Social Media in Litigation Part 2: Cleanup Time

Social Media in Litigation Part 2: Cleanup Time

A senior lawyer once said to me that “practicing law would be great, if it wasn’t for the clients.”

It’s a joke, of course. Lawyers couldn’t practice law without clients, and the clients pay the bills. So we definitely appreciate our clients.

But there’s no question that practicing law would be easier if we didn’t have to worry about the bad decisions our clients sometimes make.

Take social media, for example. In Part 1 of this series, I talked about lawyers using social media to do opposition research, i.e. to dig up dirt on the opposing party. Ethically, that’s generally ok as long as you limit your research to publicly available content and you don’t “friend” or communicate with the other party.

That sounds fun. But guess what? The lawyer on the other side is busy doing the same thing to your client. So, before you start scrolling through your adversary’s Facebook photos, you may need to advise your client about her own use of social media.

Here comes the hypothetical.

The continuing saga of Paula Payne v. Dawn Davis

As we know from last time, Dawn Davis left her sales job at Paula Payne Windows to work for competitor Real Cheap Windows. After getting sued for violating her non-compete, Dawn Davis hires litigator Maria Reynolds from the law firm Burr & Associates.

Reynolds, who is naturally suspicious after 20 years of litigation practice, Googles her own client and is appalled at what she finds. Right there on Dawn’s public Facebook page, Reynolds finds photos of Dawn downing margaritas at Matt’s El Rancho with the head of Real Cheap, two months before Dawn resigned from Paula Payne. Reynolds fires off an email to Dawn: “Dawn, delete that photo from Matt’s now, and clean up your Facebook page ASAP!”

Fortunately, Reynolds’ young associate, Peggy Schuyler, sees this email and politely suggests to Reynolds, “rather than deleting the photo, maybe we just tell Dawn to make her settings private so the other side can’t see it.”

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What will opposing counsel find on your client’s Facebook page?

Meanwhile . . .

Paula Payne’s lawyer, John Laurens, is discovering that not every problem can be settled by committee. He’s been so busy working on his firm’s dress code committee that he hasn’t had much time to focus on Paula Payne’s lawsuit. After having an associate slap together an Original Petition (that’s what we call the Complaint in Texas), Laurens neglects to tell his client anything about social media.

Laurens doesn’t even realize that the president of the company, Paula Payne herself, has launched a tweetstorm against Dawn Davis and Real Cheap. The latest salvo from Paula: “Real Cheap steals employees and customers from Paula Payne Windows. Sad!”

What advice should lawyers give clients about using social media during litigation?

I sense a possible ethical violation here. But what is it? Which of these things will get a lawyer in ethical hot water?

(A) Advising the client to change her social media settings to make potentially relevant evidence private.

(B) Suggesting in writing that the client be cautious about using social media during the lawsuit and avoid posting anything that could be used as evidence against the client.

(C) Telling the client to stop using social media entirely while the lawsuit is pending.

(D) Instructing the client to remove a potentially relevant photo from Facebook but to send a copy of the photo to the lawyer to hold.

(E) Directing the client to “clean up your social media accounts” without any guidance.

(F) Failing to give the client any advice about using social media while the lawsuit is pending.

(G) Telling the client to delete a potentially relevant photo from Facebook, without saving a copy.

Seven choices! This is worse than the Property law final I had to take in my first year of law school. (Prof. Gerald Torres was a pretty cool guy, but his exam was ridiculous.)

But unlike the Rule Against Perpetuities, this issue is fairly intuitive. Based on the consensus emerging from ethics opinions across the US, the answers above are listed in order from most to least advisable.[1]

Answers (A) and (B) are not only ethical, but almost mandatory to meet the lawyer’s ethical duty of competence. Changing settings to private does not destroy or alter evidence, and telling a client to be cautious about what she posts is not telling the client to give false testimony. Plus, all lawyers these days should know enough about social media to give this basic advice.

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Defendant’s Exhibit 1?

I don’t see any ethical problem with Answer (C), telling the client to stop using social media entirely, but it seems like overkill. Social media has become an integral part of most people’s daily lives. Lawsuits can take years to resolve, and it would be unnecessarily onerous to tell a client she can’t use social media at all during that entire time.

Answer (D) is on the borderline. Remember that there is a legal duty to preserve relevant evidence. Whether that duty includes social media content may have been a novel issue back when MySpace was the next big thing, but it should be a no-brainer to everyone today. (Everybody loves to pick on MySpace.)

There are ethics opinions suggesting that a lawyer can advise a client to remove content from a social media account, provided that any evidence relevant to the lawsuit is preserved. So, for example, in a personal injury suit, you can remove that photo of the plaintiff wake-boarding the weekend after the accident, as long as you preserve a copy of the photo, which is likely to be requested in discovery.

But sometimes that won’t be enough to solve the problem. Suppose that the relevant evidence is not merely the photo itself, but the fact that the plaintiff posted the photo and commented on it. Or maybe there is a comment from a third party that is relevant. In those cases, preserving relevant evidence may require preserving the social media content itself. I suggest caution.

While (D) is debatable, it should be pretty obvious that Answers (E) through (G) can get you in deep doo-doo.

The only question here is whether I have (E) and (F) in the right order. Which is worse, giving a client bad advice to “clean up” her social media, or giving her no advice about social media at all? Remember that a lawyer has an ethical duty of competence, and claiming ignorance of social media is no excuse. See ABA Model Rule 1.1, Comment 8 (“To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology”). So giving no advice is only a little better than giving bad advice.

Finally, there is a technical legal term for Answer (G), telling the client to delete a potentially relevant photo from Facebook, without saving a copy: boneheaded.

Actually, the term is “spoliation,” which comes from the Latin word spoliare. Translated, it means “oh crap, Brutus, the judge is going to hammer us.” Deleting relevant evidence is intentional spoliation, which can lead to severe sanctions known, oddly, as “spoliation sanctions.”

And that’s a fate even worse than my first-year Property final.

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head-shot-photo-of-zach-wolfeZach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation. His firm Fleckman & McGlynn, PLLC has offices in Houston, Austin, and The Woodlands.  

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

This post is dedicated to John Lennon.

[1] See Florida Bar, Advisory Opinion 14-1 (2015); Pennsylvania Bar Association, Formal Opinion 2014-300 (2014); Philadelphia Bar Association, Opinion 2014-5 (2014); North Carolina Bar Association, Formal Ethics Opinion 5 (2014); New York County Lawyers Association, Formal Opinion 745 (2013). I could say more about these opinions, but I really can’t improve on Dallas lawyer John G. Browning’s 2015 article You Tweeted What?, which thoroughly discusses them.

Texas Jury Finds Damages Totaling $500 Million in Oculus Rift Case

Texas Jury Finds Damages Totaling $500 Million in Oculus Rift Case

On February 1, a jury in a Dallas federal court returned a verdict in ZeniMax v. Oculus, a high-stakes battle over who owns the technology used in the Oculus Rift virtual reality system. The jury found that Oculus and its co-founders caused damages totaling $500 million. That’s a lot of money in some circles, but the COO of Oculus’s owner said “the verdict is non-material to our business.”

You see, the owner of Oculus is a little company called Facebook.

But still, it’s not every day that a Texas jury finds damages of half a billion dollars in a case involving allegations of trade secret misappropriation, copyright infringement, breach of a non-disclosure agreement, trademark infringement, and spoliation of evidence. As a Texas litigator who deals with all of these issues, I was curious to see what lessons could be learned from the Oculus verdict.

The answer: not a whole lot. The problem is that you can read every word of the 90-page jury verdict and still have no idea what happened in the trial. And news reports about the verdict don’t add much. In fact, the Oculus case is a prime example study of how little the typical press coverage of a jury verdict tells you.

Of course, you can at least learn who the main players were:

  • Video game pioneer John Carmack worked for id Software, a subsidiary of ZeniMax.
  • Carmack came into contact with wiz kid Palmer Luckey, who was developing a virtual reality headset called the Rift.
  • Luckey founded Oculus to commercialize the Rift.
  • Carmack worked with Luckey on improving the Rift.
  • ZeniMax entered into a Non-Disclosure Agreement with Luckey and Oculus.
  • Carmack eventually left id Software and joined Oculus.
  • Brendan Iribe was the CEO of Oculus.
  • Facebook bought Oculus for $2 billion.

ZeniMax and id Software sued Carmack, Luckey, Iribe,  Oculus, and Facebook, claiming they misappropriated trade secrets and other intellectual property.

For me, the most interesting nugget was ZeniMax accusing Carmack of stealing documents on a USB drive and wiping his computer to destroy evidence. Carmack denied these allegations in a Facebook post after the verdict, saying “I never tried to hide or wipe any evidence,” but if the jury heard evidence supporting these allegations, it must have colored their perception of other issues in the case.

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The defendants were able to claim a partial victory because the jury found that none of the defendants misappropriated ZeniMax’s trade secrets. But the jury found liability on other causes of action, and significant damages, against all defendants except Facebook:

  • $50 million against Oculus for copyright infringement
  • $200 million against Oculus for breach of the Non-Disclosure Agreement
  • $50 million against Oculus for false designation of origin
  • $50 million against Luckey for false designation of origin
  • $150 million against Iribe for false designation of origin

Add these up, and you get a headline like this: “Oculus lawsuit ends with half billion dollar judgment awarded to ZeniMax.” If you’re a litigator, that kind of headline makes you cringe. Not because of the amount of money, but because you know that a jury doesn’t award a “judgment” at all. The jury renders a verdict. Later, the judge enters a judgment based on the verdict.

Maybe it sounds nit-picky, but reporters make this mistake all the time. When a headline says “Oculus ordered to pay $500 million in ZeniMax lawsuit,” it is simply inaccurate. The jury doesn’t order anyone to pay anything. The jury just fills in a blank in response to a question. The judge decides whether to order the defendant to pay.

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   I don’t care who you are, that’s a lot of zeroes

The distinction can be important. In some cases, entering a judgment on the verdict is a routine, almost ministerial, act by the judge. But in any moderately complex case, you can bet there will be a battle of post-verdict motions over what to do with the verdict. This is usually the trial court judge’s last opportunity to rule on legal issues in the case before it goes up on appeal.

It’s possible that the judge in the Oculus case will simply render judgment ordering each defendant to pay the amount of damages the jury found that defendant caused, but I don’t expect it will be that simple. You can look at the complicated charge and the number of high-priced lawyers on the case and know there is going to be a battle over the judgment.

Expect the defendants to argue that there was insufficient evidence to support the jury’s answers on both liability and damages. I also wonder if there is an election of remedies issue. When the jury awards damages on several causes of action that arise from the same facts, the judge doesn’t necessarily add up all the dollar amounts and award the total to the plaintiff.

So the verdict is the climax, not the end of the story. We’ll have to wait and see whether the judgment actually awards $500 million (plus interest and maybe attorneys’ fees?), and whether the judge grants an injunction against sales of the Oculus Rift based on the jury’s finding of copyright infringement.

I tried to think of a good football analogy, but golf is better for this point. Discovery and pre-trial motions are the first 17 holes. The trial is getting the ball on the 18th green. The post-verdict motions and appeals are getting the ball in the hole to win the tournament. That’s why they say “trial lawyers drive for show, appellate lawyers putt for dough.”

It will be fun to watch ZeniMax’s lawyers putt for $500 million.

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head-shot-photo-of-zach-wolfeZach Wolfe is a Texas trial lawyer who handles non-compete and trade secret litigation. His firm Fleckman & McGlynn has offices in Austin, Houston, and The Woodlands.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

You Must Tackle This Issue First When Key Employees Leave to Compete

You Must Tackle This Issue First When Key Employees Leave to Compete

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Defense May Win Championships, But What Wins Litigation?

I love Christmas, and I love football, so with Christmas lights up and my Dallas Cowboys headed to the playoffs, I’m feeling pretty good. (We won’t talk about the Longhorns right now.) I also love football clichés, like “defense wins championships.” Another one is that the team that wins the turnover battle will usually win the game. More about that later.

The question I’m posing for my Fivers[1] this week is this: when a key employee or executive leaves a company to compete against the company, what is the very first issue the company and its lawyer should address? (I mean other than the lawyer’s hourly rate and the amount of the retainer.)

Regular readers of this blog can probably think of some obvious candidates:

These are important issues, but there is something else you should think of first. When a key employee or executive leaves a company to compete, the most immediate issue for the company and its lawyer is preservation of evidence. Specifically, preservation of electronically stored information (ESI).

There are three reasons why preserving potentially relevant ESI is the first issue to address.

1. Preservation of ESI is a time-sensitive issue

First, preservation of ESI is the most pressing issue because it is the most time-sensitive. Preservation of paper evidence—does that even exist anymore?—is not as pressing. Absent a flood or fire, paper evidence will probably still be there unchanged in a month, or even a year. Kind of like a box of Twinkies. But evidence in electronic form can easily be lost, altered, or damaged in the short term, even without any deliberate effort to delete it.

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Preservation. It’s not just for jelly.

The most obvious way that relevant ESI can be lost is for the departing employee to take it or destroy it. I had a case where my client got wind that an employee was about to leave and violate his non-compete. The first thing I told my client to do was “get his laptop—now.” As a result, my client was able to recover evidence from the employee’s laptop that was highly damaging to the employee in the ensuing litigation. Had we waited, that evidence might have been lost forever. (It was a company-issued laptop; obviously, the issue is more complicated if the employee is using his own computer.)

So, if a key employee leaves and the company expects there may be a lawsuit, typically the first thing the company needs to do is get its hands on the employee’s company-issued computer and smartphone (if any). Make a simple “chain of custody” form to keep track of who has physical possession of the devices. Follow up with a litigation hold notice to key players at the company, etc. There is of course a wealth of literature from experts like Craig Ball on how to do this. But the key thing is to act quickly before relevant ESI is lost or destroyed.

2. Preserving relevant ESI cuts across all the issues in a lawsuit.

The second reason that preserving relevant ESI is so important is that it potentially affects all other issues in a case:

  • Is the employee’s non-compete enforceable? As I explained here, that may depend on whether the company actually provided the employee confidential information, which may have been done by email. It could depend on the sales territory the employee actually worked, which could be revealed by the employee’s text messages to customers.
  • Did the employee plug a USB drive into his company computer a week before leaving and download the company’s confidential information and trade secrets? Forensic experts can probably find out, if the computer has been properly preserved.
  • Did an employee breach his Fiduciary Duty Lite™ by crossing the line from preparing to compete to actually competing?[2] You might need an expert to recover deleted emails from six months earlier to find out.
laptop-and-cappucino
Get the laptop and smartphone. Leave the cappuccino.

In short, it doesn’t matter how well you understand the typical legal issues that come up when a key employee leaves to compete. If you lose critical evidence necessary to prove your client’s claim—or to defend your client against the other party’s claim—then you are dropping the ball.

3. The failure to preserve relevant ESI can mean sanctions for spoliation

The third reason for moving quickly to preserve evidence is that the failure to preserve relevant ESI can result in spoliation sanctions. When a company expects there is going to be litigation with a key employee who left to work for a competitor, preserving potentially relevant ESI isn’t just smart litigation tactics. It’s the law.

As the Texas Supreme Court reaffirmed in Brookshire Brothers, a legal duty to preserve relevant evidence arises when a party “knows or reasonably should know” that there is a “substantial chance” that a claim will be filed.[3] In other words, a party must preserve relevant evidence when it reasonably anticipates litigation. The failure to preserve relevant evidence when there is a duty to preserve is spoliation of evidence.

“Spoliation” comes from the Latin word spoliare. Roughly translated, it means, “oh, crap, the judge is going to hammer us.”

The last thing a company wants is to be sanctioned by the judge for spoliation of evidence. The worst kind of sanction—other than outright dismissal of your claim or defense—is the “adverse inference” instruction to the jury. It goes something like this: “Ladies and gentleman of the jury, you are instructed that Plaintiff HMC (Huge Multinational Corporation) failed to comply with its duty to preserve relevant evidence, and you may presume that the lost evidence would have been favorable to Defendant Bob Bluecollar.”

Good luck winning over that jury, HMC’s counsel. It’s kind of like trying to get to the Super Bowl with your backup quarterback. Hmm. Strike that. It’s actually much worse.

The good news for companies that screw up preservation is that Brookshire Brothers sets the bar for obtaining spoliation sanctions fairly high. The general rule in Texas is that a finding of intentional spoliation is required to obtain a spoliation instruction to the jury. The standard in federal court is similar. Courts in the Fifth Circuit have required the party asking for an adverse inference instruction to prove the spoliation was in bad faith,[4] and Federal Rule of Civil Procedure 37(e) now requires a finding that the party acted with “intent to deprive another party of the information’s use in the litigation.”

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Brookshire Brothers. It’s not just a grocery store in Giddings.

But do you really want to rely on the defense that your client lost relevant evidence in good faith? Instead, have an expert make a forensic image of the departing employee’s computer and smartphone, which is now fairly routine and cheap. It’s like an insurance policy against a spoliation claim. It will certainly cost less than the hours of attorney time it will take to litigate whether the company’s spoliation of evidence was intentional or not.

And remember, it’s pronounced “spoh-liation,” not “spoil-ation.” I mean, you can be a stubborn Texan and say “spoil-ation” if you want, and hey, I kind of respect that, but it’s kind of like saying “nuke-yuh-ler” weapons.

Back to Football

So what does all this have to do with football? Well, as I said, it has become a football cliché that winning the turnover battle is the key to winning the game. Winning the turnover battle means having more “takeaways” than “giveaways.” If your team fumbles the ball away once but intercepts the ball three times, your turnover ratio is +2, and you’ve won the turnover battle. A high turnover ratio in your team’s favor is no guarantee of winning, but it’s pretty darn close.

Preservation of evidence is like winning the turnover battle. It’s not necessarily the most exciting part of the game. But if you fail to preserve relevant evidence and open yourself up to spoliation sanctions, it’s like fumbling the ball away to the other team. (For my white collar readers at big law firms, it’s like an unforced error in tennis.) If the spoliation is bad enough that the judge gives the jury the dreaded adverse inference instruction, it’s like throwing an interception that the defense returns for a touchdown. In the fourth quarter. With the game on the line.

Preserving evidence, on the other hand, is like a takeaway in football. If you act quickly to preserve ESI and discover a “smoking gun” document that proves your case, it’s as good as taking the ball away from the other team.

So think of preserving evidence as your best defense. And defense wins championships.

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head-shot-photo-of-zach-wolfe

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation. His firm Fleckman & McGlynn, PLLC has offices in Houston, Austin, and The Woodlands. In high school he starred on the football field every Friday night—in the marching band.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

[1] fiver [fiy-ver] noun. 1. A regular reader or fan of the blog Five Minute Law. 2. A celebrity who hosts Saturday Night Live for the fifth time.

[2] “Fiduciary Duty Lite” is a registered trademark of Five Minute Law. (Ok, not really.)

[3] Brookshire Bros., Ltd. v. Aldridge, 438 S.W.3d 9 (Tex. 2014).

[4] See Rimkus Consulting Group, Inc. v. Cammarata, 688 F.Supp.2d 598, 614 (S.D. Tex. 2010).