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Case Summary: Scalera; Triggering Mechanism for Litigation Holds

Posted by rjbiii on December 15, 2009

Scalera v. Electrograph Sys., 2009 U.S. Dist. LEXIS 91572 (E.D.N.Y. Sept. 29, 2009).

Status: Plaintiff, an individual, sought sanctions against Defendants (a company and two individuals) for spoliation of evidence.

Factual Background: Plaintiff is a former employee of Defendants. Plaintiff asserted that prior to her employment by Defendants, she had suffered from “noticeable muscular weakness.” Initially diagnosed as Muscular Dystrophy, the diagnosis was changed to Pompe disease. Plaintiff claimed that she was disabled within the meaning of the Americans with Disabilities Act of 1991 (ADA) and the New York Human Rights Law (NYHRL), and that Defendants failed to suitably accomodate her disabilities.

Procedural History: Plaintiff filed the original Complaint on January 4, 2008. She subsequently filed an Amended Complaint on September 30, 2008. Plaintiff served her First Request for Production of Documents upon Defendants on August 13, 2008. Plaintiff requested (1) all emails sent or received by Electrograph employees regarding Plaintiff’s medical condition, (2) all emails sent by Electrograph employees regarding Plaintiff’s request or need for any accommodation for her medical condition, (3) all emails sent on Electrograph’s “Inter-Office email system” to and from Plaintiff from 2005 to the present, “including any emails predating Plaintiff’s employment.” Plaintiff also requested all “backup and/or archive (computer) data which was generated by Defendants” and related to Plaintiff’s employment.

In response to the request, Defendants produced certain documents. Plaintiff characterized the production as consisting of a handful of emails relating to Ms. Scalera. According to Plaintiff, defendants stated that other emails were stored on backup tapes and that these tapes were corrupted and could not be restored. On November 4, 2008, Defendants sent Plaintiff’s counsel a letter stating that Electrograph had retained an outside vendor to restore the electronic data contained on the backup tapes. Defendants provided RDA Enterprises with a total of sixteen backup tapes. First, the vendor ran an inventory process to see if the tapes “met the criteria with restorable data.” Only two of the tapes met that criteria. However, the vendor was not able to restore the data on either of those two email backup tapes.

Argument: The court began by articulating the analytical framework found in Toussie v. County of Suffolk, 2007 U.S. Dist. LEXIS 93988, 2007 WL 4565160, at *6 (E.D.N.Y. Dec. 21, 2007). A party seeking an adverse inference instruction as a sanction for the spoliation of evidence must establish that:
(1) “the party having control over the evidence had an obligation to preserve it at the time it was destroyed,”
(2) “the records were destroyed with a ‘culpable state of mind,'” and
(3) “the destroyed evidence was ‘relevant’ to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.”

Plaintiff argued that Defendants had a duty to preserve the destroyed information while asserted various theories as to when this duty attached. Plaintiff contended that Defendants’ obligation to preserve the information arose immediately following Plaintiff’s July 13, 2006 fall down the steps outside Electrograph’s side entrance. According to Plaintiff, Electrograph’s July 14, 2006 accident report acknowledges that “had a railing been installed, Ms. Scalera might not have fallen.” Plaintiff maintained that if Defendants were aware of Plaintiff’s disability, Defendants had a duty to accommodate that disability — “which would include installing railings, where necessary.” Thus, Plaintiff asserts that if her injury was caused by the absence of the railing, “Defendants should have known that they were potentially liable for failing to accommodate Ms. Scalera’s disability.” Thus, according to Plaintiff, immediately following her July 13, 2006 accident, Defendants knew or should have known that some of their internal employees’ emails would be relevant to a potential litigation and that Electrograph therefore was under a duty to preserve those emails.

Plaintiff also noted that within two weeks of her fall, she had hired an attorney and filed for worker’s compensation. Because, argued Plaintiff, the company was aware of the pending worker’s compensation case and retention of counsel, Defendants were under a duty to preserve documents relating to Ms. Scalera’s disability and injury.

In opposition to Plaintiff’s motion, Defendants stated that they first anticipated litigation regarding any claim of discrimination when they received the Notice of Claim from the EEOC,” which was sometime in late November or early December 2006. Defendants argue that a letter sent by Plaintiff’s attorney to the building landlord — not Electrograph — “making a claim for negligence in maintaining the stair and personal injury” did not put Electrograph on notice that Plaintiff intended to bring a discrimination claim against the company. Defendants also maintained that “plaintiff’s submission of a worker’s comp claim and retaining an attorney for worker’s comp, an employee’s exclusive remedy in New York, also led them to the conclusion that there would be no claim by plaintiff for discrimination.” Defendants added that Plaintiff’s worker’s compensation paperwork was filed in July 2006 and did not make any reference to discrimination.

The court stated that Plaintiff evidently did not address the letter mentioned above by Defendant’s in their written arguments and there was some confusion with this point in their oral arguments. Plaintiff claimed to regularly use her e-mail to communicate with coworkers and supervisors during the tenure of her employment, and this fact on its face establishes that failed to produce numerous documents covered by the discovery request. During oral argument, Plaintiff’s counsel highlighted a statement made by one of Plaintiff’s co-workers, Carolyn Reutter, that emails she received on her Electrograph email system “would stay in her inbox . . . unless she deleted it or the technical support employees purged the emails,” and that this apparently only happened “once every couple of years.”

The Internal Support Manager of Electrograph’s IT department stated that “documents can be stored locally on the hard drives of individual computers assigned to specific employees at Electrograph,” and that such documents “may or may not also be backed up as ‘ESI,’ depending on whether the document was created on the network or only locally at a particular end-user’s computer.” Plaintiff concluded, therefore, that there must have been relevant emails exchanged between Electrograph employees in the relevant time period that were not produced by Defendants.

Plaintiff also pointed to specific examples that “proved” the failure to produce. Plaintiff submitted two e-mails she claimed were not produced in whole. Plaintiff further argued that one of those emails is clearly a “string email,” but Defendants did not “produce the underlying email correspondence. Plaintiff asserted that although Defendants touted their production of emails regarding their provision of a raised chair to Plaintiff as an accommodation for her physical condition, that Plaintiff was the only party producing such e-mail; Defendants failed to produce any Plaintiff continued by claiming that the hard drive on the computer of Defendant Rose Ann Gordon, the former Director of Human Resources for Electrograph, and the computer Plaintiff used at work, were wiped clean because (and according to an affidavit filed by Defendants) once an employee left Electrograph, all data on the hard-drive of the computer assigned to such employee was removed.

Defendants countered that despite all ESI was backed up to tape on a daily basis, although documents stored on local hard drives might not have been backed up, and they were unaware that this material would not be available (remember that the outside vendor was unable to restore data from any of the back-up tapes). With respect to Ms. Gordon’s hard drive, Defendants essentially argued that no relevant documents resided on the drive prior to wiping. Defendants granted that the emails referring to the provision of a raised chair were produced by Defendant but noted that those emails predated the start of Plaintiff’s employment and were made after having extended an offer for employment to Plaintiff but before she had begun working for the company.

Discussion:
The court concluded that Defendant’s obligation to preserve relevant emails arose as of the time Defendants received Plaintiff’s EEOC Charge. The court noted that the general rule that an employee’s disability must be accomodated where the disability is obvious or otherwise known to the employer without notice from the employee. Whether specific accomodations were requested by the Plaintiff was in dispute, and Plaintiff’s claims that a hand-rail had been requested at the spot where she then fell, should have alerted Defendants to possible pending litigation. The court dismissed their arguments to the contrary as pushing logic beyond the boundary of reasonableness.

The court found that the filing of a worker’s compensation claim by Plaintiff did not trigger a duty to preserve. The court did not find “controlling” Defendants’ argument that Plaintiff’s choice to bring a claim under worker’s compensation implied that she would not be bringing a claim under the ADA. The court stated that Plaintiff had failed to point to case law that supported the proposition that an employer should reasonably anticipate a forthcoming disability discrimination action each time an employee files a worker’s compensation claim in circumstances such as those in the instant matter. Finally, the court noted that nothing in the worker’s compensation forms completed by Plaintiff indicated that she had requested a handrail.

As to Plaintiff’s contention that the ADA required the retention of certain documents, the court cited Byrnie v. Town of Cromwell, 243 F.3d 93 (2d Cir. 2001) for the proposition that where a party has violated an EEOC record-retention regulation, a violation of that regulation can amount to a breach of duty necessary to justify a spoliation inference in an employment discrimination case. After examining the language in the Act, the court ruled:

According to the regulations, therefore, upon their receipt of Plaintiff’s EEOC Charge, Defendants were under an obligation to preserve Plaintiff’s “personnel or employment record” as that term is defined in the regulation. The regulation also makes clear that Defendants’ duty did not cease upon their provision of Plaintiff’s HR file to the EEOC during their initial investigation.

The court next reviewed Plaintiff’s arguments concerning Ms. Scalera’s (plaintiff’s) “wiped” hard drive. It quickly dismissed these claims by reasoning that because the “wiping” occurred prior to the notice of the EEOC charge, Defendants were not under a duty to preserve.

The court then moved to the subject of Ms. Gordon’s hard drive, which also had been wiped. The destruction of data in this situation occurred nearly two months after Defendants had received notice of the EEOC charge. The court stated that Defendants’ argument that the destruction of Defendant Gordon’s hard drive did not amount to a breach of a duty to preserve because Defendant Gordon printed all relevant documents and maintained them in Plaintiff’s Human Resources file does not get them off the hook. The court cited Treppel v. Biovail Corp., 233 F.R.D. 363 (S.D.N.Y. 2006) for the proposition that permitting the downgrading of data to a less accessible form — which systematically hinders future discovery by making the recovery of information more costly and burdensome — is a violation of the preservation obligation. The court reasoned that Plaintiff had the right to test the accuracy of Defendants’ representations of facts and is not obligated to simply take Defendants’ word for it that all relevant emails and documents that were on Defendant Gordon’s hard drive actually made their way into Plaintiff’s personnel file.

On the matter of other emails, the court returned to the subject of two “partial” emails that Defendants produced, concluding that these documents fell within the meaning of a “personnel or employment record” that should have been preserved for one year after their creation. If Defendants had executed on that duty, then a duty to preserve would have prevented their destruction once the EEOC charge had been filed.

With respect to those e-mails produced by Plaintiff, but not Defendant, the court was not convinced by Defendants arguments that these had been generated prior to Plaintiff’s employment. The court found that the ADA regulations would have required Defendants to preserve these emails for one year from the time they were created, namely, in September 2005. Even if Defendants had done so, the obligation to preserve these emails would have expired in September 2006 — a month and a half before Plaintiff’s EEOC Charge was filed. Therefore, the court concluded that Defendants had not breached a duty to preserve.

The first element of the analysis, the court stated, was established. However, in turning to the second element, the court articulated the rule that “even where the preservation obligation has been breached, sanctions will only be warranted if the party responsible for the loss had a sufficiently culpable state of mind.” In its examination of the facts, the court concluded that Defendants had been negligent, though not grossly negligent. Defendants, said the court, took no active steps to preserve electronic documents until early 2007, almost two months after the filing of the EEOC charge. Key facts that swayed the court included:

  • Searches of key employees’ hard drives were either never completed at all or were not completed for some time after the EEOC Charge was received.
  • The message was never communicated to the IT department to search the hard drives of two key custodians.
  • And finally, no formal written litigation hold was ever implemented.

The court cited Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 432 (S.D.N.Y. 2004) in listed the steps expected from parties under a duty to preserve:
(1) issue a litigation hold at the outset of litigation or whenever litigation is reasonably anticipated,
(2) clearly communicate the preservation duty to “key players,” and
(3) “instruct all employees to produce electronic copies of the their relevant active files” and “separate relevant backup tapes from others.”

The court also repeated Zubulake’s admonition that one of the primary reasons that electronic data is lost is ineffective communication with information technology personnel.

In turning to the final element, the court went off on a different direction, finding that Plaintiff had ultimately failed to demonstrate that any destroyed emails would have been favorable to her position. The court noted that relevance may be inferred if the spoliator is shown to have a sufficiently culpable state of mind, such as acting in bad faith or gross negligence. However, the court had already determined that Defendant was merely negligent. The court further found that Plaintiff had not submitted extrinsic evidence tending to demonstrate that the destroyed emails would have been favorable to her case, leaving the third and final element as not being established.

Result: Plaintiff’s motion for sanctions was denied.

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Posted in 2nd Circuit, Back Up Tapes, Case Summary, Data Retention Practices, Duty to Preserve, E.D.N.Y., Litigation Hold, Magistrate Judge A. Kathleen Tomlinson, Reasonable Anticipation of Litigation, Relevance, Sanctions, Spoliation | 2 Comments »

The difference between an archive and a backup

Posted by rjbiii on December 26, 2008

Computer Technology Review has posted an article describing the effect of the FRCP on business and corporate IT departments. The article contains the now familiar refrain to proactively manage your digital resources. One nice blurb, though, discusses the difference between archives and back-ups:

This underscores the difference between an archive and a backup system. An archive in today’s regulatory and litigation preparedness sense is an actively managed set of information kept as a business record when needed and disposed of when not. Backups on the other hand are designed for near term disaster recovery and not long term preservation. But many companies have suspended the rotation of their backup media, sometimes for years, because of a fear of sanctions or even bad press resulting from the improper deletion of this potentially discoverable data. What should have been a disaster recovery mechanism is now functioning as a very inefficient archive of all historical information. This becomes magnified as companies inherit backup media through merger and acquisition. In many instances the current IT staff has no idea what data exists upon those tapes.

Posted in Articles, Back Up Tapes, Best Practices, Compliance, Data Management, Data Retention Practices, FRCP 26, FRCP 34 | Tagged: , , | Leave a Comment »

Case Blurb: Zubulake III; Presumptions and Standards for Cost-Shifting Arguments

Posted by rjbiii on September 27, 2007

Although “the presumption is that the responding party must bear the expense of complying with discovery requests,” requests that run afoul of the Rule 26(b)(2) proportionality test may subject the requesting party to protective orders under Rule 26(c), “including orders conditioning discovery on the requesting party’s payment of the costs of discovery.” A court will order such a cost-shifting protective order only upon motion of the responding party to a discovery request, and “for good cause shown.” Thus, the responding party has the burden of proof on a motion for cost-shifting. Zubulake v. UBS Warburg LLC, 216 F.R.D. 280, 283 (S.D.N.Y. 2003).

In Zubulake I, I considered plaintiff’s request for information contained only on backup tapes and determined that cost-shifting might be appropriate. It is worth emphasizing again that cost-shifting is potentially appropriate only when inaccessible data is sought. When a discovery request seeks accessible data-for example, active on-line or near-line data-it is typically inappropriate to consider cost-shifting. Id.

The seven factor test from Zubulake III was posted here.

Editor’s note: Although the Zubulake decisions were foundations for current e-discovery law, and are referred to more than ever, please keep in mind that they were made before the enactments of the new amendments to the FRCP. Although many of the interpretations laid out by Judge Schindlin in the Zubulake decisions were codified in these amendments, there may be some divergence. Further, statutes numbers may have changed (or they may not have). I encourage you to do your own due diligence with respect to any case blurbs posted on our site, but especially those made before the enactment of the amendments to the FRCP. Thanks.)

Posted in 2nd Circuit, Back Up Tapes, Case Blurbs, Cost Shifting, S.D.N.Y | Tagged: , | Leave a Comment »

Are back-up tapes inhererently inaccessible for purposes of e-discovery?

Posted by rjbiii on September 16, 2007

Data may be considered not reasonably accessible by reasons of hardware limitations. In general, litigation holds do not apply to inaccessible back-up tapes. Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308, *2 (citing Zubulake IV, 220 F.R.D. at 218). Are all back up tapes inaccessible, by definition? The opinion in Alcoa stated that “accessible” back-up tapes should probably be included in any litigation hold. Id. From this perspective, then, back up tapes are not inherently inaccessible, but are merely presumptively so. What differentiates “accessible” back up tapes from tapes that are “inaccessible?” Active and frequent use of the tapes is apparently the key. Zubulake IV, 220 F.R.D. at 218 (stating that if backup tapes are accessible (i.e., actively used for information retrieval), then such tapes would likely be subject to the litigation hold.”). Another court ruled that:

[D]ata that is accessible is stored in a readily usable format that does [not?] need to be restored or otherwise manipulated to be usable. Conversely, data that is inaccessible is not readily useable and must be restored to an accessible state before the data is usable. Backup tapes are considered an inaccessible format, and, thus, shifting the costs of producing data from backup tapes may be considered.

Quinby v. WESTLB AG, No. 04Civ.7406(WHP)(HBP), 2006 WL 2597900, at *7 (S.D.N.Y. Sep. 5, 2006) (citing Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309, 320 (S.D.N.Y.2003)).

Posted in 2nd Circuit, Back Up Tapes, Best Practices, Data Management, Document Retention, Reasonably Accessible, S.D.N.Y | 1 Comment »

DataKos discusses e-mail tape backup and rotation schedules

Posted by rjbiii on September 12, 2007

In this post, DataKos looks for a silver bullet formula for tape storage and backup rotations:

Backup tapes should be used only for disaster recovery, but many organizations still use those media for archives, retention or storage, with a trend toward increased use of archive storage technologies. Archiving does not solve the information lifecycle challenges organizations face and the more information retained the more that is subject to collateral legal disclovery.

Another item to note: the more often you use tapes for archiving and restoring, the less likely a court will find those tapes “not reasonably accessible” for purposes of discovery. If you only restore in times of disaster or error, you will greatly decrease the chances of having to do costly and burdensome restore operations once litigation strikes.

Posted in Back Up Tapes, Data Management, Discovery, Document Retention, Duty to Preserve, email, Reasonably Accessible | Leave a Comment »

ESI Tests: The Seven Factor Zubalake Test for Cost Shifting

Posted by rjbiii on August 29, 2007

Seven Factor Zubulake (Zubulake I, 217 F.R.D. at 322) Test for the cost of producing data from inaccessible sources (an adaptation of the Rowe Test); factors are listed in descending order of importance:

  • The extent to which the request is specifically tailored to discover relevant information;
  • The availability of such information from other sources;
  • The total costs of production compared to the amount in controversy;
  • The total costs of production, compared to the resources available to each party;
  • The relative ability of each party to control costs and its incentive to do so;
  • The importance of the issues at stake in the litigation; and
  • The relative benefits to the parties of obtaining the information.

Application of Seven Factor Test:
The initial question is whether it is appropriate to shift the costs of electronic document production. Quinby v. WESTLB AG, 2006 WL 2597900 (S.D.N.Y. 2006).
When combined, the first two factors are known as the “marginal utility test.” Id. (citing Zubulake III, 216 F.R.D. at 284).
The more likely it is that the backup tape contains information that is relevant to a claim or defense, the fairer it is that the [responding party] search at its own expense. The less likely it is, the more unjust it would be to make the [responding party] search at its own expense. The difference is at the margin.

If the information is available from another source, the marginal utility from the e-discovery is low, and would support cost-shifting. Id.

Application of the first Zubulake factor: The extent to which the request is specifically tailored to discover relevant information.

Π argues that because the court engaged in the “pairing down” process, the document request, as modified by the court, was per se specifically tailored to discover relevant information. The court disagreed. A court may limit the scope of discovery in several ways. Fed. R. Civ. Proc. 26(b)(2) permits the court to limit discovery if the burden or expense of production outweighs its potential benefits, and R. 26(c) permits the issueance of protective orders, including by shifting the costs of unduly burdensome or expensive production. Narrowing a document request pursuant to Rule 26(b)(2) does not preclude the Court from also granting a protective order in the form of cost-shifting for those documents that were ordered to be produced. Id. (citing Zubulake III, 216 F.R.D. at 283).
Even where cost-shifting is granted, the Δ must still pay for the majority of the production b/c of the presumption that the responding party pays for its discovery costs. Id. (citing Wiginton v. CB Richard Ellis, Inc., 229 F.R.D. at 577).
In addition, shifting a share that is too costly may chill the rights of litigants to pursue meritorious claims. Id. (citing Zublake III, 216 F.R.D. 289).

Posted in 2nd Circuit, Back Up Tapes, Cost Shifting, Judge Shira A. Scheindlin, Marginal Utility Test, S.D.N.Y, Undue burden or cost | 1 Comment »

Case Blurb: WESTLB AG, Cost shifting when party inadvisably converts data to inaccessible format

Posted by rjbiii on August 29, 2007

If a party creates its own burden or expense by converting into an inaccessible format data that it should have reasonably foreseen would be discoverable material at a time when it should have anticipated litigation, then it should not be entitled to shift the costs of restoring and searching the data. Quinby v. WESTLB AG, 2006 WL 2597900 (S.D.N.Y 2006) (citing Zubulake IV, 220 F.R.D. at 216).

Posted in 2nd Circuit, Back Up Tapes, Case Blurbs, Data Management, Duty to Preserve, Reasonable Anticipation of Litigation, S.D.N.Y, Undue burden or cost | Leave a Comment »

Case Blurb: WESTLB AG, Duty to preserve has limits

Posted by rjbiii on August 28, 2007

A party need not preserve every shred of paper, every e-mail or electronic document, nor every backup tape, as this would cripple large corporations who are almost always involved in litigation. Quinby v. WESTLB AG, 2006 WL 2597900 (S.D.N.Y. 2006).

Posted in 2nd Circuit, Back Up Tapes, Case Blurbs, Data Management, Discovery | Leave a Comment »

Case Blurb: WestLB AG; Back up tapes an inaccessible format; cost shifting a consideration

Posted by rjbiii on August 28, 2007

[D]ata that is accessible is stored in a readily usable format that does [not?] need to be restored or otherwise manipulated to be usable. Conversely, data that is inaccessible is not readily useable and must be restored to an accessible state before the data is usable. Backup tapes are considered an inaccessible format, and, thus, shifting the costs of producing data from backup tapes may be considered. Quinby v. WESTLB AG, 2006 WL 2597900 (S.D.N.Y. 2006) (citing Zubulake I, 217 F.R.D. at 320).

Posted in 2nd Circuit, Back Up Tapes, Case Blurbs, Cost Shifting, S.D.N.Y | Leave a Comment »

Case Blurb: Alcoa, Inc., back-up tapes considered accessible

Posted by rjbiii on August 27, 2007

On the other hand, if [back-up tapes] are considered accessible (i.e., actively used for information retrieval), then such tapes would likely be subject to the litigation hold. Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308 (M.D.La) (citing Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 218 (S.D.N.Y.2003)).

Posted in 5th Circuit, Back Up Tapes, Case Blurbs, Document Retention, Duty to Preserve, M.D. La., Magistrate Judge Christine Noland | Leave a Comment »