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US judge orders firm to pay huge fee for ‘vast’ disclosure of foe’s secret docs

From the Association of Certified E-Discovery Specialists Staff

 

Date: July 2, 2014

 

When it comes to imposing e-discovery sanctions, Paul Grewal, US magistrate judge in San Jose, can conjure unease in a way that recalls classic monster movie reveals. You know what’s coming is big and unseemly. The only questions are how big, and how unseemly?

 

Quinn Emanuel Urquhart & Sullivan, the 650-lawyer, Los Angeles-based firm, got those answers in the last sentence of a 10-page ruling last week ordering it to pay fees related to a year-long saga that saw the firm disseminate confidential Apple files to that company’s biggest foe – Quinn’s own client, Samsung.

 

“With the present quiet on the docket, it is easy to forget the long tumult of this case that once reigned,” Judge Grewal’s June 20 ruling began. “The ceremonial courtroom has cleared. The fire drills… have ceased. All that remains for now… is the… issue of what makes for reasonable fees…. So, here goes.”

 

Smoked cleared and damaged assessed, Quinn Emanuel and Samsung will have to pay $2 million to reimburse Apple and Nokia, whose information the firm also leaked, for mistakenly distributing the terms of a confidential Apple-Nokia licensing agreement to the highest levels of Samsung management.

 

All told, the privileged materials – emblazoned with “Highly Confidential – Attorneys’ Eyes Only” – spread to some 200 persons, including attorneys at firms representing clients opposed to Apple and top Samsung licensing executives.

 

The disclosure breached a January 2012 protective order and, according to Judge Grewal, amounted to a “willful failure to institute sufficient safeguards.” Quinn Emanuel and Samsung owe Nokia about $1.1 million and $900,000 to Apple. It is not clear from the ruling how law firm and client will divide payment.

 

A spokesperson in Quinn Emanuel’s Los Angeles office did not respond to a request for comment.

 

Insufficient documentation again rears head

 

While he found fees submitted by Apple and Nokia to be appropriate for the extensive discovery and motion practice related to the leak, Judge Grewal took the companies to task for insufficiently detailed billing records.

 

He trimmed 19 billing submissions by 20 percent for descriptions that indicated “block billing” – 10 or more hours devoted to the likes of “drafting,” “preparing,” “revising” or paying “attention” to various briefs.

 

That haircut teaches important lessons to attorneys and other legal practitioners attempting to recoup e-discovery costs. Generally, Judge Grewal’s edict against poor documentation applies in those instances as well. Judges and clerks of court have routinely set aside e-discovery fee requests submitted under the federal cost-taxing statute, 28 US Code § 1920, and other rules for inadequate detail, especially as it relates to work performed by third-party service providers.

 

“The parties in this case are aware that the court… will not reward obtuse billing practices that deprive others of the ability to meaningfully evaluate how the time was spent,” Judge Grewal said.

 

A long detour

 

The broad exposure of Apple’s confidential materials comes amid its highly publicized global patent feud with Samsung over design of tablets and smart phones that at one point had spilled to 50 courtrooms across the world.

 

The case highlights the ease with which confidential information can slip through the crevices of a protective order, and spread instantaneously to adversaries and others.

 

Through extensive discovery, details emerged that the fiasco began, inconspicuously enough, when a Quinn Emanuel junior associate “working late one night” failed to redact several lines of an export report submitted by Samsung. That ill-fated document detailing the terms of Apple’s licensing agreements with Nokia and others was subsequently posted to an FTP site accessible to Samsung employees.

 

Quinn Emanuel then emailed instructions of how to access the site to a list that Samsung uses to update employees on Apple-Samsung litigation. Though the FTP site was apparently taken down after 10 days, the flawed document was downloaded and widely distributed by Samsung employees in its first two days, court papers show.

 

‘All information leaks’

 

The disclosure came to light during a licensing negotiation in June between Samsung and Nokia. Paul Melin, Chief Intellectual Property Officer at Nokia, testified that in that meeting, the head of Samsung’s Intellectual Property Center said the terms of the Apple-Nokia deal were “known to him.”

 

“All information leaks,” the Samsung executive, Seungho Ahn, is alleged to have said.

 

Apple shared the licensing documents with Quinn Emmanuel during the discovery phase of a related patent infringement case that resulted in a $1 billion jury award for the Cupertino-based company.

 

Though Apple and Nokia alleged Samsung used knowledge of the leaked terms to negotiate its own favorable deals, Judge Grewal ultimately found that Samsung had not misused the leaked files – though its excuses and explanations were “shaky at best.” 

 

‘650 lawyers wide, 1 lawyer deep’ 

 

The Quinn Emanuel soap opera highlights the steep consequences of failures to implement and execute effective safeguards in complex litigation with voluminous e-discovery and highly confidential materials at play. It shows how a small error, if left unchecked, can generate huge unnecessary costs and distract from more important aspects of the case.

 

Large law firms, if they do not have an infrastructure and clear lines of communication in place to swiftly respond to a discovery error, are just as vulnerable as their smaller counterparts. Quinn Emanuel managing partner and co-founder John Quinn acknowledged as much when, offering a mea culpa to Judge Grewal, he described his firm as “650 lawyers wide” and “one lawyer deep,” and admitted that “one lawyer doesn’t necessarily know what another lawyer is doing.”

 

“In a case of this size with this many resources and this much confidential information floating about, it is only reasonable to expect that a firm’s left hand will know what the right hand has been doing with that information,” Judge Grewal retorted in a January sanctions order.

 

“The cavalcade that followed did not happen because of… one [redaction] mistake. [I]f the process around this one mistake had been more appropriately engineered to guard the sensitive information it was processing, the missed redaction could have been caught and this entire fiasco avoided,” he continued.