Ride the Lightning

CROSS FIRE: ED VENDOR SUED BY CLIENT, SUES CLIENT IN RETURN

January 17, 2008

If you run an ED company, here is your “wake up in the middle of night sweating buckets” nightmare . . . .

It was bound to happen sooner or later – a major electronic discovery vendor sued by a major law firm. On December 28, 2007, Sullivan & Cromwell filed suit in the Southern District of New York against Electronic Evidence Discovery, Inc. (EED), asserting that EED was not entitled to payment of $710,000 in charges. The suit alleges, among other things, that EED consistently missed deadlines and prepared the wrong documents for production to opposing counsel. On January 8th, the law firm refiled the case in New York state court, saying that some of its partners were not U.S. citizens and thus the federal court did not have diversity jurisdiction. 

On the same day, EED filed suit against Sullivan & Cromwell in state court in Seattle, claiming that the law firm owes it nearly $720,000 plus interest. Most commentators have noted that this was, to their knowledge, the first battle among “whales” in the e-discovery world. Without question, it will not be the last.

Both parties announced a settlement on January 14th, without disclosing the details and both will dismiss their current suits.

Nonetheless, for anyone running an ED company, stories like this send chills down your spine. Though we do not know the facts of this case, anyone active in the electronic discovery world has already discovered, with chagrin, that “stuff happens.”  The very first time that one of your employees forgets to ensure that there is a good backup before doing a forensic image of a client server, you can be absolutely sure that this will be the precise moment that the server decides to belly up for inexplicable and forever unknowable reasons. For those who do computer forensics and electronic discovery and do not have professional liability insurance, this story should be a wake-up call.

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