Presentation is loading. Please wait.

Presentation is loading. Please wait.

Coleman (Parent) Holdings v. Morgan Stanley & Co, Inc. Florida Circuit Court – March 1, 2005 Cite as: 2005 WL 679071 (Fla.Cir.Ct.)

Similar presentations


Presentation on theme: "Coleman (Parent) Holdings v. Morgan Stanley & Co, Inc. Florida Circuit Court – March 1, 2005 Cite as: 2005 WL 679071 (Fla.Cir.Ct.)"— Presentation transcript:

1 Coleman (Parent) Holdings v. Morgan Stanley & Co, Inc. Florida Circuit Court – March 1, 2005 Cite as: 2005 WL (Fla.Cir.Ct.)

2 eDiscovery: Issue and Sanction Coleman Parent Holdings is asking the court to instruct the jury that Morgan Stanley’s destruction of s and other electronic documents and Morgan Stanley’s noncompliance with the Agreed Order can give rise to an Adverse Inference that the contents of the s would be harmful to Morgan Stanley’s defense

3 Background Coleman Parent Holdings (CPH) sued Morgan Stanley for fraud in connection with CPH’s sale of its stock in Coleman, Inc. to Sunbeam Corporation in return for Sunbeam stock ◦ Transaction took place on March 30, 1998 At the time of the sale of stock between CPH and Sunbeam, Sunbeam had artificially inflated their stock ◦ They later declared bankruptcy CPH claims that Morgan Stanley, the investment banker in the transaction, helped Sunbeam inflate the price of the stock CPH wants access to Morgan Stanley’s internal files, including s

4 Background In 1997, SEC regulation required all s be retained in readily accessible form for two years Morgan Stanley continued its practice of overwriting s after 12 months ◦ s could no longer be retrieved once they were overwritten CPH sought access to all s related to this transaction which took place in 1998 Morgan Stanley’s oversight employee was Mr. Arthur Riel who was later replaced by Ms. Allison Gorman

5 eDiscovery: Agreed Order April 16, 2004, Court entered an Agreed Order requiring Morgan Stanley to: 1) Search oldest full backup tape for each 36 employees involved in the Sunbeam transaction 2) Review s from February 15, 1998 through April 15, 1998 and s containing any of 29 specified search terms like “Sunbeam” or “Coleman” regardless of their date 3) Produce by May 14, 2004 all nonprivileged s responsive to CPH’s document request 4) Give CPH a privilege log 5) Certify its full compliance with the Agreed Order

6 eDiscovery Process Recovering back up tapes 1) Search potential storage locations 2) Send to outside vendor, National Data Conversion, Inc. in this case, to be processed and returned to Morgan Stanley as “SDLT” tapes 3) Morgan Stanley then had to find a way to upload the SDLT tapes into its new archive 4) Run scripts to transform this data into a searchable form so that it could later be searched for responsive s

7 eDiscovery: False Production On May 14, 2004, Morgan Stanley produced approximately 1,300 pages of e- mails but failed to provide the required certification On June 23, 2004, Mr. Riel finally complied fully with the April 16 th Agreed Order and gave CPH a certificate of full compliance ◦ However, when he executed the certification letter, he knew it was false

8 eDiscovery Issue: Missing Tapes Brooklyn tapes ◦ Found at some point before May 6, ,423 backup tapes which had not been processed Montana ◦ In 2002, found millimeter tapes that dated back to 1998 Both sets of tapes never made it to Morgan Stanley’s archive At this point, Mr. Riel was dismissed for “integrity issues” Additional Missing Tapes January 2005, Morgan Stanley found 169 DLT tapes that had been misplaced by its New Jersey storage vendor ◦ No specifics were given to CPH or the Court February 11 and 12, 2005, TWO days before the hearing, a Morgan Stanley executive director found 200 additional backup tapes in a closet

9 eDiscovery Data: Another liar? Ms. Gorman took over the project, however, she was not able to search any tapes until January 2005 November 17, 2004, Morgan Stanley sends a letter stating that the certificate of full compliance was incorrect November18, 2004, Morgan Stanley produces 8,000 pages of s and attachments supposedly from “newly discovered” tapes ◦ “newly discovered” = Brooklyn tapes If Gorman couldn’t search tapes until January 2005, how could she produce newly discovered tapes in November 2004? ◦ Morgan Stanley failed to offer any explanation Additional Gorman Problems Determined February 13 th that the data-range searches for users who had a Lotus Notes platform where flawed ◦ 7,000 additional messages that appeared to fall within the scope had yet to be fully reviewed

10 Court Findings on Morgan Stanley “Frustrated the Court” “Gross abuse of discovery obligations” “Grossly negligent” Court determined two failures 1) By overwriting s contrary to the legal obligation they have spoiled evidence, justifying sanctions 2) Willful disobedience of the Agreed Order justifies sanctions

11 Holdings 1) Adverse Inference instruction granted 2) Morgan Stanley shall continue to comply with the Agreed Order 3) Court shall read the statement of facts attached as Exhibit A during whatever evidentiary phase of CPH’s case that it requests 4) CPH can argue that the concealment is evidence of malice or evil intent to prove punitive damages 5) Morgan Stanley bears the burden of proving that they did now know about Sunbeam’s fraud scheme 6) Morgan Stanley shall compensate CPH for costs and fees associated with the motion 7) Morgan Stanley’s motion to compel further discovery is denied

12 Award Compensatory ◦ $604,334,000 ◦ Purchase Price of stocks Punitive ◦ $850,000,000 Total ◦ 1.58 Billion

13 Questions? What kind of programs should be put in place for large companies so that backup tapes are not lost in a storage facility or a security closet? Is a punitive damage award of $850 million appropriate against a company? Are punitive damages even necessary when it was caused by the lack of care of only a few?


Download ppt "Coleman (Parent) Holdings v. Morgan Stanley & Co, Inc. Florida Circuit Court – March 1, 2005 Cite as: 2005 WL 679071 (Fla.Cir.Ct.)"

Similar presentations


Ads by Google