Eaton says material was not intentionally withheld in legal fight

Eaton Corp. officials agree on one thing: The newly discovered emails that discussed former Hinds County District Attorney and former circuit judge Bobby DeLaughter were found on a former company lawyer’s computer.

Two company lawyers were fired in wake of new Peters/DeLaughter emails

Why they weren’t found years ago is where the stories diverge. The new emails were particularly important, because discovery fights have been common since the trade secret litigation involving Eaton and The Triumph Group (formerly Frisby Aerospace) started nearly a decade ago.

On May 10, Hinds County Circuit Judge Jeff Weill, who took over the case from DeLaughter, ordered Eaton to produce every document in the company’s possession that related to Peters and/or DeLaughter. The order was the result of Eaton having turned over in April two newly discovered emails from 2007, after finding them earlier this year. Each mentioned Peters and DeLaugher, according to court filings.

Weill also directed Eaton’s CEO and the company’s in-house and outside legal counsel to provide affidavits explaining why the two emails – one from March 2007 and another from October 2007 – had not been produced previously. Weill also solicited suggestions for sanctions the company should endure for not finding the emails in 2008, when Frisby sought the material during discovery.

The documents Eaton found as a result of the May 10 order were filed under seal. The company sought to file the affidavits under seal, but Weill denied that motion.

Mark McGuire, Eaton’s general counsel, said in his affidavit that in 2008, there was a hold issued on emails and documents that had to do with Eaton’s hiring of Ed Peters and that concerned Bobby DeLaughter. The hold was in response to a court order directing the company to produce the material.

McGuire said it was his understanding that Eaton’s IT team had been instructed to make a copy of his hard drive and the hard drives of other employees in the legal department. That would have included, McGuire said, the preservation of emails.

McGuire said he conducted a manual search of his emails and does not recall finding anything relating to Peters and/or DeLaughter that would have required production. It was McGuire’s understanding, he wrote in his affidavit, that other employees in Eaton’s legal department did the same.

McGuire says that in early 2012, Latham and Watkins, a law firm Eaton had hired in 2011 to assist with the Frisby litigation, found a March 2007 email that appeared relevant to the Peters/ DeLaughter discovery that had not been produced in 2008.

McGuire said he first saw the email in February of this year. Afterward, he ordered Latham to initiate a review and issue a report of the Peters/DeLaughter discovery to ensure Eaton had fully complied with the court’s 2008 order.

During that review, McGuire’s affidavit says, it was discovered that the March 2007 emails and emails from October of that year had not been produced. Both emails, McGuire wrote, were found on the hard drive of former Eaton lawyer Sharon O’Flaherty.

“As reflected in the Latham report, I understand that no other hard drives contain these emails, but if Eaton had performed an electronic search of Ms. O’Flaherty’s computer hard drive in 2008, these emails would have been discovered and produced at that time,” McGuire writes, calling the original search “inadequate.”

McGuire writes in his affidavit that Eaton has upgraded its document discovery, search and production capabilities, created new protocols for internal document review and invested in new software that allows the company to perform improved electronic document searches. Manual searches for emails during the course of discovery are no longer permitted, the affidavit says.

To go with that, Eaton fired May 17 O’Flaherty and VP of litigation Victor Leo.

McGuire recommended as sanctions for Eaton that the company pay Frisby’s legal fees related to the production of the newly discovered emails, and a court-appointed supervisor (at Eaton’s expense) of Eaton’s performance in discovery until the litigation ends. McGuire also recommended electronic discovery training for Eaton attorneys and paralegals. The last of McGuire’s recommendations was for Eaton to fund electronic discovery courses, with an emphasis on attorneys’ ethical obligations, at a law school based in Ohio or at Ole Miss or Mississippi College’s schools of law.

O’Flaherty denies withholding the emails in 2008, claiming in her affidavit that she turned over her computer to Eaton’s IT team for forensic imaging. She adds that she was responsible for compiling the results of the manual and forensic searches of company hard drives and email boxes, which she forwarded to Leo, she says, who then forwarded the information to Eaton’s outside counsel. O’Flaherty writes in her affidavit that she does not know why the emails were not discovered until February of this year.

Leo partially disputes O’Flaherty’s account. He writes in his affidavit that O’Flaherty was responsible for compiling the 2008 search results, but that she – not him – was responsible for forwarding the findings to outside counsel. He says he believes the 2007 emails were not intentionally omitted, “but instead were either not located during prior searches or not included with other materials designated for production. In either case, I believe this to have been inadvertent on the part of Eaton.”

Leo said that he was told by O’Flaherty and other lawyers inside and outside of Eaton that they had performed manual searches of their emails in 2008. Leo adds that he believes it inaccurate to label the information as having been withheld. He rejects the assertion included in Latham’s report that he directed Eaton’s IT team not to search PST (or email) files during the hard drive scans in 2008.

Leo and O’Flaherty’s affidavits were each dated May 16, one day before McGuire’s affidavit said they were fired.

Michael Schaalman, Eaton’s outside counsel, said his office’s IT team searched his hard drive and that of others who would have potentially had material related to Peters and DeLaughter. Schaalman acknowledges in his affidavit that it’s possible the newly discovered emails were sent to him but deleted before the 2008 search. Schaalman’s office, he writes, has a policy to automatically delete emails that are more than 60 days old, unless they have been manually archived.

Eaton CEO Alexander Cutler’s affidavit goes beyond the recounting of events, and praises the company’s Jackson facility, which has been in operation more than 50 years, for its contributions to the company.

He laments the newly discovered emails having gone unnoticed since 2008. “I have learned sufficient information thus far to cause me to believe that Eaton’s high standards were not met with respect to its obligations to the Court and opposing parties in this case to search for and produce documents responsive to discovery requests and court orders during 2008 and 2009,” he said.

Ohio-based Eaton and North Carolina-based Triumph Group (formerly known as Frisby Aerospace) have been tangled in trade secret litigation since 2004. Eaton originally sued Frisby, claiming that five former employees had stolen trade secrets after they left the Jackson aerospace facility and took jobs at Frisby.

Former Hinds County Circuit Judge Wert Yerger dismissed the case in late 2010 after he ruled that Eaton had hired Peters to improperly influence DeLaughter, who presided over the case then. Eaton has repeatedly denied that assertion. The litigation currently survives in the form of a counter-claim Frisby is pursuing. Eaton has also appealed to the Mississippi Supreme Court, asking it to restore the original litigation. That appeal is currently pending.

Lawyers for Frisby filed last month with the high court a motion to stay the appeal pending the resolution of the new findings in the case at the circuit court level. In that motion, Frisby lawyers said the emails and documents having gone undiscovered in 2008 and 2009 could not have happened by accident, as Eaton officials claim in their affidavits.

Peters and DeLaughter were involved in the Scruggs judicial bribery scandal, with Peters receiving immunity from prosecution. DeLaughter did not receive immunity, and served 18 months in federal prison after pleading guilty to obstruction of justice. He was released in April 2011.

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