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Backstory on a $604 million verdict: Morgan Stanley's e-mail debacle

I opened Jill Barton's story this morning to see that Morgan Stanley's attorneys are already swiping at the trial judge, Elizabeth Maass, accusing her of issuing a default verdict. Yesterday, Ron Perelman won $604 million in compensatory damages from the financier and, according to reports, the jury is considering another $2 billion in punitives. Morgan Stanley is crying foul:

"The verdict, while disappointing, is not surprising, given the unprecedented and highly prejudicial rulings imposed by the trial judge," said a Morgan Stanley spokesperson. "Morgan Stanley was not permitted to defend itself on the merits. As a result, the jury heard allegations, instead of true facts, and Morgan Stanley was denied a fair trial."

During the trial, Judge Maass instructed the jury to assume that Morgan Stanley was guilty of "massive fraud." Wonder what inspired her? So did I, so I poked around and found that Monica Bay has the essential backstory on The Common Scold. Here's her overview:

"Morgan Stanley's retail brokerage unit was destroyed in the 9/11 attacks on the World Trade Center, and the company subsequently used this to argue that it couldn't produce certain e-mail evidence in several arbitration cases, regulatory settlements and legal judgments, according to this story.

"But an internal review of e-mail retention related to the fraud case Perelman brought against Morgan Stanley revealed that the e-mails were discoverable. Florida state judge Elizabeth Maass told the jury to assume that "Morgan Stanley participated in a "massive fraud" ... because it failed to search backup tapes and review e-mails dating back to 1998." As [Matthew] McCarrick points out, the case nearly settled for $20 million before the e-mail debacle."

Bay's archives (March 17) also contain the judge's finding of fact in the e-mail debacle: This ugly brief. The document's timeline details Morgan Stanley's e-mail discovery woes and Judge Maass' decision to allow Perelman to hire a third-party to check up on Morgan Stanley's work. The awful result reads like some combination of train wreck and Abbott and Costello's "Who's on first?" routine.

Don't miss Bay's link today to McCarrick (The Litigation Support Guy), a regular in Bay's columns, who has a great piece in "The Woodshed Revisited." He writes,

"There will be a lot more of these cases (and verdicts) before Corporate America wakes up and senses which way these winds are blowing. That day can't come soon enough.  At least then I won't have to listen to questions like I was asked last week by a general counsel facing an e-mail intensive litigation (to whom we were introducing a native file review/e-mail analytic tool), "Why would we use something like this instead of just printing everything and handing a pile of redwells off to a bunch of attorneys?"

Now McCarrick can just print today's papers and hand a pile off to a bunch of clients.

Related story: Wake-up call on e-discovery: Morgan Stanley's e-mail fumble hits WSJ p. 1

Posted by Product Team on May 17, 2005 at 08:48 AM | Permalink | TrackBack (1)


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» The Woodshed Revisited from The Litigation Support Guy
Nothing breaks a litigation support guy out of a blog drought like a half billion verdict directly attributable to an electronic discovery violation. (Well, that and a slight break in a ridiculously busy schedule the past several weeks) The verdict [Read More]

Tracked on May 17, 2005 3:08:50 PM

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