process were willful, her intent is irrelevant to our conclusion that she defied the court’s order and “`presumptively should pay a sanction to the prevailing party.’”
The award of sanctions is further supported by Sklar’s “failure to meet and confer with Toshiba regarding both of the court-ordered inspections.”
The appeals court also upholds the finding that Sklar’s methodology in reaching the amount of fees sought, was lacking:
We also emphasize that the court found that the contradictory and multiple billing “destroys Ms. Sklar’s credibility” as to the hours she claimed to have spent during the entire litigation… Further, Sklar had “concealed and destroyed evidence” of the time she actually spent on the case, leading the court to believe that the missing records would show a lesser amount of time. The trial court stated that Sklar had not been truthful about the amount of fees (approximately $24 million) she initially requested; engaged in “dissembling and outright distortions;” and concealed and destroyed evidence, so that the court was left with “lingering skepticism over the veracity of her testimony and her evidence.” This constitutes a clear adverse credibility determination. The trial court decided against Sklar because it did not believe her evidence of time spent in the class action litigation.
Most other aspects of the trial court’s verdict are upheld, although the issue of how much Sklar’s staff should receive in fees is remanded: the point is made that even those records contained “simple calculation error[s]“.
You still with us? This opinion reads like a textbook example of eDiscovery don’ts – there’s deletion of relevant files, scrubbing of metadata, hard copies of documents, canceled appointments, an astronomical request for fees and then very little effort to justify them. Let’s give the last word to the California Appellate Report blog, where Professor Shaun Martin writes:
Justice Johnson’s lengthy opinion is a blistering indictment of attorney Lori Sklar. Who could not have done herself more harm — either in the trial court or on appeal — if she’d tried.