To Err is Human, but to Shift Blame is Less Than Divine

In the early morning hours that are reserved for researching and writing the posts for this blog, I often wonder if these posts are for naught. My frustration runneth over in vacillating between the fear that ESI in bankruptcy will remain a non-issue by the machinations of a vast anti-technology conspiracy and the sullen, sulking admission that the majority of our bar is as equally stunted in its technical competence as it is brilliant in all other areas of our practice.

A brewing controversy in the the Chapter 11 proceedings for the Catholic Diocese of Spokane, Case No. 04-08822-PCW-11 in the Eastern District of Washington, may ultimately prove me right on both counts. Amidst a bitter dispute between lawyers for the debtor, and a local newspaper (and its web counter part) The Spokesman Review about access to certain information regarding related to the sexual abuse crisis within the Church, it appears that Debtor's counsel may have inadvertently filed documents on the Court's PACER system allowing users to discover the names of some of the victims.

On the petition date, debtor's counsel wisely filed an ex parte motion (Docket No 12) authorizing portions of Schedule F, the Master mailing list and other documents related to the abuse victim's claims to be filed under seal. The court entered an order authorizing the sealed filings on the same day. Two days later, the debtor filed an amended Schedule F and a notice pleading of same (Docket Nos. 42 and 41, respectively).

For reasons that will become clear later, it is interesting to note that the Unofficial Committee of Clergy Sex Abuse Survivors filed an objection to the employment of debtor's counsel for a number of reasons, including the allegation that proposed counsel's firm had pre-petition claims against the Diocese (Docket No. 67). Attached to the objection were excerpts of discovery responses, which, on their face at least, identify one of the plaintiffs without clarifying whether or not the person identified is a victim of abuse.

On November 30, 2005, the Court entered an extensive, mostly well-prepared order and protocol for handling the abuse claims while also maintaining victim confidentiality (Docket No. 883). Under the Court's order, non-abuse claim forms are scanned as .pdf's and uploaded to via ECF. Abuse claims are not scanned, rather a "dummy" .pdf form is created reflecting the claim amount only. When the ECF system generates a claim number, the number is written on the original hard copy form and retained by Debtor's counsel. Under the information sharing protocol (Exhibit G to the order), Debtors counsel is authorized to provide true and complete copies as well as redacted copies of each abuse claim. Distribution is limited to the usual list of suspects, and only after a "Compliance Declaration" is executed by the recipient.

Fast forward now to April 16, 2007, when Tracy LeRoy, an attorney with Witherspoon, Kelley, Davenport and Toole filed a motion on behalf of Cowles Publishing Company, the publisher of the Spokesman-Review seeking an order requiring the Debtor to "publicly file copies of the Court records, claims, and decisions regarding payment thereof, regarding which the Debtor will pay the claim, with the names and identifying information of the victims redacted." (Docket No. 1868). The supporting memo is docket no. 1870.

It seems that one of the complaints lodged by the Spokesman-Review was that the claims procedure only identified 8 of the priests alleged to have committed acts of sexual abuse, although the notice documents indicate that more priests than that have been accused of such acts.

So far so good.

On May 9, 2007, the Debtor filed its objection to the paper's motion. Pointing out that the paper had the opportunity to object, and did object to the claims protocol, the debtor also pointed to the Judge's instructions regarding the media's right to access certain information.

Four days prior to the objection, John Stucke, a staff writer for the paper, revealed that he had been able to access confidential information from documents that had apparently been filed online by the Debtor. Stucke, to his credit, revealed no victims' information, but also discovered that at least 38 priests were subject to allegations of abuse. Stucke indicated that his method of obtaining the information was simple, but he did not share the methodology in the article.

Debtor's counsel, on the other hand, did. In footnote 3 of the Debtor's objection, debtor's counsel revealed that Stucke copied the "redacted" text from the .pdf files on the Court's docket, pasted the redacted text into Microsoft Word, and then "undid" the redaction. Debtor's counsel went on to characterize Stucke's actions as "hacking". At least twice in the body of the objection, Debtor's counsel also suggests that Stucke obtained his information through "presumably illicit means". The objection also complains that paper was not an "authorized Person" under the protocol, and had never signed a Compliance Declaration, so as to claim that the paper had unclean hands and should be denied all relief.

In yet another footnote, Debtor's counsel indicated that the redacted pleadings were rescanned on May 5, 2007.

In the future, the Debtor's objection may be reprinted in law school text books as one of the landmark self-destructive pleadings addressing of attorney liability in the electronic era. Conversely, Judge Williams may side with the debtor. If she does, the American bankruptcy bar will be set even farther behind the technological curve than we already are.

The protocol and the order initiating same seem to make it pretty clear that Debtor's counsel has the responsibility of taking all reasonable steps to protect the confidentiality of the abuse victims. If the order and the protocol do not make that abundantly clear, the ABA Model Rules sure as hell do. For more on this issue, see this recent article in this month's edition of the ABI's Commercial Fraud Task Force newsletter.

If the .pdf's were uploaded by the Debtor's counsel, and it isn't clear to me yet that is what occur ed, but if so, that "technical gaffe" is very likely a significant violation of the protocol by Debtor's counsel, independent of any actions of Stucke. Preventing the discovery of information in a manner such as this, is easily prevented with a minimum of technological competence. That counsel compounded this error by explaining in Footnote 3 how easy it was for Stucke to discover this information is tantamount to an admission of malpractice; counsel then poured salt in its own wounds by indicating in Footnote 5 that the remedy was simply corrected by having the forms rescanned.


I spent 13 hours yesterday working on a pro bono child abuse/custody case which has been feeding some dis-enchantment about the legal system's ability to protect victims of abuse. Shame on Debtor's counsel for, in a filed pleading no less, trying to shift the blame on the Spokane-Review. Rather than excoriate Stucke, you should be thanking him for saving you and your partners from potential claims by the victims. Imagine if someone with less restraint than Stucke had accessed the poorly protected information and caused some genuine harm to those folks.

Data Miners go Back to the Salt Mines of New Hampshire

Following the Texas Attorney General's decision to sue CVS for mishandling consumer information, as detailed in my previous post, I have been spending my free time surveying state laws regarding use and protection of data, as well as the proper care and feeding of business documents.

While grinding through that self-imposed project, Judge Paul Barbadoro, US District Judge for the District of New Hampshire handed down a welcome, and related, diversion. In a case styled IMS Health Incorporated, et. al. v. Kelly Ayotte, as Attorney General of the State of New Hampshire, Case No. 06-cv-280-PB (Opinion No. 2007 DNH 061 P), the court ruled that a New Hampshire state law prohibiting data mining companies from the commercial use of patient-identifiable and prescriber-identifiable data violates First Amendments rights to free speech. The statute specifically prohibits the licensing, transfer, use or sale of such data for any marketing, promotion or advertising purposes. See N.H. Rev. Stat. Ann. sections 318:47-f, 318:47-g, 318-B:12(IV) (2006). According to the Court, the New Hampshire law was the first of its kind in the U.S.

As described by the Court, the process generally works this way. Data is gathered from the participating pharmacies computers, which includes patient name, prescriber's name, dosage, quantity, etc. Apparently, the data miners have software installed on the pharmacy computers that collects all of this information.

The opinion is not clear on how the patient data is removed from the data before being pooled and sold to third parties. In the first paragraph of the opinion, individual personal data is "removed" before being sold. Later, the court explains that the patient information is encrypted, thereby "de-identifying" the patient information. Each de-identified record is then assigned a unique identification number, so that all subsequent prescriptions by the same individual can be aggregated. The opinion does not explain the level or complexity of the encryption, nor does the court address the sticky issue that, even if encrypted, the patient's identifying information is still present. Short of DOD approved/Tom Clancy endorsed encryption, other recent events have made it clear that encryption ain't necessary a complete bill of goods.

In any event, this was not the thrust of the underlying suit as the data miners make their gold coin from data concerning the prescriber, not the patient. The plaintiffs sell the data to the mega-pharm industry who uses the data, at least in part, to focus their marketing and promotional efforts on certain health care providers.

The Court ruled that the plaintiff's desire to use and disclose factual information, even if devoid of opinion or expression, constitutes speech for these purposes. The statutory text makes it pretty clear that the restrictions applied to commercial use of the data, meaning that an intermediate level of scrutiny is applied to the statute. In a thorough analysis, the Court explains why the statute, as applied to data miners' use of prescriber information doesn't muster-up to the demands of the First Amendment.

From an insolvency point of view, this case is interesting because it re-affirms, as though reaffirmation was required, that electronically stored information (ESI for all my readers in Mangum, Oklahoma) is a valuable asset of the enterprise. Beyond ensuring the safety and security of the ESI, this case also illustrates growing tensions between valuable commercial applications of ESI, competing interests in the ESI (the court raised briefly the potential that the use of the information might be subject to claims of confidential trade secrets), and the privacy of consumers or other third parties.

The musical chair scenarios are interesting to consider, especially in a bankruptcy context.

Two Turntables and a Microphone...

Yesterday, the renowned technology and bankruptcy attorney Warren Agin posted a blurb on his blog Tech Bankruptcy about the recent 5th Circuit decision (In re Darby, 470 F.3d 573 (5th Cir. 2006) finding that cable TV was not a utility for purposes of section 366 of the Bankruptcy Code. Agin posed the question of whether or not Internet service could constitute a utility, such that sec. 366 would protect a debtor with past due bills from having service cut off.

Agin, by the way, is the author of Bankruptcy and Secured Lending in Cyberspace, 3D edition, which I am adding as item #3 on my Christmas wish list, just below the PS3 and the Sony Reader. When Agin publicly wonders about something like this, I suspect it isn't just so he can win the next pick up game of Trivial Pursuit - Insolvency version. I also suspect he has a better handle on such issues than just about every lawyer, and dare I say, most jurists, in the lower 48.

While doing some unrelated research on another topic I recently promised to write about, I stumbled across an interesting provision in Texas law which tripped my early morning curiosity about Agin's musings. Chapter 35 of the Texas Business and Commerce Code is the aptly named Miscellaneous Commercial Provisions Section. The lead-off provision (tip of the hat to Cleveland Indians for beating my beloved and beleaguered Texas Rangers in 11 innings) is sec. 35.01, defining certain terms related to security instruments and utilities. Sec. 35.01(a)(2) defines "utility", at least for purposes of chapter 35, as "a person engaged in... (A) generation, transmission, or distribution and sale of electric power; (B) transportation, distribution and sale through a local distribution system of natural or other gas for domestic, commercial, industrial, or other use; (C) ownership or operation of a pipeline for the transmission or sale of natural or other gas, natural gas liquids, crude oil or petroleum products to other pipeline companies, refineries, local distribution systems, municipalities, or industrial consumers; (D) provision of telephone or telegraph service to others; (E) production, transmission, or distribution and sale of steam or water; (F) operation of a railroad; and (G) the provision of sewer service to others.

Interesting. What, by the way, is a telegraph? Is that a term of art for the new feature allowing me to email my voice messages to myself? I am still saddened by Western Union's decision to bow out of the telegram service. I always dreamed of doing something grand enough to warrant at least a single telegram.

After making sure that "utility" was not a term defined in the Code, at least not in either section 101 or 366, I decided to dig a little deeper into the Texas statutes. Turns out that Texas has a Utility Code, and that Chapter 51 of that code addresses Telecommunication Utilities. As luck would have it, section 51.002 of the Utility Code has a rather wordy definition section, full of multi-syllable words arranged in combinations to defy understanding. A quick pass through those big words looks to me as though Internet providers are not considered utilities under this definition unless, essentially, a telephone company is providing both telephone and Internet services (even then it seems to be limited to situations where the Internet service is considered part of the "basic local telecommunications service." In Texas, basic local service consists of two tin cans and a piece of twine. Probably no luck for consumers in this definition. (Not for nothing, but my sons and I love those Vonage commercials. I sure do hope Vonage can survive the current onslaught...)

Perhaps I am, as I am prone to do, getting ahead of myself in unravelling this puzzle. Looking back at the 5th Circuit's Darby opinion, I want to see how the court defined "utility". Exactly as Agin suggested, the court said that a "utility" was necessary to maintain minimum standards of living", and that such providers stand in a "special relationship" with the debtor as a provider of such services. Instead, the court suggested, Darby could have obtained access to television from a satellite provider.

I am guessing the 5th Circuit didn't sign up for cable tv when the court was temporarily displaced to Houston. Until recently, cable tv in Texas was administered as a franchise through municipalities. Although this is merely anecdotal, I noticed that cable tv is also a matter largely taken up in, you guessed it, the Utility Code.

Cable tv, just like our beloved foray into deregulated electricity, is also in the throes of deregulation. The Court deduced that, since alternate services were available, such as satellite tv, there was no special relationship between Time Warner and Mr. Darby. Texans are constantly bombarded now with the "good news" that they can seek out alternate providers of their electric service, and are no longer stuck with just one provider. Does this mean then that the 5th Circuit has, by logical extension of its analysis, opened the door to allow electric companies to slide around any unfavorable restrictions in sec. 366?

Even more perplexing is the idea that the Internet is not necessary to maintain minimum standards of living. For any lawyer practicing before federal courts, where ECF filings have rapidly transformed from mandatory to common place, certainly Internet access is necessary to feed a lawyer. On-line banking has allowed my creditors to empty my pockets on a much more timely basis. My health insurance provider alerts me through email that my online EOB's are ready for review. I have a touch of the multiple sclerosis, which means from time to time I am just not able to come into the office. Without Internet access, I would not have the ability to remote in and at least scratch out some of the day's "to-do" list.

Who, you might ask, is my Internet provider? It is my Cable TV provider.

In my humble opinion, rather than rely on what was, at the time, a 9 year old opinion from a bankruptcy court in North Carolina, the 5th Circuit ought to have at least waded through the definitions of "utility" as that term is understood in Texas statutes. The outcome may have been very much the same as that reached in the Darby opinion. If the court had looked to Texas law though, at least that type of analysis would give debtor's counsel, especially for consumers, an infinitely better understanding of what is in, and what is out, for purposes of section 366. Saving for another day the argument of whether or not Darby was outcome driven, the Darby opinion will have a very short lifespan as practical and applicable precedence as it overlooks the dynamic forces of changing business models, advances in technology, and the day to day reality of state regulatory authorities.

Dang-blast that Agin! Rickin-fracking racken' varmit! I will never finish my next post, let alone my All-American Novel, getting caught up in mental pretzels!

Texas AG Reminds Everyone about Document Security

Today, it is being reported that Texas Attorney General Greg Abbot has sued CVS Corp for mishandling sensitive customer information including credit card numbers and medical information. Though I have not yet read the complaint in its entirety, the AG appears to be pursuing two primary causes of action, one being the violation of the 2005 Identity Theft Enforcement and Protection Act (enacted as Chapter 48 of the Texas Business and Commerce Code), and the second being violations of Chapter 35.48 of the Texas Business and Commerce Code, which governs the retention and disposal of business records in Texas.

The suit against CVS apparently marks the fourth suit in Texas under the Identity Theft statute. Radio Shack got tagged a few weeks ago with similar issues. A brief, and incomplete, Google search indicates that other states have, or are considering bills similar to the Identity Theft statute. I would not be surprised to discover that a number of states also have some form of retention and disposal statute.

For those of us accustomed to practicing in bankruptcy courts, these types of state law requirements add yet another layer of responsibility, especially on debtor's counsel. I will be the first to admit that I only learned of these two statutes this morning, and dare say that no other bankruptcy practitioner in Texas has ever mentioned either in my presence. Not only do state law requirements of this type reinforce the need to be prepared, and to educate and prepare the client before filing, but such statutes may also add weight to the suggestion that First Day motions include a damn good document retention policy where none existed pre-petition.


Will do my best to look more deeply at these issues over the weekend and will update before Monday. There are some interesting issues here that warrant a few more electrons out on the Internet!

Watch out D.C.

"When I breeze into that City,
All the People Gonna scrape and Bow.
All the women Gonna make Me,
Show 'em What they don't Know how..."

Jackson
As performed by Johnny Cash and June Carter Cash
as portrayed in the movie Walk the Line

I know that everyone is still basking in the after glow of this morning's CSPAN coverage from the ABI Annual Spring meeting, but I just needed to put in last plug for the Commercial Fraud Task Force presentation tomorrow at 4:00 p.m. Aside from the promise of free software (see previous post), it turns out that co-committee chair Jack Seward had an open seat on the panel, to be filled by yours truly!

I can promise you that many, many hours have been put into the panel discussion and it is not to be missed! SO, sit down, lie down or fall down, but however you can get there, it is an hour and a half not to be missed.

A Last Minute Easter Egg...

This just in from the ABI's Commercial Fraud Task Force Committee: The free bankruptcy triage software being made available by committee co-chair Jack Seward is also being made available to ANYONE, free of charge, for a very limited time. This offer is not restricted to ABI members only, but is also being extended to non-members in an attempt to bring more members into the fold.

In order to access the software, simply submit 10 questions for the rapidly approaching panel presentation taking place at the ABI Spring soiree' on Saturday, April 14th beginning at 4:00 p.m. EST. Questions need to address the areas covered by the abstract below, and should be sent directly to Jack Seward at jackseward@msn.com .

Also, I heard a rumor that there may be a special guest speaker joining the panel. Check back here early and often for developments!

Abstract:
Our panel has been preparing for this event with great enthusiasm. The discussion relates to exactly how are you going to find the assets in the 21st Century for the estate, but quickly enters the subject of debtor counsel responsibilities under § 707, § 542, § 727, Rule 9011 and 18 U.S.C. Michael D. Fielding takes on the role of representing debtor's and becomes concerned regarding debtor and attorney responsibilities as we explore the numerous issues facing any business case and perhaps most consumer cases. David P. Leibowith, Esq. does what's natural to him as a panel trustee, searching for undisclosed assets for the estate but admits times have changed and the digital environment creates new opportunities and responsibilities in uncovering hidden assets. Patricia B. Fugée will be at home when she actively pursues the need for discovering electronically stored information under the FRCP. She has practically told us the rest of us on the panel "you better watch out" and perhaps some of may have thought is that a threat to bankruptcy counsel and besides being focused on the Code does it have anything to do with the ethical responsibilities in our digital society where most anything created today can be found on computers, like it or not? Jack Seward provides the "best practices" in forensics, fraud and electronic discovery issues but does not stop at the FRCP and reminds everyone, The Debtor's Digital Autopsy by definition needs to be performed in business cases and many consumer cases, but always with a tight grip on the practical aspects including timeliness, cost effectiveness and being fair to all concerned. He claims the free and fully-functional bankruptcy triage software that will be provided to those that attend will find more than some of us want to know and it will be shown in real time. Bruce L. Weiner, who often represents the panel trustee, keeps the panel focused and provides hard hitting and probative questions on what's important to understand in your practice, regardless of what side of the isle you find yourself on.

Oh but for the Want of a Mid-Year Bonus...

The most important ABI presentation taking place all year is set for April 14! If I hadn't sunk all of last year's tax return into a handful of lottery tickets, I would be headed there myself, because... it sounds like Jack Seward, Michael Fielding and company will be answering all of the questions I have tried to raise in these hallowed digital walls. If I had the answers, I could spend my 4 a.m. to 8 a.m. time slot on more profitable endeavors. So, uhhh, if someone else goes, please let me know what they decide...

By the way, I have it on good authority from Jack Seward himself, who is also the co-chair of the Commercial Fraud Task Force Committee, that there is a late "Easter Egg" for those who attend the presentation. There is some free software, a bankruptcy triage of some design, that effectively rolls the allegorical log back to show, in real time, that which lives in the mud and filth outside of plain view. Seward is a sharp character, but see if you can snake a copy of the software for me while you are at it.

Plan to attend the Commercial Fraud Task Force Committee panel presentation Saturday, April 14th – 4:00 P.M. to 5:30 P.M.

Understanding Debtor Responsibilities in Consumer and Business Cases: Providing Electronically Stored Information

The Panel:
Michael D. Fielding, Esq., Blackwell Sanders Peper Martin, LLP, Kansas City, Missouri
Patricia B. Fugée, Esq. Roetzel & Andress, Toledo, OH
David P. Leibowitz, Esq., and Ch 7 panel trustee, Leibowitz, Waukegan, Illinois
Jack Seward, Jack Seward & Assoc., LLC, New York, Co-chair
Bruce L. Weiner, Esq., Rosenberg Musso & Weiner, LLP, New York, Moderator

Abstract:
Our panel has been preparing for this event with great enthusiasm. The discussion relates to exactly how are you going to find the assets in the 21st Century for the estate, but quickly enters the subject of debtor counsel responsibilities under § 707, § 542, § 727, Rule 9011 and 18 U.S.C. Michael D. Fielding takes on the role of representing debtor's and becomes concerned regarding debtor and attorney responsibilities as we explore the numerous issues facing any business case and perhaps most consumer cases. David P. Leibowith, Esq. does what's natural to him as a panel trustee, searching for undisclosed assets for the estate but admits times have changed and the digital environment creates new opportunities and responsibilities in uncovering hidden assets. Patricia B. Fugée will be a home when she actively pursues the need for discovering electronically stored information under the FRCP. She has practically told us the rest of us on the panel "you better watch out" and perhaps some of may have thought is that a threat to bankruptcy counsel and besides being focused on the Code does it have anything to do with the ethical responsibilities in our digital society where most anything created today can be found on computers, like it or not? Jack Seward provides the "best practices" in forensics, fraud and electronic discovery issues but does not stop at the FRCP and reminds everyone, the debtor's digital autopsy by definition needs to be performed in business cases and many consumer cases, but always with a tight grip on the practical aspects including timeliness, cost effectiveness and being fair to all concerned. He claims the free and fully-functional bankruptcy triage software that will be provided to those that attend will find more than some of us want to know and it will be shown in real time. Bruce L. Weiner, who often represents the panel trustee, keeps the panel focused and provides hard hitting and probative questions on what's important to understand in your practice, regardless of what side of the isle you find yourself on.
Please send your questions to ask the panel if you do not plan to attend the ABI ASM 2007 to Jack Seward, co-chair of the Commercial Fraud Task Force Committee at jackseward@msn.com .