• May 26, 2010

An unpublished Minnesota Court of Appeals decision this week in Afremov v. AGA Medical Corp., et al, has some good lessons for litigators and those who work with them.

Litigators:  when a case settles, don’t forget to tell your service providers (for example, the e-discovery vendor who has been hosting your gigabytes of data) to pack up their toys and stop the clock on billing.

E-Discovery vendors: as you know all too well, many lawyers have no idea what you do and consequently no concept of your costs or your value.  Storage of electronic data costs money; let your customers know that up-front and get their agreement to pay for it.  

The case in a nutshell: the e-discovery provider (Computer Forensic Services, Mark Lanterman) held on to data after a corporate litigation for which it had been retained by a court-ordered receiver was settled, at considerable expense.  After the settlement of the corporate litigation, using the hosted data, CFS provided additional services to the County Attorneys’ prosecutions of some corporate insiders.  CFS sought payment for storage and its ongoing services provided; AGA Medical rejected the request.  At one point, AGA asked for an index of the data; CFS demanded to be compensated for preparing an index and AGA refused.  AGA also objected to a charge for CFS to “decrypt” the data as part of returning the data.  Then CFS had to go to court to get paid.

The district court computed a total storage-fee award of $259,000 to CFS for a net storage period of 35 months.  The Court of Appeals affirmed in part but knocked down the amount owed.

The Court of Appeals (Stauber, Stoneburner, Ross) agreed with the district court (Kerr Kerasov, J., Hennepin Cty.) that AGA has unjustly retained a benefit from CFS’s services and affirmed in part. But because the district court exceeded its discretion by awarding storage fees before AGA was informed that fees would be charged, and because the district court clearly erred in determining the reasonable value of CFS’s monthly storage, the appellate court reversed and order the trial court to recalculate CFS’s total award.  (The Court of Appeals credited the Kroll Ontrack expert testimony that $3,000/month rather than $4,700 would have been reasonable.)  Finally, “on the unique facts of this case,” the Court of Appeals held that a charge to decrypt the data was not wrongful or unreasonable.

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