Case Summary: U-Haul Int’l; Authentication of Database Summaries and the Underlying Data

Lumbermens Insurance company objected to a Trial Court’s admission of computer generated summaries of payments for loss adjustments produced by another insurance company. Each summary related to a specific individual insurance claim. Lumbermens appealed to the ninth circuit.

Lumbermens first contended that the summaries are hearsay not fitting within the business records exception (FRE 803(6)) of the FRE, and therefore should have been excluded.
The court began by explaining that FRE 803(6) allows records of regularly conducted business activity meeting the criterial laid out as follows constitute an exception to the prohibition against hearsay evidence:

A . . . report, record, or data compilation, in any form, of acts, events, condition, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the . . . report, record or data compilation, all as shown by the testimony of the custodian or other qualified witness . . . unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness.

The court then reiterated its previous stance that it is immaterial that business records are maintained in a computer rather than in company books. The logical extension of this principle is that evidence that has been compiled from a computer database is also admissible under the business records exception, provided it meets the criterial of FRE 803(6). The court quoted several decisions, including Weinstein’s Federal Evidence, which stated that “The important issue is whether the database, not the printout from the database, was compiled in the ordinary course of business.”

The court concluded that the summaries fit squarely within the exception provided under FRE 803(6). It noted that the trial court had concluded:

1. the underlying data was entered into the database at or near the time each payment was made;
2. the persons entering the data had knowledge of the payments that precipitated the data entry;
3. the data was kept in the course of regularly conducted business activity; and
4. Mr. Matsush, the authenticating witness, was qualified to testify to this information.

The court concluded that nothing in the record indicated that any of these findings were clearly erroneous.

Mr. Matush’s testimony that data entry for each payment occurs at the time of the payment, and that employees routinely queried the database to generate summaries. The court continued it’s description:

Matush testified that he was familiar with the record-keeping practices of the company, testified regarding the computer system used to compile and search the insurance claim records, and testified regarding the process of querying the computer system to create the summaries admitted at trial. This description of the process used to create the summaries was sufficient to authenticate the evidence, and the district court did not abuse its discretion in holding that a sufficient foundation was laid to admit the exhibits.

(Emphasis added).

Finally, the court was unconvinced by Lumbermens’ arguments that the summaries were inadmissible under FRE 1006, allowing summaries of “voluminous” writings to admitted only if the original data is accessible. The court stated that the summaries themselves are the business records, and so no additional data needed to be made available.

Case Blurb: Covad; Don’t blame the processing platform

Post Process: Previous decisions in this contentious case required, among other things, that the producing party submit itself to a third party forensics expert for an examination of its search protocol. In the instant decision, producing party was defending the fact that, after having produced e-mail in hard copy format, and then being ordered to re-produce it in native format, it only produced a native sub-set of the original imaged production. The producing party, in effect, blamed the processing platform for its difficulties in reconciling the two production sets. The court responded:
While the nature of the discrepancy is not explained, I have to assume that fewer e-mails have been produced in native format than were produced on paper. Revonet explains that the platform that Revonet originally used to search for documents was only capable of exporting documents to an HTML format. Thus, Revonet had to use a different platform to obtain .pst files and therefore could not re-run the original search exactly. This may explain the discrepancy. Neither party provides information about the magnitude of the discrepancy, however, largely because Revonet claims that it would be too burdensome for it to cross-reference the electronic documents against the hard copies to determine how many and which e-mails are missing.

While I appreciate that it would be difficult for Revonet to go back through its papers to determine whether all of the documents contained therein have since been produced and that Revonet’s present counsel did not supervise or conduct the August, 2008 search for e-mails, I also appreciate that it is a burden of Revonet’s own making. Covad should not be penalized by Revonet’s failure to maintain its discovery materials in some sort of organized fashion or keep some record of its own actions in this lawsuit. Wyeth v. Impax Labs., Inc., 248 F.R.D. 169, 171 (D. Del. 2006) (“[P]roducing party must preserve the integrity of the electronic documents it produces. Failure to do so will not support a contention that production of documents in native format is overly burdensome.”).

Post Process: In other words, a burden of one’s own making is not a basis for asserting undue burden. Another maxim: choose your platform wisely.

Covad Communs. Co. v. Revonet, Inc., 2009 U.S. Dist. LEXIS 75325 (D.D.C. Aug. 25, 2009).

Case Blurb: Asher Assocs LLC; Role of Intent in Assessing Sanctions

Common sense suggests that a failure to produce or preserve relevant evidence may involve conduct that falls “along a continuum of fault — ranging from innocence through the degrees of negligence to intentionality.”

In Aramburu v. Boeing Co., 112 F.3d 1398, 1407 (10th Cir. 1997), the Tenth Circuit held that “the bad faith destruction of a document relevant to proof of an issue at trial gives rise to an inference that production of the document would have been unfavorable to the party responsible for its destruction.” In the same decision, the Tenth Circuit further reasoned that no adverse inference should arise where the destruction of a document resulted from mere negligence, because only bad faith would support an “inference of consciousness of a weak case.” FN11.

FN11: “‘Bad faith’ is the antithesis of good faith and has been defined in the cases to be when a thing is done dishonestly and not merely negligently. It is also defined as that which imports a dishonest purpose and implies wrongdoing or some motive of self-interest.” Of course, in cases where an adverse inference instruction is neither requested nor appropriate, the Tenth Circuit has held that a finding of bad faith is not required to impose non-dispositive sanctions, such as excluding evidence.

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *27-28 (D. Colo. May 12, 2009)(internal citations removed).

Case Blurb: Asher Assocs LLC; Second Letter with an ‘Emphatic Tone’ Likely Triggered Duty to Preserve

Defendant cites my decision in Cache La Poudre Feeds, LLC v. Land O’Lakes, Inc., 244 F.R.D. 614, 623 (D. Colo. 2007), as support for its assertion that Plaintiff’s correspondence in September 2006 was too vague to trigger a duty to preserve evidence. To the contrary, the facts in Cache La Poudre are completely distinguishable. In that case, plaintiff’s counsel sent the putative defendant successive letters over a nearly two-year period in which she reiterated her client’s desire to explore a negotiated resolution of the parties’ dispute. I concluded that the less-than-adamant tone of counsel’s letters, coupled with the lengthy passage of time, belied the contention that Cache La Poudre’s correspondence had triggered a duty to preserve evidence.

Here, the facts compel a different conclusion. Plaintiff’s letter of September 8, 2006, came quickly on the heels of the Warranty Claim letter sent on September 1, 2008. While the earlier letter had not specifically threatened litigation, the September 8 correspondence adopted a decidedly different and emphatic tone. Plaintiff’s outside counsel characterized the earlier letter as a “failed” attempt to resolve the dispute “without litigation.” Where Plaintiff’s September 1st letter referred to “expenditures” incurred by [Plaintiffs] in connection with [certain] Contracts, outside counsel now indicated that his client had been “significantly damaged,” provided [Defendants] with an “interim damage calculation,” and claimed that “damages continue to accrue.” The September 8th letter demanded an “immediate payment” and imposed a five-day deadline for making that payment. Outside counsel went so far as to identify the specific claims for relief that [Plaintiffs] would assert if it initiated “such legal or other action to enforce its rights.” Given the tenor of the September 8th letter, [Defendants] should have understood that future litigation was reasonably foreseeable and substantially “more than a possibility.”

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *24-25 (D. Colo. May 12, 2009)(internal citations removed)(emphases added).

Case Blurb: Asher Assocs; Court Expounds upon Duty to Preserve

In most cases, the duty to preserve evidence is triggered by the filing of a lawsuit. However, the obligation to preserve evidence may arise even earlier if a party has notice that future litigation is likely.

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *23 (D. Colo. May 12, 2009).

Case Blurb: Asher Assocs LLC; Exercise of the Court’s ‘Inherent Powers’ to Sanction Party for Spoliation (10th Cir)

Plaintiffs correctly note that the court has inherent power to impose sanctions for the destruction or loss of evidence. []A spoliation sanction is proper where (1) a party has a duty to preserve evidence because it knew, or should have known, that litigation was imminent, and (2) the adverse party was prejudiced by the destruction of the evidence.[]

In exercising its discretion to fashion an appropriate sanction, the court must consider the culpability of the responsible party and whether the evidence was relevant to prove an issue at trial.

First, the court must determine whether the missing [evidence] would be relevant to an issue at trial. If that question is answered in the negative, the court’s analysis stops there. If the missing evidence would be relevant, the court must then decide whether [Producing Party] was under an obligation to preserve the [evidence]. Finally, if such a duty existed, the court must consider what sanction, if any, is appropriate given the non-moving party’s degree of culpability, the degree of any prejudice to the moving party, and the purposes to be served by exercising the court’s power to sanction.

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *16-18 (D. Colo. May 12, 2009)(internal citations removed).

Case Blurb: Asher Assocs LLC; A Definition of Spoliation

“Spoliation” has been defined as “the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.”

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *16 (D. Colo. May 12, 2009)

Case Blurb: Asher Assocs LLC; Reason for Existence of Duty to Preserve

To ensure that the discovery permitted by Rule 26(b)(1) does not become a futile exercise, putative litigants have a duty to preserve documents or materials that may be relevant to potential future litigation.

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *15-16 (D. Colo. May 12, 2009)(citing Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003)).

Case Blurb: Asher Assocs LLC, Purpose of Discovery Procedures

Discovery procedures set forth in the Federal Rules of Civil Procedure seek to further the interests of justice by minimizing surprise at trial and ensuring wide-ranging discovery of information. To that end, Rule 26(b) permits discovery “regarding any matter . . . that is relevant to the claim or defense of any party” or discovery of any information that “appears reasonably calculated to lead to the discovery of admissible evidence.”

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *15 (D. Colo. May 12, 2009)(internal citations removed).

Case Blurb: Relion, Inc; Multiple failures lead to a waiver of privilege

[Post Process: the court applies FRE 502(b) for its analysis of a situation of inadvertent production]

On the basis of this evidence, I conclude that [Producing Party] has not carried its burden of disproving waiver. [Producing Party's] discovery documents were inspected by attorneys and support staff…before they were produced… As the incident involving the re-exam file indicates, there was no surprise or deception on the part of [Requesting Party's] counsel. [Counsel for Producing Party] not only had the opportunity to inspect the documents prior to the arrival of [Requesting Party's] counsel, it had two additional opportunities to do so after [Requesting Party] had reviewed [Producing Party's] documents, as [Requesting Party] provided [Producing Party's] counsel with both hard copies and electronic, text-searchable copies of the documents [Requesting Party] had selected for copying. I conclude that [Producing Party] did not pursue all reasonable means of preserving the confidentiality of the documents produced to [Requesting Party], and therefore that the privilege was waived. The fact that [counsel for Producing Party] did not intend to produce any privileged documents is not dispositive.

Relion, Inc. v. Hydra Fuel Cell Corp., 2008 U.S. Dist. LEXIS 98400 (D. Or. Dec. 4, 2008 ).