Colgate V Disthene : A Stunning Decision

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Judge to order liquidation of Buckingham mining company for mismanagement

Credit: ALEXA WELCH EDLUND/TIMES-DISPATCH

Willis Mountain in Buckingham County is home of the world's largest kyanite mine.

By: BILL MCKELWAY | Richmond Times-Dispatch 
Published: August 31, 2012

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BUCKINGHAM, Va. --

One of the state's most closely held mining companies, fiercely controlled for more than a half century by a Buckingham County family, could go into receivership and be dissolved in coming weeks under a court decision that concludes the company oppressed minority shareholders and misapplied millions of dollars in corporate assets. 
 
In a stunning decision issued Thursday that followed years of intrafamily legal wrangling within the Dixon family and its operation of the Kyanite Mining Corp., a Fairfax County judge said in a 41-page ruling that she will appoint a receiver "to wind up and liquidate the business and affairs of the corporation."
 
Circuit Judge Jane Marun Roush, named to hear the case after local judges recused themselves and who heard more than two weeks of testimony in the case earlier this summer, called her decision a "drastic" yet appropriate remedy in light of testimony that she said showed a long history of unfair stock manipulation, exorbitant salaries for company officers, and a use of assets that embellished the estates of company leaders and allowed other assets to languish unproductively.
 
Alan D. Wingfield, lead attorney for Kyanite, which has been represented by the Richmond-based Troutman Sanders law firm and is now known as the Disthene Group Inc., said in an email Thursday that "Disthene is considering its next steps in this lengthy court case."
 
Thomas M.  Wolf, who tried the case with John H. Craddock Jr. and Michele K. Burke, all of LeClairRyan, issued a joint statement describing the ruling as "a historic decision that will be cited in legal treatises for years to come.  It shows that there are enforceable legal protections for minority shareholders."
 
Disthene controls kyanite surface mines in Buckingham County south of Charlottesville that are the world's largest producer of the mineral, which is used as a heat-tolerant component in refractory processes involved in steel-making and other industrial applications.

The Dixon family mining operations and other holdings, including the Cavalier Hotel in Virginia Beach and thousands of acres of old-growth woodlands in central Virginia, have been controlled since 1974 by Gene B. Dixon Jr., 69, who assumed that role upon the death of his father in 1974.
 
Legal actions have been ongoing for several years and generally have pitted Dixon Jr., his son and other company officials against three minority shareholders:  the husband of Gene Dixon's deceased sister and her two children, Curtis Dixon Colgate and Sharon M. Newcomb.
 
Kyanite Mining Corp. is one of rural Buckingham's largest employers but is virtually unknown of outside its tight circle of business interests.  More evident to the general public are the hundreds of acres of mined moutaintop land visible along U.S. 15 south of Dillwyn.
 
Wolf said during the summer trial that there likely would be little change in day-to-day operations at the mining company if the minority stockholders were successful in their case. The valuable property could be taken under control by new owners or continue under the Dixon family under a new business plan determined by the court and receiver or mutual agreement of the parties.    
 
(This has been a breaking news update. Check back for more details as they become available. Read more in tomorrow's Richmond Times-Dispatch.) 

Judge rejects entire defense after spoliation

Virginia Lawyers Weekly published this article today . Goes  to show that honesty and integrity  an inttegral part off our justice system.

In this lawsuit  involving Safeway, Inc., (Garlick v. Safeway, Inc.), and the Virginia Supreme Court ruled that these cases should be heard by a jury rather than decided by a trial judge. Safeway had originally been successful in getting the slip and fall lawsuit dismissed on the grounds that the plaintiff’s case lacked evidence. The Supreme Court reversed the circuit court citing that they erred in granting Safeway’s motion that the plaintiff did not have a “prima facie” case.  Prima facie is a Latin term, which refers to the evidence sufficient to prove a case

Judges can come down hard on litigants who hide or destroy evidence, but they rarely go so far as to block a defendant’s entire liability defense. Yet that’s what a Fairfax County judge did in a supermarket slip-and-fall case last year.

Circuit Judge Robert J. Smith lowered the boom on Safeway Inc., after finding the company had submitted an affidavit which – incorrectly – stated that vital evidence had been destroyed in conjunction with a store remodeling project. A company official later acknowledged the statement was false, according to Fairfax attorney Lawson D. Spivey III, who represented accident victim Cynthia Garlick.



In a trial that focused on damages only, a jury awarded Garlick $120,000 last year. The case is Garlick v. Safeway Inc.



Even after acknowledging the disingenuous affidavit, the company still never produced the information sought. The missing evidence included an employee’s statement about the accident, the name of the employee and video of the accident, Spivey said.



Spivey said his injured client did her own investigative work to locate the store employee. After five years of litigation, including three visits to the Supreme Court of Virginia, Garlick is hoping to see Safeway’s check for nearly $130,000, representing the verdict plus interest.



Garlick was shopping at a Safeway in Burke when she slipped in water on the floor and fell, breaking her arm. She had seen an employee in the area, stocking a shelf with cheese. The employee moved off and she approached the area, then slipped. She testified in an initial trial that she found herself in a puddle of water that covered an area of two-and-a-half to three feet of the floor.

Another employee testified he had seen water dripping from similar food carts, according to a 2009 Supreme Court opinion in the case.



Smith rejected Garlick’s case in the first trial. He struck her evidence, finding she had failed to show that Safeway could have known about the hazard.



The Supreme Court reversed in an unpublished order, sending the case back to Smith for another trial. With evidence showing an employee working in the area of the hazard, the court ruled, a jury could conclude that the employee should have either cleaned up the water or warned customers.



On remand to the Fairfax court, Smith gave the green light for Spivey and his team to explore Safeway’s missing evidence. “We kept getting the runaround,” Spivey complained.



Garlick’s lawyers demanded a deposition of a corporate representative with knowledge of the store’s practices regarding accidents. The designee revealed the missing information was not destroyed as part of any store remodeling. Nonetheless, the information still was not available.



Spivey said Garlick spent thousands of dollars on investigative work, in the absence of discovery documents from Safeway. “They really put it to her,” Spivey said.



Garlick managed to locate the Safeway employee involved. “It was just a stroke of luck that we found that employee,” Spivey said.



Smith’s decision to strike Safeway’s liability defense came at a hearing, Spivey said. “This has been a lesson in discovery abuse,” he reportedly said.



Safeway counsel Paul L. Warren of Norfolk did not return a call for comment.

Case law : Cops In California Don't Need A Warrant To Search Your Cell Phone For Info

Search and Seizure
"The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probably cause, supported by Oath or affirmation, and particulary describing the place to be searched, and the persons or things to be seized."

The next time you're in California, you might not want to bring your cell phone with you. Especially if you aren't planning on behaving yourself.

On January 3rd, 2011, California’s Supreme Court ruled in The People v. Gregory Diaz that phones carried at the time by suspects apprehended by police do not have Fourth Amendment protections. The case began in 2007 with the arrest of Gregory Diaz, for selling a controlled substance. Diaz was taken to a police station, where a detective removed Diaz’s phone from his person, and placed it with other evidence collected in the case. The arresting officer began to interview Diaz, and in the course of the interview, looked at the text messages on Diaz’s phone. One read “6 4 80,” or 6 pills for $80. Confronted with this text, Diaz admitted to selling drugs.



In court, however, he argued that viewing of his text messages, by police and without a warrant, violated his Fourth Amendment protections to be secure in is person, papers and effects against warrantless search. An exception to this protection exists: “incident to lawful arrest,” (United States v. Robinson (1973)) an officer may search an arrested suspect and the area immediately around him. Diaz argued that since cell phones today carry huge amounts of information, including information about associates, e-mails, text messages, records of calls and other such revealing data, it should not be subject a search, like clothing or a cigarette package were in prior case law, but rather should be treated like a closed container or box—that once separate from the actor in a significant period of time and space, it should not subject to warrantless search (United States v. Chadwick).



Dissenters on the California court found this argument persuasive; however, the court held that the character of seize evidence did not determine whether it could be searched; merely its possession or control by the actor at time of arrest made it eligible for a later search. The court made a comparison to a traveler carrying a paper bag with some personal effects, and an executive with a locked attaché case. Both, the court reasoned, should share equal protections. So then should a phone carry no more protection than other, unprotected methods of carrying personal information; perhaps an address book, or other “small spatial container” with “highly personal, intimate and private information, such a photographs, letters or diaries”.

It seems to me that the court seems to make fundamental misunderstandings about the digital nature of these devices; a cell phone can contain thousands of emails, photographs, text messages, records of meetings and birthdays, information about associates unlimited in depth and in breadth, and huge numbers of personal notes analogous to those found in a diary. A cell phone can easily hold, in its small form, more enough information to fill dozens of scrapbooks with photographs, stuff whole briefcases with e-mails and text messages, were they to be printed out on paper, fill many, many address books with information about friends and acquaintances, hold years’ worth of information that may take several calendars or planners to hold. In short, cell phones hold more information than could ever be carried by an individual, were it not in a digital form. In ignoring this fact, the court sets a dangerous precedent where a simple arrest can allow authorities to view records containing a record of the individual’s entire life since possessing a cell phone, a terrifying prospect for those with any desire to maintain protection from searches unreasonable in scope and breadth. Laptop computers and the like were not addressed and begs the question: If your phone is password protected, would they need a warrant to use some kind of equipment to get into it? Because having to break into a phone puts it clearly beyond the "plain view" rules to me.It will be interesting to see how this progresses.

This doesn't seem to apply to your everyday traffic stop, Still, this seems invasive, and not all the justices were in agreement with the ruling

Dissenters Kathryn Mickle Werdegar and Carlos Moreno wrote:

"The potential intrusion on informational privacy involved in a police search of a person's mobile phone, smartphone or handheld computer is unique among searches of an arrestee's person and effects."

California Deputy Attorney General Victoria Wilson told the media that the split decisions in California and Ohio could lead the U.S. Supreme Court to personally look into the issue of police searching cell phones.

CALIFORNIA PASSES NEW ELECTRONIC DISCOVERY ACT EFFECTIVE IMMEDIATELY

On June 29, 2009, Governor Arnold Schwarzenegger signed California’s Electronic Discovery Act into law. Because the Act contains an urgency provision, it is effective as of June 29, 2009.

Assembly Bill 5, which was signed by the governor Monday, immediately enacts new electronic discovery provisions into the state Code of Civil Procedure. The ultimate goal of the bill is to improve discovery practices for lawyers on both sides of a case.

The bill -- supported by the Civil Justice Association of California and Consumer Attorneys of California -- establishes procedures for a person to obtain discovery of electronically stored information.


The full text of the Act can be read here

All discovery propounded or responded to must now comply with the new law. These rules are very similar to the recent revisions to the Federal Rules of Civil Procedure, and bring California in line with the federal e-discovery standards and for the first time offer state litigants specific definitions of what constitutes electronically stored information.

Under the new Act, the party requesting production of electronically stored information (ESI) may specify the format in which it should be produced (e.g., native format, or TIFF, with or without certain metadata, etc.). If no format is specified, the responding party must produce the ESI in either the same format as it is ordinarily kept (likely in native format or an archived/compressed format) or in a "reasonably usable" form. The responding party need only produce the ESI in one form. If a requesting party fails to specify the format of production in its request, and the responding party produces the ESI in a "reasonably usable format," the requesting party cannot then compel a different form of production.

Lawmakers adopted almost identical legislation last year only to have the governor veto it during a bitter budget battle with the legislature.

Court Rules Against White House in Missing E-Mails Case

Wow - I don 't know how I missed the conclusion of this story......


What truly baffles me is the supposed IT difficulties from switching between email systems. I could perhaps buy that it loses you a day’s worth of email; but 400 days spread over 2 years?


Just how long did it take to install Outlook??

Personally I have almost 5 years of emails archived at my workplace available on demand. Email is relatively small and disk space is cheap; not cheap by federal government standards.... but real cheap by any measure!

- A U.S. District Court judge ruled Monday that the National Security Archive can move to force the White House to recover millions of Bush administration e-mails lost or destroyed between 2003 and 2005.

Judge Henry H. Kennedy, a Clinton appointee, rejected the Bush administration's claim that federal courts lacked the authority to require the White House to recover the e-mails. Kennedy ruled that the Federal Records Act permits a private plaintiff to file a complaint requiring the head of the EOP or the Archivist of the United States to notify Congress or ask the Attorney General to initiate action to recover destroyed or missing e-mail records.

“This ruling gives the public a clear voice in demanding preservation of our nation's history, even when that history is created at the White House,” explained Sheila Shadmand, an attorney at Jones Day who is representing the Archive. “We can now give positive action to that voice and protect these records before they get carted off or destroyed as the current administration packs its bags to leave. In that sense, the ruling itself is as historical as the records it will protect.”

Meredith Fuchs, general counsel for the Archive, said Monday's court ruling represents "a major victory for the public interest in accountability at the White House."

"Through this lawsuit we have preserved over 65,000 computer backup tapes," Fuchs said. "This decision means those tapes will survive the end of the Bush Administration so that Congress, the courts, and eventually the public will be able to learn about the decision-making that took place over the last 8 years.”

George Washington University's National Security Archive sued the Executive Office of the President and the National Archives and Records Administration in September 2007 alleging more than five million White House e-mails were deleted from White House computers between March 2003 and October 2005.

The government watchdog group Citizens for Responsibility and Ethics in Washington also sued to recover the missing e-mails. CREW's complaint was consolidated with the Archive's lawsuit. A chronology of the litigation is available here.

The email controversy first surfaced in January 2006. At the time, Patrick Fitzgerald, the special prosecutor appointed to investigate the leak of covert CIA operative Valerie Plame Wilson, said in a court filing that he "learned that not all email of the Office of the Vice President and the Executive Office of the President for certain time periods in 2003 was preserved through the normal archiving process on the White House computer system."

In October of 2005, the Office of Administration discovered that White House e-mails had not been archived in accordance with the Presidential Records Act. The Office of Administration had briefed former White House Counsel Harriet Miers about the lost e-mails.

Miers is said to have immediately informed Fitzgerald about the issue. Fitzgerald had been investigating White House officials’ role in the Plame leak and subpoenaed White House e-mails sent in 2003.

An internal investigation by officials in the Office of Administration concluded that e-mails from the office of Vice President Dick Cheney between Sept. 30, 2003, and Oct. 6, 2003 were lost and unrecoverable.

That was the week when the Justice Department launched an investigation into the Plame leak and set a deadline for Bush administration officials to turn over documents and e-mails containing any reference to Plame Wilson or her husband, former Ambassador Joseph Wilson. The timeframe also coincided with litigation surrounding the release of documentsr related to Cheney's National Energy Task Force meetings.

Additionally, Office of Administration staffers said there were at least 400 other days between March 2003 and October 2005 when e-mails could not be located in either Cheney’s office or the Executive Office of the President.

White House Chief Information Officer Teresa Payton and press secretary Dana Perino have blamed the loss of the e-mails on the administration’s transition from Lotus Notes to Microsoft Outlook.

Earlier this year, Payton filed an affidavit with U.S. Magistrate John Facciaola stating that every three years the White House destroyed its hard drives “in order to run updated software, reduce ongoing maintenance, and enhance security assurance.”

“When workstations are at the end of their lifecycle and retired… under the refresh program, the hard drives are generally sent offsite to another government entity for physical destruction in accordance with Department of Defense guidelines,” states Payton’s sworn affidavit.

In March, Payton also revealed that until October 2003 the White House had “recycled” its computer back-up tapes, which made it much more difficult to retrieve e-mails.

In August, CREW revealed in a court filing that the Bush administration may have hired an outside contractor to search individual computers for tens of thousands of missing e-mails that disappeared between 2003 and 2005 and instructed information technology experts conducting the search apparently have been told not to try and locate hundreds of thousands of missing e-mails from March 2003 to September 2003, a crucial timeframe that encompasses the start of the Iraq war, and the leak of covert CIA operative Valerie Plame Wilson.

“CREW has learned that the White House has now completed its analysis of the missing email problem and confirmed that email is missing for as many as 225 days,” said a statement posted on CREW’s website. “In addition, the White House is about to begin selecting, or has already selected, a contractor to restore the missing email, although it is CREW's understanding that the White House does not intend to use backup tapes predating October 2003.

In April 2007, CREW published a report entitled, "WITHOUT A TRACE: The Missing White House Emails and Violations of the Presidential Records Act," outlining the widespread failures by the White House to retain its emails. In its report, CREW said that "although [then-] White House counsel [Harriet Miers] was provided a detailed briefing of this analysis, and a plan of action to recover the missing email was developed, the plan has never been executed."

The Government Accountability Office issued a report in June that said four federal agencies it had monitored do not have a system in place to preserve emails. The agencies the GAO reviewed simply rely print-and-file systems to preserve their email records, meaning the documents can easily be destroyed or lost.

But Susan Cooper, a spokeswoman for the National Archives, said in an interview in July that her agency does not have the power to enforce the White House to comply with the Presidential Records Act.

“One thing you have to remember the key thing to remember about presidential records is that it doesn’t become ours until the end of the administration,” Cooper said. “The National Archives does not have any say or legal input until the end of a president’s term. It’s up to the president to decide how he manages his records. However, federal records are a different story. We have input into that immediately. If we believe a federal agency is violating the Federal Records Act we will write a letter to the agency and ask for an explanation and if necessary we will refer the case to the Justice Department.”

In May 2007, Allen Weinstein, Archivist of the United States, said the National Archives wrote a letter to the White House when reports about the extent of the missing emails began to surface.

“Because the [Executive Office of the Presdient] email system contains records governed under both the Presidential Records Act and Federal Records Act, on May 6,2007, the National Archives sent a standard letter to [ Alan R. Swendiman] the Director of the Office of Administration requesting a report on the allegations of unauthorized destruction of Federal records,” Weinstein told the House Oversight Committee in sworn testimony last month.

“While we have not received a written reply to the May 6 letter, we have been diligent in requesting an update on the status of the White House's review of these allegations and the possibility of missing Federal and Presidential emails, the White House has responded regularly that its review is still continuing.

"Furthermore, we have made our views clear, both to the White House and to this Committee, that, in the event emails are determined to be missing, it would be the responsibility of the White House to locate and restore all the emails, probably from the backup tapes, and that such a project needs to begin as soon as possible.”

The Socha-Gelbmann Electronic Discovery Survey: Time for a Change

I received this email the other day and am awed and humbled by the integrity, class, and character that these gentlemen exhibit by taking a step back from what has become an eagerly awaited and respected annual industry publication. Regardless of how one might feel about the respective company rankings - the fact is that the survey has done much to pave the way for our Electronic Discovery "industry".

The email in its entirety speaks for itself:

"The time has come for us, the creators of the Socha-Gelbmann Electronic
Discovery Survey provider rankings, to kill our rankings. We intend to
replace those rankings with an improved way to assess providers and their
capabilities.

Why are we killing the rankings? We believe that our survey rankings have
reached the point where they no longer serve their original purpose. When
they are announced, we are told, they can affect the share prices of
publically held companies. They can have an impact on the ability of
providers to obtain financing. They can be a key factor, sometimes the most
important factor, in determining which provider is selected to take on a
project or deliver a software program.

No set of generalized rankings should have this type of influence. Not ours.
Not anyone's.

A Bit of History...

When we issued our first set of rankings six years ago, we felt they helped
guide consumers entering an inchoate market. We offered the rankings as
indicators of which providers appeared to be rising to the top. In the first
year, as some may recall, we published a single set of rankings - a list of
the top five electronic discovery providers.

Over time, we expanded the scope of the rankings. With the third survey, we
extended the overall rankings from the top five to the top 20, divided into
groupings of 1-5, 6-10 and 11-20.

The following year, we expanded the rankings even more. We drew distinctions
between services and software providers. We offered service provider
rankings based on assessments of their experience, their capacity, and the
views of law firms and the corporations from whom we gathered data. We added
software provider rankings based on law firm and corporate responses as
well. We also added rankings for services and software providers by the
Electronic Discovery Research Model stage.

This year we added a set of software provider rankings that looked at the
usage of those providers' software.

We always have sought to portray the service and software providers as
objectively and as fairly as possible. This year, for example, we examined
more than 350 separate categories of information. For each category, we
gathered together all that data we had on that topic. We quantified the
data, converting it from text to numbers where necessary. We developed
something akin to a distribution curve and from that prepared a rating
scale.
We recognize that perfection is never achievable, which is why we have
always presented the rankings with a cautionary warning. Last year, we
cautioned that consumers "should not choose a provider based solely on these
lists, or solely on the basis of any other top-X list." This year, we
stressed that "anyone who makes buying decisions primarily on these rankings
is a fool."

Time for a Change...

As noted above, we are told that the rankings have become so influential
that now they affect share prices and the ability to get funding. We are
hearing, as well, that consumers are using them as a substitute for the work
they should be doing themselves - analyzing consumer needs and assessing
what and whose services and software might meet those needs.

As we stated above, this is wrong. So much for the effectiveness of
warnings.

Where Do We Go From Here?

For the next round of our survey, we intend to discontinue the rankings in
their current form. We hope to replace them with a system that will more
effectively allow potential consumers of electronic discovery services and
software match up what they perceive to be their needs with what the
providers have to offer.

As we have done with previous surveys, we will work on improving our survey
to deliver the most value to our subscribers. We will retool how we present
providers and their capabilities. We will continue to publish a high level
view of key industry trends, market size and provider and their capabilities
in Law Technology News.

We welcome your suggestions - let us know what would be more useful than the
rankings. You can send your thoughts to us at
survey.suggestions@ sochaconsulting. com.

Thanks,

George and Tom

George J. Socha, Jr., Esq.
Socha Consulting LLC

Court Reminds Parties of Their Duty to Preserve and Enters Preservation Order

In re Flash Memory Antitrust Litig., 2008 WL 1831668 (N.D. Cal. Apr. 22, 2008)

As I try and tell my clients every chance I can - the very first thing to consider at the early stages of litigation is PRESERVATION…

this court reminds us that the term “electronically stored information” is quite broad….


The court's order, in its entirety, provides:

All parties and their counsel are reminded of their duty to preserve evidence that may be relevant to this action. The duty extends to documents, data, and tangible things in the possession, custody and control of the parties to this action, and any employees, agents, contractors, carriers, bailees, or other non-parties who possess materials reasonably anticipated to be subject to discovery in this action. "Documents, data, and tangible things" shall be interpreted broadly to include writings, records, files, correspondence, reports, memoranda, calendars, diaries, minutes, electronic messages, voice mail, E-mail, telephone message records or logs, computer and network activity logs, hard drives, backup data, removable computer storage media such as tapes, discs and cards, printouts, document image files, Web pages, databases, spreadsheets, software, books, ledgers, journals, orders, invoices, bills, vouchers, check statements, worksheets, summaries, compilations, computations, charts, diagrams, graphic presentations, drawings, films, charts, digital or chemical process photographs, video, phonographic, tape or digital recordings or transcripts thereof, drafts, jottings and notes, studies or drafts of studies or other similar such material. Information that serves to identify, locate, or link such material, such as file inventories, file folders, indices, and metadata, is also included in this definition. Until the parties reach an agreements on a preservation plan or the Court orders otherwise, each party shall take reasonable steps to preserve all documents, data, and tangible things containing information potentially relevant to the subject mater of this litigation. In addition, counsel shall exercise all reasonable efforts to identify and notify parties and non-parties of their duties, including employees of corporate or institutional parties, to the extent required by the Federal Rules of Civil Procedure.