In a recent decision out of the New York State Supreme Court in Manhattan, a spoliator’s worst fears were recognized when the Court dismissed its entire Complaint as a sanction for failing to preserve electronic evidence. The decision, 915 Broadway Associates, LLC, v. Paul, Hastings, Janofsky & Walker, LLP, 2012 NY Slip. Op. 50285U (N.Y. Sup. February 16, 2012), is instructive in its clear statement and analysis of New York’s spoliation law and its demonstration of the Court’s willingness to impose the ultimate spoliation sanction where warranted.

The case involved a bungled real estate transaction and resulting legal malpractice lawsuit. After a non-party pulled out of the transaction, Plaintiff failed to draw on a $ 20 million letter of credit before it expired. Although there was evidence that Plaintiff itself was responsible, at least to some degree, for the failure to draw on the $ 20 million, Plaintiff sued its attorneys claiming that they should have drawn on the letter of credit or, instead, advised Plaintiff that the letter of credit was due to expire.

Importantly, in late March 2008, the reneging nonparty in the failed real estate transaction filed an action in New Jersey seeking a declaration that it was not in breach of contract. Upon serving Plaintiff on or about April 1, 2008, the nonparty included a litigation hold letter to Plaintiff. Plaintiff, which chose not to attempt to recover the $ 20 million from the other party to the failed transaction, but rather to seek to recover the money from its counsel in a legal malpractice action, failed to preserve documents in compliance with the litigation hold.

Specifically, one of Plaintiff’s principals intentionally and routinely deleted emails for 2 ½ years after the litigation hold was issued, emails that may have supported its former counsel’s defense that Plaintiff itself was responsible for monitoring the letter of credit expiration. There were other failures as well. Plaintiff failed to investigate the ways in which emails were stored and retained by its principals, or to make any effort to ensure that custodians were complying with their preservation duties. Six of eleven principals, who also were primary custodians, completely failed to suspend automatic deletion functions associated with their files, even after receipt of the litigation hold. Plaintiff also failed to suspend deletion of back-up tapes or to create electronic images of their data. But most egregiously, in the Court’s view, was Plaintiff’s replacement of its email servers in 2011 – after the Defendant had raised concerns to the Court about spoliation – which rendered impossible any potential recovery of deleted emails.

Based on the identity and roles of the spoliating individuals in the failed real estate transaction, the Court found that the deleted emails were relevant to the critical issue of who was responsible for monitoring the expiration of the letter of credit. The Court pointed out that even if relevance of the deleted emails had not been established, it could be presumed because Plaintiff’s destruction of evidence was at least grossly negligent (and probably willful). The Court issued the ultimate sanction and dismissed Plaintiff’s Complaint in its entirety. The Court also awarded Defendant fees incurred in connection with the motion.

The Court’s finding of spoliation is in line with recent binding precedent out of New York State’s Appellate Division, First Department (covering Manhattan and Bronx Counties), which adopted the approach taken by the Southern District of New York in the well known Zubulake decisions. (A link to a prior blog post on the referenced Appellate Division case- Voom H.D. Holdings LLC v. EchoStar Satellite LLC, 2012 N.Y. Slip Op. 00658 (1st Dep’t 2012)- can be found here.) The 915 Broadway Associates decision affirms that blatant destruction of evidence after the duty to preserve has arisen will result in sanctions in New York State, and that New York courts are not afraid to issue the ultimate sanction- dismissal of an action- where warranted.

Paul E. Asfendis is a Director on the Gibbons E-Discovery Task Force.

Background:

New York Court Dismisses Million Case as Spoliation Sanction
Source: original article
Author: Paul E. Asfendis
Categories: Electronic discovery, e-discovery, ediscovery

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       A district court case decided last month shows how a company’s email retention and litigation hold policies can affect claims of spoliation by adverse parties in litigation. In Danny Lynn Electrical v. Veolia ES Solid Waste, No. 2:09CV192-MHT, 2012 U.S. Dist. LEXIS 31685, at *2 (M.D. Ala. March 9, 2012), the Plaintiffs filed a motion for sanctions alleging the Defendants had “blatantly disregarded their duty to preserve electronic information in this case.” Specifically, the Plaintiffs alleged that the Defendants failed to implement a litigation hold, deleted a number of email accounts, and failed to disable an email “auto delete” function after litigation commenced. They requested the full spectrum of sanctions, including monetary penalties, adverse evidentiary inferences, and the striking of affirmative defenses.

          Despite the Plaintiffs’ accusations, the court found that sanctions were unwarranted. First, the court explained that to evaluate whether sanctions are appropriate in a spoliation case, it must consider the importance of the destroyed evidence, the culpability of the defending party, fundamental fairness, and whether the destroyed evidence is available from other sources. Applying these factors to the case at hand, the court questioned whether any spoliation had actually occurred. Even assuming spoliation had occurred, however, the court found that the Defendants had not acted in bad faith.

          In coming to its decision, the court noted that while a few emails may have been accidentally deleted due to a computer virus, from the very beginning of the litigation, the Defendants regularly made tape backups of all emails. The tape backup system was later replaced by a system that created email backups on the company network. Throughout the course of the litigation, the Defendants regularly supplied emails from these backup systems in response to Plaintiffs’ discovery requests. The court concluded that even if some emails had been lost, the Defendants did not act in bad faith because they “have expended great effort to insure that the plaintiffs receive information from both their live and archived email system by providing document review technology and allowing access to its database.” Therefore, the court decided sanctions were not appropriate.

          The decision highlights how an up-front investment in data management technologies and policies can lead to real cost savings from a litigation standpoint. These investments not only decrease the costs – in both time and money – of responding to discovery requests, but also show good faith effort should an adverse party allege spoliation and request sanctions. A company that formulates sound email retention and litigation hold policies, documents and disseminates these policies, and conducts regular audits to ensure these policies are properly implemented will have a readymade shield to employ any time another party makes a spoliation claim. In the long run, these investments can save the company from the tedium of having to justify every email deletion on a case-by-case basis. When it comes to defending against potential spoliation claims, being proactive, rather than reactive, will go a long way to ensure you always have the winning hand.

Background:

A Spoliation Ace in the Hole
Source: original article
Author: Brian Kint
Categories: Electronic discovery, e-discovery, ediscovery

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Although in recent years employers have become increasingly focused on the preservation, discovery and production of electronically-stored information, the Third Circuit’s January 4, 2012 decision in Bull v. United Parcel Service serves as a reminder to companies that original documents can and often do play a critical role in employment litigation matters. The preservation and discovery of originals should not be overlooked. Employers should be certain to both request original documents in discovery (and pursue their production through motion practice as necessary) and take necessary steps to preserve originals when litigation is threatened or commenced.

In Bull, the Third Circuit was asked to review the District of New Jersey’s dismissal with prejudice of the plaintiff’s discrimination claim as a sanction for her failure to produce original notes from her health care provider. The primary issue in Bull was whether the production of only copies, when the original documents were available, constituted spoliation and justified the harsh sanction imposed by the District Court. The Third Circuit agreed with the District Court, in part, holding that “producing copies in instances where the originals have been requested may constitute spoliation if it would prevent discovering critical information.” However, the Court determined that based upon the facts of this case, the District Court had abused its discretion when it dismissed the plaintiff’s claims with prejudice.

Factual and Procedural Background

After suffering a work-related injury to her shoulder. UPS offered Plaintiff Lauren Bull a temporary work assignment and, when that assignment ended, she was out of work on Workers’ Compensation. Bull returned to work with restrictions imposed by her health care provider that, in the view of UPS, made it impossible to assign her work. Thereafter, Bull submitted two notes, a few months apart, from a different health care provider. UPS found the two notes to be inconsistent and illegible and requested, but was never provided with, the originals. Bull did not respond to requests that she provide a new doctor’s note and more information, and her discrimination suit followed.

During discovery, Bull produced copies of the notes in question, not the originals. When at trial UPS objected to the introduction of copies of the notes, Bull’s counsel insisted that the originals were no longer available, and the court overruled the objection. Further questioning (some by the Court) revealed that the original notes were at Bull’s home. Bull’s counsel explained that he had asked Bull multiple times for the original notes and she was not able to locate them. Although UPS suggested a less severe sanction, the District Court declared a mistrial and invited UPS to submit a motion for sanctions for Bull’s failure to produce the original notes. Five days later, Bull produced the original notes to the Court. The Court dismissed the case with prejudice, ruling that Bull’s failure to produce the original notes constituted spoliation.

Third Circuit’s Decision

The Third Circuit first examined whether producing copies instead of original documents constituted sanctionable spoliation. The Court affirmed its broad interpretation of spoliation, citing its decision in Brewer v. Quaker State Oil Refining Corp., when it wrote in the context of an adverse inference instruction: “[w]hen the contents of a document are relevant to an issue in a case, the trier of fact generally may receive the fact of the document’s nonproduction or destruction as evidence that the party that has prevented production did so out of the well-founded fear that the contents would harm him.” Equating the destruction of evidence with nonproduction, the Court reasoned that “under certain circumstances, nonproduction of evidence is rightfully characterized as spoliation.”

Having concluded that production of copies when originals have been requested may constitute spoliation, the Court turned to whether spoliation had occurred in this case. According to the Court, spoliation occurs when “the evidence was within the party’s control; the evidence is relevant to the claims or defenses in the case; there has been actual suppression or withholding of evidence; and the duty to preserve the evidence was reasonably foreseeable to the party.” There was no question that the first two elements were met. However, the Court disagreed with the District Court’s conclusion that Bull had intentionally withheld the originals despite knowledge of UPS’ repeated demands that the originals be produced. In what reads as a results-oriented decision, the Court concluded that Bull’s failure to turn over the originals was likely inadvertent, as there was no evidence that she actually knew that a request for the originals had been made. This was so despite a statement on the record during trial by Bull’s attorney that he had repeatedly requested the originals from Bull and Bull told him they were no longer available; and Bull’s testimony that she had never looked for the original documents. The Court also disagreed with the District Court’s characterization of “repeated requests” by UPS for the original documents. Bound by the slim record before it, the Third Circuit chastised the District Court for failing to develop an adequate record for its review.

The Court agreed with the District Court’s conclusion that Bull had a foreseeable duty to preserve and turn over the original notes but not without stating its “reservations.” In an interesting footnote, the Court acknowledged a “growing concern” relating to electronic documents and the difficulty of defining what constitutes an ”original” document. According to the Court, this leads to difficulty in determining “where the boundary of the objectively reasonable duty to preserve such documents lies.” In the Court’s view, counsel is obligated to ensure that their communications are clear in terms of what must be searched for, maintained and produced.

Having concluded that the original notes were not intentionally withheld and that there was no bad faith on Bull’s part, the Court held that the District Court had abused its discretion in finding that sanctionable spoliation had occurred. Although the Court’s conclusion rendered a review of the sanction imposed unnecessary, the Court nevertheless reviewed the record “in an abundance of caution” to determine whether dismissal with prejudice was appropriate. The Court reviewed each of the factors enunciated in Poulis v. State Farm Fire and Cas. Co. and concluded that the District Court had abused its discretion in ordering dismissal.

Implications for Employers

The Third Circuit’s decision is a mixed bag for employers. The Court’s determination that the failure to produce originals when requested can constitute spoliation has the potential to impact parties on both sides. The decision is tempered by its requirement that the original must contain “critical information” that could not be gleaned from a copy. In this case, the Court’s decision was further watered down by the less than compelling factual record and the Court’s apparent inclination to give the plaintiff the benefit of every doubt.

What lessons can be learned from this case? Employers involved in litigation should make an early request for the preservation and production of original documents and if originals are not made available, should pursue their production through motion practice. Waiting until trial to take issue with the failure to produce originals was UPS’ downfall. Similarly, employers must be certain to retain original documents when litigation is threatened or commenced to avoid being on the receiving end of a spoliation allegation.

To discuss any of your company’s employment or e-discovery needs, contact any attorney in the Gibbons Employment & Labor Law Department.

Susan L. Nardone is a Director on the Gibbons E-Discovery Task Force. This blog post originally appeared on Gibbons Employment Law Alert on March 27, 2012.

Background:

Third Circuit Finds That Failing to Produce Original Documents May Constitute Sanctionable Spoliation
Source: original article
Author: Gibbons P.C.
Categories: Electronic discovery, e-discovery, ediscovery

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United States District Judge Carl Barbier recently affirmed Magistrate Judge Sally Shushan’s denial of BP’s motion for spoliation sanctions against Halliburton Energy Services, Inc. BP alleged that Halliburton “intentionally destroyed evidence” and “violated the Court’s orders regarding the production of documents.” For these violations, BP sought sanctions including an adverse finding against Halliburton, attorneys’ fees, and an order compelling Halliburton to deliver a computer used in producing 3D modeling results. Judge Shushan refused to make an adverse finding and refused to award attorneys’ fees but ordered Halliburton to deliver the modeling computer for forensic testing. 

            By way of background, one of Halliburton’s main defenses in this multi-district litigation included the assertion that foam cement that Halliburton pumped into the Macondo well on April 19, 2010 was stable. Access to Halliburton’s testing results was integral to prove or disprove this defense. Another of Halliburton’s main defenses involved BP’s alleged engineering decisions to use fewer centralizers than Halliburton had recommended inside the well. Halliburton’s proprietary Displace 3D Simulator (“Simulator”) allowed engineers to predict with accuracy the possibility of channeling. Halliburton employees conducted an analysis of the April 19 cementing operation using the Simulator that allegedly indicated that there was no channeling at the Macondo well.

            BP asserted that Halliburton intentionally destroyed the results of physical slurry testing as it related to foam cement used in the wells because “it wanted to eliminate any risk that this evidence would be used against it at trial.” Judge Shushan, however, determined that BP failed to establish the three elements necessary to secure an adverse inference: 1) Halliburton’s duty to preserve; 2) Halliburton’s bad faith breach of the duty; and 3) that BP was prejudiced. Judge Shushan determined that BP had not demonstrated prejudice and refused BP’s request for an adverse finding as to the cement tests. 

            Similarly, BP sought Halliburton’s post-incident Simulator modeling. BP argued that the proprietary nature of the model rendered it unavailable to BP or other litigants. Halliburton, however, revealed that the results of the Simulator modeling were “gone.” BP then argued that Halliburton should transfer the computer on which the Simulator modeling had been completed to a third party for forensic testing. Halliburton agreed to submit the computer to a third-party and to make its software available to BP pursuant to a software escrow agreement. Judge Shushan ordered Halliburton to produce the computer for forensic testing and ordered the parties to split the costs. 

            The mysterious disappearance of evidence in most cases would result in a plethora of sanctions. How, then, did Halliburton fare so well? One possible reason might be Halliburton’s contention that the cement testing that BP referenced used off-the shelf materials that had little or no relevance to the case. Perhaps this fact contributed to Master Shushan’s finding that BP was not prejudiced. Another likely reason includes Halliburton’s willingness to cooperate with BP to conduct forensic testing of its computer. In contentious cases, a little cooperation goes a long way. In all cases, especially in the e-discovery context, sound record-keeping and cooperation with all parties remains essential to avoiding costly and embarrassing sanctions. 

Background:

All’s “Well” for Halliburton: No Sanctions Result from BP’s Spoliation Claims
Source: original article
Author: Diana Lin
Categories: Electronic discovery, e-discovery, ediscovery

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Bull v. United Parcel Service, Inc., — F.3d —, 2012 WL 10932 (3d Cir. Jan. 4, 2012)

In this case, the appellate court concluded that “producing copies in instances where the originals have been requested may constitute spoliation if it would prevent discovering critical information,” but found that in the present case, the District Court abused its discretion in finding that spoliation had occurred and in imposing a sanction of dismissal with prejudice.

The plaintiff in this case failed to produce two original notes from her doctor (but did produce copies during discovery).  During trial, when plaintiff’s counsel attempted to introduce a copy of one of the notes, defendant objected on the basis of best evidence.  In the sidebar that followed and in subsequent questioning of the plaintiff by the court, it became clear that there was some confusion between plaintiff and counsel as to the existence of the originals.  Ultimately, plaintiff indicated that the original note “should be” at her home and the there was no reason she did not search for it previously.  This contradicted her attorney’s representation that the plaintiff had been asked for the originals and reported that she could not find them.  Accordingly, the District Court declared a mistrial and invited the defendant to file a motion for sanctions.  Plaintiff produced the original doctor’s notes to the court five days later.  Thereafter, upon consideration of defendant’s motion for sanctions, the District Court invoked its inherent authority and ordered the case dismissed with prejudice.  Plaintiff appealed.

The appellate court’s analysis was lengthy and detailed.  Summarizing broadly, the appellate court first concluded “that–theoretically—producing copies in instances where the originals have been requested may constitute spoliation if it would prevent discovering critical information.”  The court further concluded, however, that the District Court abused its discretion “in ruling that, within its spoliation analysis, Bull intentionally withheld the original documents from UPS.”  A showing of bad faith/intentionality is required to establish spoliation in the Third Circuit.  The appellate court’s finding was based in large part upon its determination that the record lacked a factual foundation to support the premise that plaintiff actually knew that the defendant wanted the originals.

In addition to the question of bad faith/intentionality, the appellate court’s analysis also focused on whether the plaintiff had a foreseeable duty to preserve and produce the original doctor’s notes.  Ultimately, despite some reservations, the appellate court concluded that the District Court did not abuse its discretion in determining that there was a foreseeable duty to preserve the originals, noting that the question was not “whether a particular scenario is possible, but rather whether the duty was objectively foreseeable.”  The appellate court recognized, in footnote, however, a “growing concern not implicated in this case”:

FN12. This highlights a growing concern for us that is not directly implicated in this case.  As electronic document technology progresses, the concept of an “original” document is becoming more abstract.  Moving from the more easily distinguishable photocopy or facsimile to documents created, transmitted and stored in an electronic form means that it will be increasingly difficult to ascertain where the boundary of an objectively reasonable duty to preserve such documents lies.  There are—and increasingly will be—circumstances in which the foreseeability of a duty to preserve the information contained in a particular document is distinguishable—under an objective analysis—from the need to preserve that information in its “original” form or format.  Indeed, arriving at a common understanding of what an “original” is in this context is challenging enough.  Although it does, and always will rest with the courts to preserve the distinction between an objectively foreseeable duty and actual knowledge of such a duty, there is a concomitant obligation that counsel must assume to clearly and precisely articulate the need for parties to search for, maintain, and—where necessary—produce “original” or source documents.  This case gives us one more opportunity to highlight our position that clarity in communications from counsel that establish a record of a party’s actual knowledge of this duty will ensure that this technology-driven issue does not consume an unduly large portion of the court’s attention in future litigation.

The appellate court’s opinion also addressed the District Court’s reliance on its inherent authority to impose terminating sanctions and determined that the court’s decision to dismiss with prejudice was an abuse of discretion.  In addition to finding that several of the relevant factors analyzed by the District Court did not weigh in favor of dismissal, the appellate court also noted the defendant’s efforts “in obfuscating to the District court and this Court the details of its requests for the originals” and concluded that “apart from the merits of the appeal, without the benefit of unclean hands here, UPS should not be the beneficiary of a sanction that we are, under most circumstances, already loathe to affirm.”  Accordingly, the case was reversed and remanded for a re-trial.

A copy of the court’s full opinion is available here.

Background:

Failure to Produce Originals Could be Spoliation in Third Circuit
Source: original article
Author: K&L Gates
Categories: Electronic discovery, e-discovery, ediscovery

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Patel v. Havana Bar, Restaurant & Catering, No. 10-1383, 2011 WL 6029983 (E.D. Pa. Dec. 5, 2011)

In this opinion addressing the parties’ cross motions for sanctions, the court ordered an adverse inference for defendants’ failure to preserve relevant video surveillance footage and an adverse inference for plaintiff’s failure to preserve relevant witness statements.  For plaintiff’s other discovery violations, including delayed and piecemeal production of witness statements and failure to timely produce a full copy of the relevant police report, as well as for the spoliation of witness statements, the court ordered re-deposition of several witnesses at plaintiff’s expense.  The court also awarded defendants’ attorneys fees and costs “for the time and effort they expended in attempting to obtain discovery that they were entitled to receive.”

Plaintiff was injured when he “fell” from a second story balcony/loft at defendants’ bar and restaurant. Whether plaintiff fell or jumped was apparently in dispute.  There was also a question as to whether plaintiff was intoxicated at the time of his “fall.”

Defendants recorded video surveillance near the time of plaintiff’s fall which was viewed by the restaurant owner on the night of the accident.  He claimed the video did not reveal how the fall occurred. At deposition, the owner explained that he had attempted to copy the video but was unable, despite a call to the system’s provider.  He further stated that although the system could print still images, he did not print any.  Thus, the video was automatically recorded over and no footage was preserved.  The court found that spoliation had occurred.  Accordingly, following its identification of the relevant considerations and after noting that “even ‘negligent destruction of relevant evidence can be sufficient to give rise to the spoliation inference,” the court ordered an adverse inference instruction.

The court’s opinion also addressed defendants’ motion for sanctions.  Specifically, it was revealed that a year after the accident, in September 2008, plaintiff’s sister solicited, via Facebook, witness statements in support of her brother’s case.  Plaintiff’s sister was explicit regarding the type of information sought, specifically asking for comments refuting the idea that plaintiff was intoxicated.  Approximately two years later (in 2010), plaintiff’s sister sought additional statements but this time asked for information indicating that plaintiff was intoxicated and that defendants “recklessly continued to serve him drinks.”  She specifically indicated that any statements that accused plaintiff of jumping from the balcony would not be included in her collection.

Neither the 2008 nor 2010 statements were provided to defense counsel during the initial discovery period. When the existence of the statements was discovered during a deposition, they were produced in a “piecemeal” fashion, and only immediately prior to each witnesses deposition. No 2008 statements were ever produced and the family and counsel provided conflicting evidence over who had possessed the statements and when.  Plaintiff’s counsel also failed to timely produce a police report of the incident and, when it was produced, failed to include relevant witness statements (which cast doubt on plaintiff’s claim that he fell) or plaintiff’s guest check from the evening of the accident.  The court found this to be a violation of plaintiff’s Rule 26 obligations following discussion of the requirements for initial disclosures.

Regarding the 2008 witness statements, the court found that spoliation had occurred.  Accordingly, an adverse inference instruction was warranted.  Further, for the delay in production of the 2010 statements (and again noting the spoliation of the 2008 statements), the court ordered that several witnesses be re-deposed at plaintiff’s expense.  The court also awarded defendants’ attorneys fees and costs “for the time and effort they expended in attempting to obtain discovery that they were entitled to receive.”

Although plaintiff’s counsel was not separately sanctioned, the court was clearly displeased with counsel’s discovery behavior and specifically took issue with counsel’s failure to initially disclose the existence of the witness statements and with the belated disclosure of those statements as well as the incomplete police report.  The court also criticized counsel’s claims that the witness statements were work product in light of the delay in raising the claim and the absence of a privilege log.

A copy of the full opinion is available here.

Background:

Court Grants Cross Motions for Spoliation Sanctions, Imposes Adverse Inference Against Both Parties
Source: original article
Author: K&L Gates
Categories: Electronic discovery, e-discovery, ediscovery

This e-discovery news is syndicated from e-discovery websites and blogs that make their feed available via RSS. Contact us to have your RSS feed added or removed.

In a trademark infringement case involving two restaurants, Katiroll Company, Inc. v. Kati Roll and Platters, Inc. et al., Plaintiff sought a spoliation inference, alleging various discovery abuses involving several types of evidence including social media. Specifically, Plaintiff requested sanctions for the individual Defendant’s failure to preserve his Facebook pages in two different ways. Recognizing that Facebook users change their pages frequently given the nature of the media at issue, Chief Judge Brown of the District of New Jersey crafted a creative remedy, which was based in large part on the level of prejudice to Plaintiff.

Regarding the first Facebook issue, Plaintiff sought PDF versions of Defendant’s Facebook pages before they were taken down pursuant to Plaintiff’s take-down request. The Court declined to sanction Defendants for actions taken at Plaintiff’s request because it would be "unjust."

Plaintiff also sought a spoliation inference because the individual Defendant altered his profile picture on Facebook. The prior picture reflected the infringing trade dress of the restaurant at issue but was not preserved. The Court recited the four requirements for a spoliation inference, which the Chief Judge described as the mildest of sanctions: (1) whether the evidence was in the party’s control; (2) whether the evidence was actually suppressed or withheld; (3) whether the evidence was relevant vis-à-vis the claims or defenses at issue; and (4) whether it was reasonably foreseeable that the evidence at issue would subsequently be discoverable. The Court concluded that the most important consideration in determining what level of fault is required to support the second factor (an issue that is disputed within the District) is the degree of prejudice to the movant. Specifically, the Court concluded that a negligence standard may be appropriate if there was substantial prejudice whereas intentional conduct would be required if minimal prejudice resulted.

The Court had little difficulty finding that Plaintiff met the third requirement. It similarly found that the first requirement was met because "defendants have a discovery obligation to produce [websites]” and “only defendants knew whether the website would be changed." As for the second and fourth requirements, the Court found that, although the individual knew he had to preserve evidence, “it would not have been immediately clear that changing his profile would undermine discoverable evidence" given that a change of a profile picture "changes the picture associated with each and every post that user has made in the past.” Although the Court found that the spoliation was not intentional, the Court also determined that the loss of information was “somewhat prejudicial.” But instead of imposing an adverse inference instruction (as Plaintiff had requested), the Court directed Defendant to post the image of the allegedly infringing picture for a short period of time so that Plaintiff could then print relevant posts; thereafter, Defendant was permitted to re-post the non-infringing picture.

Katiroll demonstrates the Court’s understanding that the nature of Facebook invites changes to postings and pictures, and it teaches that the prejudice to the movant is a significant factor in determining the level of fault required before an adverse inference instruction will be imposed. Katiroll also demonstrates that courts will fashion novel remedies for spoliation in the social media context.

Mara E. Zazzali-Hogan is a Director on the Gibbons E-Discovery Task Force.

Background:

Chief Judge Finds That Alteration of Facebook Page Can Lead to Spoliation Inference
Source: original article
Author: Mara E. Zazzali-Hogan
Categories: Electronic discovery, e-discovery, ediscovery

This e-discovery news is syndicated from e-discovery websites and blogs that make their feed available via RSS. Contact us to have your RSS feed added or removed.

Lester v. Allied Concrete Co., Nos. CL.08-150, CL09-223 (Va. Cir. Ct. Sept. 1, 2011); Lester v. Allied Concrete Co., Nos. CL08-150, CL09-223 (Va. Cir. Ct. Oct. 21, 2011)

In this case, significant monetary sanctions were ordered against the plaintiff and his counsel for egregious discovery violations, including intentional deletion of pictures on Plaintiff’s Facebook page per the instructions of Counsel and subsequent efforts to cover those instructions up, among others.

In this wrongful death case, Defendants sought production related to the contents of Plaintiff’s Facebook page, which were presumably relevant to the question of damages suffered by Plaintiff as the result of the tragic death of his wife.  Attached to the request was a picture of the plaintiff "clutching a beer can, wearing a T-shirt emblazoned with ’I ♥ hot moms’ and in the company of other young adults."  Plaintiff’s counsel (with the assistance of his paralegal) determined that the photo likely came from Facebook.  Accordingly, Counsel accessed Plaintiff’s Facebook account and thereafter directed his paralegal to instruct Plaintiff to “clean it up” because “we don’t want blowups of this stuff at trial.”

Because the request for production specifically asked for the contents of Plaintiff’s account “on the day this request is signed,” Counsel also instructed Plaintiff to deactivate his account.  Plaintiff’s response to the request for production, therefore, was that he had no Facebook account on the day the request was signed.  The response was also signed by Counsel.  Thereafter, upon being advised that he was obligated to produce the Facebook materials, Counsel instructed his client (through his paralegal) to reactivate the account.  Plaintiff complied, and following the prior instruction to “clean up” his account, deleted 16 photos before the contents were printed for production by the paralegal (who claimed not to know of the deletions, as did Counsel).  Later, testifying under oath, Plaintiff stated that he had never deactivated his account.

For reasons unknown, Plaintiff’s counsel later forwarded to the defense Plaintiff’s Facebook IP logs which he had acquired directly from Facebook.  Upon examination of the logs, experts for both sides agreed that 16 photos had been deleted.  Accordingly, the court ordered that an adverse inference instruction be given to the jury at trial.

Before trial, Defendants served the above mentioned paralegal with a subpoena duces tecum commanding production of all emails between herself and the plaintiff during the timeframe of the spoliation.  The attendant privilege log and in camera production to the court omitted mention of the email in which the paralegal first instructed Plaintiff to delete photos from his account.  The email was not disclosed until after trial, with the explanation that the omission was the fault of a different paralegal no longer with Counsel’s firm “when, in fact, [Counsel] knew his own misconduct caused the omission.”

At trial, Plaintiff was awarded a significant sum.  Thereafter, Defendants filed several post-trial motions, including a Motion for Sanctions against Plaintiff and Counsel for the above-detailed behavior (among other reasons).

The court concluded that the actions of Counsel and the plaintiff warranted sanctions.  Specifically, Counsel was ordered to pay monetary sanctions equal to the “reasonable expenses, including a reasonable attorneys fee, incurred by Defendants because of [Counsel’s] violation” of court rules by signing the dishonest discovery response.  For Counsel’s omission of the incriminating email from his spoliation privilege log and in camera production and for Counsel’s dishonesty regarding the cause of the omission, the court ordered him to pay monetary sanctions equal to the “reasonable expenses, including a reasonable attorneys fee” incurred by the defendants as the result of his misconduct.  Defendants’ Motion for Sanctions as to Plaintiff was also granted with the amount of the sanction to be determined.

Later, upon submission of Defendants’ Memoranda of Costs and Fees, the court issued a final order containing the specific amounts to be paid: Counsel was ordered to pay $ 542,000 and Plaintiff was ordered to pay $ 180,000.  The court also indicated its intent to refer Counsel’s violations of the Code of Professional Responsibilty to the Virginia State Bar and to refer "matters relating to allegations of perjury on the party of [Plaintiff] to the Commonwealth’s Attorney for the City of Charlotte."

Copies of the court’s relevant orders are available here and here.

Background:

Client & Counsel Sanctioned for Spoliation where Plaintiff was Instructed to “Clean Up” His Facebook Page
Source: original article
Author: K&L Gates
Categories: Electronic discovery, e-discovery, ediscovery

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The proper preservation of electronic data for discovery has become an increasing source of contention between parties. Two recent cases illustrate the importance of mindfully preserving electronic data during discovery. 

In Gentex Corp. v. Sutter, No. 3:07-CV-1269, 2011 U.S. Dist. LEXIS 122831 (M.D. Pa. Oct. 24, 2011), the district court granted default judgment to the plaintiffs in a spoliation action. Gentex Corporation sued two of its former employees, Brad Sutter and Patrick Walko, for violating non-disclosure agreements. Gentex claimed that Sutter and Walko copied proprietary files when they left the company and shared them with a rival company, Armor. 

In response to the suit, Armor implemented a litigation hold and instructed employees to preserve “all paper documents and electronically stored information concerning the Company’s relationship with Brad Sutter and his work while at the Company.” Armor also obtained a consulting firm to help preserve documents relevant to the litigation. 

Sutter, however, began destroying evidence despite knowledge of the litigation hold. Sutter scrubbed his computer, explaining that he did so “because he was scared because Gentex had sued him.” Sutter destroyed all CD-ROMs containing Gentex information that he possessed and purposely destroyed a thumb drive after his deposition. Sutter also deleted numerous email messages when he was printing them for production to Gentex. 

Similarly, Walko knowingly deleted documents relating to Gentex files on his computer. Walko claimed that various supervisors, including Sutter, instructed him, “Do what you have to do to clean up. If you need to clean up, clean up.” 

Gentex’s expert concluded that the deletions were “intentional and coordinated and designed to circumvent the duty to preserve documents.” The district court agreed and found that Gentex had presented sufficient evidence to show that Sutter and Walko engaged in willful spoliation. The court ultimately determined that granting default judgment to Gentex was the “least onerous” sanction corresponding to the willfulness of the spoliation, given Sutter and Walko’s “unabashedly intentional destruction of relevant, irretrievable evidence.”

By contrast, another court facing similar facts refused to levy the ultimate sanction. In Cedar Rapids Lodge & Suites, LLC v. JFS Dev., Inc., No. C09-0175, 2011 U.S. Dist. LEXIS 110671 (N.D. Iowa Sept. 27, 2011), the court determined that “a stronger showing of bad faith [was] required” before it would grant default judgment to the plaintiffs. In that case, plaintiff investors sued the developers of a proposed hotel for fraudulent inducement. Following a protracted discovery dispute, plaintiffs sought default judgment against one of the defendants for failure to comply with discovery requests and for intentional destruction of evidence. 

The defendant previously produced seven computers, ten hard drives, and 23 CDs for inspection and copying. Although the plaintiffs’ expert extracted over 34,000 relevant documents from these sources, the expert concluded that external drives that had been connected to the laptop were missing. Additionally, the expert contended that a large number of relevant documents, folders, files, and emails had been targeted for strategic deletion. The expert, however, conceded that several innocent explanations existed for the deletions and missing drives. 

Citing an Eighth Circuit decision, the district court determined that there was no proof that the defendant intentionally engaged in spoliation. As an initial matter, the court seemed impressed by the sheer volume of documents that plaintiffs had already recovered from the defendants. The defendant had initially produced 875 documents followed by an additional 2,700 pages, not to mention the 34,000 documents extracted from various hard drives and computers. 

Additionally, the court found that plaintiffs had not met the relevant legal standard. To warrant any sanction, much less a default judgment, the court had to find: 1) intentional destruction indicative of a desire to suppress the truth; and 2) actual prejudice to the other party resulting from the spoliation. Here, the court deemed the defendant to be merely “unsophisticated in the requirements of litigation and preservation of documents” rather than willfully destructive. Further, the plaintiffs suffered no prejudice, as “[i]t would seem that Plaintiffs have plenty of information upon which to pursue their claims.” In denying the motion for sanctions, the court simply stated, “I believe a stronger showing of bad faith is required.” 

While a default judgment represents the ultimate sanction in spoliation cases, destruction of electronic evidence can result in sanctions running the gamut from claim dismissal and suppression of evidence to an adverse inference and attorneys’ fees and costs. As the district court judge in Gentex observed, “I am especially conscious of the deterrence value of harsh sanctions in cases like this where the crucial evidence exists in electronic form, and a party may destroy its opponent’s case with the mere click of a button.” These two cases teach us to beware the fine line that distinguishes behavior worthy of a default judgment and behavior that is merely vexatious.

Background:

Document Preservation: Spoliation and the “Ultimate Sanction”
Source: original article
Author: Diana Lin
Categories: Electronic discovery, e-discovery, ediscovery

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United Cent. Bank v. Kanan Fashions, Inc., No. 10 CV 331, 2011 WL 4396912 (N.D. Ill. Mar. 31, 2011); United Cent. Bank v. Kanan Fashions, Inc., No. 10 C 331, 2011 WL 4396856 (N.D. Ill. Sept. 21, 2011)

In this case, the magistrate judge recommended sanctions against defendants for their bad faith spoliation of a relevant server where the evidence strongly suggested that defendants arranged for the sale of the server to company in Dubai, which resulted in the unavailability of its admittedly relevant contents.  The magistrate judge declined to sanction defendants’ attorneys, however, where the evidence indicated that they made efforts to ensure preservation but were misled by their clients and unaware “of what was going on behind the scenes.”

Plaintiff alleged that defendants were in default on several loans and sought damages accordingly.  In the course of discovery, defense counsel repeatedly informed defendants of their obligation to preserve relevant information.  Despite their obligation to preserve and their assurances to counsel that all appropriate efforts were being undertaken, defendants took steps to ensure the unavailability of a relevant server which was maintained in one of defendants’ warehouses.  The details of defendants’ efforts are numerous and complex.  Summarizing broadly, when defendants experienced significant financial problems and defaulted on both the lease of the at-issue server and the loan related to the warehouse in which it was stored, Defendant Shah (who controlled the four corporate defendants) entered into an agreement for a “friendly foreclosure” on the warehouse and for the foreclosing bank to purchase the server’s lease (which was owned by a different bank and also in default) and to resell the server to Shah.  This agreement was reached after plaintiff’s complaint had been filed and after defendants had been informed of their duty to preserve.  Despite this, the arrangements for the bank’s purchase of the lease and resale of the server to Shah were not revealed to defense counsel.  Rather, defendants’ attorneys were assured that preservation was ongoing and repeated these assurances to the court and to the plaintiff, without correction or clarification from defendants.  When counsel eventually learned that the server had been left at the warehouse following defendants’ eviction and was in the possession of the bank, defendants assured counsel that access would not be a problem; such assurances continued for several months.

When it was finally revealed that the server had been left in the warehouse and had not been accessed (negotiations for the terms of the purchase and resale had been ongoing), the court ordered defendants to obtain the server or a forensic copy within a matter of weeks.  Several days later, defendants announced that the server was sold by the bank to a company in Dubai.  The details surrounding the sale were quite unusual, however, and led the magistrate judge to conclude that defendants had been involved (or had fabricated the sale).  Upon news of the sale, plaintiff moved for sanctions.

Following extensive analysis of the facts, the magistrate judge found that defendants were “at fault” for the spoliation and had acted “willfully and in bad faith.”  The magistrate judge also concluded that defendants deliberately withheld information from counsel and allowed them to make misrepresentations to the plaintiff and the court.

Plaintiff also sought sanctions against counsel, alleging that that they “failed to take an adequately active role in supervising their client’s discovery obligations.”  While the magistrate judge acknowledged that counsel could have done more and should not have accepted defendants’ assurances that they were upholding their discovery obligations, he concluded that their actions were not sanctionable.  In so holding, the magistrate judge reasoned that counsel had issued an initial litigation hold, had “continuously” reminded defendants of their discovery obligations, and had repeatedly instructed defendants to move the server to a more secure location.  Meanwhile, he pointed out, “Defendants were working against them with their own scheme to avoid producing the warehouse server.”  The analysis also included a discussion of Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y.2004) and Qualcomm, Inc. v. Broadcom Corp., No 05–cv–1958–B, 2010 WL 1336937 (S.D.Cal. Apr.2, 2010)—two cases in which counsels’ supervision of discovery was also at issue.

The magistrate judge recommended that the District Court order defendants to reimburse plaintiff for all expenses and fees related to the Motion for Sanctions and that defendants “be barred from introducing any evidence at trial regarding information on the server, and that the jury be instructed that Defendants’ failure to preserve the server may be considered evidence that the server contained information unfavorable to Defendants’ position.”

Upon review, the District Court adopted the recommendations of the magistrate judge, except to remand for a determination of whether the magistrate judge intended to sanction all six defendants, or only those most closely involved in the sanctionable behavior.

A copy of the Magistrate Judge’s Report and Recommendation is available here.

A copy of the District Court’s order is available here.

Background:

Court Sanctions Defendants for Elaborate Spoliation, Declines to Sanction Misled Counsel Unaware of “What was Going on Behind the Scenes”
Source: original article
Author: K&L Gates
Categories: Electronic discovery, e-discovery, ediscovery

This e-discovery news is syndicated from e-discovery websites and blogs that make their feed available via RSS. Contact us to have your RSS feed added or removed.