Gender (Sex) Discrimination Basics

Gender (or sex) discrimination occurs when a person is subjected to different or unequal treatment (“discrimination”) in any number of situations Continue reading

Advertisements

The Voting Rights Act of 1965

The 1965 Enactment

By 1965, concerted efforts to break the grip of voter disfranchisement in certain states had been under way for some time, but had achieved only modest success overall and in some areas had proved almost entirely ineffectual. The murder of voting-rights activists in Philadelphia, Mississippi, gained national attention, along with numerous other acts of violence and terrorism. Finally, the unprovoked attack on March 7, 1965, by state troopers on peaceful marchers crossing the Edmund Pettus Bridge in Selma, Alabama, en route to the state capitol in Montgomery, persuaded President Johnson and Congress to overcome Southern legislators’ resistance to effective voting rights legislation. President Johnson issued a call for a strong voting rights law and hearings began soon thereafter on the bill that would become the Voting Rights Act.

Congress determined that the existing federal anti-discrimination laws were not sufficient to overcome the resistance by state officials to enforcement of the 15th Amendment. The legislative hearings showed that the U.S. Department of Justice’s efforts to eliminate discriminatory election practices by litigation on a case-by-case basis had been unsuccessful in opening up the registration process; as soon as one discriminatory practice or procedure was proven to be unconstitutional and enjoined, a new one would be substituted in its place and litigation would have to commence anew.

President Johnson signed the resulting legislation into law on August 6, 1965. Section 2 of the Act, which closely followed the language of the 15th amendment, applied a nationwide prohibition against the denial or abridgment of the right to vote on the literacy tests on a nationwide basis. Among its other provisions, the Act contained special enforcement provisions targeted at those areas of the country where Congress believed the potential for discrimination to be the greatest. Under Section 5, jurisdictions covered by these special provisions could not implement any change affecting voting until the Attorney General or the United States District Court for the District of Columbia determined that the change did not have a discriminatory purpose and would not have a discriminatory effect. In addition, the Attorney General could designate a county covered by these special provisions for the appointment of a federal examiner to review the qualifications of persons who wanted to register to vote. Further, in those counties where a federal examiner was serving, the Attorney General could request that federal observers monitor activities within the county’s polling place.

The Voting Rights Act had not included a provision prohibiting poll taxes, but had directed the Attorney General to challenge its use. In Harper v. Virginia State Board of Elections, 383 U.S. 663 (1966), the Supreme Court held Virginia’s poll tax to be unconstitutional under the 14th Amendment. Between 1965 and 1969 the Supreme Court also issued several key decisions upholding the constitutionality of Section 5 and affirming the broad range of voting practices that required Section 5 review. As the Supreme Court put it in its 1966 decision upholding the constitutionality of the Act:

Congress had found that case-by-case litigation was inadequate to combat wide-spread and persistent discrimination in voting, because of the inordinate amount of time and energy required to overcome the obstructionist tactics invariably encountered in these lawsuits. After enduring nearly a century of systematic resistance to the Fifteenth Amendment, Congress might well decide to shift the advantage of time and inertia from the perpetrators of the evil to its victims. South Carolina v. Katzenbach, 383 U.S. 301, 327-28 (1966).

The 1970 and 1975 Amendments

Congress extended Section 5 for five years in 1970 and for seven years in 1975. With these extensions Congress validated the Supreme Court’s broad interpretation of the scope of Section 5. During the hearings on these extensions Congress heard extensive testimony concerning the ways in which voting electorates were manipulated through gerrymandering, annexations, adoption of at-large elections, and other structural changes to prevent newly-registered black voters from effectively using the ballot. Congress also heard extensive testimony about voting discrimination that had been suffered by Hispanic, Asian and Native American citizens, and the 1975 amendments added protections from voting discrimination for language minority citizens.

In 1973, the Supreme Court held certain legislative multi-member districts unconstitutional under the 14th Amendment on the ground that they systematically diluted the voting strength of minority citizens in Bexar County, Texas. This decision in White v. Regester, 412 U.S. 755 (1973), strongly shaped litigation through the 1970s against at-large systems and gerrymandered redistricting plans. In Mobile v. Bolden, 446 U.S. 55 (1980), however, the Supreme Court required that any constitutional claim of minority vote dilution must include proof of a racially discriminatory purpose, a requirement that was widely seen as making such claims far more difficult to prove.

The 1982 Amendments

Congress renewed in 1982 the special provisions of the Act, triggered by coverage under Section 4 for twenty-five years. Congress also adopted a new standard, which went into effect in 1985, providing how jurisdictions could terminate (or “bail out” from) coverage under the provisions of Section 4. Furthermore, after extensive hearings, Congress amended Section 2 to provide that a plaintiff could establish a violation of the Section without having to prove discriminatory purpose.

Race Discrimination: U.S. Supreme Court Cases

Below is a list of U.S. Supreme Court cases involving race discrimination and the rights of members of racial groups, including links to the full text of the U.S. Supreme Court decisions.

  • Korematsu v. U.S. (1944)
    The Court in this case upheld the conviction of an American of Japanese descent, who had been prosecuted for remaining in California after a 1942 presidential order designating much of the west coast a “military area”, and requiring relocation of most Japanese-Americans from California (among other west coast states)
  • Shelley v. Kraemer (1948)
    This decision held that “racially restrictive covenants” in property deeds are unenforceable. In this case, the “covenants” were terms or obligations in property deeds that limited property rights to Caucasians, excluding members of other races.
  • Bailey v. Patterson (1962)
    The Court in this case prohibited racial segregation of interstate and intrastate transportation facilities.
  • Loving v. Virginia (1967)
    This decision holds that state laws prohibiting inter-racial marriage are unconstitutional.
  • Jones v. Mayer Co. (1968)
    The Court held in this case that federal law bars all racial discrimination (private or public), in sale or rental of property.
  • Lau v. Nichols (1973)
    The Court found that a city school system’s failure to provide English language instruction to students of Chinese ancestry amounted to unlawful discrimination.
  • Batson v. Kentucky (1986)
    This decision holds that a state denies an African-American defendant equal protection when it puts him on trial before a jury from which members of his race have been purposefully excluded.
  • Grutter v. Bollinger (2003)
    In this case, the Court finds that a law school’s limited “affirmative action” use of race in admissions is constitutional.

Rights of Inmates

Even the most chronic or hardened inmates have basic rights that are protected by the U.S. Constitution. If you are facing incarceration, you should know your rights. If you have a family member or friend who is in prison or jail, you should know what their rights are, as well.

    • Pre-trial detainees (those citizens who are too poor to afford bail and who are therefore held pending trial) have the right to be housed in humane facilities. In addition, pre-trial detainees cannot be “punished” or treated as guilty while they await trial.
    • Inmates have the right to be free, under the Eighth Amendment, from inhuman conditions because those conditions constitute “cruel and unusual” punishment. The term “cruel and unusual” was not defined at the time the Amendment was passed, but it was noted by the Supreme Court in 1848 that such punishments would include “drawing and quartering, embowelling alive, beheading, public dissecting, and burning alive,” among other things. Today, many of these punishments may seem antiquated, but the basic scope of the protection remains the same. Any punishment that can be considered inhumane treatment or that violates the basic concept of a person’s dignity may be found to be cruel and unusual.

Example: In 1995, a federal court in Massachusetts found that inmates’ constitutional rights were violated when they were held in a 150-year-old prison that was infested with vermin, fire hazards, and a lack of toilets.

    • Inmates have the right to be free from sexual crimes, including sexual harassment.

Example: A federal court in the District of Columbia found prison officials liable for the systematic sexual harassment, rape, sodomy, assault, and other abuses of female inmates by prison staff members. In addition, the court found that the prison facilities were dilapidated, that there was a lack of proper medical care available, and that the female inmates were provided with inferior programs as compared to male inmates within the same system.

    • Inmates have the right to complain about prison conditions and voice their concerns about the treatment they receive. They also have a right of access to the courts to air these complaints.

Example: A federal court in Iowa recently awarded a prisoner over $7,000 in damages after it was found that he was placed in solitary segregation for one year and then transferred to a different facility where his life was in danger just because he complained about prison conditions and filed a lawsuit challenging the conditions of his confinement.

    • Disabled prisoners are entitled to assert their rights under the Americans with Disabilities Act to ensure that they are allowed access to prison programs or facilities that they are qualified and able to participate in.
    • Inmates are entitled to medical care and attention as needed to treat both short-term conditions and long-term illnesses. The medical care provided must be “adequate.”
    • Inmates who need mental health care are entitled to receive that treatment in a manner that is appropriate under the circumstances. The treatment must also be “adequate.”
    • Inmates retain only those First Amendment rights, such as freedom of speech, which are not inconsistent with their status as inmates and which are in keeping with the legitimate objectives of the penal corrections system, such as preservation of order, discipline, and security. In this regard, prison officials are entitled to open mail directed to inmates to ensure that it does not contain any illegal items or weapons, but may not censor portions of correspondence which they find merely inflammatory or rude.

Note: Inmates do not have a right to have face-to-face interviews with news reporters or media representatives. The rationale for this limitation is that the media are not entitled to have access to inmates that members of the general public would not be able to have.

    • Inmates have the right to be free from racial segregation in prisons, except where necessary for preserving discipline and prison security.
    • Inmates do not have a reasonable expectation of privacy in their prison cells and are not protected from “shakedowns,” or searches of their cells to look for weapons, drugs, or other contraband.
    • Inmates are entitled, under the Due Process Clause of the Constitution, to be free from unauthorized and intentional deprivation of their personal property by prison officials.
    • The Supreme Court has held that inmates who are the subject of disciplinary investigations or proceedings are entitled to advance written notice of the claimed violation and a written statement of the facts, evidence relied upon, and the reason for the action taken. The inmate is also entitled to call witnesses and present documentary evidence if allowing him to do so would not risk order, discipline, and security. In that regard, inmates are rarely allowed to confront and cross-examine adverse witnesses in an internal disciplinary proceeding.

Note: In most cases, an inmate is not entitled to representation by counsel in a disciplinary proceeding.

  • Inmates are entitled to a hearing if they are to be moved to a mental health facility. However, an inmate is not always entitled to a hearing if he or she is being moved between two similar facilities.
  • A mentally ill inmate is not entitled to a full-blown hearing before the government may force him or her to take anti-psychotic drugs against his or her will. It is sufficient if there is an administrative hearing before independent medical professionals.

In 1996, Congress passed the Prison Litigation Reform Act (PLRA), which has been seen by many critics as unfairly limiting inmate access to the federal court system. The PLRA contains five major provisions:

    1. Prisoners must exhaust internal prison grievance procedures before they file suit in federal court.
    2. Prisoners must pay their own court filing fees, either in one payment or in a series of monthly installments.
    3. Courts have the right to dismiss any prisoner’s lawsuit which they find to be either “frivolous,” “malicious” or stating an improper claim. Each time a court makes this determination, the case can be thrown out of court and the prisoner can have a “strike” issued against them. Once the inmate receives three “strikes,” they can no longer file another lawsuit unless they pay the entire court filing fee up front.

Note: If the inmate is in risk of immediate and serious physical injury, the three strike rule may be waived.

  1. Prisoners cannot file a claim for mental or emotional injury unless they can show that they also suffered a physical injury.
  2. Prisoners risk losing credit for good time if a judge decides that a lawsuit was filed for the purpose of harassment, that the inmate lied, or that the inmate presented false information.

What Are Civil Rights?

“Civil rights” are the rights of individuals to receive equal treatment (and to be free from unfair treatment or “discrimination”) in a number of settings — including education, employment, housing, and more — and based on certain legally-protected characteristics.

Continue reading

eBay Standard Applies to Preliminary Injunctions in Trademark Cases

Considering whether requests for preliminary injunctions against alleged trademark infringement are subject to the traditional equitable principles set forth by the Supreme Court of the United States in eBay v. MercExchange, the U.S. Court of Appeals for the First Circuit vacated the district court’s grant of preliminary injunction to a trademark owner. Voice of the Arab World, Inc. v. MDTV Medical News Now, Inc., Case No. 10-1396 (1st Cir., May 27, 2011) (Torruella, J.).

Voice of the Arab World filed an action against MDTV Medical News Now in the District Court of Massachusetts, seeking a declaratory judgment that the plaintiff’s use and registration of the mark “MDTV” did not infringe on the defendant’s trademark rights. After filing counter claims, including one alleging trademark infringement, the defendant moved to preliminarily enjoin the plaintiff from using the MDTV mark. After the district court granted the preliminary injunction, the plaintiff appealed to the 1st Circuit.

The plaintiff challenged the district court’s preliminary injunction order on three grounds. First, the plaintiff argued that the district court erred in finding that the defendant demonstrated a likelihood of success on the merits of its trademark infringement claim. Second, the plaintiff alleged that the lower court erred as a matter of law by presuming that the defendant would likely suffer irreparable harm in the absence of preliminary injunctive relief and in not requiring the defendant to actually demonstrate such likelihood of irreparable harm. Third, the plaintiff argued that even if a preliminary injunction was appropriate, the district court abused its discretion by issuing an overly broad injunction.

The plaintiff’s argument concerning irreparable harm was two-fold. First, the plaintiff argued that presuming irreparable harm in trademark infringement cases where preliminary injunctive relief is sought is inconsistent with the Supreme Court’s 2006 decision in eBay Inc. v. MercExchange, L.L.C. In the alternative, the plaintiff contended that even if irreparable harm is properly presumed in certain trademark infringement cases, such a presumption could not apply in this case due to the defendant’s excessive delay in seeking injunctive relief.

Citing eBay, which dealt with a request for permanent injunction in a patent infringement case, the court held that a request to preliminarily enjoin alleged trademark infringement is subject to the traditional equitable principles delineated in eBay. Specifically, the court reiterated the eBay holding that “the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.” In recognizing that eBay properly applies to non-patent cases, the court noted that “it is significant that the Court in eBay supported its formulation of the traditional four-factor permanent injunction standard by citing cases that were unrelated to patent law.” The court also recognized that “nothing in the Lanham Act indicates that Congress intended to depart from traditional equitable principles,” noting, “like the Patent Act, the Lanham Act provides a court the ‘power to grant injunctions, according to principles of equity and upon such terms as the court may deem reasonable, to prevent[,]’ among other things, trademark infringement and domain name cybersquatting” citing 15 U.S.C. § 1116(a) (emphasis supplied). The court stated that the fact that eBay dealt with a permanent injunction did not change the conclusion that the its principles are equally applicable in the context of preliminary injunctions.

EPA and Corps of Engineers Extend Comment Period for Revised Guidance on Identifying Waters Subject to the Clean Water Act

On May 2, 2011, the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers published proposed joint guidance (“Proposed Guidance“) describing how the agencies will identify waters regulated pursuant to Section 404 of the Clean Water Act (“CWA”).  The Proposed Guidance is intended to clarify and implement the Supreme Court’s decisions in Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers (“SWANCC”), 531 U.S. 159 (2001), and Rapanos v. United States, 547 U.S. 715 (2006).  The Proposed Guidance asserts that it is further intended to reaffirm federal jurisdiction over waters that currently lack clear protection under the law, and to provide clearer, more predictable guidelines to reduce uncertainty and delay for businesses and regulators.

The Proposed Guidance allows the EPA and the Corps to expand the universe of waters covered under Justice Kennedy’s Rapanos “significant nexus” text by allowing the use of a “watershed analysis” to aggregate similarly situated waters and wetlands within a watershed without requiring the kind of detailed site-specific analysis for individual adjacent wetlands required under the current Guidance.  The agencies acknowledge that the number of water bodies found subject to CWA jurisdiction will increase greatly under the new guidance.  The costs of such expansion of jurisdiction will be felt by the regulated community.

The comment period for the Proposed Guidance has been extended from July 1, 2011 to July 31, 2011 The Proposed Guidance would supersede existing guidance documents including the 2008 Bush Administration Guidance (the 2008 Guidance will remain in effect until the Proposed Guidance is issued).  After the Proposed Guidance is issued, the agencies will likely conduct a formal rulemaking process to further clarify the extent of the CWA jurisdiction.

Sixth Circuit Holds Michigan Ban on Affirmative Action Unconstitutional – Labor & Employment/Higher Education Law Alert

In an opinion issued July 1, 2011, the Sixth Circuit Court of Appeals struck down Michigan’s constitutional amendment known as “Proposal 2,” finding it unconstitutional under the Equal Protection Clause of the U.S. Constitution’s Fourteenth Amendment. Proposal 2, which passed by public referendum in 2006, targeted affirmative action programs in public colleges and universities and added language to the Michigan Constitution which bans “preferential treatment” on the basis of “race, sex, color, ethnicity, or national origin” in public employment, education, and contracting. The Sixth Circuit’s decision may allow Michigan’s public colleges and universities to revive any minority scholarships or other programs that considered race as a criterion, but the full effect of the court’s decision will not be known until the time period for challenging the decision has been exhausted.

The plaintiffs in Coalition to Defend Affirmative Action et al. v. Regents of the Univ. of Mich. et al challenged Proposal 2 on two constitutional equal protection arguments. They argued that the amendment violated the Equal Protection Clause both by impermissibly classifying individuals on the basis of race (what the Sixth Circuit called the “traditional” argument) and by impermissibly restructuring the political process along racial lines (the “political process” argument). In deciding the case, the Sixth Circuit only addressed the “political process” argument, holding 2-1 that Proposal 2 “unconstitutionally alters Michigan’s political structure by impermissibly burdening racial minorities.”

In finding Proposal 2 unconstitutional, the Sixth Circuit looked to previous U.S. Supreme Court cases in which the Court found that state laws requiring a more rigorous process to pass certain local laws involving race were unconstitutional because they placed special burdens on minorities by making it more difficult for them to enact laws for their benefit. From these case precedents, the Sixth Circuit culled a two-part test for when enactment of a law deprives minority groups of equal protection of the laws. An enactment is unconstitutional under this test when (1) the law “has a racial focus, targeting a goal or program that inures primarily to the benefit of the minority” and (2) results in a “reallocation of political power or reordering of the decision making process that places special burdens on a minority group’s ability to achieve its goals through that process.”

The court then applied this test to Proposal 2 and found it to be unconstitutional. The majority found that Proposal 2 had a racial focus because it was targeted at affirmative action programs. It also found that Proposal 2 reordered the political process to place special burdens on minorities because it requires citizens who want Michigan’s public universities to adopt affirmative action programs to “begin by convincing the Michigan electorate to amend the Michigan Constitution,” while citizens seeking any non-race-related change would only have to lobby the school’s admissions committee or attempt to elect supportive candidates to the university’s board. The Sixth Circuit’s opinion emphasized that “Michigan cannot force those advocating for consideration of racial factors to go down a more arduous road than others without violating the Fourteenth Amendment.”

Circuit Judge Julia Smith Gibbons dissented from the court’s opinion, arguing that Proposal 2 does not impermissibly restructure the political process in a way that burdens minorities because the university faculty committees to which admissions decisions have been delegated by the universities’ governing boards are not politically accountable to the people of Michigan, and therefore are not part of the “political process.” Judge Gibbons also pointed out that even if these institutions were considered part of the political process, Proposal 2 does not require a more onerous process for changing the law. She noted that the governing boards of Michigan’s public universities are entities created by Michigan’s Constitution, and Michigan voters “lack a viable electoral mechanism to change university admissions policies at a sub-constitutional level.” By enacting Proposal 2 at a constitutional level, therefore, Michigan voters have not “restructured the political process,” but “merely employed it.”

In overturning Proposal 2, the Sixth Circuit reversed the decision of the Eastern District of Michigan court, which had held the amendment to be constitutional. The Sixth Circuit’s decision also conflicts with decisions of the Ninth Circuit and California Supreme Court which have found a similar constitutional amendment in California not to violate the Equal Protection Clause, dismissing the constitutional arguments that the Sixth Circuit has now endorsed.

The Michigan Attorney General (a defendant in the case) has already indicated that the Attorney General’s office will be challenging the decision. Given the nature of the subject matter and the conflict with the Ninth Circuit, the Sixth Circuit may agree to reconsider its decision or the U.S. Supreme Court may grant review. If the Attorney General requests a rehearing by the Sixth Circuit, the court’s July 1 decision will not go into effect until after the petition for rehearing is considered. If the Attorney General petitions the Supreme Court for a writ of certiorari, this would not automatically stay the Sixth Circuit’s decision, although the Sixth Circuit may grant a stay of its July 1 decision if requested and for good cause shown. Either development could delay the current Sixth Circuit decision from going into effect for months, if not longer.

The Perils of Email: Navigating the Legal Risks

In 2011, the typical corporate user will send and receive more than 110 electronic messages a day (over 40,000 per year), according to the Radicati Group. The number of worldwide email accounts is projected to increase from over 3.1 billion in 2011 to over 3.8 billion by 2014, 25% of which will belong to corporate users. As technology continues to drive growth and expansion for businesses, greater volumes of communication will be handled via email.

Although electronic messaging makes communication easier, faster and less expensive, it also creates an extraordinary set of issues. Identifying these perils and developing procedures to avoid them is critical for every company.

Information Preservation and Hold Notices

Various federal, state and local laws, rules and regulations require corporations to retain electronic communications and other information. For example, Rule 17a-4 of the Securities and Exchange Act requires SEC-regulated companies to retain all communications sent and received for at least three years, the first two in an easily accessible place. NASD Rule 3110 requires members to preserve books, accounts, records, memoranda and correspondence, and under the Sarbanes-Oxley Act, emails can become part of the business records of a company that are to be retained.

But, even when it is not required by law, an email retention policy should be in place. For example, according to a 2008 study by Osterman Research, 66% of the organizations surveyed rely upon email, IM archives or backup tapes to support and defend the organization in litigation. This should come as no surprise. Under the Federal Rules of Civil Procedure, a party generally is entitled to any document – in “hard” or “soft” (i.e., electronic) copy – that “appears reasonably calculated to lead to the discovery of admissible evidence.” Knowing this, litigation battle lines are often drawn around electronically stored information (ESI) and allegations that evidence has been destroyed (or “spoilated”). Savvy lawyers know that ESI discovery costs can drive settlement negotiations, or at least, distract parties from the real issues in the case. It is important, therefore, to have a sound retention policy to help make retrieving data for both business and legal purposes less painful.

Information Retention Policies

The adoption and enforcement of a retention policy is the first step to managing ESI. To be worthwhile, retention policies should: 1) reduce the risk of loss of critical and/or confidential business data, 2) alleviate burdens during an investigation or a lawsuit, and 3) account for information that needs to be retained to advance the goals of the business units and is legally required to be retained by the administrative and regulatory entities to which the corporation reports. What this means is that information critical for business continuity should be backed-up, retained and stored in a sensible way for retrieval. In developing retention policies, management should consider the importance and usefulness of information that is not legally required to be retained against the potentially high costs of locating and producing the information if required to do so later.

Determining what information to retain should be a collaborative process that includes at least one member of the IT department, the legal department, the affected business unit or units and human resources. That team should appoint a leader, most likely a legal department member, who is charged with mastering all facets of the policy and assuming ultimate responsibility for implementing and supervising all of its requirements. In terms of litigation, one of the requirements should include the process for retrieval, taking into consideration the time, manpower and monetary expense needed to actually assimilate relevant information for review and production.

After the policy is implemented, an ESI task force should schedule periodic reviews to test the retention procedures in order to confirm that the scope of retention adequately meets the over-arching goals, and that record-purging and backup activities are occurring and are documented. Additionally, the task force should ensure that data on all servers, desktops, laptops, PDAs, etc. is accounted for in the regularly scheduled purging cycle. When financially feasible, periodic audits of the policy and the processes, with the assistance of a third party, can verify and enhance reliability and compliance.

A lot of effort goes into formulating an effective retention policy and adequately communicating its importance to all of the persons affected by it.  As one analyzes ways to improve and enforce the policy, one should be mindful to consider whether the policy includes certain characteristics as suggested by information management firm Iron Mountain’s Records Management Best Practices Guide. These include:

  • A sound and defensible record retention schedule that captures and reviews all records created by all business units.
  • Electronic records that are migrated into a digital archive equipped with efficient and effective tools for searching, discovery organization and retention management.
  • A retention program with components integrated into an internal audit process.
  • Appropriate disposal methods, based on the different record classes or media types employed by the end-users of the electronic media.

Managing the Litigation Hold

Information retention policies that are reasonable outside the litigation context may nevertheless result in the destruction of ESI that would be relevant in litigation and give rise to a claim of spoliation. A proactive approach to thwart such a claim should require strong lines of communication between management, IT and legal and a keen appreciation for determining the date at which the company may “reasonably anticipate litigation.” Indeed, courts have insisted upon the suspension of routine document retention and destruction policies at the moment a party reasonably anticipates litigation. At that instance, a litigation hold notice should be prepared and distributed to all key personnel.

Obviously, deciding what to retain for purposes of a litigation hold is as equally important as determining when to distribute the litigation hold notice. For this reason, it is recommended that the litigation hold notice be a joint effort between in-house and outside counsel, and include language broad enough to describe categories of information that may be relevant to both the defense and prosecution of any reasonably anticipated claim. The litigation hold notice should also clearly identify one or two people to whom all questions should be directed and describe which ESI storage devices are subject to the hold. In more significant litigation, counsel should also plan to meet and interview key custodians and summarize the efforts undertaken to preserve and collect documents and ESI. While the summary should be privileged, it is an important document that counsel may refer to in defending a claim challenging the integrity of the litigation hold. In short, a well thought out and executed litigation hold plan may save a bundle of money (both in legal fees and possible sanctions) in responding to allegations of spoliation or other nonsensical litigation gamesmanship.

Avoiding Sanctions

Spoliation is “the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Courts have broad discretion to impose appropriate sanctions under Rule 37 of the Federal Rules of Civil Procedure when a party spoliates evidence in violation of a court order. However, in the absence of a court order, a party asserting a spoliation motion has the burden to prove spoliation occurred. As a general rule, that party should prove: 1) the party charged with destroying the evidence had an obligation to preserve it; 2) the records were destroyed with a “culpable state of mind”; and 3) the destroyed evidence was relevant to the moving party’s claim or defense.

While evidence of the third point may be under the control of the moving party, proving the first two points will usually require evidence within the possession, custody and control of the party against whom the motion is filed.

As with most prudent plans, the key is to be proactive. The first step to potentially avoid sanctions for spoliation is to initiate the litigation hold as soon as possible. Thereafter, one should immediately identify and modify retention policy features, systems and devices that, in routine operation, would destroy potentially relevant ESI. Then, one should send a notice to all personnel affected by the hold. Purging functions should be disengaged and protocols to overwrite backup media should be suspended. It is also important to be diligent and anticipate what employees will hide, destroy or alter ESI; one should guard against such tactics by interviewing key employees early and monitoring their use of company email and electronic document storage systems for signs of tampering, destruction or other troublesome behavior. An “Electronic Discovery Response Team” composed of management, IT personnel and legal counsel, should be assembled and should secure all storage media containing potentially discoverable data immediately upon receiving a request for production, and document all preservation efforts. In significant matters, consider retaining forensic experts to segregate, image and examine potentially discoverable electronic media both to meet early disclosure deadlines and to be in a better position to avoid abusive fishing expeditions.

Forensic Reviews

No discussion about ESI is complete nowadays without a reference to forensics. According to a November 2007 article in the American Bankruptcy Institute Journal entitled “Digital Forensics 101: Where to Find Critical Evidence,” authors Walt Manning and Michelle Campbell define digital forensics as a practice that “combines elements of law and computer science to collect and analyze electronic data in a way that could be admissible as evidence.” Forensic tools and techniques search every obvious and hidden space for stored data, and usually uncover evidence missed by even a diligent custodian’s review. Common places where stored data is overlooked in the data retrieval process can include computer hard drives, telephones, fax machine transaction records, USB “thumb” drives, optical media such as CD-ROM or DVD disks, backup media, online storage services, off-site archival services, shared network drives, external hard drives, cell phones or PDAs capable of containing email or text messages.

Through the use of forensic tools, techniques and experts, it is possible to: 1) recover deleted files or email messages; 2) recover fragments of data, even if a portion of the original has been permanently deleted; 3) identify and capture relevant data saved on external data storage devices; 4) capture and search data from cellular telephones and personal digital assistants; 5) capture and analyze instant messaging traffic; and 6) analyze internet history and recover images of websites visited. Given the particularly aggressive nature of some lawyers, and the evolving procedural guidelines for ESI discovery, effective internal policies should consider the ability to resurrect and unveil deleted and/or “hidden” ESI. The simple, but harsh, truth is that the days of total document destruction (i.e., shredding) are gone. The concept of “shredding electronic data” is a complex, often incomplete, process.

New Technology, New Threats

The internet and email have revolutionized the way individuals and businesses communicate with each other. As email and text-messaging increasingly become the primary forms of communication, the continued widespread use of email and texting in the corporate setting creates a whole host of interesting issues for companies and their lawyers. In litigation, for example, emails are an important component of discovery and often contain the proverbial “smoking gun.” The best defense is a good offense, which starts with a thoughtful analysis of the threats, backed by sound policies and practices that may ensure the proper use, retention and handling of emails and other ESI.

Ninth Circuit Finds Jurisdiction Over Foreign Corporation Based On Its Subsidiary’s Contacts in the United States

In the recent case of Bauman v. DaimlerChrysler Corp. (No. 07-15386 (9th Cir. May 18, 2011)), the Ninth Circuit expanded the use of agency theory” to impose personal jurisdiction over a foreign corporation doing business in the U.S. solely through its U.S. subsidiary. The court found jurisdiction based on the subsidiary’s contacts within California, even though the lawsuit was initiated by non-U.S. residents regarding acts allegedly committed in a foreign country that had nothing to do with the subsidiary’s contacts.

If this decision stands, it has the potential to affect any foreign company doing business in the U.S. through subsidiaries, even if those subsidiaries have nothing to do with the company’s alleged actions giving rise to the lawsuit.

In the decision, the Ninth Circuit held that personal jurisdiction existed over DaimlerChrysler AG (DCAG), a German company, based in part on its right to maintain control over Mercedes-Benz USA LLC (MBUSA), its wholly owned U.S. subsidiary. The court held that DCAG could be haled into court in California due to MBUSA’s contacts within California.

Background

The plaintiffs in Bauman are 22 Argentine nationals who allege that DCAG’s Argentine subsidiary, Mercedes-Benz Argentina (MBA), collaborated with the Argentine government during its “Dirty War” in order to break up the union at an MBA plant. The plaintiffs brought suit under the Alien Tort Statute and the Torture Victims Prosecution Act of 1991. 

Suit was brought against DCAG in the Northern District of California. Like many global companies doing business in the U.S., DCAG owns an American holding company, DaimlerChrysler North America Holding Corp., which in turn owns MBUSA. MBUSA is a Delaware company with its principal place of business in New Jersey, but it has a regional office in California, as well as other centers of operation located in California.

The relationship between DCAG and MBUSA is governed by a General Distributor Agreement which establishes requirements for MBUSA as the general distributor of Mercedes-Benz cars in the U.S. MBUSA is the single largest supplier of luxury vehicles to the California market, and MBUSA’s sales in California alone account for 2.4 percent of DCAG’s total world wide sales. DCAG did not dispute that MBUSA was subject to general personal jurisdiction in California.

However, DCAG did dispute that it was subject to personal jurisdiction in California. At the district court level, DCAG’s motion to dismiss for lack of jurisdiction was granted. Plaintiffs appealed to the Ninth Circuit, which reversed the district court’s holding.

Ninth Circuit’s Decision

The question before the Ninth Circuit was whether the district court has general personal jurisdiction (i.e. jurisdiction over any claims against DCAG, regardless where they arise) over DCAG through the contacts of MBUSA. The court recognized that the district court did not have specific personal jurisdiction over DCAG, since the plaintiffs’ claims did not arise from DCAG’s contacts with California. Instead, the court determined whether general jurisdiction was appropriate over DCAG.

First, the court considered whether DCAG had “the requisite contacts with the forum state to render it subject to the forum’s jurisdiction” by considering either “substantial” or “continuous and systematic” contact with the forum state. The real question was whether the court could impute MBUSA’s contacts in California to DCAG. To decide this, the Ninth Circuit said that courts can use the “alter ego” test or the “agency” test. Recognizing that the alter ego test was not met in this case, the court turned to the agency test.

The agency test is predicated upon showing the “special importance of the services performed by the subsidiary.” Specifically, the agency test is satisfied by a showing that the subsidiary functions as the parent corporation’s representative in that it performs services that are sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation’s own officials would undertake to perform substantially similar services.

Further, the parent company must also exert, or have the right to exert, sufficient control over the subsidiary, though “not as much control as is required to meet the ‘alter ego’ test.”

The court held that MBUSA’s services were sufficiently important to justify personal jurisdiction over DCAG via the agency test. The court explained that “DCAG simply could not afford to be without a U.S. distribution system,” given the amount of cars sold in the U.S. and in California. Moreover, DCAG had the right to control MBUSA’s activities under the distributor agreement.

Second, the court analyzed whether the assertion of jurisdiction would be fair and reasonable under the circumstances of this case. Looking at several factors, the court concluded that it was reasonable to assert jurisdiction over DCAG.

Of importance, the court focused on DCAG’s purposeful interjection into the California market. The court looked at the importance of the California market to DCAG’s car sales and the fact that DCAG had initiated lawsuits in California to challenge clean air laws and to protect its patents. The court also found that DCAG was a large sophisticated company, therefore the burden to litigate the dispute in California was not enough to preclude jurisdiction.

The court also found Germany’s sovereignty concerns trumped by California’s interest in adjudicating important questions of human rights. Finally, the court expressed doubts that Argentina was an adequate alternative forum to address allegations involving the “Dirty War.”

Conclusion 

The importance of Bauman is that the Ninth Circuit’s use of the “agency” test makes it easier for foreign corporations to be sued in the U.S. based on the unrelated activities of an American subsidiary. Foreign corporations exercising control, or which have clauses in distribution or other agreements with their U.S. subsidiaries which allow them to control their subsidiary’s activities, should pay close attention to the court’s analysis in Bauman

However, Bauman’s importance may be limited depending on the Supreme Court’s approaching decision in Goodyear Dunlop Tires, S.A. v. Brown (No. 10-76), which raises similar issues regarding personal jurisdiction over a foreign company when the lawsuit does not arise from events in the U.S. It is possible that the Ninth Circuit views their “agency theory” as a way around any Supreme Court decision, but until Goodyear is decided, Bauman’s reach remains uncertain.