Don’t Phone in Adverse Inference Allegations

I have a nut on the phoneCan a Plaintiff win adverse inference instructions for the destruction of a phone recording destroyed after a one-year retention policy and whose relevance (or existence) was not known by the Defendants for two years after the event happened?

Short answer is no.

The test for establishing adverse inference instructions for the destruction of evidence is:

(1) That the party having control over the evidence had an obligation to preserve it at the time it was destroyed;

(2) That the records were destroyed with a culpable state of mind; and

(3) That 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.

Candy Marcum v. Scioto County, 2014 U.S. Dist. LEXIS 112100, 42-43 (S.D. Ohio Aug. 13, 2014).

The case involved the Plaintiff seeking adverse inference instructions for the recording of a phone call in November 2008. The deceased called his wife from the county jail. The recording was deleted per the one-year document retention.

The Magistrate Judge initially found that the phone recording was destroyed per the Defendant’s document destruction policy, but granted adverse inference instructions because of the Defendants’ “negligence.” The Magistrate Judge looked to the facts that the Sheriff requested an investigation into the death of the victim and the Plaintiff had hired an attorney. Marcum, at *43.

The District Court Judge found these facts did not constitute enough for an adverse inference instruction for the phone recording. The Defendants did not know of the recording, which goes against the “culpable state of mind” requirement for adverse inference instructions. Marcum, at *43-44.

The Plaintiff further declined an interview with the investigator in 2008 and did not notify the Defendant of the existence of the phone call. Moreover, the Plaintiff waited two years to file a lawsuit and request the recording. Marcum, at *44. The existence of the recording was not made until 2010. Id.

The Defendants did retain relevant video, but claimed they never knew of the phone call or its relevance. As such, the District Court modified the Magistrate Judge’s order regarding adverse inference instructions. Marcum, at *48.

Bow Tie Thoughts

Attorneys cannot phone in spoliation allegations. If one side believes information exists that should be preserved, include that in your preservation letter to the opposing party. It is difficult for one party to be attacked for the destruction of evidence if they were never on notice of its existence. Moreover, discuss possible sources of relevant ESI during the meet and confer to ensure the electronic information is both identified and preserved.

Don’t Call Discovery Over Document Retention Policies Premature After You Admit Destroying Relevant Discovery

A Defendant sought reconsideration of a Court order allowing discovery on their document retention policies and litigation hold strategy on the grounds 1) the order was premature and 2) it was irrelevant and not discoverable. Cactus Drilling Co. v. Nat’l Union Fire Ins. Co., 2014 U.S. Dist. LEXIS 45251, 11-14 (D. Okla. 2014).

The Court denied the motion.

The discovery at issue centered on a key player who left the Defendant’s company whose files were accidently destroyed. The Court stated:

Plaintiff is entitled to inquire into the circumstances of the destruction of such relevant files while this litigation is pending, whether defendants took proper precautions, and whether such precautions were actually exercised by defendants’ employees. Thus, clearly a discovery request on defendants’ document retention and litigation hold practices and policies and whether such policies were followed with respect to Ms. Valerio’s hard copy Cactus file is relevant and discoverable.

Cactus, at *13.

The Court also held that the order was not premature, as the Defendants requested a ruling on whether they had to produce the discovery and witness for deposition in their Joint Status Report. Cactus, at *12.

The parties were ordered to meet and confer over privilege and stipulation issues over the pending discovery. The Court “vented” over the parties prior cooperation in a footnote:

The Court has been disappointed with the parties’ inability to communicate in good faith and work out many discovery issues that could have been resolved between the parties. Such behavior has necessitated repeated intervention by the Court, unnecessarily and significantly depleting the Court and the parties’ valuable time and resources. Accordingly, the Court advises the parties that it will not look favorably on any party engaging in less than good faith behavior that leads to further abuse of the Court’s time and resources.

Cactus, at *14, fn 5.

Bow Tie Thoughts

Discussing the preservation of discovery, its scope and privilege is NEVER premature. These issues should be at the first meet and confer. Attorneys should be actively thinking about preservation the moment the case begins. Lawyers cannot afford to take a “let’s see how the motions go” before ensuring discovery is preserved.

Why do attorneys wait to exercise their duty of competency to ensure the preservation of discovery? Some might not know how to, others might not want to spend the money and others might think they can keep their clients happy by having the least amount of intrusion. These are all bad reasons.

An effective client interview and litigation hold strategy is less invasive then the joys of a person most knowledgeable deposition over how a litigation hold was enacted. Moreover, motion practice is not known for its low billable hours.

There are some lawyers who model their meet and confer strategies right out of Tombstone. This is not a good idea. There are issues worth fighting about, but methods of preservation, the scope of discovery, and other technical issues should stay objective. These issues are vital for moving the case forward, but are not worth brawling over. Save the fight for the merits.

You Need a Duty to Preserve Before Issuing Sanctions

In a case where the Court called the Defendants’ disclosures troubling, the Plaintiffs sought sanctions for the failure to back-up hard drives or issue a litigation hold.

There was one big problem with the Plaintiffs’ argument: they did not prove that the Defendant had a duty to preserve the email when it was destroyed. Magnuson v. Newman, 2013 U.S. Dist. LEXIS 138595, at *44 (S.D.N.Y. Sept. 25, 2013).

The Court stated the earliest the Defendants could have been on notice of the duty to preserve was on August 18, 2010, when they were served the original complain. Magnuson, at *45. Additionally, the Defendants had a three-month email retention policy. Id. 

persegrossnegligence

The Plaintiffs did not even argue the timing of the destruction of the email, instead focusing exclusively on the fact the Defendants:

1) Did not back up their computers or;

2) Issue a litigation hold. Id.

In the Plaintiffs’ view, that amounted to per se gross negligence. Id. 

The Court noted that the Plaintiffs did not cite any authority requiring the Defendants to “back-up” their computers. Magnuson, at *45-46.

The Court stated the Second Circuit abrogated the holding of Pension Committee’s holding that it is gross negligence per se to not issue a litigation hold. Id. Moreover, whether a party failed to failed to issue a litigation hold is one factor in determining whether a party should be sanctioned for spoliation. Magnuson, at *46.

The Plaintiffs failed to demonstrate that the duty to preserve had yet triggered when relevant email was lost as a part of a routine data retention policy. As such, sanctioned were not warranted, however the Court warned that it would preclude any late emails from being introduced at trial. Id. 

Bow Tie Thoughts

The duty to preserve is the trickiest part of litigation for attorneys in my opinion. Lawyers have to give clients news they do not want to hear that can disrupt business. Often times lawyers are in denial about having to learn how clients communicate to identify relevant sources of ESI. Despite these challenges for many, there is simply no escaping the duty to preserve.

That being said, lawyers cannot argue sanctions are warranted if there was no duty to preserve. Moreover, the failure to issue a litigation hold is one factor in determining sanctions, not an outcome determinative fact.

Of Diapers & Litigation Hold Sanctions

Diapers. Perhaps the most effective tool for encouraging family planning. Now a messy diaper shipment case delivers a message on the importance of issuing a litigation hold.

RedDiaper

A Defendant brought a sanctions motion against a Plaintiff for their alleged failure to preserve evidence in a case over $3 million worth of diapers.

The Plaintiff admitted they had a duty to preserve electronically stored information. That did not happen because a formal litigation hold was not issued.

The Plaintiff’s failure to issue a litigation hold was not gross negligence per se under Chin v. Port Auth. of N.Y. & N.J., 685 F.3d 135, 162 (2d Cir. 2012) cert. denied, 133 S. Ct. 1724, 185 L. Ed. 2d 785 (U.S. 2013).

The Court stated, “the facts here establish that SJS’s failure to take the most basic document preservation steps, even after it discovered the packaging nonconformities and filed this action, constitutes gross negligence. Such failure is particularly inexcusable given that SJS is the plaintiff in this action and, as such, had full knowledge of the possibility of future litigation.” Sjs Distrib. Sys. v. Sam’s East, Inc., 2013 U.S. Dist. LEXIS 147549, at *10-17 (E.D.N.Y. Oct. 11, 2013), citing Sekisui Am. Corp. v. Hart, No. 12 CV 3479, 2013 U.S. Dist. LEXIS 115533, at *6 (S.D.N.Y. Aug. 15, 2013). This failure met the Defendant’s burden to show the Plaintiff was culpable for the loss of ESI. Id. 

Judicial Spoliation Wipes

BabyRedDiaperJudges look forward to disputes on whether lost email was relevant to case as much as changing a diaper.

The Court found that some of the Plaintiff’s lost email messages would have related to the business transaction between the parties. However, there was no extrinsic evidence of the relevance specifically. Sjs Distrib. Sys., at *11-13.

The Court had to determine a sanction that would (1) deter parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore “the prejudiced party to the same position [it] would have been in absent the wrongful destruction of evidence by the opposing party.” Sjs Distrib. Sys., at *13-14, citing Goodyear Tire & Rubber Co., 167 F.3d at 779.

The Court refused to issue a preclusion order on the Plaintiff from using any documentary evidence after a specific date relevant to the lawsuit. The Defendant had recovered some of the Plaintiff’s communications from 3rd parties and their own records. Sjs Distrib. Sys., at *14. Preclusion was simply too drastic a sanction, given the fact there were other ways to find some of the relevant email communications.

The Court held the proper sanction was an adverse inference against plaintiff that it negligently deleted emails in the fall of 2010 that would have been relevant and favorable to defendant. The Court reasoned that such an order would restore the Defendant to the same position it would have been absent the destruction of ESI by the Plaintiff. Sjs Distrib. Sys., at *15-16. 

The Court also ordered an award of fees to be determined after reviewing the Defendant’s time billed for the motion. Id. 

Bow Tie Thoughts 

Attorneys have to take litigation holds seriously. That means having a set plan for communicating to a client’s custodians, identifying data sources and ensuring ESI is being properly preserved. The duty to preserve is not something that can be said in passing to a HR manager in the hopes it is done correctly. Have a plan and take action.

There are many tools on the market for issuing litigation holds. I have many friends at Legal Hold Pro that have a great cloud solution for issuing holds, tracking interview responses and documenting compliance. There are other options available.

The cost to use one of these tools is not prohibitive. Cloud solutions help keep fees reasonable. Moreover, the cost to a firm’s reputation because a Judge said a firm was “grossly negligent” in their duty to preserve is far more costly than properly issuing a litigation hold.

Control of Personal Email Accounts & Litigation Holds

Puerto Rico once again has issued a thought provoking eDiscovery opinion. It’s about time we hold a conference there.

FlagPuertoRico

The Court found the Plaintiff had offered sufficient evidence that the Defendant had a duty to preserve the personal email accounts of its former officers. The Court explained the email accounts were within the Defendant’s control because the officers had used the accounts for as along as seven years to manage the company. P.R. Tel. Co. v. San Juan Cable Llc, 2013 U.S. Dist. LEXIS 146081, at *4-5 (D.P.R. Oct. 7, 2013). Since the Defendant likely knew its managing officers were using personal email to conduct business, the duty to preserve included those accounts. Id. 

Sending smsThe Court did not grant the Plaintiff’s motion for adverse inference instructions, because there was no bad faith nor a showing of prejudice. P.R. Tel. Co., at *5.

The Defendant had issued a litigation hold within a month of the lawsuit.

Moreover, it appeared that only three email chains were “lost.” P.R. Tel. Co., at *6. 

While the Plaintiff could show three email chains were missing, it could not offer a clear theory on how it suffered any prejudice. P.R. Tel. Co., at *7.

Judge Bruce J. McGiverin ended the opinion with this legal foreshadowing:

Upon further discovery, more information regarding the extent of spoliation may come to light. Forensic analysis of these three former employees’ personal email accounts and computers may be appropriate to determine whether critical emails have been deleted. Nacco Materials Handling Grp., Inc. v. Lilly Co., 278 F.R.D. 395, 406 (W.D. Tenn. 2011) (“The only way to determine if relevant evidence currently exists or previously existed and was lost destroyed is to conduct a forensic examination to see if such evidence exists.”). At that time, plaintiff may renew its motion for sanctions if circumstances so warrant.

P.R. Tel. Co., at *7.

Bow Tie Thoughts

This case makes me think of one big issue: BYOD.

If an employer knowingly enables an employee to use a personal device for work, there is a duty to preserve what is relevant off of the device in a lawsuit. This could get ugly fast in litigation, as attorneys and experts debate doing targeted collections off of a personal device vs a mirror image.

If a company has Bring Your Own Device policies, they better have litigation plan that includes preserving any relevant information. It might be easier to simply have a work issued smartphone.

As to the personal email account issue, this would raise interesting collection issues. Email messages with eBay alerts, online dating or kid’s soccer games are highly unlikely to be relevant to a lawsuit. A data collection strategy could include targeting messages with work topics, specific individuals, date ranges and other narrowing methodologies. Early Case Assessment or data clustering technology would be very helpful in identifying relevant ESI.

You just need to compel the employee to turn over their passwords.

Understanding the Scope of the Duty to Preserve

The important litigation hold cases are not the ones that issue monstrous sanction awards; The important cases are the ones that demonstrate the analytical framework to understand how the law works. These are the opinions that help us represent our clients in knowing what to do when litigation is reasonably anticipated.

Magistrate Judge Paul Grewal’s opinion in AMC Tech., LLC v. Cisco Sys., is such a case that breaks down the duty to preserve, triggering events and the timeline of facts. I think it is extremely helpful in understanding the scope of the duty to preserve.

Judge Grewal opened his opinion with the following:

Ten years after Judge Scheindlin woke up the legal world from its electronic discovery slumber in the Zubulake series, plenty of other courts now have weighed in on when the duty to preserve electronic evidence attaches. With varying degrees of sophistication, most parties have gotten the basic message: the duty begins at least no later than the day they are sued and told about it. Less understood is exactly what a party must then do and by when. For example, while a suit against a particular CEO for sexual harassment would pretty clearly require that his relevant data be locked down at least by the time the company gets wind of the complaint, what must counsel do about less obvious players in a more abstract dispute? The motion before the court presents just such a question.

AMC Tech., LLC v. Cisco Sys., 2013 U.S. Dist. LEXIS 101372, 1-2 (N.D. Cal. July 15, 2013) [Emphasis added].

Here is the basic factual scenario of the case:

Defendant had a team negotiating a contract and royalty payments;

Employee not on the team contributed sales data for lead negotiator’s royalty payment schedule;

Employee kept his sales data on his computer and email;

Employee communicated by phone and email to negotiator;

Employee retired four days before Plaintiff files lawsuit;

Employee’s computer was wiped within the 30-day policy after someone leaves the company;

Neither party listed Employee as a custodian;

Defendant sought information from Employee slightly over one year from the filing of the lawsuit.

AMC Tech., LLC at *3-4.

BusinessMeeting

The Plaintiff sought adverse inference instruction against the Defendant for what it called “reckless destruction of documents created by a key decisionmaker.” AMC Tech., LLC at *5.

The Court summarized its inherent authority over spoiliation as follows:

The court has “inherent discretionary power to make appropriate evidence rulings in response to the destruction or spoiliation of relevant evidence,” which arises out of its inherent power to direct “orderly and expeditious disposition of cases.” The range of appropriate sanctions is broad, and may take form in relatively minor sanctions, such as the award of attorney’s fees, to more serious sanctions, such as dismissal of claims or instructing the jury that it may draw an adverse inference. The court’s discretion is not, however, unbounded — it must weigh a number of factors to determine whether to grant sanctions, and if so, tailor the remedy according to the conduct that triggered the sanction. To determine whether to award spoiliation sanctions, the court considers whether the moving party has established: “(1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a culpable state of mind; and (3) that the 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.”

AMC Tech., at *6-7.

The Court had to answer the following question: Did the Defendant have an obligation to preserve the Employee’s computer/email at the time the ESI was destroyed?

The Court explained that there was “no question” that the ESI had to be preserved when the Plaintiff requested the ESI. This was not possible, since the ESI had been destroyed approximately 11 months earlier as part of the Defendant’s routine policy when an employee left the company. AMC Tech., at *7.

Had the duty to preserve already attached to the ESI prior to its deletion?

The Court explained the scope of the duty to preserve as follows:

A general duty to preserve evidence relevant to the litigation arises from the moment that litigation is reasonably anticipated. Because Cisco received notice of the complaint before McKeon’s documents were destroyed, and concedes that it had notice of the suit even before AMC filed the complaint on July 11, 2011, Cisco had a general duty to preserve evidence when it destroyed McKeon’s documents.

But the scope of this duty is not limitless. A litigant has an obligation to preserve only evidence “which it knows or reasonably should know is relevant to the action.” This duty requires a party to “identify, locate, and maintain, information that is relevant to specific, predictable, and identifiable litigation,” which includes identifying “key players” who may have relevant information and taking steps to ensure that they preserve their relevant documents. It is critical to underscore that the scope of this duty is confined to what is reasonably foreseeable to be relevant to the action. Requiring a litigant to preserve all documents, regardless of their relevance, would cripple parties who are often involved in litigation or are under the threat of litigation.

AMC Tech., at *7-9 [Emphasis added].

What did this mean for the Defendant and retired Employee? The Court explained the following:

AMC’s complaint plainly put Cisco on notice to identify and preserve documents that generally might reasonably be relevant to the AMC-Cisco Agreement, the Siebel Adapter, and the UCCX Connector. But should Cisco have known specifically that McKeon was a “key player,” such that his documents, just days before their demise, were relevant to the case? McKeon was an unlikely candidate to have documents relevant to the Agreement because he did not engage in negotiations of the Agreement in any way. Nor did he work on any internal committees deciding whether to commence the UCCX Connector project. He was merely the product manager for the underlying Cisco UCCX product. Although McKeon’s input might have informed Nijenhuis’ computation of the royalty schedule in the Agreement, which might be relevant to the issue of damages, these documents are only tangentially related to even that question because AMC does not allege that the royalty payment schedule was incorrect. Nothing in the complaint suggests that AMC would be making such a claim. Because Cisco could not reasonably have known that McKeon’s documents would be at all relevant to the litigation when those documents were destroyed, there was no duty to preserve them at that time.

AMC Tech., at *9-10.

The Court rejected the Plaintiff’s argument that the retired Employee was a “key player” that justified harsh sanctions. The Court zeroed in on the fact the Employee was just a project manager who had no role in the contract negotiations. Moreover, his data was not unique, because the Defendant produced its internal financial spreadsheets pertaining to the sales of the subject devices. Those files likely were created by the Employee. AMC Tech., at *12-13.

The Court held there was no prejudice to the Plaintiff and that the sanctions sought establishing full liability for the breach of the agreement to be “wholly inappropriate.” As such, the Court denied the Plaintiff’s motion.

Bow Tie Thoughts

Many litigation hold cases often have a theme where a party seeks to have the opposing party drawn and quartered for missing a tangential custodian. While Courts are supposed to get to the truth of a matter, they are not supposed to be a medieval battleground whenever a custodian is missed, but the relevant data still appears to have been produced. This is not the time to release the dragon to rain fire.

Litigation hold cases are fact intensive. They require asking the age old questions, “What did the President know and when did he know it?” This can require not just custodian interviews, but using ECA technology to see communication patterns to identify the key players involved in the dispute.

Judge Grewal conducted very detailed analysis on the timeline on this case and applying those facts to the law. This case is an excellent way to teach the scope of the duty to preserve. I encourage attorneys to read the full opinion.

Grocery Shopping for Spoliation of Audio Evidence

GoingShoppingA Plaintiff was fired from her job at a grocery store that she held for 21 years for allegedly adjusting her own pay.

Prior to be fired, a representative from the Defendant grocery store secretly recorded an interview with her that was used as part of the decision making process in the Plaintiff’s termination.

However, the recording was destroyed during a four month period between when the Defendants were on notice of an imminent lawsuit and issuing of a litigation hold. Hart v. Dillon Cos., 2013 U.S. Dist. LEXIS 95441, 1-5 (D. Colo. 2013).

The destruction of the recording enabled the Plaintiff to win a spoliation shopping spree at the Federal Courthouse.

To prove spoliation of evidence, a party must prove:

1. The evidence relevant to an issue at trial;

2. The party have a duty to preserve the evidence because it knew or should have known, that litigation  was imminent;

3. The other party prejudiced by the destruction of the evidence.

Hart, at *2-3, citing E.E.O.C. v. Dillon Companies, Inc., 839 F. Supp. 2d 1141 (D. Colo. 2011).

The Court found that 1) the recording was relevant, because the Defendant used the recording as part of reason for firing the Plaintiff and 2) there was a duty to preserve the recording because the Defendant knew litigation was imminent from the filing of the EEOC complaint, the demand to arbitrate and the Plaintiff had a lawyer. Hart, at *3.

Vintage Reel-to-Reel Tape Player

The Court also held the Plaintiff had been prejudiced by the destruction of the recording, because the deposition testimony of the investigator who recorded the interview and Plaintiff had 14 alleged discrepancies between the two accounts, which included a key fact on how the Plaintiff entered the pay adjustment the way she knew how. Hart, at *4.

The Court stated:

The Court finds that Plaintiff has met her burden to establish a reasonable possibility based on concrete evidence rather than a fertile imagination that access to the lost material would have produced evidence favorable to her cause.

Hart, at *4, citing McCargo v. Texas Roadhouse, Inc., Civil Action No. 09-CV-02889-WYD-KMT and Gates Rubber Co. v. Bando Chem. Indus. Ltd., 167 FRD 90, 104 (D. Colo. 1996).

The Court further held that the failure to collect the audio recording was grossly negligent or willful behavior. Hart, at *4-5. The Court set a hearing for what sanctions should be imposed on the Defendant. Id. 

Bow Tie Thoughts

Identifying electronically stored information for preservation is a challenge to many attorneys. It is extremely important to ask a client in an interview “what technology do you use? How do you use it?”

The Court hit a very good point about proving spoliation: Showing concrete evidence instead of a “fertile imagination that access to the lost material would have produced evidence favorable to her cause.” Many times claims of spoliation seem to be swinging wildly at a bad pitch because a litigation hold letter was not communicated to a party in a timely fashion. That is a sign for alarm, but not proof evidence was lost.

This case was different. The facts favored the Plaintiff and met all the elements for spoliation. It will be interesting to watch what sanctions are entered against the Defendant.