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Archive for the ‘Duty to Preserve’ Category

Case Summary: In re Delta/AirTran; Preservation Trigger for Civil Suit following DOJ Anti-Trust Investigation Discussed

Posted by rjbiii on April 1, 2011

In Re Delta/AirTran Baggage Fee Antitrust Litigation, CIVIL ACTION FILE NUMBER 1:09-md-2089-TCB, 2011 U.S. Dist. LEXIS 26945 (N.D. Ga. Feb. 22, 2011).

Plaintiffs brought their respective actions against Delta and AirTran for collusion on baggage fees after a Department of Justice (DOJ) investigation. During its action, the DOJ served a Civil Investigative Demand (CID) on Delta, requiring the airline to produce certain documents. There were some missteps along the way for Delta in its attempts to preserve the targeted data:

  • A litigation hold notice failed to include the CEO on it, despite the fact that he was a custodian in the case. The court appears to dismiss concerns on this ground, reasoning that the CEO received verbal instructions, his exchange mailbox was already being preserved by the company’s IT staff, and he did produce documents in accordance with the DOJ’s request.
  • Some data from back-up tapes was lost, and there was a dispute as to whether Delta was responsible. Delta claimed they had verbally instructed a third party vendor not to continue the process of rotating (and overwriting) tapes. The process wasn’t changed by the vendor until later, resulting in the deletion of data from some of those tapes.

While plaintiffs argued that the DOJ had been concerned about spoliation because of these missteps, the court noted that:

  • Delta worked closely with the DOJ “to ensure all relevant documents were…produced,” and
  • The DOJ has not requested additional information from the airline since December 2009.

After the court stated the standard that it would typically use for spoliation analysis, it came to the crux of the issue:

Unlike the quintessential spoliation situation, Plain-tiffs do not contend that Delta destroyed or altered evidence during the course of this litigation. 7 Plaintiffs’ argument is more nuanced; they contend that they are entitled to spoliation sanctions because Delta did not immediately comply with the CID issued by the DOJ.

The court explained that in order to be successful, plaintiff’s must argue that they, as private civil litigants, can enforce the provisions of a CID when the DOJ has not taken such action and where the CID was issued three months prior to the first case in this action.

The court noted that:

Plaintiffs have not cited any authority that would support such a sweeping and novel theory of spoliation. 10 In the absence of such authority, the Court is unwilling to conclude that upon service of a DOJ-issued CID, a duty to Plaintiffs to preserve documents devolved upon Delta even though Plaintiffs did not file this action until three months later. The Court’s caution in this regard is particularly justified given the severe sanctions that Plaintiffs seek.

And the opinion further explained:

During oral argument, Plaintiffs suggested that the duty to preserve documents is a duty that does not attach to any party. Thus, Plaintiffs posit that anyone (including them) could advance a spoliation argument against Delta for its alleged failure to comply with the DOJ’s CID. However, not only is such a suggestion unsupported by any case law, but it flies in the face of the legal definition of the word duty, which defines duty as a “legal obligation that is owed or due to another . . . .” BLACK’S LAW DICTIONARY 580 (9th ed. 2009).

During oral argument, Plaintiffs also chastised Delta for not having found a case that supports its position on the duty issue. However, Plaintiffs, not Delta, have the burden of proof on the spoliation issue, including the legal elements needed to establish spoliation. See Eli Lilly & Co. v. Air Express Int’l USA, Inc., 615 F.3d 1305, 1318 (11th Cir. 2010).

In essence, Plaintiffs ask this Court to hold that, as a matter of law, when a business is served with a CID, an irrebuttable presumption arises that civil litigation filed by one or more parties against the business receiving the CID is reasonably foreseeable. No court has so held, and this Court is unwilling to be the first.

The court concluded with this:

Two important points about the CID must be emphasized. First, it triggered the commencement of a confidential investigation. Indeed, the Government did not publicize its investigation, and all documents and testimony provided to the Government in response to the CID remain confidential. Second, the first case in this MDL action was not filed until May 22, 2009, over three months after Delta was served with the CID. As Delta explains in its briefs, it has been the recipient of numerous CIDs, subpoenas, or similar formal demands for information from the DOJ that have not led to either private or government litigation. For these reasons, when Delta received the CID, it cannot be said that Delta should have anticipated this lawsuit. Consequently, Delta owed no preservation duty to Plaintiffs that it could have breached. If Delta failed to comply with the CID, the DOJ–not Plaintiffs–is the appropriate party to take action.

Posted in 11th Circuit, Case Summary, Civil Investigative Demand, Duty to Preserve, Judge Timothy C. Batten, N.D. Ga., Reasonable Anticipation of Litigation | Leave a Comment »

Case Blurb: Victor Stanley II; The Gang that couldn’t Spoliate Straight

Posted by rjbiii on September 14, 2010

PostProcess-Pappas = defendant and spoliating party; VSI = Plaintiff and Requesting Party Victor Stanley, Inc.

At the end of the day, this is the case of the “gang that couldn’t spoliate straight.” All in all, in addition to the attempted deletions that caused delay but no loss of evidence, there were eight discrete preservation failures: (1) Pappas’s failure to implement a litigation hold; (2) Pappas’s deletions of ESI soon after VSI filed suit; (3) Pappas’s failure to preserve his external hard drive after Plaintiff demanded preservation of ESI; (4) Pappas’s failure to preserve files and emails after Plaintiff demanded their preservation; (5) Pappas’s deletion of ESI after the Court issued its first preservation order; (6) Pappas’s continued deletion of ESI and use of programs to permanently remove files after the Court admonished the parties of their duty to preserve evidence and issued its second preservation order; (7) Pappas’s failure to preserve ESI when he replaced the CPI server; and (8) Pappas’s further use of programs to permanently delete ESI after the Court issued numerous production orders. The reader is forewarned that although organized into separate categories to facilitate comprehension of so vast a violation, many of the events described in the separate categories occurred concurrently. FN7

FN7: As will be discussed in detail later in this memorandum, when a court is evaluating what sanctions are warranted for a failure to preserve ESI, it must evaluate a number of factors including (1) whether there is a duty to preserve; (2) whether the duty has been breached; (3) the level of culpability involved in the failure to preserve; (4) the relevance of the evidence that was not preserved; and (5) the prejudice to the party seeking discovery of the ESI that was not preserved. There is something of a “Catch 22” in this process, however, because after evidence no longer exists, it often is difficult to evaluate its relevance and the prejudice associated with it. With regard to Pappas’s many acts of misconduct, the relevance and prejudice associated with some of his spoliation can be established directly, or indirectly through logical inference. As to others, the relevance and prejudice are less clear. However, his conduct still is highly relevant to his state of mind and to determining the overarching level of his culpability for all of his destructive acts. When the relevance of lost evidence cannot be proven, willful destruction of it nonetheless is relevant in evaluating the level of culpability with regard to other lost evidence that was relevant, as it tends to disprove the possibility of mistake or accident, and prove intentional misconduct. Fed. R. Evid. 404(b).

Victor Stanley, Inc. v. Creative Pipe, Inc., 2010 U.S. Dist. LEXIS 93644 at *11-13 (D. Md. Sept. 9, 2010)

Posted in 4th Circuit, Case Blurbs, D. Md., Duty to Preserve, FRE 404(b), Magistrate Judge Paul W. Grimm, Sanctions, Spoliation | Leave a Comment »

Case Summary: Calixto; Court Analyzes Preservation Methodology

Posted by rjbiii on April 16, 2010

Calixto v. Watson Bowman Acme Corp., 2009 U.S. Dist. LEXIS 111659 (S.D. Fla. Nov. 16, 2009)

Case Background: Plaintiff Calixto brought this action against defendants CRT and Watson Bowman Acme Corp. (WABO), alleging infringement of patent and trademark, breach of contract, and tortious interference of an agreement between plaintiff and another party. CRT had signed an Asset Purchase Agreement and was negotiating with Calixto on a licensing agreement for the Asian territory, for use of a patented system for joining concrete slabs that may be used in the construction of parking garages or vehicular roadways and an associated trademark. WABO was to be a sub-licensee of CRT’s rights.

Procedural History: The court addresses a motion to compel by Calixto.

Basic Points:

  • Restoration of 30 back-up apes was found to be unnecessary when moving party failed to establih a reasonable expection that doing so would yeild relevant documents not already produced.
  • Restoration of a single back-up tape was ordered because of sufficient possibility that new information would be found
  • Failing to object to search methodology might be a factor in losing your motion to compel
  • Failing to counter expert opinion on pricing might be a factor in losing your motion to compel
  • When sending a deman letter to trigger the duty of preservation, make sure it explicitly cites all possible causes of action and directly addresses every potential litigant.

Factual Background: During a deposition, WABO’s former CEO discussed a document retention policy that included measures to ensure the retention of e-mails on offsite storage for, as best as he could recall, a minimum of ten years. In a 30(b)(6) deposition, WABO’s witness implied that there was a systematic data purge for e-mails older than six months that was implemented when BASF AC acquired WABO. However, the deponee was unable to say whether such a purge had been in place prior to the acquisition. Based on this testimony, however, Calixto filed a motion to compel, requesting the court find spoliation had occurred in the face of ongoing litigation.

During the hearing on the motion to compel, Calixito challenged WABO’s actions on two grounds:
1. the destruction of former CEO Burri’s e-mails on his hard drive after Burri left WABO; and
2. WABO’s refusal to restore monthly back-up tapes.

WABO argued that its policy was to destroy ESI from the hard drives of separated employees, and that Mr. Burri left prior to December 1, 2004, which was the earliest date from which it still retained data on back-up tapes. Therefore, no record of Burri’s e-mails existed, and WABO could not recover the e-mails from anywhere.

With respect to the second issue, WABO claimed that nothing relevant that existed on the back-up tapes had not already been produced to Calixto.

The Court ordered WABO to produce an affidavit explaining, among other matters,
(1) how WABO conducted its search for documents responsive to the deposition notice and discovery obligations;
(2) what, if any, documents had been deleted from WABO’s IT system, and the circumstances surrounding any such deletions; and (3) what, if any, options existed for recovery of any deleted documents.

Subsequently, WABO filed the affidavit with the court.

Process Used for Conducting a Search and Collection of Relevant ESI:
WABO first identified and contacted all WABO employees who:
1. had any possible contact with Plaintiff;
2. Who had any possible knowledge of the Trademarks or Patent at issue; or
3. Who possibly had any information relating to the Lawsuit or to Plaintiff’s document requests.

WABO instructed these individuals to search their personal electronic records, including their personal hard drives and computer files, and their personal hard copy records for any responsive documents or information. WABO searched the Lotus Notes mailboxes of the selected group of custodians.

WABO IT searched the server house directories, the shared drives, and the individual files (including archive files) for the identified individuals for keywords and terms, including the terms “Degussa,” “BASF,” “CORTE,” 4 “Calixto, “Asset Purchase Agreement,” “‘381 Patent,” “JEENE,” and “ALADIN.” WABO also directed the identified individuals to search their local hard drives and Lotus Notes mailboxes for the same search terms. WABO officers also made personal inquiries of those identified as possibly having responsive information or documents, asking about their knowledge and the location of any pertinent information.

WABO made available to its counsel all documents obtained through the efforts outlined above. Counsel then provided relevant documents to Calixto and listed privileged documents on a log.

The court observed that testimony in the declaration implicitly suggested that reconfiguring the back-up tapes into a searchable format and then searching the reformatted version would not yield additional responsive documents because everything reasonably anticipated to be relevant to the litigation was preserved via the litigation hold and searched pursuant to the procedures articulated above.

WABO stated that the it was a routine business practice to delete a former employee’s email upon separation, although no written policy existed. No documentation recording the deletion operation was generated, and the exact date of deletion could not be recalled, although WABO insisted that the deletion did occur prior to receiving a letter from Plaintiffs threatening litigation.

Back-up Tapes:
Because back-up tapes used a compressed format that rendered data contained by them inaccessible, WABO claimed that the data must be restored in order to render it accessible. Because of the tape rotation schedule, WABO only held data for approximately 30 months, meaning that WABO now only retained tapes containing data from December of 2004. WABO has preserved data from that time forward in order to comply with its discovery obligations.

In reviewing WABO’s IT representative’s testimony, the court noted that IT felt they needed to deleted data to increase performance and liberate memory and disk space. IT generated the policy of deleting emails of departed employees at its own initiative, although it did communicate the fact that it was engaged in this practice to executives at the time. BASF’s newly implemented automatic deletion program exempts those custodians on a litigation hold.

WABO (and BASF) Counsel:

Senior counsel at BASF, who also had a history with WABO also testified on the existence of two letters and their effects on the litigation hold process. The first, dated March 1, 2004, was sent to WABO president Burri, described negotiations with respect to licensing at an impasse, and concluded that no further discussions would occur. The “re” block was “Proposed Exclusive License Agreement Between Jorge Calixto and Shanghai Master Builders Co., Ltd.” It reminded WABO that they were prohibited from making, distributing, or selling any product using the process set forth in the Patent and from using the JEENE trademark in the Asia/Pacific Territory. It warned that Calixto would enforce his rights and remedies under an earlier signed Asset Purchase Agreement, as well as any common law and/or statutory rights in the relevant jurisdiction.

Counsel claimed never to have seen that letter, but contended that he did not view it as threatening imminent litigation against WABO because:
(1) he saw the letter as a demand letter for royalty payments; and
(2) WABO is not a signatory to the Asset Purchase Agreement discussed in the letter

The second letter was dated September 9, 2004. The “re” block on this letter reads, “Breach of Asset Purchase Agreement dated November 17, 2003 by and Between [CRT] and . . . Calixto.” the letter alleges that CRT was engaging in precisely these activities within the Asia/Pacific Territory. Among other instances, Plaintiff’s counsel cited a WABO announcement that it had “changed the name of the ‘JEENE’ system to ‘Aladin’ as of 1st January 2004.'” The letter concluded by demanding that CRT:

cease and desist from engaging in [such] activities. Furthermore, . . . Calixto is entitled to damages as a result of the breach of the Agreement, including the attorneys’ fees and costs he has incurred pursuant to Section 10.2 of the Agreement. Unless we receive a written response from [CRT] within ten (10) days of your receipt of this notice detailing its intended actions for addressing these matters and compensating . . . Calixto, . . . Calixto has authorized us to pursue all rights and remedies available to him under the Agreement and in accordance with applicable law.

Senior counsel testified that he remembered receiving this letter, but he did not view it as triggering document retention requirements at WABO because:
(1) the letter was about CRT’s alleged breach of the Agreement, and WABO was not a party to that Agreement,
(2) it did not appear to him as though litigation was imminent, based on this letter, and
(3) even had it appeared so, because CRT is a German entity and Calixto is a citizen of Brazil, Pendergast did not anticipate that litigation in the United States would occur, and document preservation and discovery requirements in other countries can differ substantially from those in the United States.

Counsel stated he did not consider that WABO might be sued until Calixto actually filed suit against WABO and others in Florida Circuit Court and served it on WABO. More specifically, Pendergast stated, on March 30 or 31, 2005, after learning of the lawsuit, he put a litigation hold in place.

As mentioned above, Calixto sought to obtain letters of request enabling service of subpoenas duces tecum to proceed against BASF SE Construction Chemicals Division, in Germany; BASF Construction Chemicals Asia Pacific in Shanghai, China; Sanfield Industries Ltd. in Hong Kong; and Vispack Co., Ltd., in Thailand. WABO objected, asserting that it had already provided Calixto with documents in its possession regarding all sales during the relevant time frame.

Analysis:

The court observed that it must address two issues in resolving Plaintiff’s Motion to Compel:
(1) Whether WABO’s alleged destruction of the Burri e-mails or its process of searching for documents relevant to this litigation and responsive to Calixto’s requests was so deficient as to justify an order from the Court directing WABO to engage in sampling or some other methodology requiring WABO to reconfigure any or all of its back-up tapes and conduct a search of them; and
(2) Whether WABO’s destruction of the Burri e-mails in 2004 constituted spoliation warranting some type of sanction.

Sufficiency of WABO’s Search:
The court began this part of its analysis by citing FRCP 26(b)(2)(B):

Specific Limitations on Electronically Stored Information. A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C). The court may specify conditions for the discovery.

Rule 26(b)(2)(C), in turn, directs the court to limit discovery when it finds that the discovery sought is, as relevant to the analysis in this case, unreasonably cumulative or duplicative. The burden fell on WABO to demonstrate that the information that Calixto seeks is not reasonably accessible because of undue burden or cost.

WABO submitted an estimate from e-discovery vendor Kroll Ontrack, stating the cost to restore these back-up tapes to a searchable format would be approximately $ 40,000.00. WABO would then have to spend further funds for a review for relevance and privilege any documents resulting from this endeavor. The Court concluded that WABO satisfied its initial burden of showing that the materials that Calixto seeks from the back-up tapes are not reasonably accessible because of undue burden or cost. The court then concluded that Calixto has not established good cause for the Court to require WABO to restore and search the back-up tapes, despite the cost and burden.

The court continued by finding that Calixto has failed to establish a reasonable expectation that restoring and searching all of the back-up tapes will yield relevant documents that WABO’s other search methods have not. Calixto raised no objections to the adequacy of WABO’s search methods, including, among other procedures, the keywords that WABO chose to use in performing its search for relevant and responsive material from its electronic databases. Moreover, the Court’s independent review of WABO’s specified search methodology revealed that it appeared to have been designed to find relevant information, and no obvious significant gaps in the methodology.

The court did find, however, that the very earliest back-up tape should be restored and searched, because of doubts about the actual date of the deletion of former CEO Burri’s email. The court stated that it was possible that such a search would not return merely duplicative data, and the court was not persuaded that searching a single back-up tape would constitute an undue burden.

Spoliation Sanctions:
Spoliation sanctions constitute an evidentiary matter, and in diversity cases, the Federal Rules of Evidence govern the admissibility of evidence in federal courts. The key to unlocking a court’s inherent power requires a finding of bad faith.

Where no direct evidence of bad intent exists, in this Circuit, bad faith may be found on circumstantial evidence where all of the following hallmarks are present:
(1) evidence once existed that could fairly be supposed to have been material to the proof or defense of a claim at issue in the case;
(2) the spoliating party engaged in an affirmative act causing the evidence to be lost;
(3) the spoliating party did so while it knew or should have known of its duty to preserve the evidence; and
(4) the affirmative act causing the loss cannot be credibly explained as not involving bad faith by the reason proffered by the spoliator.

In applying these factors to the deleted emails, it first concluded that it was likely that Burri’s email store contained relevant documents. There was no doubt that WABO affirmatively caused the data to be destroyed. However, the court was not convinced that a duty to preserve attached at the time of destruction, as it decided that neither of the letters discussed above triggered that duty. The court emphasized that WABO was not a signatory of the Asset Purchase Agreement cited in the letters, and that it appeared that WABO was not a proper defendant for a breach of contract claim based on that document.

WABO IT’s representative credibly testified that, as a senior information systems analyst, her primary job was to ensure the security and proper functioning of WABO’s computer system, something that too much information storage threatened. Therefore, no deliberate act of destruction of evidence occurred.

Ultimately, the court agreed to require the restoration and search of a single back-up tape while denying the other requests discussed here.

Posted in 11th Circuit, Case Summary, Demand Letter, Document Retention, Duty to Preserve, FRCP 26(b), FRCP 28(b), Litigation Hold, Magistrate Judge Robin S. Rosenbaum, Reasonable Anticipation of Litigation, S.D. Fla., Spoliation, Undue burden or cost, Unreasonably Cumulative | Leave a Comment »

Case Blurb: Cammarata; Duty to Preserve

Posted by rjbiii on March 29, 2010

Generally, the duty to preserve arises when a party “‘has notice that the evidence is relevant to litigation or . . . should have known that the evidence may be relevant to future litigation.'” Generally, the duty to preserve extends to documents or tangible things (defined by Federal Rule of Civil Procedure 34) by or to individuals “likely to have discoverable information that the disclosing party may use to support its claims or defenses.”

See case summary here.

Rimkus Consulting Group, Inc. v. Cammarata, 2010 U.S. Dist. LEXIS 14573, at *18-19 (S.D. Tex. Feb. 19, 2010)

Posted in 5th Circuit, Case Blurbs, Duty to Preserve, FRCP 34, Judge Lee H. Rosenthal, S.D. Tex. | Leave a Comment »

Case Summary: Cammarata; Court Discusses E-Discovery Misconduct, Proportionality and Reasonableness

Posted by rjbiii on March 26, 2010

Rimkus Consulting Group, Inc. v. Cammarata, 2010 U.S. Dist. LEXIS 14573 (S.D. Tex. Feb. 19, 2010)

Procedural History: In Nov. 2006, Rimkus was sued by former employees Nickie Cammarata and Gary Bell. In this action in Louisiana, Cammarata and Bell sought a declaratory judgment that the forum-selection, choice-of-law, noncompetition, and nonsolicitation provisions in agreements they had signed with Rimkus were unenforceable. In response, Rimkus brought two actions in 2007 against these ex-employees in Texas; one in January and one in February. Rimkus alleged breach of the noncompetition and nonsolicitation covenants in their written employment agreements and that they used Rimkus’s trade secrets and proprietary information in setting up and operating a competitive enterprise (U.S. Forensic). The Texas cases were consolidated in this court.

Procedural Posture: The court convened to hear motions by Rimkus alleging that the Cammarata and Bell and their counsel “conspiratorially engaged” in “wholesale discovery abuse” by destroying evidence, failing to preserve evidence after a duty to do so had arisen, lying under oath, failing to comply with court orders, and significantly delaying or failing to produce requested discovery. Defendants responded by acknowledging that they did not preserve “some arguably relevant emails” but argue that Rimkus cannot show prejudice because the missing emails “would be merely cumulative of the evidence already produced.” Rimkus asked the court to strike the defendants’ pleadings,enter a default judgment against them or give an adverse inference jury instruction, and hold both defendants and their counsel in contempt.

Discussion: The court began its analysis by acknowledging the framework recently set out by Judge Scheindlin in Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, No. 05 Civ. 9016, 2010 U.S. Dist. LEXIS 4546, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) (see our case summary here). Unlike Montreal Pension Plan, this case involve allegations of intentional destruction of ESI, but common analytical issues existed, nevertheless.

In the fifth circuit, Federal Courts apply federal rules in diversity cases. The court stated that allegations of spoliation are addressed by courts by an applicable statute that adequately addresses the conduct with its attendant limits, and if no such statute exists, by the more flexible inherent power of the court. When inherent power does apply, it is interpreted narrowly, and its reach is limited by its ultimate source–the court’s need to orderly and expeditiously perform its duties. In this case, the court’s inherent power and Rule 37 both apply.

Electronically stored information is routinely deleted or altered and affirmative steps are often required to preserve it. Such deletions, alterations, and losses cannot be spoliation unless there is a duty to preserve the information, a culpable breach of that duty, and resulting prejudice. Generally, the duty to preserve arises when a party has notice that the evidence is relevant to litigation or . . . should have known that the evidence may be relevant to future litigation. Generally, the duty to preserve extends to documents or tangible things (defined by Federal Rule of Civil Procedure 34) by or to individuals likely to have discoverable information that the disclosing party may use to support its claims or defenses.

The court stated that bright-line rules were difficult to draw with respect to acceptable and unacceptable behavior in e-discovery matters, and explained that acceptable conduct turned on the concepts of reasonableness and proportionality with respect to the case.

Analysis depends heavily on the facts and circumstances of each case and cannot be reduced to a generalized checklist of what is acceptable or unacceptable. Determining whether sanctions are warranted and, if so, what they should include, requires a court to consider both the spoliating party’s culpability and the level of prejudice to the party seeking discovery. Culpability can range along a continuum from destruction intended to make evidence unavailable in litigation to inadvertent loss of information for reasons unrelated to the litigation. Prejudice can range along a continuum from an inability to prove claims or defenses to little or no impact on the presentation of proof. A court’s response to the loss of evidence depends on both the degree of culpability and the extent of prejudice.

The court explained that the general rule for the 5th Circuit is that severe sanctions of granting default judgment, striking pleadings, or giving adverse inference instructions may not be imposed unless there is evidence of “bad faith.” This is different from the 2d Circuit’s rule allowing for such rulings in instances of gross negligence, under which the court in Pension Committee of the University of Montreal Pension Plan was operating. The court went on to list the general rule of other circuits, as summarized in the table below.

Circuit Standards for Severe Sanctions

The court then contrasted case law between the 5th and 2d circuits, noting that the Supreme Court’s decision in Chambers v. NASCO, Inc., 501 U.S. 32 (U.S. 1991) might limit the ability of a court to impose sanctions when acting under the authority of its inherent powers.

The court then turned to the issue of burden of proof. A party seeking the sanction of an adverse inference instruction based on spoliation of evidence must establish that: (1) the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the evidence was 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.

The “relevance” and “prejudice” factors of the adverse inference analysis are often broken down into three subparts: “(1) whether the evidence is relevant to the lawsuit; (2) whether the evidence would have supported the inference sought; and (3) whether the nondestroying party has suffered prejudice from the destruction of the evidence.” Like the court in Pension Committee, the court here acknowledged the difficulty and potential unfairness in requiring an innocent party seeking discovery to show that information lost through spoliation is relevant and prejudicial. Fortunately in this case (and many others), the party seeking discovery can also obtain extrinsic evidence of the content of at least some of the deleted information from other documents, deposition testimony, or circumstantial evidence.

The court also stated its belief that such requirements act as an important check on spoliation allegations and sanctions motions. Unlike the 2d circuit, case law in the Fifth Circuit indicates that an adverse inference instruction is not proper unless there is a showing that the spoliated evidence would have been relevant. Also unlike the 2d circuit, the 5th circuit has no case law allowing for the presumption that destroyed evidence was relevant or its loss prejudicial, even in the event that bad-faith is established. Before an adverse inference may be drawn, there must be some showing that there is in fact a nexus between the proposed inference and the information contained in the lost evidence and that “some extrinsic evidence of the content of the emails is necessary for the trier of fact to be able to determine in what respect and to what extent the emails would have been detrimental.

In the present case, the party seeking sanctions for deleting emails after a duty to preserve had arisen presented evidence of their contents. The evidence included some recovered deleted emails and circumstantial evidence and deposition testimony relating to the unrecovered records. There was no need to rely on a presumption of relevance or prejudice.

In determining an appropriate penalty, the court stated that the severity of a sanction for failing to preserve when a duty to do so has arisen must be proportionate to the culpability involved and the prejudice that results. A sanction should be no harsher than necessary to respond to the need to punish or deter and to address the impact on discovery. Adverse inference instructions can take varying forms that range in harshness, and are properly viewed as among the most severe sanctions a court can administer.

The court made the findings necessary to submit the spoliation evidence and an adverse inference instruction to the jury. The court noted, however, that the record also presented conflicting evidence about the reasons the defendants deleted the emails and attachments; evidence that some of the deleted emails and attachments were favorable to the defendants; and an extensive amount of other evidence for the plaintiff to use.

The instruction formulated by the court will ask the jury to decide whether the defendants intentionally deleted emails and attachments to prevent their use in litigation. If the jury finds such misconduct, the jury must then decide, considering all the evidence, whether to infer that the lost information would have been unfavorable to the defendants. Rather than instruct the jury on the rebuttable presumption steps, it is sufficient to present the ultimate issue: whether, if the jury has found bad-faith destruction, the jury will then decide to draw the inference that the lost information would have been unfavorable to the defendants

Posted in 5th Circuit, Adverse Inference, Burden of Proof, Case Summary, Duty to Preserve, Inherent Power of Fed. Courts, Judge Lee H. Rosenthal, Litigation Hold, S.D. Tex., Sanctions, Spoliation | 7 Comments »

Implementing a Litigation Hold

Posted by rjbiii on February 24, 2010

Law.com has posted an article discussing trigger events and implementing litigation holds. This is the first of 7 parts on the subject. From the article:

As articulated by Judge Scheindlin in Pension Committee v. Banc of America, courts definitely do not want to wade through stacks of motions papers and days of hearings to determine if preservation efforts were sufficient to prevent the destruction of ESI and other documents. As a result, it is imperative for an organization to have in place a litigation hold policy and adequate procedures necessary to avoid going down the litigation “detour” of discovery sanctions motions.

The goal, on the other hand, is not perfection but rather development of a systematic approach to implementing litigation holds within your organization. Systematic, means repeatable and methodical. The idea is to build credibility. The purpose is to demonstrate reasonable efforts conducted in good faith, to search for ESI containing the truth and preserving it. While no system is foolproof, we developed the “Seven Steps” to help meet the litigation hold duties enumerated in recent litigation hold cases.

Posted in Articles, Data Management, Duty to Preserve, Litigation Hold | Leave a Comment »

Case Summary: AccessData; Effects of German Blocking Statute on Discovery Obligations

Posted by rjbiii on January 27, 2010

AccessData Corp. v. ALSTE Techs. GMBH, 2010 U.S. Dist. LEXIS 4566 (D. Utah Jan. 21, 2010).

Background: In May, 2005, AccessData and ALSTE Technologies GmbH (“ALSTE”) entered into a contract allowing ALSTE to resell to their customers. Since executing the agreement, ALSTE has sold “hundreds, if not thousands” of AccessData’s products. AccessData sued ALSTE for breach of contract, alleging that over $79,000 in invoices had not been paid for its FTK toolkit 2.0 software. While ALSTE admits that it hasn’t paid the invoices in question, it asserts that it shouldn’t be made to, as the software is defective. ALSTE also filed a counterclaim for the breach of a technical support agreement requiring AccessData to pay ALSTE $2,000 to $4,000 per month to cover technical support for users of AccessData’s products in Germany who were not also customers of ALSTE.

Procedural History: AccessData made requests to ALSTE for the production of documents containing information on customer complaints and any resulting injury suffered by ALSTE. AccessData also propounded interrogatories asking ALSTE to provide information and document regarding any technical support it provided non-customers under the Technical Support Agreement. ALSTE objected to the interrogatories and production requests, contending they were: 1) overly broad, unduly burdensome, and sought irrelevant information, and 2) the disclosure of information relating to third parties identities would violate German law. Access then filed the motion to compel on which the court rules in this opinion.

Discussion: The court stated that ALSTE assertion that providing personal information about its customers and their employees “would be a huge breach of fundamental privacy laws in Germany,” was not backed up by reference to any specific rule or law. ALSTE failed to cite any provision of the German Data Protection Act (GDPA) or German Constitution to back-up its claim. The court then noted that I, Section 4c of the GDPA, entitled “Derogations,” allows for the transfer of personal information to countries without the same level of data protection if the data subject gives his or her consent, or the transfer is necessary or legally required for the establishment, exercise, or defense of legal claims. The court wrote that ALSTE had not described any difficulties in obtaining consent, or explained why the provisions would not apply to this case.

Even in the event that ALSTE had overcome those challenges, the court stated that it disagreed with ALSTE’s assertion that the court must comply with the Hague Convention’s rules governing disclosure of evidence to courts in foreign countries. Citing Societe Nationale Industrielle Aerospatiale v. United States District Court, 482 U.S. 522, 544, 107 S. Ct. 2542, 96 L. Ed. 2d 461 (1987), the court noted that the law in the U.S. was: “It is well settled that such [blocking] statutes do not deprive an American court of the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that statute.”

The Supreme Court referenced the American Law Institute summary of the interplay between blocking statutes and discovery orders generally:

“[W]hen a state has jurisdiction to prescribe and its courts have jurisdiction to adjudicate, adjudication should (subject to generally applicable rules of evidence) take place on the basis of the best information available . . . . [Blocking] statutes that frustrate this goal need not be given the same deference by courts of the United States as substantive rules of law at variance with the law of the United States.”

Ultimately, the court decided on this issue to overrule the objections to the discovery request and required ALSTE to search through their data repositories and produce the requested data.

Posted in 10th Circuit, Blocking Statutes, Case Summary, D. Utah, Discovery Requests, Duty to Disclose, Duty to Preserve, Duty to Produce, Hague Convention, International Issues, Magistrate Judge Paul M. Warner | Leave a Comment »

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.

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 »

Case Summary-ME: Parlin; Spoliation not an Independent Cause of Action in Maine

Posted by rjbiii on November 17, 2009

Parlin v. Cumberland County, 2009 U.S. Dist. LEXIS 83192 (D. Me. Sept. 11, 2009)

District Court of Maine interprets state law.

Factual Background: Prison inmate brings claims against Sheriff and sheriff’s employees for actions during her stay in the counter jail. Plaintiff was an inmate at the Cumberland County jail. She had self-reported to the facility to serve a seven day sentence. During the first day of her stay, she became emotional and disruptive, possibly due to the influence of prescription drugs, which were taken legally (although she admitted to taking double the amount prescribed for one of the medicines). Plaintiff’s outbursts caused her to be moved a number of times to the “detox” cell. The detox cell is a simple cement slab with a metal grate in the floor and no bunk or toilet. During one of these moves, an incident occurred in which the plaintiff and one of the defendant prison guards fell to the ground. Plaintiff landed chin first, while the guard landed on top of her. This incident, according to plaintiff, caused a torn rotator cuff to plaintiff’s shoulder, on which she had already had surgery.

Plaintiff’s Claim under a theory of Spoliation:
Plaintiff had submitted a claim for spoliation in her complaint, contending that defendants failed to preserve videotape of the incident in which she was injured. The court immediately dismissed this part of the complaint, because “Maine does not recognize an independent cause of action for spoliation.”

Plaintiff’s Motion for Sanctions for Spoliation: Plaintiff had moved that the court issue an order: (1) establishing as a matter of fact that Defendants destroyed the videotape and physically assaulted Plaintiff; (2) striking all defenses to Counts VI 1 (spoliation of evidence) and VIII (battery); and (3) prohibiting Defendants from introducing any evidence at trial opposing Counts VI and VIII. Plaintiff also requests an adverse inference instruction at trial.

Defendants argued that any failure to preserve was not their fault. The court agreed, stating that: “[a] key consideration in whether to impose sanctions for spoliation of evidence is the ‘degree of fault of the offending party.'” The court stated that Plaintiff had failed any fault could be attributed to defendants for the failure to preserve the video. Because it would be inequitable to sanction a blameless party for another’s act of spoliation, the court denied the motion.

Posted in 1st Circuit, Case Summary-ME, D. Me., Duty to Preserve, Judge George Z. Singal, Maine, Sanctions, Spoliation, states | Leave a Comment »

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

Posted by rjbiii on July 12, 2009

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).

Posted in 10th Circuit, Adverse Inference, Bad Faith, Case Blurbs, D. Colo., Data Retention Practices, Duty to Preserve, Exclusion of Evidence, Good Faith, Magistrate Judge Craig B. Schafer, Sanctions, Spoliation | Leave a Comment »