How to Get A Judge to Say “Stern Measures Are Called For”

How do you know there is a duty to preserve?

When two managing officers involved in the termination of an employee are repeatedly asked by an attorney for their electronic calendars, including a letter threatening an EEOC complaint if there was not an amicable resolution, and then followed by formal discovery requests.

How do you get sanctions?

When after repeated statements that the Defendants did not have electronic calendars, one of the managing officers states in deposition that he kept a daily electronic calendar and routinely deleted the entries after the date has passed. Making matters more complicated, the witness admitted “he was told a week before his deposition to retain his calendars but he nonetheless continued his practice of deleting” his electronic calendars. Kirgan v. Fca Llc, 2013 U.S. Dist. LEXIS 51747, at *1-2 (C.D. Ill. Apr. 10, 2013).

Overview of Sanctions

A party must enact a litigation when it reasonably anticipates litigation, which generally requires the suspension of its document destruction policy.  Kirgan, at *3.

Courts analyze three factors in determining sanctions for the failure to preserve evidence:

(1) A breach of the duty to preserve or produce documents;

(2) The level of culpability for the breach; and

3) The prejudice that results from the breach.

Kirgan, at *3, citing Danis v USN Communications Inc., 2000 WL 1694325, at *31 (NDIL).

Case law states that sanctions must be proportionate to the offending conduct. Kirgan, at *3. A party also had to know or had reason to know that litigation was forthcoming. Kirgan, at *3 citing Morton v Motel 6 Operating L.P., 534 F3d 672, 681 (7th Cir 2008). Sanctions can be imposed on a finding of bad faith, willfulness, or fault. Kirgan, at *3 citing Brandt v Vulcan, Inc., 30 F3d 752, 756 (7th Cir 1994).

The Court’s Findings 

The Court held that the Defendants breached their duty to preserve the daily calendars and that the Plaintiff had been prejudiced by the destruction of the electronic evidence. Moreover, the Court found that the Defendants’ conduct was misleading and intentional. Kirgan, at *5.

The Court stated the following on determining sanctions:

I do not believe that the sanction of default is warranted. I do, however, believe that stern measures are called for. The Defendant’s direct and vicarious conduct was willful and intentional, and it cannot be condoned. 

Kirgan, at *7.

The Court noted that the destruction of the calendars was the only reported instance of misconduct.

However, that misconduct included untruthful statements that the calendars did not exist, with one of the parties deleting the ESI. Kirgan, at *6.

This conduct created a “clear impression that [the officer] had deliberately decided to thwart Plaintiff’s efforts to obtain them.” Id.

Based on the above, the Court entered the following sanctions order:

 

1. The jury is to be given a spoliation instruction, which permits the jury to draw a negative inference from its failure to preserve and its destruction of relevant documents.

2. Defendant may not use — at summary judgment or at trial — any evidence or argument that may have been contained in Borsdorf’s destroyed calendars, unless that evidence or argument is corroborated by other documentary evidence or by testimony of witnesses independent of the Defendant.

3. Defendant shall pay attorney’s fees to the Plaintiff for the fees his counsel incurred in preparing this motion. That amount shall be doubled, in a rough effort to compensate Plaintiff for the efforts that were made in her counsel’s attempts to obtain the calendars.

Kirgan, at *7.

Bow Tie Thoughts

Judges do not like lies. Attorneys have a duty of candor to the Court and witnesses take an oath to tell the truth. Judges get upset when anything less than the truth is told.

This is the first time I have seen a Court double an attorneys fee award as part of a sanction for the destruction of evidence (I am sure it has happened before). However, it is noteworthy, because the Court did it “in a rough effort to compensate Plaintiff for the efforts that were made in her counsel’s attempts to obtain the calendars.” 

Complying with the duty to preserve is rightly a hot topic in litigation. Attorneys must conduct detailed interviews with their clients to determine what technology is used in the ordinary course of business. Does the client text? Is there data outside the firewall in a “cloud,” such as a Google Calendar?

Attorneys must develop a preservation strategy after determining the relevant sources of information. Telling a custodian to “stop deleting” is a good first step, but the relevant data has to be collected in a defensible manner. This could range from content information management systems “locking down” the custodians’ communications, which are then exported for analysis and review. Other options include collecting data directly from the computers with computer forensic experts. Regardless of the strategy used, it is advisable to not allow custodians to self-collect their own data.

The Find a Litigation Hold App on An iPhone

In a dispute involving claims of monopolistic violations regarding booking A-list DJ’s at nightclubs, the Defendants did not take any steps to preserve or review text messages on an iPhone for relevance that was lost.  Christou v. Beatport, LLC, 2013 U.S. Dist. LEXIS 9034, 36-39 (D. Colo. Jan. 23, 2013).

While the ensuing motion practice did not have the fist-pumping energy of an A-list nightclub, the issue of spoliation sanctions is worthy of a late night freestyle eDiscovery rap battle.

Cueing Up a Litigation Hold

The Plaintiffs served a litigation hold letter on the Defendants at or about the same time as the beginning of the lawsuit in December 2010, which identified text messages as ESI to preserve. Christou, at *36-37.

The Plaintiffs sought an adverse jury instruction for the failed preservation of text messages, because 1) the Defendants took no steps to preserve the text messages on the Defendant’s iPhone; 2) Defendants did not disclose any text messages in their May 2011 discovery responses; and 3) The Defendant claimed that he lost his iPhone in August 2011, thus also loosing and any text messages saved on it. Christou, at *37.

Spinning Relevance and Review

The Defendants argued whether any relevant text messages were lost pertaining to the litigation was “sheer speculation,” because the Defendant did not use text messages to book DJ’s. Id.

The Defendants also argued that they “responded fully” to the May 19, 2011 discovery, thus “showing” that there were no responsive text messages. Id.

The Court stated that the Defendant’s claim he “did not use texting to book DJ’s is hardly proof that his text messages did not contain relevant evidence.” Id.

The Court turned up the volume on the fact that just because the Defendants stated that they “found no responsive text messages,” did not address whether defense counsel reviewed the Defendant’s text messages and determined that the text messages “contained nothing of relevance.” Christou, at *37-38.

Setting the Master Level on Sanctions 

The Court explained that spoliation sanctions are proper when “(1) a party has a duty to preserve evidence because it knew, or should have known, that litigation was imminent, and (2) the adverse party was prejudiced by the destruction of the evidence.” Christou, at *38, citing Turner v. Public Serv. Co. of Colorado, 563 F.3d 1136, 1149 (10th Cir. 2009) (quoting Burlington N. & Santa Fe Ry. Co. v. Grant, 505 F.3d 1013, 1032 (10th Cir. 2007)).

The Court found the Defendants had a duty to preserve the text messages, which they did not do. Christou, at *38.

Moreover, the Court held, “Those text messages, few as they might have been, should have been preserved and either provided to the plaintiffs or potentially made the subject of further proceedings before the Court.” Id. 

The Court had no reason to believe the phone was not lost on accident or the failure to preserve was just negligent. Christou, at *38-39.

However, the Court had to determine an appropriate sanction. The Court explained:

A commercial party represented by experienced and highly sophisticated counsel cannot disregard the duty to preserve potentially relevant documents when a case like this is filed. However, an adverse jury instruction is too harsh and is unwarranted as a sanction for the negligent “spoliation” of evidence in the circumstances presented here.

Christou, at *39.

The Court mixed the following sanction: The Plaintiffs could introduce the litigation hold letter and that the Defendants failed to preserve the text messages. Id.  Further, the Plaintiffs could “argue whatever inference they hope the jury will draw.” Id. Additionally, the Defendants could offer admissible evidence to explain the loss and argue that no “adverse inference should be drawn.” Id. 

Bow Tie Thoughts

The duty to preserve and mobile devices can potentially give lawyers serious stress. Attorneys should discuss with clients how they use technology, how they communicate and involve consultants in ensuring the preservation of relevant ESI. Additionally, if a litigation hold letter specifies a type of data, it is advisable to conduct a reasonable investigation whether any relevant information exists on the identified media.

Litigation hold letters can be multiple page lists including every possible form of ESI known to man. While no one wants data to go missing, or to not include a possible data source, it is always a good plan for parties to meet and confer over possible data sources to narrow what data needs to be preserved and collected.

Finally, it is important to remember data can exist in multiple locations. While a smartphone such as an iPhone might be lost, the text messages might be backed-up on a computer when the iPhone was synced. It is also worth investigating whether the text messages were iMessages that possibly could be backed-up in iCloud.

Remote Control Duty to Preserve

Can a party issue a litigation hold to one of its contractual agents to preserve information by remote control?

The answer is yes, yes they can.

In Haskins v. First Am. Title Ins. Co., the first issue was whether the Defendant was in “possession, custody, or control” of documents held by its “independent title agents,” and second whether the Defendant had a duty to direct its agents to “preserve” the documents. Haskins v. First Am. Title Ins. Co., 2012 U.S. Dist. LEXIS 149947 (D.N.J. Oct. 18, 2012).

By way of background, the lawsuit involved allegations of overcharging on title insurance. The “independent title agents” issued most of the policies. Haskins, at *1-2.

Under Federal Rule of Civil Procedure Rule 34(a), a requesting party can request information within an opposing party’s “possession, custody, or control.” This does not actually require physical control. Haskins, at *3.

Moreover, the Court explained, “It logically follows that a litigating party has control of documents if a contractual obligation requires a non-party to provide requested documents to the litigating party upon demand.” Haskins, at *4.

Furthermore, a party has control if it has “a right to access the [requested] documents or obtain copies of them.” Haskins, at *4, citing Andrews v. Holloway, 256 F.R.D. 136, 145 n.13 (D.N.J. 2009).

The Court zeroed in on the Defendant’s contracts with its agents that gave the Defendant control of the files, because the Defendant the right to access and use of the files. Haskins, at *6-8.

Litigation Hold Overview

Case law holds that a party has a duty to preserve when a party “knows or reasonably should know” that litigation is foreseeable. Haskins, at *11-12, citing Mosaid Techs. Inc. v. Samsung Elecs. Co., Ltd. 348 F. Supp. 2d 332, 336 (D.N.J. 2004). Once there is a duty to preserve, a party must “put in place a litigation hold to ensure the preservation of relevant documents.” Haskins, at *12, citing Major Tours, Inc. v. Colorel, No. 05-3091(JBS/JS), 2009 U.S. Dist. LEXIS 68128, at *2 (D.N.J. Aug. 4, 2009).

In the age of smartphones and complex networks, the Court stated for a hold to be “suitable” (probably code for reasonable), “a party must identify potentially relevant sources of information, implement procedures to retain that information, and produce information responsive to discovery requests.” Haskins, at *12.

If there is a failure to preserve data and a party seeks spoliation sanctions, a party must demonstrate four factors:

1) The evidence must have been in the party’s control;

2) It must be relevant to claims or defenses in the case;

3) It must have actually been suppressed or withheld by the party; and

4) The duty to preserve evidence must have been reasonably foreseeable to the party.

Haskins, at *12-13, citing Bull v. United Parcel Serv., Inc., 665 F.3d 68, 73-74 (3d Cir. 2012).

The Court held that the Defendant had a duty to preserve, because litigation was active and the material relevant. As such, the Defendant was required to issue a litigation hold of documents within its possession, custody or control. As the Court explained, control did not require physical control, but contractual control was enough to require the Defendants to issue a litigation hold to its independent agents.

Bow Tie Thoughts

The duty to preserve can become tricky with third parties bound by contractual obligations that show control over data. The issue of data stored in “cloud computing” could become extremely complicated, especially if data is hosted in different states or countries from the venue of a lawsuit.

In the end, control of “cloud storage” will be a review of  “Terms of Service” in contractual agreements, most of which are likely clickwrap agreements. These cases will be interesting to watch, especially as more companies host data in a “cloud.”

Drop-by-Drop Water Torture Productions

There are judges who have a way with words when they want to make a point. One example of such judicial prose was by Magistrate Judge Gregory G. Hollows in Botell v. United States:

At this juncture, the United States has purportedly been looking for documents for months, yet the undersigned, to the date of the hearing, does not have confidence that an organized, thorough search has been performed. Rather, defendant’s document production performance in these proceedings has been akin to a drop-by-drop water torture. At some point, plaintiff must be protected from the United States’ further belated production of pertinent documents. The court now enters a preclusion order prohibiting the United States from presenting evidence in its case that had been requested by plaintiffs in the Requests for Production, but which has not been produced by the date of compliance with this order.

Botell v. United States, 2012 U.S. Dist. LEXIS 134265, 15-16 (E.D. Cal. Sept. 18, 2012).

Botell v. United States is a wrongful death and personal injury case involving a minor injured and another killed at a National Park. The Government produced over 7,000 pages of documents, but there was a “a glaring lack of production of emails from defendant’s agents and employees.” Botell, at *11-13. Moreover, the total number of custodians produced by the Defendant totaled one.

The Plaintiffs argued five other relevant custodians’ emails needed to be produced, because the custodians were referenced in the already produced ESI. Botell, at *11.

The Defendants produced one declaration by the Chief Ranger at the park, which explained his efforts to find responsive email.

These efforts included “searching” the office and network drives, and the Ranger’s coordination with officials and IT personnel at another National Park to search another custodian’s computer. The declaration was silent on any search for emails by the other custodians. Botell, at *11-12.

Another declaration curtly explained the back-up policy for Lotus Notes emails as follows: “[B]ack-up emails are retained for 30 days only, unless they are subject to a litigation hold notice or pertain to the BP Gulf Oil spill.” Botell, at *12.

The Court ordered the Defendants to provide a declaration explaining the searches conducted to locate physical and electronic copies of responsive emails by the five custodians. The Court specifically required the following:

The declaration shall state the steps taken to locate these emails, whether any such emails exist, and if not, a definitive statement that they no longer exist. If further responsive documents are located, they shall be produced at the time declarations are filed.

Botell, at *12-13.

Bow Tie Thoughts

Nothing goes for the jugular like a preclusion order for failing to produce discovery. Botell is a powerful example of the dangers of what appeared to be “do it yourself” collection. While it was not outright stated the Defendant did not have an eDiscovery collection expert, it sure sounds that way from the context of the declarations.

One would hope when a large organization has a triggering event for a lawsuit, an effective litigation hold is enacted. Many of today’s records information management systems have the ability to electronically sequester a specific custodian’s email and ESI with a keystroke. Additionally, much of this technology has Early Case Assessment and data reduction features that can identify the relevant information for attorneys to review.

An organization should either have professionals trained in the search and preservation of ESI or retain outside professionals to competently preserve ESI. The steps taken to search and identify responsive ESI must be documented and should, at a minimum, explain the search methodology; technology used; data sources searched; search results; possible exclusions or exotic files; and anything else relevant to explain to a judge how ESI was searched.

A requesting party should not have to blink “torture” in Morse Code for a judge to stop a party neglecting their discovery obligations. An attorney’s duty of competency should compel their preservation obligations are met with those trained to effectively find and produce responsive discovery.

Establishing Prejudice: Putting the Brakes on Spoliation Motions

In a very short opinion, Magistrate Judge Facciola showed a path to putting the brakes on spoliation motions: “Assessing whether sanctions are warranted for the loss of otherwise discoverable information is a function of whether a party has been prejudiced by that loss.”  Davis v. Grant Park Nursing Home, LP, 2010 U.S. Dist. LEXIS 118853 at *3 (D.D.C. Nov. 9, 2010).  

Demonstrating prejudice is not new.  Judge Facciola discussed it in D’Onofrio v. SFX Sports Group, Inc., 06-cv-687, 2010 U.S. Dist. LEXIS 86711, at *11 (D.D.C. Aug. 24, 2010).  As Judge Facciola explained:

Prejudice to a party can only be examined by looking at all the information that is available, for only in that context can the nature and extent of the loss suffered be accurately gauged.

Davis, at *3. 

The path to controlling the rush to file spoliation motions is when these motions should be filed.  In this case, the Court held that discussing sanctions was “premature” until the end of discovery.  Davis, at *3-4. At that time, the Court could accurately determine if there had been any prejudice from the alleged destruction of electronically stored information.  Davis, at *4.

Bow Tie Thoughts

The failure to issue a litigation hold and the preservation of evidence are unquestionably important issues.  Courts seek the truth of a matter and if evidence has been destroyed, sanctions should rightly issued on the offending party.

Now for the big “however”: the question of sanctions is not a game.  The hint of a failure to issue a litigation hold is not reason to put a party in a stockade.  While it should put a party on alert, there must be prejudice before a call to arms for sanctions.  Moreover, the a court is best able to determine if a party has suffered prejudice is at the close of discovery, not the beginning or middle of it.

Raiders of the Lost Hard Drive

Legend says in 2005, litigation began over cell phone towers and “monopoles.”  Discovery was extensive.  Summary judgment motions were lost and won.  

Time had past.  And then, what was lost was then found. 

When You Find the Ark of the e-Discovery Covenant

A custodian’s computer was found in September 2008 that had been in storage. The custodian was terminated in 2002.  The computer had not been searched in the lawsuit and nothing from it produced in discovery.  Crown Castle USA, Inc. v. Fred A. Nudd Corp., 2010 U.S. Dist. LEXIS 32982, at *14 (W.D.N.Y. Mar. 31, 2010).

Email messages from the lost computer were produced to the opposing party in December 2008.  Crown at *14. 

The messages included an exchange between the lost custodian and a key player who was responsible for the “monopoles” in the lawsuit.  Crown at *14. 

The producing party had 15 custodians re-searched their records for other responsive documents after finding the lost hard drive. 

Much to their horror, they found more responsive electronically stored information. 

An additional 1,442 email messages were produced from one of the key players in January 2009, totally nearly half of the late production.  Crown at *14.  Twenty-two more emails were produced in August 2009.  Crown at *15.  Engineering reports were also found that were prepared for a municipality.  Id.

Adding to the nightmare, the late-produced emails showed the producing party knew of a product defect, which disproved their own victorious arguments from their motion for reconsideration to reinstate certain claims.  Crown at *17. 

No one wants to be in this position. 

The Temple of Discovery Doom

The producing party’s discovery failures took the Court on an analytical adventure spanning preservation, litigation holds and the collection of electronically stored information. 

The producing party’s emails with in-house counsel showed they contemplated litigation in August 2004.  Crown at *18-19.  Email messages were labeled “Attorney-Client” and they hired litigation counsel by November 2004.  Crown at *19.

The producing party’s document retention/destruction policy called for email messages to be deleted within 90 days of an employee’s termination.  Crown at *19.  These email messages were not stored on back-up tapes.  Id.

Conversely, electronic documents were deleted within two weeks of an employee’s termination and stored on back-up tapes for one year.  Crown at *19.

As the producing party admitted in correspondence: 

[R]ecords generated in the normal course of business from 2001 until this litigation were retained or not retained on an individual employee basis, and Crown expects that some records generated during that time frame were not retained by those individual employees. Any documents that were deleted by the employee are not forensically recoverable.

Crown at *19-20.

The Danger of Custodian Collection of ESI for Production

The producing party’s protocol for responding to discovery can be summarized as follows: 

1)       Discovery requests provided to in-house counsel

2)       In-house counsel asked specific employees to search for emails regarding the monopoles and collect the responsive documents.

3)       The in-house legal team reviewed the employee collected material and provided the discovery to trial counsel.

Crown at *20-21.

This might sound good on paper until over a thousand responsive emails are found on computers you had access to for years, in addition to email messages found on a lost hard drive. 

This sounds like a very bad plan when a custodian testifies that they were give no search instructions by their attorneys, so their “search” for responsive email with just one word that produce no results.  Crown at *23. 

This plan sounds extremely damaging when a custodian testifies that it was their practice to delete emails each week and they were never instructed to stop deleting email.  Crown at *24. 

I Have a Bad Feeling About This:  Failure to Enact a Litigation Hold

There was no evidence the producing party enacted a litigation hold.  Crown at *20.

One supervisor’s electronically stored information was destroyed after he left the producing party, which was 10 months after the duty to preserve was triggered and 4 months after the filing of the lawsuit.  Crown at *35-36. 

The Court described the “wholesale destruction” of ESI as “inexcusable.”  Crown at *36. 

The loss of the supervisor’s electronically stored information completely denied the requesting party any opportunity to conduct any discovery on the hundreds of emails he admitted to sending during his deposition.  Crown at *36. 

The Director of Engineering for the producing party was also never directed to search his records for responsive ESI.  Crown at *36.  The Court described the failure to preserve the Director of Engineering’s ESI as “inexplicable.”  Crown at *37. 

The Court stated the “reasonable inference” from the facts was the producing party “failed to take adequate measures to preserve electronic documents.”  Crown at *37.

The Court further stated that a supervisor’s ESI being destroyed four months after the filing of the lawsuit as “wholly unacceptable.”  Crown at *37.

The Court held the producing party acted with gross negligence with the failure to enact a litigation hold.  Crown at *37.  The Court could assume that the lost ESI was also relevant, because of the gross negligence and other produced emails showing relevancy.  Crown at *40. 

However, the Court could not find the producing party acted in bad faith by intentionally destroying data.  Crown at *37. 

Sanctions: Keep Your Eyes Closed!

The producing party, in-house legal and trial counsel rightly feared violently melting in Court.

However, they survived what could have been cataclysmic. 

The Court could not find any evidence that the requesting party had been prejudiced by the destruction of the supervisor’s electronically stored information.  Crown at *48. 

There were nearly 500 emails from the supervisor that had been produced from other employees.  Crown at *48.  Moreover, there was no evidence that the lost email messages would have been favorable to the requesting party’s defense.  Crown at *48. 

The Court left open the possibility of a sanction sequel: The producing party had to pay the cost for re-deposing the supervisor.  If the disposition testimony showed the likelihood that lost email was favorable to the requesting party’s defenses, then the requesting party could renew their request for an adverse inference instruction. Crown at *49. 

Bow Tie Thoughts:  

We Are Simply Passing Through e-Discovery. This, This is e-Discovery…

This case highlights what can go totally wrong with custodians performing self-collection, attorneys not providing sufficient guidance and the total gross negligence in failing to issue a litigation hold.  Given that the facts of the lawsuit began in 2004, many of these errors are understandable for that time.  Attorneys and clients in 2010 should not make the same mistakes in issuing litigation holds and preserving electronically stored information.

Self-collection of electronically stored information is playing Russian roulette with your case.  Trusting that custodians will thoroughly collect all relevant ESI for review runs the risk of failed preservation, spoliation and sanctions. The end result in this case was custodian who used one keyword to search email that generated zero results. 

Is a custodian searching Outlook for email and determining relevance cheap?  Yes, it is.  Is defending a motion for spoliation and adverse inference sanctions cheap?  No.  It also can be devastating if you lose.  Even if you manage to dodge sanctions, being branded with “gross negligence” cannot help your case. 

There are defensible cost-effective tools on the market to control collection costs.  One is from PinPoint Labs, where a collection expert can write a script that is place on a thumb drive that will collect data off a computer.  The device is given to the custodian, plugged into the USB port and allowed to run.  Once the collection is complete, the thumb drive is placed in an evidence bag and sealed.  A custodian affidavit is then completed and everything returned to the expert for processing. 

The preservation and collection of data cannot be done on the “cheap” with custodians devising their own search terms on an ad hoc basis without the involvement of counsel.  The collection of electronically stored information truly needs to have the involvement of the attorneys interviewing custodians and working with trusted consultants to select the most appropriate search terms.    Developing this sort of workflow can show a reasonable, repeatable and defensible process that can avoid cases such where data is lost due to botched preservation and collection.

A Field Day of Litigation Holds

A music festival known as “Field Day” sued a County for the denial to issue a permit for a concert that included First Amendment and business tort causes of action.  Field Day, LLC v. County of Suffolk, 2010 U.S. Dist. LEXIS 28476 (E.D.N.Y. Mar. 25, 2010).

The Plaintiffs alleged that the County and Individual Defendants engaged in spoliation from the failure to issue a litigation hold, resulting in the loss of electronically stored information. 

Having a Field Day

Field Day set out to have a sanction field day with the following spoliation allegations:

(1)”[t]he County Attorney’s Office never implemented a litigation hold to prevent its employees from destroying evidence exclusively within the county’s control and custody since the litigation period commenced;”

(2) “[t]he County has made no attempt to search for relevant documents that it confirms exist among the over 82,000 boxes of documents archived in the county’s records retention facility;”

(3) “[t]he County has destroyed internal and external e-mail communications, electronic word documents, calendars, and other data relevant to the claims and defenses in this case by systematically erasing this information by “wiping” or “ghosting’ in this case the computer hard drives of its former county employees, including the individual County Defendants in 2004, months after the litigation period commenced;” and

(4) “[a]s late as October 2006, former County Health Department officials “purged” and destroyed hard document files containing evidence that directly supports Plaintiff’s claims . . . .”

Field Day, at *6-7

Go Big or Go Home: Seeking Relief  

The Plaintiffs sought relief for the alleged spoliation against both the County and all of the Individual Defendants.  They went for the jugular, requesting answers and affirmative defenses be struck, adverse inference instructions and leave from the Court to amend their Complaint to add the Individual Defendants for their “discovery abuses.”  Field Day, at *7-8. 

The Eye of the Paper Tiger

The County claimed a unique defense in the digital age: There was no spoliation because the County had a Paper Retention Policy. Field Day, at *8.

The County did not challenge the fact a litigation hold was not enacted or that their computer hard drives were wiped clean with a change in administration in 2004.  Field Day, at *8.

The Defendants claimed there was no spoliation because the Defendants printed out relevant emails as part of a paper-based document retention policy.  Since everything was printed as paper, there was no evidence missing.  Field Day, at *8.

Fielding Spoliation: A Summary

The Court engaged in the traditional spoliation and sanctions analysis for the County and each Individual Defendant. 

For those not familiar with spoliation, case law defines it “as the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Field Day, at *9.

To prove spoliation, the moving party must show:

(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.”

Field Day, at *9-10.

Triggering Event

The Court found that the “triggering event” for the duty to preserve began when the County received the Plaintiff’s notice of claim, which put the County on notice for possible litigation.  Field Day, at *15.

Who Knew What When: In-Depth Spoliation Analysis for Each Individual

The Court reviewed extensive testimony from the Defendant’s Director of Information Management and discussed all of the individuals who were subject of spoliation claims.  This article will not review every individual’s spoliation analysis. 

The Director of Information Management testified that he did not know whether a litigation hold had been issued.    Field Day, at *18. 

The Director explained that the County’s document retention police was to “print out any pertinent e-mails and then file them as paper, so that’s how they would be preserved.” Field Day, at *18-19. 

It was the employee’s responsibility to print any business related emails and then file the printed email messages. Field Day, at *19. 

The County did have email on emergency back-up tapes, which were solely for disaster recovery.  The County did not have the technology to search their back-up tapes.  Field Day, at *19. 

Email messages might not have been archived on the County’s back-up tapes if the messages were removed from inboxes by the computer users.  Field Day, at *19. 

The Court held that the County spoliated evidence with the County employees who were 1) involved with issuing a permit to Field Day; 2) sent or received emails and created ESI, and 3)  whose computers were wiped clean after the triggering event.  Field Day, at *20-21. 

The Court could not find any finding of spoliation for the County’s search for ESI based on the Director of Information Management’s testimony.  The Director did not know if there were efforts to find responsive documents at the County’s records retention archives, the County Attorney’s Office or the Clerk’s Office.  Field Day, at *21.

As for many of the individuals accused of spoliation, the analysis in almost every case focused simply on the absence of evidence that they were aware their hard drive would be wiped upon their departure.  Any spoliation resulting from the wiping of their hard drives was attributable to the County, not the specific individuals. Field Day, at *22; 29; 31; and 34.

Timing is Everything: The County’s State of Mind

A key factor in the Court’s “state of mind” analysis was the facts for this case took place in 2003 and 2004.  A lot has happen since then, such as Zubalake V, which established the requirement to issue a litigation hold in the Southern District of New York; the enactment of the Amendments to the Federal Rules of Civil Procedure and a large body of case law.  Field Day, at *40. 

Simply put, this case started before it was clear that the email messages should have been preserved both electronically and as paper in light of the Defendant’s paper document retention policy.  Id.

A party would not get such a big free pass today for the loss of electronically stored information. 

Negligent Spoliation

The Court found that the County was negligent in their preservation of electronically stored information.  Field Day, at *41. 

The Court further held that the County’s “failure to execute a comprehensive search for documents and its failure to sufficiently supervise or monitor document retention by its employees supports that the County acted in an indifferent fashion.”  Field Day, at *41. 

Now for the big “however”: The Court found none of the destruction was the result of “willful misconduct or bad faith.”  Field Day, at *41. 

Relevance: The Sanction Killer

This was not a case where egregious conduct determined the lost ESI was relevant as a matter of law.  The Plaintiffs had to prove with extrinsic evidence that the lost email would have been favorable to their case.  Field Day, at *43. 

Proving lost electronically stored information would have been relevant to the moving party is perhaps the hardest element to prove in a spoliation motion. 

The lost electronically stored information was due to a destruction policy of wiping computers at the change of a political administration at a time before the “litigation hold” case law we know today.  Field Day, at *43. 

The Plaintiffs were unable to show any extrinsic evidence, such as an email referring to another email that was not produced, support their spoliation claims.  Field Day, at *44. 

The Court further noted it was unclear the Plaintiffs suffered any prejudice from the lost electronically stored information, because the County produced the relevant email messages in paper format.  Field Day, at *44. 

The Plaintiffs were unable to gain any of the relief they sought against the Defendants for spoliation.  However, they did recover attorneys’ fees.  The Court explained that attorneys’ fees were justified because the “County’s carelessness gave Plaintiffs reason to believe that something improper had occurred.” Field Day, at *45.

Bow Tie Thoughts

Cases where a party can dodge sanctions for the loss of electronically stored information because they had a paper-based retention policy will likely be limited to lawsuits that began before the case law from the last 7 years.  

More importantly, remember the Court’s order for attorneys’ fees, because of the Defendants’ carelessness gave reason to believe something improper had happened.  A policy of simply printing what someone thinks is important as a retention policy can just make a party look bad, even if nothing sinister has happened. 

I also think arguing back-up tapes are not reasonably accessible because you do not own the technology to search them will not last.  There are affordable ways to search back-up tapes, because of the advancements in technology.  What was cost prohibitive 5 years ago is not necessarily cost prohibitive today.  The standard of “not reasonably accessible” will be a moving target as new technology enters the market.

Another interesting take away from this case is proving specific individuals committed spoliation because of an organization’s document destruction policy.  The requirement that an individual had to know their work computers would be wiped after they left the organization highlights an almost “specific intent” element for each actor in spoliation analysis.

Going Too Far with a Litigation Hold: Do Not Secretly Copy the Adverse Party’s Data

In a business divorce, the Plaintiffs received a litigation hold notice from the Defendants.  The Plaintiffs then secretly copied computer files from the Defendants’ data center in Oakland, California through their virtual private network (VPN) connection to the data center.  Joseph Oat Holdings, Inc. v. RCM Digesters, Inc., 665 F. Supp. 2d 448, 452 (D.N.J. 2009).

Here is a quick take away: This was a bad idea.  Don’t play spy as your litigation hold strategy. 

Even though the Plaintiffs dodged some violations, secretly copying data from a party as a preservation procedure is riddled with risk. 

The Plaintiffs’ actions erupted with in-depth analysis on whether the California Computer Data Access and Fraud Act was violated by this “litigation hold” tactic. Joseph Oat Holdings, Inc., at *451. 

While there are other points of law at issue in this detailed opinion shortly addressing conversion, Federal and New Jersey law, this article will focus on the California Computer Data Access and Fraud Act analysis. 

The Facts & Procedural History: A Litigation Hold Too Far

Two business partners in the biological sciences industry decided to end their business relationship after 18 “stormy” months.  Joseph Oat Holdings, Inc. at *451.

The Plaintiffs, without either the Defendant’s permission or knowledge, accessed and copied over 150,000 files at the Defendant’s data center.  Joseph Oat Holdings, Inc. at *454. 

Many of the files were created after the parties ended their joint venture.  Id.

The data was accessed after the Plaintiffs had a right to do so, because the property rights had reverted to the Defendants.  Joseph Oat Holdings, Inc. at *455. 

There was evidence the Plaintiffs also deleted files and changed administrative passwords.  Joseph Oat Holdings, Inc. at *455. 

The Plaintiffs named their data acquisition project the “Information Copy Project.”  Joseph Oat Holdings, Inc. at *454.  They were able to keep the project secret for a year.  Id.

The Plaintiffs’ computers had desktop shortcuts to the “Information Copy Project” files, allowing quick access to the electronically stored information.  Joseph Oat Holdings, Inc. at *454-455. 

The Plaintiffs claimed they were just preserving electronically stored information and had permission to do so because the Defendants sent a “litigation hold.”  As such, they did not violate the California Computer Data Access and Fraud Act (or other laws) for their “preservation” actions.  Joseph Oat Holdings, Inc. at *455. 

And with that, the “litigation hold” defense to secretly accessing and copying a data center was born. 

The Defendants referred to the Plaintiffs’ preservation actions as an “after-the-fact concoction to justify their illegal actions.” Joseph Oat Holdings, Inc. at *452. 

The Magistrate Judge found that the Plaintiffs’ secretive conduct in discovery was “troubling,” however, found that the data was copied to seek a business advantage, not a litigation advantage.  Joseph Oat Holdings, Inc. at *453.  As such, the proper remedy was for the Plaintiffs to pay the Defendants’ costs, but not attorneys’ fees.  Id. 

Dueling Summary Judgments

The District Court addressed the data acquisition issues in the parties’ dueling motions for partial summary judgment.

The Defendants went on the offensive in their partial summary judgment motion, arguing the Plaintiffs violated the California Computer Data Access and Fraud Act.  The key issue was whether the Plaintiffs “knowingly and without permission accessed, and/or copied, and/or deleted defendants’ computer files.” Joseph Oat Holdings, Inc. at *454. 

The California Computer Data Access and Fraud Act (California Penal Code § 502), states in relevant part:

[A]ny person who commits any of the following acts is guilty of a public offense:

(1) Knowingly accesses and without permission alters, damages, deletes, destroys, or otherwise uses any data, computer, computer system, or computer network in order to either (A) devise or execute any scheme or artifice to defraud, deceive, or extort, or (B) wrongfully control or obtain money, property, or data.

(2) Knowingly accesses and without permission takes, copies, or makes use of any data from a computer, computer system, or computer network, or takes or copies any supporting documentation, whether existing or residing internal or external to a computer, computer system, or computer network. ..

(4) Knowingly accesses and without permission adds, alters, damages, deletes, or destroys any data, computer software, or computer programs which reside or exist internal or external to a computer, computer system, or computer network. . . .

(6) Knowingly and without permission provides or assists in providing a means of accessing a computer, computer system, or computer network in violation of this section.

(7) Knowingly and without permission accesses or causes to be accessed any computer, computer system, or computer network.

 Joseph Oat Holdings, Inc. at *454. 

The Plaintiffs’ key defense was that they had “permission” to access the data because of the litigation hold letter from the Defendants to preserve “…all recorded information…”  Joseph Oat Holdings, Inc. at *455.

The Plaintiffs further argued they were motivated to preserve the electronically stored information out of fear the Defendants would “recklessly destroy electronic information by attempting to unilaterally sever the joint system,” thus they “began to make a backup copy of the data that was on the joint server in Oakland.” Joseph Oat Holdings, Inc. at *455.

The Plaintiffs mounted a “should have expected” argument, claiming that since the Defendants’ attorneys knew there was an active VPN connect, the defense attorneys “should have expected” the Plaintiffs to copy the data.  Id.

No “Litigation Hold” Shield

There is no “litigation hold” defense shield for secretively copying data.  The Plaintiffs’ arguments were rejected twice by the Magistrate Judge and by the District Court.  Joseph Oat Holdings, Inc. at *455.

The Court noted that the Plaintiffs maintained desktop shortcuts to the files, which severely undercut any notion of preservation.  Joseph Oat Holdings, Inc. at *455-456.  Preserving data requires it is being saved and unaltered for litigation.  The very fact there were desktop shortcuts on the Plaintiffs’ computers highlighted the data could be accessed and used by a party.  That is simply not preservation for litigation.  

As the Court explained:

The duty to preserve evidence for litigation is just that–for preservation of documents as they existed at the commencement of litigation. Further, that duty is to preserve one’s own documents. It is not to serve as a method by which to create an accessible database of an adversary’s proprietary information.

Joseph Oat Holdings, Inc. at *456.

The Court further stated that a preservation letter from an opposing party does not give “a party carte blanche authority to secretively copy computer files located on the adversary’s computer server.”  Joseph Oat Holdings, Inc. at *456. 

The Court went on to explain that if there truly was a fear of the destruction of evidence, the Plaintiffs should have sought relief from the Court, most logically in the form of a preservation order on a expedited basis.  Joseph Oat Holdings, Inc. at *456.  Since the lawsuit was already underway and the offending party was the Plaintiff, they had the means and ability to seek judicial relief from the Court.  Id.

No Litigation Privilege Protection

The Plaintiffs claimed their conduct in copying the data in secret was protected by the litigation privilege.  Joseph Oat Holdings, Inc. at *456. 

The Litigation Privilege protects attorneys and litigations with an “absolute privilege to statements or communications made…in the course of judicial and quasi-judicial proceedings.”  Joseph Oat Holdings, Inc. at *456, FN 5. 

The Plaintiffs argued that Litigation Privilege protected them for their secretive data copying, because, “[c]ommon sense and fairness dictate that a litigant should be permitted to discharge their e-discovery duties without the fear of being subjected to additional causes of action.” Joseph Oat Holdings, Inc. at *456. 

The short answer is “NO” to this argument.  As the Plaintiffs’ actions were found not to be done for litigation purposes, the litigation privilege was not applicable.  Joseph Oat Holdings, Inc. at *457. 

One probably can argue data preservation is not a communication made in the course of a judicial proceeding and would further be inapplicable on those grounds. 

The California Computer Data Access and Fraud Act

The Court held the Plaintiffs violated the California Computer Data Access and Fraud Act. Joseph Oat Holdings, Inc. at *457.  

The Court held that the “unauthorized copying of a competitor’s proprietary information was ‘wrongful’ as defined by the statute and the California legislature,” pursuant to subsection (1) of the Computer Data Access and Fraud Act.  Joseph Oat Holdings, Inc. at *458.   

The Court found that after the end of the joint venture that “no rational factfinder could conclude that plaintiffs had permission to copy the files of a completely separate and unrelated entity, and particularly a competitor,” pursuant to subsection (2) of the statute.  Joseph Oat Holdings, Inc. at *458.   

The Defendants’ Relief for Violation of the California Computer Data Access and Fraud Act

The Court ordered the Plaintiffs to return all copies of the data after the ending of their joint venture.  The Plaintiffs were also barred from using the data “in any manner.”  Joseph Oat Holdings, Inc. at *460.    However, there was no injunction issued for the “pre-divorce” data.  Id. This data had been produced in discovery by the Defendants to the Plaintiffs.  Id. 

Bow Tie Thoughts

When it comes to the preservation of evidence, here are some basic actions:

1. Send a written litigation hold to your client once litigation is reasonably anticipated.   
2. Discuss with your client possible data storage locations that can be subject to the law suit.
3. Send a preservation letter to your opponent.
4. Discuss at a meet and confer the preservation of electronically stored information, including custodians and data locations.
5. If at any point there is a real threat that the opposing party’s data will be lost, seek the Court’s assistance for a preservation order or a temporary restraining order to cease the actions threatening the loss of electronically stored information.  Due to the transitory nature of some data, an expedited order might be necessary. 

The temptation to play spy and secretly copy your adversary’s data is fraught with risk.  There are different Federal and State laws that prohibit the unauthorized access of computer systems.  There is no “litigation hold” exception to these laws and it is doubtful that a colorable argument can be made with the “litigation privilege” to usurp these data protection laws. More importantly, a lawyer has an ethical duty not to advise a client on how to commit a crime. 

The moral of the story is simple: If there is truly the risk of data destruction, seek the help of the Court.

Michael Arkfeld on Litigation Holds Webinar: Understanding Judge Scheindlin’s Pension Committee Decision

United States District Court Judge Shira Scheindlin set the gold standard for litigation holds six years ago with the Zubulake decisions.  Judge Scheindlin recently raised the bar again in the landmark Pension Committee of Montreal v. Banc of America Securities decision.

D4 and Legal Hold Pro are pleased to welcome Michael Arkfeld, Esq., author of the Arkfeld on Electronic Discovery and Evidence and Arkfeld’s Best Practices Guide for Litigation Readiness and Hold, for a discussion of the impact of Judge Scheindlin’s most recent opinion on February 26, 2010 at 10am Pacific Time.   To register, click here.

The webinar will address:

• How the failure to issue a written litigation hold amounts to gross negligence
• The propriety of custodian identification of responsive electronically stored information
• Key best practices for issuing a litigation hold

Please join us on February 26, 2010 at 10am Pacific Time and 1pm Eastern Time for this video webinar.  There is no charge to participate in this event.  To register, click here.    

About Michael Arkfeld, Esq.   

Michael R. Arkfeld, is considered one of the leading experts in the field of electronic document retention, discovery, production and admissibility of electronic information.  Michael is the author of multiple books on law and electronic evidence, including Arkfeld on Electronic Discovery and Evidence, eDiscovery Best Practices Guides and The Digital Practice of Law, along with numerous articles on technology and the practice of law.  Michael was a trial litigator for over 30 years and has been a primary organizer for many law related technology conferences in the United States and a presenter at over 200 conferences, seminars and training sessions.

Discovery Games in Gaming Litigation

Discovery games were taking place in a gaming case in Mississippi. 

The Plaintiffs brought a motion to strike and a motion for sanctions for discovery misconduct in responding to requests for electronically stored information.  Maggette v. BL Dev. Corp., 2009 U.S. Dist. LEXIS 116789 (N.D. Miss. Nov. 24, 2009).  The Court did not grant the sanctions motion, but took a direct shot across the Defendant’s bow, stating:

This is not to say that sanctions will not ultimately be found to be warranted. The court has already imposed sanctions upon defendants for what it views as a casual, if not arrogant, rebuff to plaintiffs’ repeated efforts to obtain information which is ordinarily easily produced in litigation. Maggette at *6, fn 1.

The Court had earlier ordered the Defendants to “. . . search any available databases for responsive information and produce it to the plaintiffs.”  Maggette at *7.   

The Defendants claimed they had search for responsive ESI pursuant to the Court order, but failed to state what databases were searched, what methodology was used, what search terms were deployed or any expert report validating the position there was no responsive electronically stored information.  Maggette at *7-8.

The Court’s frustration was evident as it summarized the discovery issues at bar:

Further, the defendants have not provided any concrete reason or rationale for the numerous discrepancies within their discovery responses and the deposition testimony of their own employees. Nor has defendant articulated a satisfactory response to the court’s doubts expressed at the hearing that corporations as large and sophisticated as the defendants, which operate numerous gaming facilities across the country with various operations centers, do not have either paper files, electronic files or information or — even in light of Hurricane Katrina — backup measures and files for at least some of the information requested by plaintiffs. Maggette at *8.

Preservation Roulette: A Review

The Court noted that the Fifth Circuit Court of Appeals had not stated any standards for the preservation of electronically stored information and corresponding sanctions for the loss of ESI.  Maggette  at *8.

The Court looked to the Zubulake line of cases for guidance, citing the basic preservation obligation that the duty to preserve triggers when “the party has notice of the litigation or when it should have known that the evidence may be relevant to future litigation.” Maggette  at *8-9, citing Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 216 (S.D.N.Y.2003).

Once there has been a triggering a reasonable anticipation of litigation, a party must suspend its records information management/destruction policy and enact a litigation hold.  Maggette  at *9.

Order for 3^rd Party e-Discovery Expert

The Court had a big problem: It appeared the Defendants had not met their discovery obligations; however the Court could not hold so with certainty. Maggette  at *10.  As the Courts are to find the truth of an issue, the Court declined to rule on whether “the standards for preservation of electronic evidence and disclosure of all relevant evidence have been met or not met…” Maggette  at *11.

In what some experts would call a truly magnanimous Christmas gift, the Court stated it could not make “such a determination without further review by a third-party expert in the field of electronic discovery and who has knowledge of the gaming industry.”  Maggette  at *11.

Before any skeptics yell “Bah, Humbug,” the Court has very valid points in using a third-party expert to determine electronic discovery issues. 

The Court stated the Defendants had “failed to satisfy the court’s inquiries calculated to determine the legitimacy of their searches to date or whether they have in good faith attempted to use preservation techniques reasonably available to them…” right before ordering the costs to be paid by the Defendants.  Maggette  at *11.

The Court ordered the parties to agree on an expert who not only had knowledge or electronic discovery, but also the gaming industry, to “determine whether the defendants have met the standards for preservation of electronic evidence and disclosed all relevant evidence.”  Maggette  at *11.

Bow Tie Thoughts

When I was a young associate doing construction defect litigation, I did not personally rip out windows with a crowbar for destructive testing.  We had experts who could testify in court as to industry standards and how the work performed met or fell below those standards.  The same is true for issues with electronically stored information.

There are situations with electronic discovery requiring people with knowledge of SQL databases, CCE’s for collection of electronically stored information and strategies on what search terms will be effective or not.  This is a reality of the “digital age.”  The Court in Maggette not only realized this fact, but that it was necessary to have someone knowledgeable of the gaming industry as well.