Delaware Ruling Involving a Lawsuit against Arie Genger Contradicts Delaware Guidelines
Introduction
The Digital Revolution which began in the early 80s marked the beginning of the Information Age. This continuing revolution is mostly attributed to the shift in technology from electronic to digital. The information age has developed rapidly with continued innovations and a responsive market. Inevitably, the judiciary system plays a significant role within the digital revolution, reviewing cases and setting precedents which affect the entire technology industry.
Information Technology & Judiciary Oversight
Information Technology Law (IT Law) governs the process and distribution of information in digital formats. In some cases, the courts have been successful in keeping pace with technology growth, deciding on rulings that are in line with the technology in question. In other cases, the courts have set rulings which conflict with the very nature of the relevant technology. This has put the state of the courts in a quandary of sorts, with rulings that make logical sense, but ultimately lose their relevance in the context of technology. One major topic of concern is the validity of digital evidence and "preservation of books and records".
Judicial Obstacles with Technology-Related Rulings
As demonstrated in the pivotal ruling of TR Investors LLC v. Genger, (No. 3994-VCS, Delaware Court of Chancery, Dec 9, 2009), the technical circumstances posed an especially complex barrier in determining a viable ruling. The case involved a lawsuit between overseas entities controlled by Jules and Eddie Trump (Trump Group) and the Founder and former CEO of TRI, Arie Genger. Trump Group was in the midst of a control battle with Arie Genger for control of TRI. Finally in August 2008, through a purchase of stocks by the Trump Group from Genger's estranged son, the power struggle shifted, enabling the Trump Group to vote for removing both Genger and the TRI Board. A lawsuit followed, with Genger repudiating the vote, and the Trump Brothers litigating for his removal through their majority shares of TRI.
Preservation of Books and Records & the Removal of Private, Sensitive Materials
During the trial, a court order to preserve the books and records has been issued. Genger agreed to this; however he did request to remove his personal information and national security documents which were stored on the TRI system. Genger's personal and classified files were encrypted under the supervision of TRI's outside counsel and an external technology firm. However, to avoid any possible exposure to sensitive secure files -- which were mistakenly copied unencrypted by the technology people on to the unallocated space -- Genger authorized their deletion from the unallocated space -- and here is were the complexity unfolds.
Allocated and Unallocated Space - Background
Files saved on a computer's hard drive are said to be stored in the computer's "allocated space". Unstructured data from file remnants, temporary files or subdirectories are stored on a computer's "unallocated space", which is in most cases never accessed by the user. When files are deleted from allocated space they are removed, making room for more storage within the allocated space; however, they are not entirely removed from the computer. Fragments of these files may also be moved at random to the unallocated space of a computer, deleted naturally with the activities occurring in the allocated space, and retrievable only in some cases through forensic means. As part of Genger's efforts to protect his privacy, after all active files have been imaged, he allowed the usage of a "wiping" program to erase the unallocated space of the computer and server of the unencrypted mistaken copies created during the encryption process.
Consequences of Deleting Unallocated Space
Viewing Genger's actions as a direct violation of the Court's preservation order, Arie Genger was held in contempt of court. The court also claimed that a document was missing and assumed that it was stored on the computer's unallocated space. The court's ruling is considered especially controversial for four main reasons:
1. Customary preservation efforts do not require the imaging of the unallocated space.
2. It is not known what materials were in fact located on the computer's unallocated space. Fragments of files may have been located on the unallocated space but the likelihood that old files would have been available there is disputed by computer experts.
3. By treating unallocated space as a computer's memory backup system, the courts viewpoint comes into direct conflict with the technological norms and standards. Unallocated space is regarded as part of the computer's operating system, enabling the system to run optimally, not as a legitimate backup system that contains active files.
4. Treating unallocated space as a valid backup source also directly contradicts Delaware guidelines and the Sedona Conference Principles for Electronic Documentation Production. These guidelines indicate that relevant data subject to Delaware's preservation hold rules relate only to data stored in allocated space. Thus, the court's ruling was in fact contrary to Delaware own guidelines.
Background of the Defendant, Arie Genger
Arie Genger's personal background plays a significant role in explaining his motivations for taking extra precautions when deleting the inadvertent unsecured copies of files created during the encryption process. An American citizen born in Israel, Arie Genger is an experienced businessman and entrepreneur. As a senior executive at the Rapid American Corporation and later President of the McCrory Corporation, Arie Genger established a reputation for turning around companies in a financial crisis. After working in the United States for nearly ten years, Genger was offered a government position to help bolster Israel's economic and security ministries. It was during this time when he also became the personal advisor to future-Israeli Prime Minister Ariel Sharon. Later in 2001, Genger was appointed as White House Emissary by Prime Minister Ariel Sharon during the Bush administration and was entrusted with sensitive materials. The private files contained on TRI's systems included files that related to Genger's contacts with Israeli Prime Minister Ariel Sharon, high-ranking White House officials, as well as court sealed documents related to Genger's bitter divorce from his wife.
Conclusion
Unlike tangible evidence such as fingerprints, digital evidence presents a new challenge for today's judges to overcome. While the court viewed the wiping of the unallocated space as the deletion of a source of information that may have been relevant to the court's proceedings, this assumption is questionable. Also, the court's consideration of unallocated space as a legitimate backup for digital information may sound to be legally valid, but in today's electronic technical advanced world, it is problematic at best and probably economically and practically unworkable.
The case is currently being appealed.
About the Author
Mark Hyde is a twenty year legal system veteran. In recent years he has worked with Fortune 500 companies, among others, on issues related primarily to cyber crime and technology investigations. In the past he has worked independently with national legal and financial firms on various legal matters ranging from technology, to finance, and fraud.
Mr. Hyde is a highly respected authority in the legal profession who works privately and discreetly with each one of his clients.
Comments
