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This blog post is co-authored by Seyfarth Shaw and The Chertoff Group and has been cross-posted with permission.

What Happened

On July 26, the U.S. Securities & Exchange Commission (SEC) adopted its Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure final rule on a 3-2 vote. The final rule is a modified version of the SEC’s earlier Notice of Proposed Rulemaking (NPRM) released in March 2022. The final rule formalizes and expands on existing interpretive guidance requiring disclosure of “material” cybersecurity incidents.Continue Reading SEC Publishes Public Company Cybersecurity Disclosure Final Rule

Recently, a federal Special Master in the District of New Jersey addressed whether a requesting party waives its right to relevant and discoverable documents when it fails to timely follow up on the responding party’s objections. In In re Valeant Pharmaceuticals International, Inc. Securities Litigation,[1] the Special Master refused to entertain the plaintiffs’ waiver argument, finding that the relevant and discoverable documents should be produced regardless.

In that case, defendant served its first request for the production of documents from plaintiffs on October 22, 2018.[2]  On July 29, 2019, plaintiffs served objections and responses to those requests.[3] Certain responses included general objections.[4] The response to one request, Request No. 7, included a statement that plaintiffs were “willing to meet and confer” with defendant regarding the “appropriate scope of responsive documents.”[5] The response to another request, Request No. 11, included a statement that plaintiffs would conduct a “reasonable search for and produce responsive, non-privileged, or otherwise unprotected communications in their possession, custody, or control.”[6]
Continue Reading Recent Decision Holds That Failure to Timely Follow Up On Objections to Discovery Requests Does Not Waive Discovery

Business executives face the challenge of improving their company’s cybersecurity posture while balancing costs. The consequences of a cyberattack – including lost revenue, customers, diminished reputation and credibility, or even total shut down – force executives to prioritize cybersecurity within their budgets and strategize how to best allocate their limited resources. How should business executives…

At the end of 2019, the Second Circuit finally weighed in on an issue that has divided federal courts considering applications for discovery pursuant to 28 U.S.C. § 1782, through which a litigant can obtain an order from a federal court for discovery to be used in a foreign proceeding. (You can read more about Section 1782 here and here). Federal courts have split over whether Section 1782 allows a party to obtain documents controlled by an entity in the United States but that are held overseas—for example, records held in the London office of a corporation headquartered in New York.1 In a pair of recent decisions, the Court of Appeals for the Second Circuit joined the Eleventh Circuit in holding that Section 1782 does permit discovery of documents held outside the United States and that are within the control of a US individual or entity.
Continue Reading Second Circuit Weighs in on the Extraterritorial Application of 28 U.S.C. § 1782

In a much-anticipated opinion, Judge George B. Daniels of the United States District Court for the Southern District of New York recently affirmed the decision of a magistrate judge regarding the scope of discovery in aid of a foreign litigation pursuant to 28 U.S.C. § 1782.  (You can read more about Section 1782 and the magistrate judge’s underlying decision in our prior blog post, here).  Briefly, Magistrate Judge Gabriel W. Gorenstein grappled with an issue that has divided federal courts: whether Section 1782 can be used to compel the production of documents maintained outside the United States.[1]  Magistrate Judge Gorenstein held that the fact that documents were maintained overseas did not bar the discovery sought so long as the documents were within the control of a discovery target located in the U.S.—in this case, a New York-based law firm with a branch office in Russia. 
Continue Reading New Decision Regarding Discovery in Aid of Foreign Litigation

This is what it sounds like, when sanctions are granted.

In March 2019, a federal judge in Minnesota sanctioned Defendants for their failure to preserve text messages in a copyright infringement suit brought in part by the estate of the late musician commonly known as “Prince”.

Representatives for Prince’s estate brought suit against Defendants George Ian Boxill, Rogue Music Alliance (“RMA”), Deliverance LLC (“Deliverance”), David Staley, Gabriel Solomon Wilson, and other parties alleging copyright infringement.  Plaintiffs filed suit for copyright infringement after learning that Defendants Boxill and RMA created Deliverance to market and release previously unreleased recordings that Prince created during recording sessions in 2006.  Defendant Boxill worked as Prince’s sound engineer during the 2006 recording sessions. Plaintiffs allege that a confidentiality agreement with Boxill placed ownership of the recordings solely on Prince.

Before releasing the music, Defendant Staley sent an email to Sensibility Music indicating that Defendant Boxill would indemnify RMA if Plaintiffs challenged the release. Shortly thereafter, Plaintiff’s estate sent a cease and desist letter, then filed suit.

The parties agreed to certain stipulations regarding discovery of ESI including taking “reasonable steps to preserve reasonably accessible sources of ESI.” The court did not enter an order concerning the stipulation but noted that it will enforce the agreement and warned that any non-compliance will be met with all available remedies, including sanctions. The Court also issued a pretrial scheduling order for both parties to preserve “all electronic documents that bear on any claims, defenses, or the subject matter of this lawsuit.” The court issued two additional pretrial scheduling orders each containing similar language to the first regarding preservation and warnings regarding consequences for violations.
Continue Reading Court Sanctions Defendant for Failure to Preserve Text Messages in Copyright Infringement Suit Brought by Prince’s Estate

The eDiscovery and Information Governance Group has been ranked in Tier Three in the latest Legal 500 ranking. Richard (Rick) Lutkus was also recognized as a Rising Star in Media, Technology & Telecoms – Cyber Law. Rick Lutkus and Kathleen McConnell were also recognized by the editorial as recommended lawyers. Led by Scott Carlson (also…

Picture your client telling you they were considering starting a litigation, but that they did not yet have all the facts needed for you to prepare a pleading.  Now add the wrinkle that the action would need to be forumed in a foreign country, one with discovery rules narrower than those in the United States, and then the kicker, that some of the relevant documents are held by third parties outside of the planned litigation forum.  Although your initial reaction might be that your client is out of luck, 28 U.S.C. § 1782, which allows foreign litigants (or soon-to-be litigants) to obtain discovery in the United States, under U.S. discovery rules, for use in a pending or contemplated foreign proceeding, might offer some help.

Under Section 1782, a federal courts can grant an application for discovery in aid of a foreign proceeding (or planned proceeding) if the applicant: (a) has an interest in the foreign proceeding; (b) the discovery will be used in that foreign proceeding; and (c) the target of the discovery request resides in the judicial district where the request is made.[1]  However, federal courts can deny the discovery request, even when those statutory factors are met, based on purely discretionary factors such as whether the target is a party to the litigation, whether the applicant is attempting to circumvent either U.S. or foreign proof gathering restrictions, and whether the requests are found “unduly burdensome.”[2]  Although one might think that overworked federal courts would often use those discretionary factors to deny discovery requests in support of litigation pending in a far-flung forum, federal courts routinely grant Section 1782 applications.  Two recent decisions—one granting and one denying a Section 1782 application—show just how broad discovery under Section 1782 can be.
Continue Reading The Broad Scope of 28 U.S.C. Section 1782

On January 4, 2019, the California Court of Appeal, First Appellate District issued an opinion reminding us that under California law, tax returns are privileged and improper disclosure of them can even potentially rise to tortious invasion of privacy claims in overturning a demurrer as to that claim. Strawn v. Morris, Polich & Purdy, LLP, No. A150562, 2019 Cal. App. LEXIS 9 (Ct. App. Jan. 4, 2019).

Federal and state tax returns have been held to be privileged from disclosure under California law. Id at *13; Wilson v. Superior Court, 63 Cal. App. 3rd 825, 828 (1976); Webb v. Standard Oil Co., 49 Cal. 2nd 509, 512-513 (1957).  As highlighted by the opinion, the purpose of the privilege “is to encourage voluntary filing of tax returns and truthful reporting of income, and thus to facilitate tax collection.” Strawn at *13; Weingarten v. Superior Court, 102 Cal. App. 4th 268, 274 (2002); Webb at 513. 
Continue Reading The Privileged Nature of Tax Returns in California

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