Days after a boardroom showdown sent three top executives at Motion Picture Distribution LP out the door last July, a team of investigators set up camp in the company's Toronto offices to retrace the departed managers' electronic movements.
The forensic specialists from Deloitte & Touche sifted through tens of thousands of e-mails and electronic documents and presented Motion Picture's board with a report that could have read from the script of a Hollywood thriller. According to a court affidavit, the investigators uncovered a secret plan, code named "Project Godfather," which the trio allegedly hatched months earlier to negotiate with potential buyers without board approval.
Armed with the stunning electronic discovery, Motion Picture dispatched lawyers from Stikeman Elliott LLP to the Superior Court of Ontario to seek an injunction preventing the top departed executive, former chairman Victor Loewy, from joining rivals or divulging corporate secrets. Stikemans partner Alan D'Silva asked for the injunction on Aug. 24 and a temporary order was granted by Mr. Justice John Ground on Aug. 25. Weeks later, Mr. Loewy signed a peace accord and returned to Motion Picture as a consultant.
Such sweeping injunctions against high profile executives are rare and it is almost unheard of to see them granted a mere day after the motion is filed. Why did Judge Ground move with such speed? Because Motion Picture was packing one of the hottest litigation weapons available today: electronic or e-discoveries of tell-tale computer hard drives and servers.
Alan L.W. D' Silva, a partner at Stikeman Elliott poses for photo in front of servers at the law firms offices in downtown Toronto. (Fred Lum/The Globe and Mail)
The good news is that electronic communications are so prolific that lawyers today can substantially strengthen the odds of winning such motions as injunctions or search orders by showing the courts a paper trail of what defendants have said or done.
"The game has changed," said Mr. D'Silva, who declined to discuss the details of the Motion Picture case. "It is so much easier to show the courts exactly what people's actions are as opposed to speculating what they might be doing."
The bad news is that the costs and challenges of storing, managing and searching electronic data can be staggering.
"It's just a nightmare," said Frank Walwyn, a litigation expert with WeirFoulds LLP who specializes in e-discoveries. "People are not really thinking about how to manage or store their electronic data. When they are compelled to produce data it is so overwhelming and expensive that it can literally stop the business."
In the United States, corporations such as Morgan Stanley have paid heavily for responding improperly to demands for electronic data.
When the Wall Street firm was sued by billionaire financier Ronald Perelman for allegedly aiding bankrupt Sunbeam Corp. with accounting fraud, Morgan Stanley initially resisted e-discovery demands, arguing it would require "a massive safari into the remote corners" of 36 employees' computer backup tapes.
A Florida court found in 2005 that Morgan Stanley's failure to produce thousands of documents was in effect an admission of wrongdoing and a jury ordered the firm to pay more than $1.5-billion (U.S.) in damages to Mr. Perelman. The decision is under appeal.
Canadian litigators got a wake-up call about the burdens of e-discovery last year when Ontario Superior Court Justice Ian Nordheimer ordered Air Canada to manually review 75,000 of its electronic documents for relevance before it handed them over to WestJet as part of a corporate spying lawsuit against its smaller competitor. Within weeks of the daunting order, Air Canada reached a settlement with WestJet.
"Everyone is struggling to find a way to manage their electronic data. There are practical and financial limits to what companies can do," said Marie-Andrée Vermette, one of the WeirFoulds team that represented WestJet last year.
In the United States, where lawsuits and demands for e-discoveries are more prolific, some U.S. firms are generating new business by setting up specialized teams that give clients legal and technical support for storing, organizing and producing electronic data. According to U.S. legal experts, electronic discoveries tracking the computer activities of multiple parties in a single lawsuit have cost some major companies more than $10-million in legal fees.
Despite the heavy burden of managing e-discoveries, Stikeman's Mr. D'Silva says they are an indispensable litigation tool.
In recent years, he said, forensic investigations of business computers have given him enough evidence to persuade courts in business or employee dispute cases to search the homes of defendants. Courts rarely approve search orders in civil disputes, but Mr. D'Silva said he has been able win the orders in a few cases recently after he was able to document improper activities. In one case, Mr. D'Silva was given court approval to search the Toronto homes of two former executives of Prima Telematic Inc. after he submitted e-mails and other electronic evidence alleging that they had downloaded corporate secrets to their home computers.
"People are unbelievably frank on e-mails even though they are up to no good," he said.
