Case Summary: Bunnell; Terminating Sanctions and Default Judgment appropriate for Willful, Systemic Spoliation

In this copyright infringement case, the court held that terminating sanctions and the entry of default judgment in favor of the requesting party was appropriate the court found:

• User forum postings had been systematically reviewed for the purpose of modifying or deleting those which referred to acts associated with copyright infringement;
• Directory headings where copyrighted content was stored was changed from specific names of television shows to more generalized names (e.g., “TV-Unsorted”).
• Evidence suggested that [Producing Party] may have failed to produce previously existing, unaltered versions of these directories.
• Producing Party failed to produce, and claimed not to possess, the full IP addresses related to clients downloading works protected by copyright laws, where evidence suggested that the party did in fact have this information.
• Producing party failed to produce names of forum moderators, as required.

Columbia Pictures Inc. v. Bunnell, No. 2:06-cv-01093 (C.D. Cal. Dec. 13, 2007) (Order Granting Plaintiffs’ Motion for Terminating Sanctions)

Case Blurb: Bunnell; Deleting and modifying user forum postings constitutes willful spoliation

[Requesting Parties] claim that [Producing Parties] responded to the filing of this lawsuit with a plan to delete and modify “hundreds or thousands” of postings on [Producing Party's] forums whose content included references to copyright infringement (the issue in the case).

Forum postings were modified to replace the names of copyrighted works with, for example, “[some movie 1]” and “[some movie 2].” Two forum threads were deleted entirely: a thread on how to “crack” or bypass the copyright security on electronic games and a glossary of terms like CAM, TS, DVDSCR, and Telecine (terms referring to methods of copying content).

This process was implemented to “clean up” the site in response to the lawsuit, with an eye to avoiding future complaints of copyright infringement. [Producing Party] claims that it assumed [Requesting Party] had already seen the existing forum postings. Thus, its intention was not to destroy evidence but to “steer clear of anything related to piracy.” This contention is simply not believable. The destruction of evidence clearly relevant on the issue of copyright infringement cannot be justified by the assumption that it’s already been viewed by [Requesting Party].

Most piracy-related threads were closed and removed from public view, leaving their content intact, rather than modified.

Vbulletin, the software [Producing Party] uses to operate the forums, “does not save material which has been edited from the post.”

Columbia Pictures Inc. v. Bunnell, No. 2:06-cv-01093 (C.D. Cal. Dec. 13, 2007) (Order Granting Plaintiffs’ Motion for Terminating Sanctions)

Case Blurb: Lowry Development LLC; Producing Party’s destruction of evidence and untruthful testimony warrant sanctions

In the exercise of my discretion in this matter, I have determined that the destruction of this computer occurred at a time [Producing Party] knew or should have known that the computer and the data it contained were part of the evidence in this case. [Producing Party]’s decision to discard the computer was not the product of simple negligence, and [Producing Party]’s untruthful testimony concerning the manner in which this computer was handled is sufficient to infer the necessary element of bad faith in connection with his actions. I am of the opinion that [Requesting Party] should be allowed to introduce evidence concerning the disposition of this computer and concerning Groves’s untruthful testimony about this matter.

The existence of a mutual mistake of fact in connection with the formation of the [Requesting Party] insurance contract is an issue on which Great American would ordinarily bear an extraordinary burden of proof. The jury’s decision on this issue will depend in substantial part on the credibility of [Producing Party]’s testimony, and the parties have recognized that should [Requesting Party] prevail on the defense of mutual mistake [Producing Party], would be liable to the plaintiff for his wind-related losses. In these circumstances, I find that the appropriate sanction for [Producing Party]’s destruction of the data contained in his computer is to ameliorate the effect of this loss of evidence by reducing [Requesting Party]’s burden of proof to a preponderance of the evidence. See: McGuire v. Sigma Coatings, Inc., 48 F.3d 902 (5th Cir.1995). I will so instruct the jury at the appropriate time.

Accordingly, I will grant [Requesting Party]’s motion for sanctions, and I will permit [Requesting Party] to elicit testimony and introduce other evidence related to the destruction of this evidence. After I have heard the evidence in the case, I will fashion an appropriate jury instruction concerning the inferences or conclusions the jury may draw from [Producing Party]’s actions, and [Requesting Party]’s burden of proof on the issue of mutual mistake will be to prove the facts necessary to establish this defense by a preponderance of the evidence.

Great Am. Ins. Co. of N.Y. v. Lowry Dev., LLC, 2007 WL 4268776 (S.D. Miss. Nov. 30, 2007)

Why “Spoliation” is a moving Target

In reading a court opinion on the subject, I discovered a passage which sums up where we are at in wading through the quagmire:

There is, in fact, a division of authority among the circuits on this issue. While the tendency is to view that split in terms of whether vel non a showing of bad faith is required, in fact, the diverging views cover a much broader spectrum. On one end of that spectrum, actually representing a distinct minority, are courts that require a showing of bad faith before any form of sanction is applied. Other courts expect such a showing, but only for the imposition of certain more serious sanctions, such as the application of an adverse inference or the entry of a default judgment. Further relaxing the scienter requirement, some courts do not require a showing of bad faith, but do require proof of purposeful, willful or intentional conduct, at least as to certain sanctions, so as not to impose sanctions based solely upon negligent conduct. On the other side of the spectrum, we find courts that do not require a showing of purposeful conduct, at all, but instead require merely that there be a showing of fault, with the degree of fault, ranging from mere negligence to bad faith, impacting the severity of the sanction. If this continuum were not complicated enough, some circuits initially appear to have adopted universal rules, only to later shade their precedents with caveats. Other times, the difference between decisions appear to be more a matter of semantics, perhaps driven by state law, with some courts, for example, identifying as “bad faith” what others would call “recklessness” or even “gross negligence.”

United Medical Supply Co. v. U.S., 77 Fed. Cl. 257, 266-67 (Fed. Cl., 2007).

The calculus of determining what constitutes spoliation is convoluted due to several factors, including: the different rules between circuits; the two sources of authority for sanctions (a court’s inherent authority to manage its cases and FRCP 37 for a violation of a court order); the discretion given individual courts to manage their own affairs; and the understanding (or lack of it) of IT principles by the Judges or Magistrate Judges who are ruling on issues.

Safety first in approaching collections and processing of data…but reasonableness means one shouldn’t have to go to extremes.

Case Blurb: Hawaiian Airlines; Purpose of spoliation doctrine

The spoliation doctrine serves various purposes. One set of purposes is evidentiary and remedial: as a matter of common sense, it is reasonable to assume that, when a person destroys evidence, the evidence was unfavorable to that person; and when evidence is destroyed that might have benefitted one party, it is appropriate to impose a sanction that restores the evidentiary status quo. The second category is prophylactic and punitive: spoliation sanctions deter others who might be tempted to destroy evidence and uphold the integrity of the judicial process.

In re Hawaiian Airlines, Inc., 2007 WL 3172642 (Bkrtcy. D.Hawaii October 30, 2007).

Case Blurb: L-3; Elements of Spoliation, 11th Circuit

“‘Spoliation’ is the ‘intentional destruction, mutilation,alteration, or concealment of evidence.’” Federal law governs the imposition of spoliation sanctions in this case, but state law may be consulted to guide the Court in its analysis.

Generally, spoliation is established when the party seeking sanctions proves (1) that the missing evidence existed at one time;(2) that the alleged spoliator had a duty to preserve the evidence;and (3) that the evidence was crucial to the movant being able to prove its prima facie case or defense. Additionally, in this circuit sanctions for spoliation of evidence are appropriate “only when the absence of that evidence is predicated on bad faith. . . . ‘Mere negligence’ in losing or destroying the records is not enough for an adverse inference, as ‘it does not sustain an inference of consciousness of a weak case.’”

Lockheed Martin Corp. v. L-3 Communications Corp., 2007 U.S. Dist. LEXIS 79572 (M.D. Fla. Oct. 25, 2007) (internal citations removed).

Airline blames executive’s “porn purge” for deletion of evidence

Uh oh. This isn’t good:

Mesa Air Group said yesterday its chief financial officer went to great lengths to permanently delete computer data sought by Hawaiian Airlines to cover up his interest in pornography.

In an evidentiary hearing held yesterday before Hawaiian’s lawsuit against Mesa goes to trial, the operator of the interisland airline go! said it discovered that CFO Peter Murnane had been browsing adult Web sites.

It also said Murnane was solely responsible for deleting data from his three computers and that the company had given to Hawaiian all the deleted data.

How far did Mr. Murnane allegedly go in his cover-up attempts? A computer forensics expert explains:

Jefford Englander, a computer forensics expert from Phoenix-based Lightstone Solutions, spent about 90 minutes on the stand yesterday detailing how he uncovered multiple instances of deleted files that he could not identify. He also uncovered signs the computer clock had been manipulated — including files that appeared to have been modified before they were created.

Now, to be sure, this all must be substantiated. Mr. Murnane has his own side to the story, and as everyone knows, things aren’t always what they seem. But it doesn’t look good.

Case Summary: Quintus Corp.; Court grants default judgment in b/r trial where defendant was found to have destroyed evidence

In a bankruptcy trial where defendant had destroyed electronic files, evidence that “went to the heart of the Trustee’s suit,” for the purpose of clearing more drive space; where defendant had breached a contract and therefore knew that the files would be relevant to potential litigation, the court ruled that judgment should be entered in favor of the Trustee for all claims listed in the Debtors’ b/r schedules and on the claims register. Trustee’s motion seeking attorneys’ fees as well was denied because the court granted a more severe sanction. In re Quintus Corp. v. Avaya, Inc., 353 B.R. 77 (Bkrtcy. D. Del. 2006).

Case Blurb: Tschirhart; Factors to examine before dismissing a case, 5th Circuit

To support the severest sanctions under Rule 37(b)-striking pleadings or dismissing a case-the Fifth Circuit has usually required a finding of bad faith or willful conduct. Arista Records LLC v. Delina Tschirhart, 241 F.R.D. 462 (W.D. Tex.) (citing Pressey v. Patterson, 898 F.2d 1018, 1021 (5th Cir. 1990)).
When a defendant demonstrates flagrant bad faith and callous disregard of its responsibilities, the district court’s choice of the extreme sanction is not an abuse of discretion. Id. (citing Emerick v. Fenick Industries, Inc., 539 F.2d 1379, 1380 (5th Cir. 1976)).
The Fifth Circuit has specifically required, in addition to a finding of bad faith, several factors which must be present prior to dismissing a case for violating a discovery order. Those factors include:

• The violation must be attributable to the client instead of the attorney;
• The misconduct must cause substantial prejudice to the opposing party; and
• A finding that less drastic sanctions would not be appropriate. To support the severest sanctions under Rule 37(b)-striking pleadings or dismissing a case-the Fifth Circuit has usually required a finding of bad faith or willful conduct.

Id. (citing FDIC v. Connor, 20 F.3d 1376, 1380-81 (5th Cir. 1990)).

Case Blurb: Leon; Dismissal as a sanction, 9th Circuit

Dismissal is an available sanction when “a party has engaged deliberately in deceptive practices that undermine the integrity of judicial proceedings” because “courts have inherent power to dismiss an action when a party has willfully deceived the court and engaged in conduct utterly inconsistent with the orderly administration of justice.
Before imposing the harsh sanction of dismissal…the district court should consider the following factors:

• the public’s interest in expeditious resolution of litigation;
• the court’s need to manage its dockets;
• the risk of prejudice to the party seeking sanctions;
• the public policy favoring disposition of cases on their merits; and
• the availability of less drastic sanctions.

While the district court need not make explicit findings regarding each of the five factors, a finding of “willfulness, fault, or bad faith” is required for dismissal to be proper. The prejudice inquiry [of the five factor test] “looks to whether the spoiling party’s actions impaired the non-spoiling party’s ability to go to trial or threatened to interfere with the rightful decision of the case.
In reviewing whether the district court properly considered lesser sanctions prior to dismissing Leon’s case, [the appeals court] examines:

• Whether the district court explicitly discussed the feasibility of less drastic sanctions and explained why such alternate sanctions would be inappropriate;
• Whether the district court implemented alternative sanctions before ordering dismissal; and
• Whether the district court warned the party of the possibility of dismissal before ordering dismissal.

Leon v. IDX Systems Corp., 464 F.3d 951 (9th Cir. 2006).