Spoliation is a “Grimm” Business

Magistrate Judge Grimm is no stranger to watershed opinions…and on occasion the 100 page a law review article disguised as an opinion on the admissibility of electronically stored information.

Goodman v. Praxair Servs., 2009 U.S. Dist. LEXIS 58263 (D. Md. July 7, 2009) is Judge Grimm’s recent opinion on litigation holds, the duty to preserve and sanctions.  It is detailed and a great case study of spoliation. 

The Background Facts

The Plaintiff was a pro se litigant seeking damages for breach of contract.  The Plaintiff claimed he was critical to the success of a project, thus he was entitled to a $50,000 “success fee.”  Goodman, 1-3.  The Defendants did not agree…

The Plaintiff’s Motion for Sanctions

The Pro Se Plaintiff apparently knew his way around a keyboard and argued the following for spoliation sanctions: 

 (1) Defendants reasonably should have anticipated litigation and preserved evidence relevant to the underlying dispute after April 1999, November 1999, March 2000, or December 2000;

(2) Defendants chief executive officer Shannan Marty (“Marty”) deleted all relevant documents from her computer “while selectively preserving hard copies”;

(3) Defendants failed to issue a litigation hold to its “key players” and third-party consultants;

(4) Defendants destroyed employees’ computers after the duty to preserve was triggered;

(5) Internal communications and emails of Defendants’ employees were not preserved; and

(6) Defendants failure to search disaster recovery tapes and compact discs constitutes destruction of evidence. Goodman, 1-3.

The Defendants’ “I Don’t Think So” Arguments

The Defendants’ claimed the following:

(1) Plaintiffs’ Motion was untimely;

(2) The duty to preserve did not arise until February 19, 2001;

(3) The CEO was the sole “key player” for the Defendants, and she properly instituted a litigation hold once the duty to preserve arose;

(4) There was no duty to preserve the computers of the Defendants’ employees or files of third-party consultants; and

(5) The Plaintiff failed to provide any authority to show Defendants’ failure to search the disaster recovery tapes and compact discs constituted spoliation. Goodman, 3.

The Court’s Findings

Burned up Computer

 

In a factually detailed opinion, Judge Grimm found the following:

(1) The Plaintiff’s Spoliation Motion was timely filed;

(2) Defendants reasonably should have anticipated litigation on January 5, 2001, and its duty to preserve evidence relevant to the Plaintiff’s claim commenced on that date;

(3) The duty to preserve applied to the CEO and other key Defense players;

(4) Defendants were not obligated to issue a litigation hold to third-party consultants or preserve any documents or records prepared by third-party consultants;

(5) Defendants’ failure to search backup tapes did not constitute spoliation of evidence;

(6) Defendants did not act in bad faith in its destruction of evidence;

(7) Defendants was negligent in its failure to issue a litigation hold to key players;

(8) Defendants acted willfully in its destruction of Marty’s laptop, and knew of the relevance of the laptop to Goodman’s claim;

(9) The CEO acted willfully when she deleted emails in violation of the duty to preserve, and knew of the relevance of the emails;

(10) Plaintiff’s request for summary judgment or a series of fact-specific adverse jury instructions must be denied; and

(11) Plaintiff’s request for a general adverse jury instruction as to Defendants and the CEO’s actions was granted.

(12) Attorneys Fees & Costs for the Plaintiff.  Goodman, 5-6

The Contract & Dispute

The Plaintiff negotiated with the Defendant CEO “Marty” for compensation based on project success and services.  Goodman, 9-10. 

Things were not as productive as the Defendants wanted on the project and the Defendants brought in other third-party consultants to finish the project. 

The Plaintiff was incensed by the other consultants taking the lead on the project, which resulted in him sending letters threatening litigation.

On the Path to the Litigation Hold

The Defendant CEO would delete emails after reading them.  The CEO would print relevant emails and place in a client file if she needed to save them.  After the Plaintiff’s letter demanding payment, she sought counsel and enacted a “litigation hold.”  Goodman, 19.

The Court found no evidence the Defendants’ attorney instructed the CEO, other Defendants or third-party consultants to enact a litigation hold, because “…Marty [CEO] preserved the evidence herself.”  Goodman, 19.  The company founder, another employee and third party consultants involved in the project were never subject to a formal litigation hold.  Goodman, 19-20. 

The Defendants’ Records Retention Policies

RecordsThe Defendants had seven data servers, one of which was for employees to save “work-related” files.  Goodman, 22.   The “work-related” file server, plus the Microsoft Exchange and Outlook emails systems, were backed up on a disaster recovery system.  Id.

The Defendants were acquired by a new company and the IT systems changed, including replacing 45 computers.  Data from the “old” computers was only transferred to new computers if an employee requested it.  Goodman, 22-23.  The Defendants’ email system was changed to Lotus Notes after the change in ownership.  Goodman, 24.

The record showed, “Any emails from the old email system[s] that were not deleted in the [ordinary course of business] would have been captured in the nightly back up process on the disaster recovery tapes . . . .” Goodman, 24.

The CEO’s Laptop

The CEO had her own laptop and would save files locally onto the machine.  Goodman, 23.

After the Defendants were acquired, the laptop was re-imaged and assigned to a different employee and ultimately replaced.  Goodman, 24.

Back Up Data

The Defendants’ “back up” data included 280 disaster recovery tapes and CD’s.  Even though the material was not labeled, the Defendants continued to store them. Goodman, 24-25.

Journey into Search Terms

Defense counsel had their expert run search terms over a hard drive with the archive from the Defendants’ “work-related” server.  This search returned 35,485 hits that contained at least one search term.  Goodman, 25-26.

The Defendants narrowed the search to between April 1, 1998 to April 1, 2001 which returned 309 hits.  Defense counsel determined only one “hit” was responsive to the Plaintiff’s request for production.  Goodman, 25-26. 

Defendants also produced 2,530 pages of documents to the Plaintiff.  Goodman, 26.

Spoliation Standards

“The failure to preserve electronic or other records, once the duty to do so has been triggered, raises the issue of spoliation of evidence and its consequences.”

Goodman v. Praxair Servs., 2009 U.S. Dist. LEXIS 58263, 28 (D. Md. July 7, 2009), citing Thompson v. U.S. Department of Housing & Urban Development, 219 F.R.D. 93, 100 (D. Md. 2003).

A Federal Court can sanction a party for spoliation pursuant to the Court’s inherent power or if a party has violated a Court order.  Goodman, 28-29.

Spoliation sanctions may include a dismissal, default judgment, preclusion of evidence, adverse inference instruction or attorney’s fees and costs.  Goodman, 29.

No Court Order Violated

There was no court order that the Defendants violated justifying an order for spoliation sanctions.  Goodman, 29.  As such, if there was to be any spoliation sanctions they would be based on the Court’s inherent powers because the Defendants violated the general duty to preserve.  Goodman, 29-30. 

When is a Spoliation Motion Untimely?

The Defendants claimed the Plaintiff’s spoliation motion was untimely.  The Court identified five steps in analyzing whether a spoliation motion was untimely.

(1)    How long after the close of discovery the relevant spoliation motion was filed?

(2)    The temporal proximity between a spoliation motion and motions for summary judgment.

(3)    Was the motion made on the eve of trial?

(4)    Whether there was any governing deadline for filing spoliation motions in the scheduling order issued pursuant to Fed. R. Civ. P. 16(b) or by local rule.

(5)    A moving party’s explanation as to why the motion was not filed earlier should be considered.  Goodman, 31-32.

Spoliation motions need to be filed “as reasonably possible” after facts are discovery showing the loss of evidence.  Judge Grimm explained that those motions are fact intensive that require the Court to determine “when the duty to preserve commenced, whether the party accused of spoliation properly complied with its preservation duty, the degree of culpability involved, the relevance of the lost evidence to the case, and the concomitant prejudice to the party that was deprived of access to the evidence because it was not preserved.”  Goodman, 35-36.

Untimely or Timely?

Stop-watchThe tone of Judge Grimm’s holding made it sound like the motion was going to be untimely.  However, the Court denied the Defendants’ request to find the Spoliation motion untimely.  Goodman, 39-40.

The Plaintiff had filed his motion 5 months after discovery closed.  The Plaintiff offered no valid reasons why he was late, especially when he stated his intention to do so at an earlier status conference.  Goodman, 39.

The justification for not filing the Spoliation Motion was that the dispositive motions had not yet been ruled upon.  Additionally, the motion was not filed on the eve or trial nor would it require discovery being reopened.  Goodman, 39-40.

Spoliation Elements

The elements for spoliation are:

(1) [T]he party having control over the evidence had an obligation to preserve it when it was destroyed or altered;

(2) The destruction or loss was accompanied by a “culpable state of mind;” and

(3) The evidence that was destroyed or altered was “relevant” to the claims or defenses of the party that sought the discovery of the spoliated evidence, to the extent that a reasonable factfinder could conclude that the lost evidence would have supported the claims or defenses of the party that sought it. Goodman, 40.

Trigger Date for Duty to Preserve

 The mere existence of a dispute does not necessarily mean that parties should reasonably anticipate litigation or that the duty to preserve arises.

Goodman v. Praxair Servs., 2009 U.S. Dist. LEXIS 58263, 40 (D. Md. July 7, 2009).

The Court found that the duty to preserve was triggered when the Plaintiff sent the CEO a letter that provided constructive notice of a lawsuit was likely, because of the fee dispute and threats of seeking legal counsel.  Goodman, 40.

What is a “Relevant Document”?

The Court defined “relevant documents” as anything defined by Federal Rule of Civil Procedure 34(a) that was “likely to have discoverable information that the disclosing party may use to support its claims or defenses.” Goodman, 47.

The Duty to Preserve relevant documents included those who can be identified from email message “To” fields to anything relevant to the subject matter of the case.  Goodman, 47.

Getting the Band Back Together: Identifying the Key Players

The Duty to Preserve extends to employees likely to have relevant information, which the Court coined as the “key players.”  A “key player” is not based on the volume of ESI they generate but whether they are likely to have “information relevant to the events that underlie the litigation.” Goodman, 47.

The Court found that the Defendants’ “key players” were under a duty to preserve relevant documents and ESI beginning on January 5, 2001, the date of the Plaintiff’s letter.  Goodman, 48.  

Who Does the Duty to Preserve Apply To?

A Reminder NoteThe Court found that the duty to preserve applied to the CEO and employees of the Defendants, because the Defendants had control of those documents and ESI within their possession.  Goodman, 63-64. 

The Defendants did not preserve the CEO’s laptop and computers of other employees.  The Court found that the loss of these computers violated the Defendants’ duty to preserve electronically stored information.  Goodman, 64.

Noteworthy Findings

The Court stated there was insufficient evidence to find any spoliation for documents pertaining to a draft release made after a December 2000 phone call that might have existed.  Goodman, 64-65. 

The Court held that a failure to perform a keyword search over preserved backup tapes is not the functional equivalent of spoliation.  Goodman, 64-65. 

Failure to Enact a Litigation Hold: Negligent & Willful

Damaged IT GoodsThe Court found that the Defendants were negligent by failing to enact a litigation hold over the Defendant CEO and employees. Goodman, 81.

The Court held the Defendants acted willfully when they destroyed the computers of the CEO and employees.  However, the Court stated the Defendants likely knew only the CEO’s was relevant.  Goodman, 81.

As such, there was insufficient evidence to justify an adverse inference instruction against the two Defendant employees.  Id.  However, the CEO is another story. 

The relevance of the CEO’s laptop was “overwhelming” in the Court’s own words.  The CEO is also a case study in the dangers of a party “self-collecting” electronically stored information. 

The CEO stated, “I believed that I retained all of the documents (emails, hard copy and electronic documents) relevant to the ‘project’ of obtaining exemptions from the EPA for Tracer’s leak tracers and Mr. Goodman’s involvement in that ‘project’ in the file cabinet in my office.” Goodman, 82-83.

Things start to look grim whenever Judge Grimm states, “This is particularly troublesome.”  Goodman, 83.

The CEO saved her ESI onto her laptop, not the “work-related” drive.  As such, the failure to preserve her computer, the Defendants knew “that the only relevant documents and emails produced by Marty [CEO] detailing Goodman’s [Plaintiff] role in the project to obtain the EPA exemptions would be those she personally selected.” Goodman, 83, emphasis added.

The Court found the CEO’s willfully destroyed relevant evidence when she selected deleted emails after the litigation hold triggering event of the Plaintiff’s letter.  Goodman, 83.

The Court found the willful destruction of the CEO’s laptop and emails justified an adverse inference instruction that if the evidence had been produced, would have been unfavorable to the Defendants’ defense. Goodman, 84-5.

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