Preservation Case Law

Edited by Brad Harris Summer 2014

ABOUT BRAD HARRISVICE PRESIDENT OF LEGAL PRODUCTS, ZAPPROVED INC.

Brad Harris has more than 30 years of experience in the high technology and enterprise software sectors, including assisting Fortune 1000 companies enhance their e-discovery preparedness through technology and process improvement. Brad is a frequent author and speaker on e-discovery and preservation issues, including articles in National Law Journal, Corporate Counsel, and KMWorld and presentations at leading industry events such as Legal Tech New York. Prior to joining Zapproved, he led electronic discovery readiness consulting efforts and product management for Fios, Inc., from 2004 to 2009. He has held senior man-agement positions at prominent public and privately held companies, including Hewlett-Packard, Tektronix and Merant.

DISCLAIMERThis Signature Paper is provided for general information and educational purposes only. The contents should not be construed as legal advice or opinion. While every effort has been made to be accurate, the contents should not be relied upon in any specific factual situation. This Signature Paper is not intended to provide legal advice or to cover all laws or regulations that may be applicable to a specific factual situation. If you have matters to be resolved or for which legal advice may be indicated, you are encouraged to contact a lawyer authorized to practice law in your jurisdiction.

ABOUT ZAPPROVED INC.Zapproved is a Software-as-a-Service (SaaS) provider based in Portland, Ore., with a platform that adds account-ability to business communications. Zapproved’s first products focus on targeted compliance workflows that reduce liability risk in legal and regulatory compliance. The company is expanding its product line to create a suite of appli-cations that address additional compliance issues and workplace collaboration.

© 2014 by Zapproved Inc. All rights reserved.

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Preservation Case Law | 1

Table of Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Knickerbocker v. Corinthian Colleges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Quantlab Techs. Ltd. v. Godlevsky. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Digital Vending Servs. Int’l LLC v. The Univ. of Phoenix, Inc.. . . . . . . . . . . .8

In re Actos (Pioglitazone) Prods. Liab. Litig.. . . . . . . . . . . . . . . . . . . . . . . .10

Calderon v. Corporacion Puertorrique a de Salud . . . . . . . . . . . . . . . . . . .12

Hart v. Dillon Cos.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

In re Pradaxa (Dabigatran Etexilate) Prods. Liab. Litig. . . . . . . . . . . . . . . .14

Zest IP Holdings, LLC v. Implant Direct Mfg., LLC. . . . . . . . . . . . . . . . . . .16

SJS Distribution Sys. v. Sam’s East, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .18

Puerto Rico Tel. Co. v. San Juan Cable, LLC. . . . . . . . . . . . . . . . . . . . . . .20

In re Pradaxa (Dabigatran Etexilate) Prods. Liab. Litig., MDL . . . . . . . . . .21

Sekisui Am. Corp. v. Hart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Herrmann v. Rain Link, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

AMC Tech., LLC v. Cisco Sys., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Sekisui Am. Corp. v. Hart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Case Summaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28-35

VENUES: # U.S. Circuit or State Court Jurisdiction

TOPICS: Tr Trigger Pr Proportionality Sc Scope Te Technology LH Legal Hold

SANCTIONS: Monetary Sanctions Adverse Inference Additional Discovery Dismissed

LEG

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© 2014 by Zapproved Inc.


Introduction

Legal Preservation – Where Law and Technology IntersectWe are proud to introduce this compendium of case law that pertains specifically to preservation. In recent years, this is a particularly fast-moving area of case law as courts struggle to keep pace with the rapid pace of technology.

Starting with Zubulake more than a decade ago, the scrutiny on data preservation has been increas-ing. U.S. District Judge Shira Scheindlin, in light of the rampant spoliation that occurred in that case, laid out the framework of what the court’s expectations were regarding the need to keep potentially responsive electronically stored information (ESI). In the early days, the concept of a “litigation hold” was relatively novel. Over time, they not only became de rigueur but the continued to evolve to include more process and apply to new technologies such as smartphones, social media and “cloud” services.

With the interest of those in the legal community to keep abreast of the latest developments, we found overwhelmingly positive feedback when we included in prior publications a list of cases as an Appen-dix. Our goal with this is to provide a helpful reference guide to assist legal professionals in researching existing case law when they find themselves facing issues in a case.

While we have endeavored to make this guide as comprehensive as possible, inevitably there will be cases that are not included. Please send us a message at [email protected] if you are aware of an opinion that should be included and we will attempt to include it in the next edition.

We welcome any feedback you may have and we hope you find Preservation Case Law Summary to be a “go to” resource.

- Brad Harris


Knickerbocker v. Corinthian Colleges, No. C12-1142JLR (W.D. Wash. Apr. 7, 2014)

Spoliation Four Ways: Washington Court Orders $25,000 and Attorneys’ Fees and Costs

In this employment law case, the court found “clear and convincing evidence” that the defendant and its counsel “have refused to participate forthrightly in the discovery process and that this refusal constitutes or is tantamount to bad faith.” Sanctions were necessary to remedy their “discovery tactics,” which “delayed resolution of Plaintiffs’ claims, expended both the court’s and Plaintiffs’ limited resources on matters ancillary to the merits, and threatened to interfere with the rightful decision of this case.”

First, the defendant failed to issue a litigation hold notice, though its standard practice was to do so. Instead, here, the defendant’s lawyer claimed it asked employees the company deemed “key” to preserve evidence. However, several of these witnesses testified and denied search-ing for relevant documents. The court had “no confidence in the quality of Corinthian’s discovery production” given its “self-selection of a limited pool of discovery materials, combined with doubt as to what searches, if any, were performed of this pool of materials.”

Second, the defendant deleted three plaintiffs’ e-mail accounts; it deleted two after its duty to preserve was trig-gered by receipt of a notice of discrimination charges from the Equal Employment Opportunity Commission.

Third, defense counsel offered the court “unsubstanti-ated information” about the defendant’s records retention program for e-mail accounts of terminated employees that contradicted the defendant’s actual policy; the court found the lawyer’s lack of effort to speak with the defendant’s IT department “until the eve of oral argument” on the plaintiffs’ first motion for sanctions to “fall[] below acceptable stan-dards of professional conduct.”

Fourth, the defendant claimed its backup tapes were not reasonably accessible, but then it claimed no spoliation had occurred because it could recover all deleted employee e-mail from these tapes. The court asserted the defendant’s “characterization of the backup tapes has shifted with the winds throughout this litigation, adopting whatever posture is most convenient in the immediate context.” If the tapes were in fact accessible, the defendant “had little basis for

refusing to search the backup tapes under the parties’ Stipulated Order, no basis for filing a verification with the court affirming that it had searched ‘all available electronic sources’ . . . and appears to have assumed a misleading stance with Plaintiffs from the beginning.”

After defense counsel asserted that the e-mails could be recovered, the court ordered the defendant to recover all e-mail accounts and to search them. With the trial date less than a month away, the court set a due date of roughly two weeks for the production. The defendant missed the dead-line, and the court attributed the defendant’s “substantial technical difficulties and costs in retrieving the emails from the backup tapes” to its “inadequate discovery search, deletion of evidence, and lack of candor with both Plaintiffs and with the court. Such obstacles do not transform bad faith into good.” Seven weeks later, when the defendant finally produced approximately 3,000 new documents (more than double its prior production), the court extended the trial date to November 2014.

TakeawayAlways implement a written litigation hold, with regular follow up to custodians and IT—particularly if it is your company’s cus-tom to do so. Also, follow any retention pro-tocol that halts the automatic deletion of evidence. Keep in mind that any deviation from regular company policies and proce-dures will cast suspicion on your motives. Also, be sure that IT and counsel cooper-ate and keep each other in the loop on the status of holds.

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The court ruled that the defendant and its counsel had acted in bad faith, based on its

lackluster search for documents, failure to implement a litigation hold, deletion of evidence, refusal to cooperate with Plaintiffs in the discovery process (particularly as evidenced by its withholding of information regarding both the backup tapes and its interpretation of the parties’ Stipulated Order), reliance on a recklessly false declaration, shifting litigation positions, and inaccurate representations to the court constitute bad faith or conduct tantamount to bad faith.

The court found an adverse inference instruction was not an appropriate sanction because the loss of any docu-ments was purely speculative; the plaintiffs had no evi-dence that any documents had been destroyed. The court also declined to prevent the defendant from using its documents at trial, since it had extended the trial date. However, attorneys’ fees and costs were appropriate for the cost of the plaintiffs’ motions and the duplicative dis-covery: the defendant’s “bad faith discovery conduct has delayed the parties’ trial date by almost one year, wasted the court’s and Plaintiffs’ trial preparations, required the court to engage in numerous hearings and status confer-ences, resulted in more documents being produced after the original scheduled trial date than during discovery itself, and threatened to interfere with the rightful decision of this case.” Accordingly, the court required the defendant to pay a fine of $25,000 and its counsel to pay a fine of $10,000.


The court determined that an adverse inference instruction was the appropriate remedy for the loss of a “staggering amount of evidence potentially relevant to this case,” Id. at *82, even though the plaintiffs could not adduce evidence that the contents of the computers and devices lost would have been relevant or that they would have been prejudiced by their loss.

After the plaintiff fired two of the defendants, who had writ-ten code and algorithms on the plaintiff’s behalf, the plaintiff sued them, claiming they were using the company’s trade secrets. The plaintiff argued that because it had begun litigation against these two defendants in 2007 and filed the instant lawsuit in 2009, the defendants were required to preserve their computers since at least 2009. In 2010, it had also asked for the computers the defendants had used since March 2007.

The court first considered whether “death penalty” case-terminating sanctions or, in the alternative, whether a spo-liation jury instruction was necessary. To evaluate the issue, the court considered three factors:

(1) the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the evidence was destroyed with a culpable state of mind; and (3) the destroyed evidence was “relevant” to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.

Id. at *29 (citation omitted).

The court considered the transgressions of various defen-dants in turn. First, it found that the owner of a company the defendants formed after leaving their company had a duty to preserve evidence, but he wiped clean or gave away 23 workstations. The owner claimed that when his company closed its doors, he got rid of the computers but did not do so in bad faith; he believed a copy of everything existed on the company’s servers. The court noted that the owner “disclaim[ed] any intent to liquidate,” Id. at *45-46,

but later admitted getting rid of the workstations as part of a liquidation plan. The court noted it could not “say which story is true; that there are multiple of them is enough to raise red flags.” Id. at *46. The court ruled he acted in bad faith because the owner “intentionally wiped and gave away numerous computers nearly three years after the ini-tiation of this lawsuit and concealed it from the Court” and gave “contradictory explanations of [his company’s] plans to liquidate.” Id. at *47-48. Finally, the court ruled that the computers were relevant and that their loss was prejudicial because they were the best evidence of whether the defen-dants used the plaintiff’s code as a guide for their work.

The court reached the same conclusion for two other defendants, both of whom had discarded computers and other storage devices. Their “inability to keep track of the tools of [their] trade seems more indicative of a reckless disregard for [their] obligations as a litigant and, more likely, bad faith.” However, the plaintiff could not establish that either acted with “sinister motives, and thus they had not

Quantlab Techs. Ltd. v. Godlevsky, No. 4:09-cv-4039, 2014 U.S. Dist. LEXIS 20305 (S.D. Tex. Feb. 19, 2014)

Texas Judge Orders Adverse Inference Sanction for ‘Staggering’ Loss of Evidence

TakeawayShifting memories and explanations as to the existence of computers, devices, and evidence will not inspire confidence in the court or opposing counsel that you have done everything to preserve potentially relevant evidence. Therefore, it is impera-tive for organizations to create and follow a comprehensive information governance program, anchored by a litigation hold pro-cedure, to shore up the defensibility of their actions in the event of litigation.

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acted with the most culpable state of mind possible. Id. at *60. Between this and the other categories of electronic evi-dence and devices that were lost, the court felt an adverse inference instruction was warranted. However, because so

much information remained in flux, the court delayed draft-ing the instruction until it crafted the remainder of the jury instructions at trial.



A U.S. Magistrate Judge recently refused to honor the par-ties’ agreement to withdraw discovery sanctions entered earlier in the case as part of a settlement. Instead, the judge crossed out the word “granted” in the proposed order and scrawled by hand, “Denied. The court will not agree to hide the discovery abuses of the plaintiff in this case by with-drawing the October 3, 2013 Opinion and Order.”

In this patent infringement case, the defendants filed a motion seeking sanctions for spoliation when they learned the plaintiff had lost a thumb driving labeled “Important DVSI Documents,” which included two interviews with the inventors of the patent at issue. However, the defendants could not establish that the thumb drive was intentionally lost or destroyed or that its contents were relevant to the litigation; moreover, the interview files were recovered.

Even so, the court found the plaintiff had not lived up to its discovery responsibilities for two reasons. First, the plaintiff was inconsistent in disclosing the existence of the inter-views: they had been cited in testimony, yet no one recalled giving them, and the CEO was searching for them. Second, as the CEO searched, he located nearly 7,500 previously

undisclosed documents. Given their untimely production outside the discovery period, the court had to address “this rather unorthodox situation.”

Under Fourth Circuit law, a party claiming spoliation must establish three elements:

(1) The 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 missing evidence would have supported the claims or defenses of the party that sought it.

Id. at 8 (citation omitted). Here, the defendants could not establish a prima facie claim. They could establish that the plaintiff had a duty to preserve the evidence at issue—indeed, the plaintiff’s mission was to protect intellectual property, meaning it anticipated litigation by its very exis-tence. However, the defendants could not show the plaintiff intentionally destroyed the evidence; ordinary negligence did not suffice to support the defendants’ request for sanc-tions. Nor did they offer anything but speculation as to the contents of the thumb drive.

Despite the lack of spoliation, the magistrate judge sanc-tioned the plaintiff for its tardy disclosure under Federal Rule of Civil Procedure 26(e). Had the plaintiff performed a proper search for evidence and not claimed it lacked docu-ments in response to a subpoena four years prior, it would have uncovered and produced the 7,500 documents well before the eve of trial. Therefore, the court considered five factors in determining whether sanctions were warranted:

(1) the surprise to the party against whom the

Digital Vending Servs. Int’l LLC v. The Univ. of Phoenix, Inc., No. 2:09-cv-00555 (E.D. Va. Feb. 5, 2014)

Judge Refuses to Vacate Spoliation Sanctions in Intellectual Property Dispute – Even After Case Settles

TakeawayAlthough it has previously been common for parties to wipe the slate clean of dis-covery transgressions and other sanctions in the wake of settlement, this decision indi-cates courts may be less willing to conceal preservation abuses in the future.

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evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the nondisclosing party’s explanation for its failure to disclose the evidence.

Id. at 16 (citation omitted). Given the timing of the disclo-sure and surprise to the defendants, allowing the evi-dence would significantly disrupt the trial. Accordingly, the magistrate judge ruled the plaintiff’s failure to disclose the evidence merited three sanctions under Rule 37(c)(1): prohibiting the use of the late-disclosed documents at trial, requiring the judge to pay attorneys’ fees related to the late disclosure, and recommending the issuance of an adverse inference instruction to the trial judge.


In a 75-page opinion, U.S. District Judge Rebecca F. Doherty detailed the defendants’ numerous bad-faith trans-gressions of the discovery rules, including the spoliation of the files of more than 46 key custodians, that merited vari-ous sanctions in this 2,600-member products-liability class action over the effects of the drug Actos.

At the beginning of the factual section of her opinion, the judge praised the parties for allowing the case to “prog-ress[] in an exceptional manner due to the continued and professional cooperation of the parties . . . resulting in the resolution of most discovery issues and disputes without the need for formal court intervention,” Id. at 3. However, the facts devolved markedly from there.

A key issue before the court was when the duty to preserve documents arose. The defendants claimed the earliest they could have anticipated litigation involving bladder cancer was the summer of 2011. However, the defendants had issued a sweeping litigation hold in 2002 that was not lim-ited to any particular disease; instead, the hold instructed custodians to preserve any documents that referred to the drug Actos, regardless of malady. The court found the defendants’ argument that they did not reasonably antici-pate bladder cancer claims until 2011 “undercut both by its own broad language used in the 2002 hold as well as its multiple ‘refreshers’”—on at least five occasions—of that hold. Id. at 36. The defendants’ “ever-shifting argument as to the nature, importance, and character” of the 2002 hold damaged their position. Id. at 38.

The “clear, express, and unambiguous language of the 2002 Litigation Hold and its ‘refreshed’ incarnations all include broad language without limitation to or distinction between or among specific maladies.” Id. at 44. Therefore, the court ruled the duty to preserve arose in 2002.

The court also determined that the spoliated evidence was relevant and that its loss prejudiced the PSC. Examining the files of one custodian, the court extrapolated that “the missing files could evidence a corporate culture embracing

attempts to remove mention of or an attempt to conceal or underplay expressed safety concerns surrounding the development of Actos.” Id. at 54.

In choosing which sanctions were appropriate, the court examined evidence of the defendants’ bad faith, including the following:

• destroying the files of 46 high-ranking custodians involved in the development, sales, marketing, and promotion of the drug Actos, suggesting a “deliberate disregard” of the litigation hold;

• engaging in the “repeated, systemic, and wide-spread destruction” of documents over a course of 10 years, which could “only be the result of a willful and intentional failure to preserve”;

• failing to follow their own document policies; • making multiple misrepresentations

about the litigation holds; • designating a third-party e-discovery consultant

who had no firsthand knowledge of the litigation holds and document destruction as the defendants’ 30(b)(6) corporate designee;

In re Actos (Pioglitazone) Prods. Liab. Litig., MDL No. 6:11-md-2299 (W.D. La. Jan. 27, 2014)

Pharmaceutical Company Faces Setback from Sanctions for ‘Bad Faith’ Spoliation in Huge Product Liability Case

TakeawayLitigants must carefully observe their preser-vation practices to ensure they are consistent across their entire litigation portfolio. In particu-lar, they must carefully consider the language to include in each litigation hold notice and deter-mine how it applies to all pending litigation as well as any future litigation.

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• reversing their “position regarding file deletion and inaccessibility”; and

• engaging in a “campaign of concealment and obfuscation—in short, a cover-up.”

Id. at 60-62. Even so, the court, “at this juncture, stop[ped] short of concluding the PSC has demonstrated sufficient bad faith to support the full breadth of onerous sanctions

requested.” Instead of awarding a default judgment, the court opted to let all evidence of bad faith go to the jury, to draft an adverse inference instruction, and to award attor-neys’ fees and costs. Id. at 71-73.

At trial, the jury awarded the plaintiffs $1.5 million in actual damages as well as $9 billion in punitive damages.


Calderon v. Corporacion Puertorrique a de Salud, No. 12-1006 (FAB), 2014 WL 171599 (D.P.R. Jan. 16, 2014)

Selective Preservation of Text Messages Uncovered with an Undisclosed Subpoena that Is Allowed to Impeach Evidence; Adverse Inference Sanction Results

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The court found an adverse inference instruction was appropriate where a party selectively preserved and deleted text messages relevant to the issues in the case.

In this sexual harassment case, the defendants believed that the plaintiffs’ discovery responses were deficient because plaintiff Jonathan Polo-Echevarria (“Polo”) admit-ted he had deleted certain text messages from his phone. Accordingly, they filed a motion in limine asking the court to exclude all messages Polo sent or received and then to dismiss the plaintiffs’ complaint because of the selective retention of text messages.

Meanwhile, the defendants had submitted a third-party subpoena to telephone carrier T-Mobile requesting Polo’s phone and messaging records. The production from T-Mobile confirmed that Polo’s document production was deficient: among the T-Mobile records were 38 text mes-sages that Polo had not produced in discovery, not to

mention a host of text messages that Polo sent in response to those messages. The defendants notified the court of this production and again asked the court to dismiss the plaintiffs’ case because of Polo’s bad faith spoliation of evidence.

The court reviewed the evidence and determined that spo-liation had occurred. At the time Polo destroyed the mes-sages, the record showed that he reasonably anticipated litigation and thus had a duty to preserve relevant evidence. First, he forwarded some messages to himself from two accounts so he could print them. Second, he contacted his attorney before forwarding the messages, a clear signal that he foresaw litigation.

Although the defendants asked the court to dismiss the case, the court found the circumstances were not extreme enough to warrant such a severe penalty. Instead, it ruled that an adverse inference was sufficient punishment. To qualify for the instruction, the defendants had to show Polo was aware of the claim as well as of the relevance of the destroyed evidence to that claim. Here, the “mere act of Polo forwarding himself some messages” on the day he filed a complaint of sexual harassment “reveals his under-standing that those messages were relevant to a potential claim.” Even if Polo had not acted in bad faith, his “decision not to forward or save the unproduced texts and photos . . . constitutes ‘conscious abandonment of potentially use-ful evidence’ that indicates that he believed those records would not help his side of the case.” Id. at *2 (citations omitted).

Further, the court found the plaintiffs’ spoliation “severely prejudices defendants by precluding a complete review of the conversations and pictures” that Polo sent the alleged harasser and “prevents defendants from introducing . . . other writings ‘that in fairness ought to be considered at the same time’ as the messages that plaintiffs seek to intro-duce at trial.” Id. at *3. Finally, it prevented the defendants from providing evidence that the alleged harasser’s identity could not be determined.

TakeawayParties must be careful to implement a compre-hensive litigation hold that covers all forms of electronic evidence, including text messages, and reaffirm it periodically to custodians. As this case demonstrates, the selective deletion of text messages—or any evidence—can not only cast doubt on a party’s argument, but it can also signal that the duty to preserve has arisen. Moreover, the selective retention of per-tinent materials can also create an inference that the party destroyed the evidence in bad faith to hide information and thus prejudiced its opponent.

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Hart v. Dillon Cos., No. 1:12-cv-00238-RM-DW, [need WL cite] (D. Colo. July 9, 2013)

Colorado Court Deems Loss of ‘Key Player’s’ Evidence a Sanctionable Offense Tr


A U.S. Magistrate Judge in Colorado found that the defen-dant’s failure to preserve a recording merited spoliation sanctions where the plaintiff established the loss of evi-dence caused significant prejudice.

In this employment case, a long-time employee was fired in August 2011 for what the company alleged was giving herself an incorrect salary when working as bookkeeper. Before her termination, the employer’s loss prevention employee, made a secret tape recording of the plaintiff’s interview, which in part led to her termination.

In November 2011, the plaintiff filed a charge of discrimina-tion with the Equal Employment Opportunity Commission (EEOC). Instead of imposing a litigation hold immediately, the defendants waited four months to do so. During that time, the investigator who made the recording drafted a written “case narrative” of the recording but also inadver-tently taped over or erased the recorded interview.

The court considered a three-prong test in assessing the plaintiff’s claim of spoliation:

1. is the evidence relevant to an issue at trial;2. did the party have a duty to preserve the

evidence because it knew or should have known that litigation was imminent;

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

Id. at *__.

First, the court determined that that the evidence was relevant because the defendant relied on it in terminating the plaintiff’s employment. Next, the court found that a duty to preserve had attached since litigation was imminent

because the plaintiff had filed a charge with the EEOC, had an attorney, and intended to sue the company. The court then turned to whether the lost evidence was prejudicial. Citing numerous discrepancies and omissions between the defendants’ case narrative and the plaintiff’s recollections, found that the plaintiff “met her burden to establish a rea-sonable possibility based on concrete evidence rather than a fertile imagination that access to the lost material would have produced evidence favorable to her cause.” Id. at *__ (citations omitted).

Given the four-month delay in issuing a legal hold, the court found the defendant “highly culpable for the failure to preserve.” Id. at *__. Furthermore, because the recording involved a key player, the action rose to the level of “grossly negligent or willful behavior.” Id. at * (citation omitted). The court noted that “responsibility and control” were sufficient to establish “[b]ad faith culpability”; “evil intent” was not required. Id. at *__ (citation omitted).

TakeawayHere, the plaintiff was able to establish spolia-tion because she had concrete evidence instead of speculation to support her claims. The plain-tiff’s ability to show significant discrepancies in how each side viewed the spoliated evidence, combined with the preservation failures, tipped the court toward a finding of gross negligence.

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In a blistering opinion, the court continued its campaign of “progressive discipline” described in an earlier ruling from September 2013 for the defendants’ repeated dis-covery failures. This time, the failures cited by the Plaintiffs Steering Committee (PSC) resulted in a substantial fine approaching $1 million.

The court noted that “[a]lmost since its inception,” this liti-gation had been “plagued with discovery problems primar-ily associated with misconduct on the part of the defen-dants.” The court took the defendants to task for offering excuse after excuse for their failures:

The [c]ourt is continuously being called upon to address issues relating to untimely, lost, accidentally destroyed, missing, and/or “just recently discovered” evidence. The defendants’ justifications for these discovery violations include but are not limited to the following: (1) placing the blame on others such as third-party vendors (production is delayed due to “vendor issues”), their own IT departments (we told IT to give the vendors full access to the database but for some reason IT provided the vendors with limited access), their own employees (the defendants’ deponent did not understand that work-related day planners should have been produced or the employees did not understand that work-related text messages should have been retained and produced); (2) the defendants’ and/or counsel’s lack of experience in addressing litigation of this size; (3) the defendants did not know, until recently, that this would turn into a large nationwide MDL; (4) unusual technical issues (despite our best efforts, that employee’s hard drive was accidentally erased during a routine Windows 7 update); (5) minimizing the alleged abuses (yes, we failed to produce this database but it was

only 500,000 pages of documents compared to the 3 million we already produced or yes that material was accidentally destroyed but the PSC doesn’t really need it); (6) blaming the PSC for submitting too many discovery requests that are broad in scope (only as an

TakeawayThis case serves as a cautionary tale for defen-dants facing extensive discovery requests. Here, the court noted that the plaintiffs’ pro-duction requests were “so broad as to cover any possible derivation of means to document someone’s thoughts, words and deeds short of attaching electrodes to their scalps and elec-tronically downloading what is contained in their minds.” Id. at *6.

When facing broad discovery requests, parties have several options. One reasonable approach is to cooperate with opposing counsel to nar-row the requests. Another is to ask the court to enter a protective order.

Parties must also be vigilant in assessing the scope of discovery early in a matter so they can construct a comprehensive litigation hold; they must continually revisit the scope of the hold throughout the course of the litigation to make sure it encompasses all potentially relevant information.

In re Pradaxa (Dabigatran Etexilate) Prods. Liab. Litig., No. 2385, 2013 WL 6486921 (S.D. Ill. Dec. 9, 2013)

Court Fines Defendants $931,500 in Pradaxa Class Action After Repeated Failures to Implement Legal Holds

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excuse after discovery violations are alleged but never as a proactive motion to limit discovery); and (7) the defendants did not know about the “gaps” in their production until they began a comprehensive re-check or audit of the discovery process in September 2013.

Id. at *2. After commenting on its exceeding patience and initial willingness to give the defendants the benefit of the doubt, the court noted the cumulative effect of the failures and reviewed the defendants’ history of transgressions. It then turned to the subject of the current motion and found that the audit the court required the defendants to perform unearthed “a growing number of ‘gaps’ in production” that resulted from the defendants’ “incremental approach to its ‘company-wide’ litigation hold.” Id. at *6. The narrow scope of the hold was unwarranted given the breadth of the litigation—a fact the defendants were aware of no later than April 2012.

Despite their awareness, the defendants engaged in four breaches of the duty to preserve that led to the motion before the court.

1. The defendants failed to preserve the records of a “high-level scientist” intimately involved in the product’s research and development because “‘he had not been identified as a custodian.’” Id. at *9. The court interpreted this to mean one of two things: (1) the defendants failed to recognize that the scientist had relevant information—and the court was “stunned” the defendants had not identified him as a potential custodian, or (2) the defendants believed they had no duty to preserve the scientist’s files simply because the PSC had not requested them, a position the court characterized as “nonsense.” Id. at *12. The court admonished the defendants for “their own determination that he singularly was not important enough in light of including his coworkers whose custodial materials were being provided” in discovery. Id. at *18.

2. The defendants took a piecemeal approach to extending litigation holds to cover several classes of sales representatives, resulting in some custodians not being instructed to preserve data until more than a year after the duty to preserve attached. The court

found the defendants’ litigation hold “wholly inadequate in light of the size and scope of this litigation.” Id. at *14. The court was “frankly amazed” that the defendants argued they did not understand the true scope of this nationwide litigation; moreover, it was unacceptable that the defendants decided to “‘expand[] the scope of their sales representative preservation efforts as the litigation expanded in size.’” Id. at *15. The court found the “defendants’ efforts to suggest they and they alone decided to implement such a proportionality test to the litigation hold smacks of a post-debacle argument in desperation to salvage a failed strategy regarding production evasion.” Id.

3. The defendants failed to share passwords with the vendor handling document collection from the shared network drives, missing the collection of at least 400,000 pages of documents.

4. The defendants failed to save text messages, a primary system for communications between employees and supervisors, by not instructing custodians to preserve them and by not disabling the automatic deletion of the messages, placing them outside the safe harbor of Federal Rule of Civil Procedure 37(e).

The court found each of the defendants’ “actions and omis-sions . . . to be in bad faith” and scoffed at the defendants’ argument that their discovery shortcomings were “the result of a good faith measured approach to the production of millions of documents over a fairly short period of time.” Id. Instead, the court found it “clear . . . that the defendants have been pursuing a policy of turning over relevant mate-rial, or withholding relevant material, on their schedule and not the [c]ourt’s” in violation of the court’s case manage-ment orders. Moreover, they misrepresented to the court “in open court and in chambers” that they had implemented a comprehensive litigation hold. Id.

The court ordered the defendants to produce any remaining documents in each category and left open the opportunity to impose sanctions if the defendants could not produce the records. In addition, the court imposed a “measured” fine of $500 per case “to encourage defendants to respect this [c]ourt and to comply with its orders” and required the defendants to pay the fees and costs associated with the PSC’s motions. Id. at *20.


Zest IP Holdings, LLC v. Implant Direct Mfg., LLC, No. 10-0541-GPC(WVG), 2013 WL 615977 (S.D. Cal. Nov. 25, 2013)

Calif. Magistrate Judge Recommends Adverse Inference Sanction for Failure to Issue Legal Hold Despite ‘Saved Everything’ Defense

Spoliation sanctions were proper where a party’s sole mea-sure to preserve evidence was a policy prohibiting employ-ees from deleting documents and not a proper litigation hold notice.

This patent infringement lawsuit arose when the defen-dants informed the plaintiffs that they intended to clone a patented Zest product. The plaintiffs sent two letters to the defendants in 2008: the first notified them that the defen-dants’ planned clone infringed on their patent, while the second notified the defendants that the plaintiffs intended to sue. The plaintiffs filed the lawsuit in March 2010.

After the lawsuit was filed, the defendants “did not take steps to preserve electronic documents, nor did they instruct their employees to preserve documents.” Id. at *4. During this time, the defendants’ employee charged with developing and testing products testified that she “inten-tionally deleted her emails because she received so many emails and that no one told her not to delete them” from both her work account and her AOL account, which she also used for work purposes. Id. The defendants’ president and chief executive also confirmed that he did not produce or preserve emails from any of his six accounts; instead, he claimed to have saved all relevant emails in a folder on his computer, which was produced to the plaintiffs. How-ever, third-party productions showed that at least two of the president’s emails were missing that would have been preserved had a litigation hold been put in place when the defendants became aware of the likelihood of litigation.

As a result, the plaintiffs filed a motion seeking sanctions for spoliation. The defendants claimed that they did not need to implement a litigation hold because they had a “company policy that ‘no documents are to be deleted’” and “did not believe any of [d]efendants’ employees would delete company documents.” Id. at *2. However, the court found it “obvious” that the policy did not prevent the destruction of documents, a finding exacerbated by the defendants’ lack of “a back-up system to prevent the destruction of documents.” The preservation of emails to a

server was not enough to save the defendants from sanc-tions because they could have deleted emails from the servers.

The court also found the plaintiffs readily established preju-dice “because the contents of [the lost emails] were directly relevant to the claims at issue in this litigation” and their loss would force the plaintiffs to “go to trial while relying on incomplete evidence.” Id. at *20-21. Accordingly, sanctions were appropriate for the defendants’ inactions in failing to issue a litigation hold or to monitor employees’ document preservation efforts.

In determining the proper sanction, the court evaluated which punishment would appropriately address the harm. A default judgment was “inappropriate” because the defen-dants’ conduct “amounts to gross negligence” but did “not rise to the level of bad faith sufficient to warrant default judgment.” Id. at *8. Next, the court applied the three-part Zubulake test to assess the propriety of granting an adverse inference instruction: (1) the party had an obliga-

TakeawayZest demonstrates the importance of issuing a timely, clear litigation hold to all custodians. “Saving everything” is no substitute for a formal, documented process. Nor is email archiving a panacea, particularly where employees are using mobile devices and personal email accounts for business purposes.

Even if parties do not act in bad faith, much like the defendants here, they may face sanctions if they fail to take their obligations to preserve evidence seriously.

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tion to preserve the evidence before it was destroyed; (2) the party destroyed the records with a “‘culpable state of mind,’” which the court defined as “‘conscious disregard’ of its obligations to not destroy documents; and (3) the evidence was relevant to the opposing party’s claims or defenses. Id.

Here, all three prongs were satisfied. The defendants may

not have acted in bad faith, but they were at least negli-gent in failing to issue a litigation hold and failing to instruct employees to preserve evidence, so the court recom-mended reading an adverse inference instruction to the jury. The court also awarded monetary sanctions in the form of attorneys’ fees and costs to cover the plaintiffs’ expenses in bringing the motion.


SJS Distribution Sys. v. Sam’s East, Inc., No. 11 CV 1229 (WFK)(RML), 2013 WL 5596010 (E.D.N.Y. Oct. 11, 2013)

Plaintiff in Diaper Lawsuit Hit with Adverse Inference to Remedy Spoliation from Failure to Issue Legal Hold

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A party acted with gross negligence that merited an adverse inference instruction when it failed “to take the most basic document preservation steps” including never issuing a “formal litigation hold to ensure preservation of electronic information, despite admitting familiarity with its obligations to preserve documents.” Id. at *__.

In this breach of contract lawsuit that arose from a diaper packaging problem, the magistrate judge imposed sanc-tions where a party failed to issue a litigation hold notice.

The defendant asked the plaintiff to produce documents related to the sale, and the plaintiff complied, claiming it had produced all relevant documents in its possession. The defendant objected, finding the production incomplete, which the plaintiff disputed. Subsequently, the defendant asked for the production of additional documents, and the plaintiff produced three more pages, adding further responses and objections as well as stating that it did not “normally save copies of all emails or sent or received, that it ‘did not anticipate’ litigation with defendant or the need to save all communication with defendant, and that plain-tiff has no internal emails since it is primarily a one-person entity.” Id. at *__.

The defendant sought leave to file a motion to compel, which the court granted. After holding a hearing, the court instructed the parties to reach an agreement on a remedy for the discovery dispute, but the parties were unable to do so. The plaintiff then produced an additional 181 pages of documents, but the defendant was still convinced that the production did not include all relevant electronic records—a fact it confirmed when it received more than 300 pages of relevant electronic communications, including emails ref-erencing the plaintiff—through third-party discovery. After two more discovery conferences, the judge again asked the parties to jointly devise a remedy for their discovery squab-bles, but the parties were unsuccessful.

Subsequently, the defendant moved for spoliation sanc-tions, asserting the plaintiff’s failure to produce documents damaged its case. Specifically, the plaintiff had failed to

produce at least 169 emails, internal correspondence, third-party communications, and other relevant electronic docu-ments. Therefore, the defendant argued appropriate sanc-tions included an order precluding the plaintiff from offering testimony or documents from the date of the discovery of the packaging discrepancies, an adverse inference instruc-tion, attorneys’ fees, and costs.

The plaintiff admitted it had not timely produced documents but claimed the defendant could not show its defense had been prejudiced because it could obtain the same informa-tion from other sources, including third-party discovery and depositions of the plaintiff and other parties.

The court ruled that the plaintiff had a duty to preserve as soon as it learned of the packaging problems: it knew information relating to the sale would have been relevant to future litigation. Moreover, the plaintiff “admitt[ed] familiar-ity with its obligation to preserve documents in the event that litigation seems likely for a particular matter.” Id. at *__. Although the defendant argued the plaintiff acted at a minimum with gross negligence and possibly recklessly, the court found the defendant could not offer evidence of inten-tional misconduct or bad faith. Rather, the court determined the plaintiff acted with gross negligence when it failed “to take the most basic document preservation steps” includ-ing never issuing a “formal litigation hold to ensure preser-

TakeawayA party that fails to issue a litigation hold risks the imposition of sanctions, even when it does not act in bad faith. In particular, plaintiffs have little room to argue they did not anticipate litiga-tion and will be taken to task for failing to imple-ment sound preservation practices as soon as they plan to file a lawsuit.


vation of electronic information, despite admitting familiarity with its obligations to preserve documents.” Id. at *__. This conduct was “particularly inexcusable given that SJS is the plaintiff in this action and, as such, had full knowledge of the possibility of future litigation.” Id. at *__ (citing Sekisui Am. Corp. v. Hart, No. 12 CV 3479, 2013 WL 4116322, at *6 (S.D.N.Y. Aug. 15, 2013)).

The court also found the emails were relevant to the mat-ter. The defendant had the burden to establish prejudice, and here, the court found “the emails would certainly have aided defendant in gaining additional information about the circumstances surrounding the sale and attempted re-sale of the goods.” Id. at *__. Therefore, sanctions were appropriate.

In choosing the proper sanction, the magistrate judge found the defendant’s request to exclude evidence too drastic where there was no evidence of bad faith. Moreover, there was no guarantee that the “destroyed records would have corroborated defendant’s account of events” and the defendant could obtain some of the information from third parties, its own records, and from depositions. Id. at *__. However, an adverse inference instruction would “prop-erly readjust the balance to the extent that it was tilted by plaintiff’s failure to preserve email communications.” Id. at *__. In the absence of bad faith, an adverse inference would “restore the prejudiced party to the same position it would have been in absent the wrongful destruction of evidence.” Id. at *__. The court also awarded fees and costs to com-pensate the defendant for having to file the motion.


The court refused to give the jury an adverse inference instruction because a party alleging spoliation could not establish that it was prejudiced by the loss of evidence.

In this commercial litigation case between two telecom-munications providers in Puerto Rico, the plaintiff filed a motion seeking an adverse inference instruction as a sanc-tion for the defendant’s failure to preserve emails from three former executives’ personal accounts.

The defendant had issued a litigation hold notice within a month after learning of the litigation, and it sent the notice to its former officers, including the three at issue in this motion. However, it “failed to preserve relevant emails within its control” where it “presumably knew its managing officers used their personal email accounts to engage in company business, and thus its duty to preserve extended to those personal email accounts.” Id. at *1. Its failure to account for “three responsive email chains” breached its duty to preserve. Id.

This failure was tempered by the speedy issuance of the litigation hold notice, the lack of evidence that the emails were destroyed intentionally or in bad faith, and the recov-ery of the three email chains from other sources. Further-more, the plaintiff could not establish that the email chains were “potentially damaging.” Id. at *2. Therefore, the plaintiff was unable to “articulate a clear theory of how it has suffered prejudice, because the extent of spoliation is unknown.” Because prejudice was merely “speculative” at that point, the court could not impose an adverse inference

instruction. Id. The plaintiff had “not proffered evidence that tends to show the allegedly ‘lost’ emails would actually support [its] claims or weaken [the defendant’s] defenses.

However, the court noted that sanctions might be appropri-ate “upon further discovery,” including “[f]orensic analysis of these three former employees’ personal email accounts and computers” to “determine whether critical emails have been deleted.” Id.

TakeawayThis opinion serves as a reminder that the duty to preserve can extend beyond corporate sys-tems to personal accounts when employees use them to conduct business. Parties must clearly establish that litigation holds apply not only to business applications but also personal accounts, including email, social media, text messages, and the like. They must also care-fully follow up with both current and former employees and issue periodic reminders of their continuing duty to preserve evidence.

Puerto Rico Tel. Co. v. San Juan Cable, LLC, No. 11-2135 (GAG/BJM), 2013 WL 5533711 (D.P.R. Oct. 7, 2013)

Puerto Rico Magistrate Judge Denies Adverse Inference Motion Absent of Prejudice for Spoliation of Executives’ Personal Email

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In re Pradaxa (Dabigatran Etexilate) Prods. Liab. Litig., MDL No. 2385, 2013 WL 5377164 (S.D. Ill. Sept. 25, 2013)

Massive Product Liability Tort Not Derailed by Spoliation Claim Due to Rule 37 ‘Safe Harbor’

In this products liability matter over the drug Pradaxa, defendant Boehringer Ingelheim Pharmaceuticals, Inc. (BIPI) avoided spoliation sanctions because the destruc-tion of a key custodian’s email occurred before the duty to preserve was triggered, in accord with BIPI’s document retention policy.

During discovery, the Plaintiff Steering Committee (PSC) sought the records of Wa’el Hashad, BIPI’s execu-tive in charge of marketing Pradaxa. Hashad left BIPI in August 2011, before the first Pradaxa case was filed. BIPI explained Hashad’s file was destroyed according to the terms of its document retention policy, which required BIPI to retain documents either for 30 days after an employee leaves the company or for 24 hours after a litigation hold is released. Here, Hashad’s files had been retained because they were subject to a previous litigation hold. When the

hold was released on November 11, 2011, Hashad’s files were destroyed within 24 hours—three months before BIPI’s duty to preserve arose.

The PSC argued that BIPI’s duty to preserve arose as soon as the company could “reasonably anticipate” litiga-tion. To establish the timeline, the PSC referred to privilege log entries describing BIPI’s document preservation, but they were referring to other unrelated litigation. The PSC also pointed to FDA adverse event reports and safety announcements as well as “internet chatter,” but the court found these insufficient to trigger the duty. Id. at *14. The court noted that if “postings on a plaintiffs’ blog or other media reports. . . . were the standard, pharmaceutical com-panies would be in a perpetual litigation hold.” Id.

To the contrary, BIPI argued the preservation duty was not triggered until litigation was “imminent” under Seventh Circuit law. Thus, it maintained it had no duty to preserve documents until it received a demand letter relating to the first post-launch Pradaxa product-liability lawsuit in Febru-ary 2012. The court reviewed the law and agreed with BIPI.

Because no duty to preserve existed at the time of destruc-tion, a spoliation inference was not appropriate. Further, even if a duty to preserve had existed at the time of destruction, the PSC could not establish “a showing of bad faith.” The court noted that “[i]ntentional conduct does not establish bad faith.” Id. at *14. Instead, “bad faith ‘means destruction for the purpose of hiding adverse information.’” Id. (citation omitted).

The court concluded by ordering BIPI to conduct further evidence to produce any of Hashad’s files that still existed, given BIPI’s ongoing attempts to recover his files from disaster recovery backup tapes. It also reminded BIPI of the appropriate scope of discovery, based on the PSC’s concern that BIPI was only producing documents that referenced the drug: it reiterated the relevancy standard from Rule 26(b)(1) in asserting that all material “relevant to any party’s claim or defense” must be produced and asked the defendants to attest that they had been producing more than documents that merely referenced Pradaxa. Id. at *4.

TakeawayThe court’s analysis provides a textbook exam-ple of how to analyze trigger events and how to implement a document retention policy. Parties should seek to emulate BIPI’s actions in this case, which demonstrated to the court’s satis-faction that its information governance program was reasonable and that the company followed the program in good faith.

All information governance programs should include a well-documented records retention policy and require the creation of an audit trail describing when key actions were taken. Addi-tionally, they should include a thorough litigation hold procedure that incorporates an important step often overlooked by legal teams: deter-mining when to release legal holds.

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Sekisui Am. Corp. v. Hart, No. 12 Civ. 3479 (SAS) (FM), 2013 WL 4116322 (S.D.N.Y. Aug. 15, 2013)

Judge Scheindlin Game Changer – She Emphatically Overturns Magistrate’s Order and Imposes Adverse Inference Sanction

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U.S. District Judge Shira Scheindlin found that an innocent party to the spoliation of evidence need not show prejudice to be entitled to an adverse inference instruction.

In this case, the plaintiff sued the Harts, spouses who included the former president of a company the plaintiff had recently acquired and his wife. Shortly after the trans-action was complete, the plaintiff decided the defendants had misrepresented their compliance with FDA regulations and decided to sue. After the plaintiff sent a notice of claim to the defendants, it delayed more than 15 months before instituting a litigation hold. During this period, the plaintiff permanently deleted the email files of the former president as well as another former employee responsible for ensur-ing the company’s FDA compliance, allegedly to “free up space” on a server. Id. at *2. The plaintiff also failed to notify its IT vendor of the need to preserve evidence. The defendants then filed a motion seeking sanctions for the plaintiff’s spoliation of evidence.

Judge Scheindlin initially referred the case to U.S. Mag-istrate Judge Frank Maas, but he refused to issue sanc-tions because the defendants could not establish that they were prejudiced by the loss of evidence. Judge Scheindlin reviewed the decision, found it clearly erroneous, and reversed.

Judge Scheindlin undertook a thorough review of the Second Circuit case law on adverse inference instructions, particularly Residential Funding Corp. v. DeGeorge Finan-cial Corp., 30 F.3d 99 (2d Cir. 2002). Residential Funding established a three-part test for imposing an adverse infer-ence instruction:

(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.

Id. at *4 (citing Residential Funding, 30 F.3d at 107) (quota-tion marks omitted).

Here, it was clear that the plaintiff had the obligation to preserve evidence—an obligation that Judge Scheindlin asserted should be “quite clear—especially to the party planning to sue.” Id. at *1.

Turning to culpability, “a showing that evidence was destroyed knowingly, even if without intent to [breach a duty to preserve it], or negligently” was sufficient to estab-lish the element. Id. at *4. She rejected the magistrate judge’s reference to the proposed amendments to the Fed-eral Rules of Civil Procedure, finding it irrelevant. She noted that the proposed rule’s requirement that the innocent party would be required to establish substantial prejudice to impose sanctions on a spoliating party was unfair. Id. at *4 n. 51. Moreover, she argued that “imposing sanctions only

TakeawayThis 32-page ruling presents a forceful rejec-tion of trends from some courts that require a showing of prejudice before imposing severe discovery sanctions. In refusing to require a demonstration of bad faith or prejudice, Judge Scheindlin’s decision focuses on the inexplica-ble delay between the time the duty to preserve was triggered and the issuance of a litigation hold. Even companies that have a seemingly good faith reason to delete evidence must pro-ceed cautiously when litigation is on the horizon and balance the needs of the business against the likelihood of litigation.

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where evidence is destroyed willfully or in bad faith creates perverse incentives and encourages sloppy behavior.” Id.

As she reviewed the facts of the case, Judge Scheindlin found clearly erroneous the magistrate judge’s conclusion that the destruction “may well rise to the level of gross negligence” but was not willful because there was no showing of a “malevolent purpose.” Id. at *5. The excuse of a cluttered server was insufficient to excuse the deletion: “even a good faith explanation for the willful destruction of ESI when the duty to preserve has attached does not alter the finding of willfulness.” Id. at *6. Therefore, based on the plaintiff’s failure to institute a litigation hold for 15 months and on its failure to notify the IT vendor of the need to preserve for an additional 6 months, as well as the dele-tion of the emails of two significant custodians, she ruled that the destruction of evidence was intentional and grossly negligent.

In evaluating the relevance of the documents, Judge Scheindlin explained that “[w]hen evidence is destroyed willfully, the destruction alone ‘is sufficient circumstantial evidence from which a reasonable fact finder could con-

clude that the missing evidence was unfavorable to that party.’” Id. at *5 (footnote omitted). In addition, she noted that “‘a showing of gross negligence in the destruction . . . of evidence will in some circumstances suffice, standing alone, to support a finding that the evidence was unfavor-able to the grossly negligent party.’” Id. (footnote omitted).

Therefore, she found that “prejudice to the innocent party may be presumed because that party is ‘deprived of what [the court] can assume would have been evidence relevant to [the innocent party’s claims or defenses].’” Id. (foot-note omitted). Here, the documents were clearly relevant because they referred to the acquired company’s compli-ance with the terms of the stock purchase agreement. Furthermore, she refused to shift the burden to establish prejudice to the innocent party, the defendants, where the plaintiff had intentionally destroyed the evidence. To do otherwise “‘would allow parties who have destroyed evidence to profit from that destruction.’” Id. at *7. Here, an “unknowable amount of ESI” was permanently destroyed. Id. at *7. Therefore, an adverse inference was proper. The judge also awarded the costs and attorneys’ fees associ-ated with bringing the motion.


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In this case involving allegations of employment discrimi-nation and other matters, the U.S. District Court Judge adopted the report and recommendation of a U.S. Magis-trate Judge finding that prejudice was required to impose an adverse inference instruction.

The matter arose when the plaintiff filed a complaint after being dismissed from the defendant. During the course of the case, the plaintiff uncovered the loss of ESI, which he alleged prejudiced his case. The defendants had destroyed draft meeting minutes, emails in their native for-mat (although produced in PDF format), work-in-progress documents, and an attorney’s memorandum memorializing a telephone call with the plaintiff’s counsel. The plaintiff argued that losing metadata associated with the docu-ments was a hardship because it “would have illuminated the content and sequence of revisions” and could have shown that the documents were fabricated. Id. at *4.

The plaintiff sought sanctions, including an adverse infer-ence instruction, the admission of evidence relating to the spoliation, the exclusion of certain evidence, attorneys’

fees, and other monetary sanctions. The plaintiff argued that the court could presume prejudice from the inten-tional destruction of documents, based on a 2007 opinion from the U.S. Bankruptcy Court for the District of Kansas that applied the Southern District of New York’s Zubulake standard.

However, the magistrate judge disagreed, based on more recent Tenth Circuit case law that specifically required prejudice. Here, the plaintiff was required to show “actual prejudice rather than theoretical prejudice,” meaning the “destroyed evidence would have to be relevant to the claims or defenses in the case.” Id. at *3. Mere speculation would not suffice.

Turning to the evidence, the court did not find the defen-dants’ destruction of evidence to be intentional; rather, it “it resulted from defendants’ failure to suspend their routine practices, which under the circumstances demonstrates negligence. It does not suggest an intent to deprive plaintiff of evidence.” Id. Furthermore, according to the defendants, a number of remaining documents “either never existed, were produced to plaintiff in discovery, or were properly withheld based on a claim of privilege.” Id. Although the plaintiff contested these assertions, he could not establish that the defendants’ failure to produce these documents negatively affected his case.

The only “close call” was a memorandum prepared by defense counsel. Id. at *5. The memorandum was pro-duced in PDF format, but the plaintiff wanted the native format version so he could review the metadata and raise a challenge to its authenticity. Although the plaintiff called into question the lawyer’s veracity, he could not provide any evidence “suggesting that defense counsel would make misrepresentations to this court.” Id. Therefore, he could not establish the requisite prejudice.

Herrmann v. Rain Link, Inc., No. 11-1123-RDR, 2013 WL 4028759 (D. Kan. Aug. 7, 2013)

Kansas Federal Court Finds No Prejudice as Grounds for Denying Spoliations Sanctions

TakeawayThe Hermann decision serves as a reminder of the lack of consistency across jurisdictions on what threshold a party is required to meet before a court will issue sanctions for the spoliation of ESI. The magistrate judge’s recommendation runs counter to some recent decisions in other jurisdictions where prejudice can be presumed, such as Judge Shira Scheindlin’s August 2013 opinion in Sekisui American Corp. v. Hart.

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AMC Tech., LLC v. Cisco Sys., Inc., No.: 11-cv-3403 PSG, 2013 WL 3733390 (N.D. Cal. July 15, 2013)

Northern District of California Opinion Shows Judicial Restraint When Duty to Preserve Is Deemed ‘Not ‘Limitless’

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Sanctions were not appropriate where a party destroyed the evidence of an employee who was not a key player in the litigation and did not destroy the evidence in bad faith.

In this breach of contract action, the plaintiff asked the defendant to produce information from an employee who had retired just before the lawsuit was filed. The custo-dian in question was not one of the key business execu-tives who participated in the deal, although he did provide some calculations on sales estimates that may have been pertinent to the plaintiff’s claim. The defendant could not comply with the request because it had reformatted the

employee’s computer and deleted his email archives 30 days after his departure, in accord with the company’s standard retention practices.

The court began by acknowledging that the defendant had a general duty to preserve evidence once it received notice of the claim in July 2011. However, the court noted that “the scope of this duty is not limitless.” Id. at *_. Rather, it 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 litiga-tion.” Id. at *_. Here, the employee was “an unlikely candi-date” to have relevant documents.

In assessing whether Cisco acted with a culpable state of mind, the court reviewed the appropriate standard: “[a] party acts with a culpable state of mind when it consciously disregards its litigation duty to preserve information.” Here, the court found that “Cisco did not act in conscious disre-gard of its litigation preservation duties because again, the filing of the suit did not reasonably put Cisco on notice to preserve [the custodian’s] documents given [his] tangential relationship to the [contract].” Id. at *__. Furthermore, the deletion was routine: the defendant was simply following its “established company procedure” of deleting information within 30 days. Id. at *__.

Finally, the court found that the documents had only “tan-gential relevance” to the claims. Id.at *__. Moreover, the lost documents were not unique, and the information created by the custodian was included among evidence already provided.

TakeawayParties should observe that the defendant escaped further scrutiny for two primary rea-sons: (1) it had a documented retention pol-icy, which helped establish that there was no willfulness on its part, and (2) the employee at issue was not a key custodian. Therefore, par-ties would be well advised to take steps well before litigation arises to establish a defensible records retention program. In addition, parties should evaluate matters as early as possible to determine potential custodians and then work to obtain opposing counsel’s agreement as to the proper scope of discovery.

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Sekisui Am. Corp. v. Hart, No. 12 Civ. 3479(SAS)(FM), 2013 WL 2951924 (S.D.N.Y. June 10, 2013)

Without Evidence of Prejudice, S.D.N.Y. Court Denies Sanctions Despite Spoliation of Evidence

U.S. District Judge Shira Scheindlin referred this matter to a magistrate judge, who decided that a party’s failure to establish prejudice was fatal to its request for an adverse inference instruction as a sanction for spoliation.

In this case arising from the plaintiff’s failed acquisition of a company owned by the defendants, the plaintiff notified the defendants that it intended to sue them for breach of contract. However, the plaintiff waited more than 15 months to implement a litigation hold. Furthermore, the company failed to notify a vendor overseeing its IT operations to preserve email, which was subsequently lost, until three months after it filed the lawsuit. Meanwhile, the plain-tiff’s office manager authorized the destruction of several employees’ email folders, including the former president’s files, to solve file server problems due to the amount of email.

The defendants argued the destruction of the emails were the result of the plaintiff’s “‘willful, wanton and reckless disregard for its discovery obligations.’” Id. at *3. Therefore, they were entitled to an adverse inference instruction. Id.

The magistrate judge applied a three-part test to determine whether an adverse inference instruction was appropriate:

“(a) the party having control over the evidence had an obligation to preserve it; (b) the records were destroyed with a “culpable state of mind;” and (c) the destroyed evidence was “relevant” to the moving party’s claim or defense, “such that a reasonable trier of fact could find that it would support that claim or defense.”

Id. (citation omitted). Here, there was “no question” that the plaintiff had a duty to preserve the emails, and the com-pany’s “failure to take [reasonable precautions] to preserve Hart’s email files constitutes at least negligence.” Id. at *4. However, the question of culpability was a closer issue. The defendants could not show the emails were deleted for “any malevolent purpose.” Id. However, the IT vendor’s ability to delete Hart’s email folder “may well rise to the

level of gross negligence.” Id. But culpability did “not by itself entitle [the defendants] to sanctions.” Id.

The defendants also had to establish that the emails were relevant and that they suffered prejudice. Here, the defen-dants did not show that “relevant information potentially helpful to them is no longer available.” Id. The court found it telling that “despite their complaints,” the defendants had “yet to produce—or even describe—so much as a single relevant email that [the plaintiff] has failed to produce.” Id.

Moreover, although the plaintiff conceded that the dele-tion was “a serious mistake,” it attempted to remedy the mistake by disclosing the problem to defense counsel and by continuing to search for alternative sources of informa-tion and locating at least 36,000 emails. Id. at *3. It also asserted that the lost emails were “‘of only marginal rel-evance’” to the defendants’ case and that the “significant number of Hart emails that have been located show[ed] that any prejudice” was “‘minimal.’” Id.

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TakeawayHere, the plaintiff was fortunate in two respects. First, it was able to find other sources of the sought-after ESI. Second, the defendants were unable to establish how the loss of information might have prejudiced them. However, most parties in similar situations likely will not be so lucky. Well before they anticipate litigation, orga-nizations should establish a litigation plan that includes steps to preserve information, such as implementing a litigation hold and working with the IT department and outside vendors to halt the automatic destruction of records.


The defendants had also complained about the loss of other custodians’ emails. Some of the custodians’ emails were not among the list of agreed-upon custodians for the case. Some others’ files had been preserved, but the defendants had previously instructed these custodians to ‘delete unwanted email.’” Id. at *8. The files of one employee, who was responsible for FDA compliance—an issue that played a role in the plaintiff’s decision to renege on the acquisition—had been deleted, ostensibly to pre-vent the accumulation of junk mail that was cluttering the company’s server. However, the plaintiff had collected and produced almost 7,000 emails and their attachments from the employee’s archived email files and other custodians’ files. Therefore, the court had no reason to find any preju-

dice to the defendants, and sanctions were unwarranted. At best, the defendants “have established the presence of some smoke, intimating that there consequently must have been a fire.” Id. at *9.

In addition, this opinion reflects the language of the pro-posed amendment to Federal Rule of Civil Procedure 37(e), which would permit spoliation sanctions only for willful or bad faith spoliation that caused “substantial prejudice” or that “irreparably deprived” a party of a “meaningful oppor-tunity to present or defend against” claims. Although U.S. District Judge Shira Scheindlin ultimately reverses the magistrate judge’s opinion, this standard may soon become the law of the land.



CaseSummaries


CASE SUMMARIESSokn v. Fieldcrest Cmty. Unit School Dist 2014 WL 201534 (C.D.Ill., Jan. 16, 2014)

Unfair labor practices case involving destruction of audio tape recordings; being unable to determine when the tapes were destroyed, Court could not rule that destruction was done in bad faith and therefore sanctions not appropriate. Additional deposition ordered.

7

VENUE: C.D. Ill.JUDGE: Joe Billy McDade

Little Hocking Water Assn v. Dupont LEXIS 134869 (S.D. Ohio Sept. 20, 2013)

In this dispute over waste disposal practices, court declined to issue sanctions or permit additional discovery regarding the defendant’s preservation efforts (including production of litigation hold letters) due to insufficient ‘preliminary showing’ that spoliation had occurred.

6

VENUE: S.D. Ohio

Hixson v. City of Las Vegas, 2:12-cv-00871-RCJ-PAL (D. Nev. July 10, 2013)

Wrongful discharge case where plaintiff filed for Rule 37(c) sanctions due to automatic destruction of emails; court found that the duty to preserve had not attached until after the alleged spoliation occurred and denied sanctions.

Tr

VENUE: D. Nev.JUDGE: Peggy Leen

Pillay v Millard Refrigerated Services 2013 WL 2251727 (N.D.Ill., May 22, 2013)

Employment case where plaintiff sought spoliation motion for destruction of performance data due to routine data destruction; resulted in adverse inference sanction.

7

VENUE: N.D. Ill.JUDGE: Joan Lefkfow

Cottle-Banks v. Cox Communications, Inc. 2013 U.S. Dist. LEXIS 72070 (S.D. Cal. May 21, 2013)

In this unfair competition lawsuit, plaintiff alleged destruction of relevant audio recordings; agreeing that spoliation had occurred, the court denied motion for adverse inference due to lack of any showing of prejudice.

9

VENUE: S.D. Cal.JUDGE: Gonzalo Curiel

Research Foundation of State University of New York v. Nektar Therapeutics, No. 1:09 cv 1292 (N.D.N.Y. May 15, 2013) In this patent dispute case, the court denied defendant’s motion for an adverse inference, citing among other actions a comprehensive preservation policy and issuance of legal holds.

2

VENUE: N.D.N.Y.JUDGE: Gary L. Sharpe

Kirgan v FCA LLC 2013 U.S. Dist. LEXIS 51747 (C.D. Ill., Apr. 10, 2013)

Employment case involving defendant’s routine destruction of calendar entries (despite issuing a LH notice) and false testimony; court granted adverse inference and monetary fine.

7

VENUE: C.D. Ill.JUDGE: John Gorman

Dunbar v Google 2013 US Dist LEXIS 48630 (N.D.Cal, Apr. 2, 2013)

Plaintiff sought prior versions of documents retained in defendant’s document management system; court ordered additional discovery.

9

VENUE: N.D. Cal.JUDGE: Paul Grewal

Frank Gatto v United Air Lines, et al, 10-cv-1090-ES-SCM (D. NJ Mar. 25, 2013)

Personal injury case where defendant sought sanctions related to the deletion a Facebook account, resulting in an adverse inference sanction.

3 Sc

VENUE: D. N.J.JUDGE: Steven Mannion

Kenneth Day v LSI Corp., No. CIV 11-186-TUC-CKJ (D. Ariz., Dec. 20, 2012)

Employment discrimination case, where a critical witness was excluded from the original preservation request and legal hold; data was subsequently lost, resulting in default judgment and adverse inference sanctions.

9 Sc

VENUE: D. Ariz.JUDGE: Cindy K. Jorgenson

LEGEND: VENUES: # TOPICS: Tr Trigger Pr Proportionality Sc Scope Te Technology LH Legal Hold

SANCTIONS: Monetary Sanctions Adverse Inference Additional Discovery Dismssed


CASE SUMMARIESE.E.O.C. v. JP Morgan Chase Bank N.A., No. 2:09-cv-00864 (S.D. Ohio Feb. 28, 2013)

EEOC discrimination case involving destruction of data due to untimely issuance of a legal hold and failure to suspend routine email culling, resulting in permissive adverse inference.

6 Tr

VENUE: S.D. OhioJUDGE: Gregory L. Frost

E.E.O.C. v. Ventura Corp., Civ. No. 11-1700 (PG), 2013 U.S. Dist. LEXIS 19662 (D.P.R. Feb. 12, 2013) Title VII complaint where relevant documents were shredded and emails lost due to a software migration, despite multiple warnings from the EEOC. Resulted in adverse inference despite absence of bad faith.

1

VENUE: D.P.R.

Christou v. Beatport, LLC, Civil Action No. 10-cv-02912-RBJ-KMT, 2013 U.S. Dist. LEXIS 9034 (D. Colo. Jan. 23, 2013) Commercial case where defendant failed to take steps to preserve text messages, and due to loss of the phone, there were subsequently unable to produce requested messages during discovery. Citing that the duty to preserve had attached, the court found negligence and provided a rebuttable inference at trial.

10

VENUE: D. Colo.JUDGE: R. Brooke Jackson

Simms v. Deggeller Attractions 7:12-cv-00038-JCT (W.D. Va. January 2, 2013) Personal injury case where plaintiff moved for sanctions for destruction of photos; court concluded duty to preserve neither existed nor bad faith; denied the motion, applying Rule 37(e) safe harbor.

Tr

VENUE: W.D. Va.JUDGE: James Turk

Haskins et al v First American Title, No. 10-5044 (D. NJ, Oct. 18, 2012) Insurance fraud case where plaintiff filed a motion to compel preservation of ESI held by third-parties (agents). Court found ESI was in defendant’s “possession, custody or control” and ordered issuance of litigation hold and request for production.

3 Sc

VENUE: D. N.J.JUDGE: Joel Schneider

Scentsy Inc. v. B.R. Chase LLC, No. 1:11-cv-00249-BLW, 2012 WL 4523112 (D. Idaho Oct. 2, 2012)

Copyright infringement case where defendant filed a motion to compel forensic examination. Court concluded plaintiff’s litigation hold and document retention policies were “clearly unacceptable” (lack of written legal hold; timing of verbal hold coinciding with filing complaint; routine email disposition after 6 months). Court ordered additional depositions (along with potential for additional sanctions if spoliation found to have occured).

Tr

VENUE: D. IdahoJUDGE: B. Lynn Winmill

Hynix Semiconductor, Inc. v Rambus, Inc. No. C-00-20905 RMW (N.D. Cal. Sept. 21, 2012)

Upon appeal, two federal court cases (Hynix v Rambus and Micron Tech v Rambus) were remanded after finding differing conclusions regarding spoliation claims with nearly identical underlying facts. Originally, in Hynix, the court determined that Rambus did not spoliate documents. The Federal Circuit court concluded that the court had “applied too narrow a standard of forseeability.” Following reconsideration, the court concluded the earlier trigger date and that Rambus had therefore committed spoliation.

9 Tr

VENUE: N.D. Cal.JUDGE: Ronald M. Whyte

Robinson v. Jones Lang LaSalle Americas Inc., No. 3:12-cv-00127-PK, 2012 U.S. Dist. LEXIS 123883 (D. Or. Aug. 29, 2012) “No principled reason to articulate different standards for the discoverability of communications through email, text message, or social media platforms.”

Boeynaems v. LA Fitness Internat’l, 285 F.R.D. 331 (E.D. Pa. August 16, 2012) Rule 23 consumer class action involving dispute over membership termination rights. Plaintiff sought expanded scope of discovery; court entered a cost-shifting order against plaintiffs.

Pr

VENUE: E.D. Pa.JUDGE: Balyson

Apple v Samsung Elecs. C. Ltd. No. C 11-1846 LHK (PSG) (N.D. Cal. July 25, 2012)

In this patent infringement case, court agreed with Apple in seeking an adverse inference for data spoliation due to failure to suspend automated deletion of email protocol (and lack of email being produced form 14 key fact witnesses for relevant time period)

9

VENUE: N.D. Cal.JUDGE: Paul Grewal



CASE SUMMARIESChin v Port Authority of New York New Jersey Nos. 10-1904-cv(L), 10-2031-cv(XAP), 2d Cir., July 10, 2012 In this Second Circuit Court of Appeals employment discrimination opinion, Chin sought a spoliation sanction for Port Authority’s purported gross negligence for failure to issue a written legal hold; court rejected SDNY “per se” gross negligence argument, finding that in this case there was no prejudice suffered due to ample evidence being produced by the Port.

2 LH

VENUE: 2d Cir N. Y.JUDGE: Miriam Goldman Cedarbaum

Omogbehin v. Cino 2012 U.S. App. LEXIS 12545, (3d Cir. N.J. June 20, 2012)

Employment discrimination suit where plaintiff filed a motion alleging spoliation; court concluded that plaintiff had failed to prove that supposed emails had in fact existed (an no allegation of faulty legal hold processes)

3 Pr

VENUE: 3d Cir N. J.JUDGE: Franklin S. Van Antwerpen

In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, 2010 E.D.La., MDL No. 2179 Former BP drilling engineer indicted on charges he deleted text messages relevant to the ongoing lawsuit (obstruction of justice)

5 Te

VENUE: E.D. La.

GenOn Mid-Atlantic LLC v. Stone & Webster Inc., No. 11 Civ. 1299(HB)(FM) (S.D.N.Y. Apr. 20, 2012)

In this contract dispute, defendant alleged spoliation by data held by a third-party; court found that the duty to preserve did extend to data under “practical control” of the party, but denied sanctions due to lack of prejudice shown.

2

VENUE: S.D.N.Y.JUDGE: Frank Maas

BYU v. Pfizer Inc. (D. Utah, April 16, 2012)

BYU alleged that 1) Pfizer’s initial inquiry for legal advice following its withdrawal from the research arrangement was a preservation “triggering” event and 2) that Pfizer’s 1994 litigation “sensitized” it to the possibility that additional interested parties might come forward. Court denied that the duty to preserve had attached 12 years prior to filing complaint.

10 Tr

VENUE: D. UtahJUDGE: Brooke C. Wells

Danny Lynn Electrical v. Veolia ES Solid Waste No. 2:09CV 192-MHT, 2012 U.S. Dist. LEXIS 31685, (M.D. Ala. March 9, 2012) In denying a motion for sanctions late in the case, the court concluded that the defendant had not acted in bad faith, that an effective litigation hold process was in place, and the degree of prejudice suffered was minimal.

1 Pr

VENUE: M.D. Ala.JUDGE: Terry F. Moorer

Tracy v. NVR Inc., 04-cv-6541L (WDNY, March 26, 2013)

In this FLSA class-action lawsuit, plaintiffs moved to compel production of litigation hold notices and list of recipients, based on preliminary showing of spoliation of potentially similarly situated opt-in plaintiffs. The motion was denied due to plaintiffs’ failure to demonstrate that the duty to preserve extended to potential opt-in plaintiffs, nor that spoliation had occurred. The court did grant NVR’s motion for spoliation against one of the opt-in plaintiffs.

2 Sc

VENUE: W.D.N.Y.JUDGE: Marian W. Payson

State National Insurance Co. v. County of Camden 08-cv-5128 (D.N.J. March 21, 2012)

Finding the County’s efforts severely lacking (“including a failure to institute a legal hold after the trigger event, suspend auto-deletion of email, or retain copies of any back-up tapes”), the Court ordered monetary sanctions despite finding no actual spoliation

3

VENUE: D. N.J.JUDGE: Noel L. Hillman

Pouncil v. Branch Law Firm Case No. 10-1314-JTM-DJW (D. Kan. Mar. 7, 2012)

In this malpractice product liability case, motion to compel defendant for failing to take proper steps to preserve ESI (including court-ordered litigation hold, additional discovery and monetary sanctions for costs)

10

VENUE: D.Kan.JUDGE: David Waxse



CASE SUMMARIES915 Broadway Associates, LLC, v. Paul, Hastings, Janofsky & Walker, LLP 2012 NY Slip. Op. 50285U (N.Y. Sup. February 16, 2012)

In this malpractice real estate transaction case, the court agreed with motion for spoliation sanctions and dismissal of the claim with prejudice due to a failure to take adequate steps to preserve potentially relevant evidence (including failure to implement an effective litigation hold process, suspend automated destruction of email, decommission and discarding of an integral email server)

NY LH Sc

VENUE: N.Y. Sup.JUDGE: Bernard J. Fried

Pippins v. KPMG LLP 279 F.R.D. 245 (February 3, 2012) During the stay of discovery in this FLSA class-action lawsuit, KPMG sought a protective order limiting the scope of preservation efforts due to the burden imposed by preserving hard drives for thousands of former employees that might fall within a potential FLSA collective. After failing to resolve the dispute, the court concluded that it would be premature to limit scope of preservation.

2 Sc

VENUE: S.D.N.Y.JUDGE: James L. Cott

Voom HD Holdings LLC v. EchoStar Satellite LLC 2012 NY Slip Op 00658 (January 31, 2012)

Contract dispute, confirming lower court sanctions due to EchoStar failed to issue a legal hold once litigation could be “reasonably anticipated” and failed to suspend automatic email deletion until four months after the suit was filed resulting in a loss of relevant emails.

NY Tr

VENUE: N.Y. Sup.JUDGE: Sallie Manzanet-Daniels

Perez v. Vezer Industrial Professionals, Inc. 2011 WL 5975854 (E.D. Cal. Nov. 29 2011)

Personal injury case where no litigation hold was implemented and “minimal, if any, efforts were made to preserve relevant documents and ESI”; small monetary sanction awarded to plaintiff (due to lack of gross negligence and minimal prejudice suffered)

9

VENUE: E.D. Cal.JUDGE: Carolyn K. Delaney

NACCO Materials Handling Group, Inc. v. Lilly Co. (No. 11-2415 AV, 2011 WL 5986649, W.D. Tenn. Nov. 16, 2011)

In this case involving improper access to secure dealer website, Lilly failed to take reasonable steps to preserve (e.g., failure to issue company-wide litigation hold due to scope of allegations, to suspend auto-delete and routine overwriting features, or to collect ESI), resulting in court-imposed preservation actions and monetary sanctions.

6 Sc

VENUE: W.D. Tenn.JUDGE: Diane K. Vescovo

N.V.E., Inc. v. Jesus J. Palmeroni, et al. Civil Action No. 06-5455 (ES), 2011 U.S. Dist. LEXIS 107600 (D.N.J., September 21, 2011)

Wrongful termination case where defendant admits to not issuing a legal hold and found to be “was grossly negligent in failing to preserve” records (e.g., destroying ESI from a computer system that was subsequently upgraded)

3

VENUE: D. N.J.JUDGE: Esther Salas

E.I. Du Pont De Nemours & Co. v. Kolon Indus., Inc. No. 3:09cv58, 2011 WL 2966862 (E.D. Va. July 21, 2011) In this countersuit, Kolon was found to have failed to implement an effective legal hold process and key players indicating intentional destruction of relevant documents; adverse inference in lieu of default judgment (citing efforts in issuing litigation holds and subsequent efforts to preserve files)

4 Pr

VENUE: E.D. Va.JUDGE: Robert E. Payne

Haraburda v. Arcelor Mittal USA, Inc. No. 2:11 cv 93, 2011 WL 2600756 (N.D. Ind. June 28, 2011)

Employment discrimination case where defendant chose to defer issuing a litigation hold or implement a process to preserve evidence until after the Rule 26(f) conference; court agreed with motion to compel and ordered placing an appropriate litigation hold

7

VENUE: N.D. Ind.JUDGE: Andrew P. Rodovich

Gaalla v. Citizens Medical Ctr. 2011 WL 2115670 (S.D. Tex. May 27, 2011)

Plaintiffs sought sanctions in response to the defendant’s failure to preserve disaster recovery backup tapes. The court ruled against sanctions, finding preservation efforts that were undertaken were reasonable, including issuing a timely litigation hold, making timely snapshots of relevant email accounts and instituting journaling.

5 Sc

VENUE: S.D. Tex.JUDGE: Janis G. Jack



CASE SUMMARIESZimmerman v. Weis Markets, Inc., 2011 Pa. Dist. & Cnty. Dec. LEXIS 187 (Pa. County Ct. May 19, 2011)

Ordering plaintiff to provide “all passwords, user names and log-in names for any and all MySpace and Facebook accounts to Defendant” because “no privilege exists … for information posted in the non-public sections of social websites, liberal discovery is generally allowable, and the pursuit of truth as to alleged claims is a paramount ideal.”

PA Te

Surowiec v. Capital Title Agency, Inc. 2011 WL 1671925 (D. Ariz. May 4, 2011)

Finding gross negligence for inadequate preservation efforts and discovery misconduct, including failing to issue a timely litigation hold and suspend routine document destruction when the defendant should have reasonably anticipated litigation, the court imposed monetary sanctions and an adverse inference instruction.

9

VENUE: D. Ariz.JUDGE: David G. Campbell

E.I. du Pont de Nemours and Co. v. Kolon Indus., Inc. 2011 WL 1597528 (E.D. Va. Apr. 27, 2011)

Despite a claim by the plaintiff that critical information was lost, the court denied sanctions for willful spoliation, citing that a defendant’s duty to preserve is not absolute, but must only be reasonable and proportional to the circumstances.

4 Pr

VENUE: E.D. Va.JUDGE: Robert E. Payne

Steuben Foods, Inc. v. Country Gourmet Foods LLC WL 1549450,WDNY April 21, 2011

Breach of contract case where defendant asserted plaintiff’s reliance on a verbal legal litigation hold and failure to produce at least three emails warranted spoliation sanctions; court found no evidence of spoliation or resulting prejudice

2

VENUE: W.D.N.Y.JUDGE: Leslie Foschio

Star Direct Telecom, Inc. v. Global Crossing Bandwidth, Inc. 2011 WL 1125493 (W.D.N.Y. Mar. 21, 2011)

Among numerous discovery disputes, plaintiff sought spoliation sanctions for destruction of emails; court concluded that duty to preserve arose when complaint was filed (not earlier as contended by Star Direct); however, failing to issue a litigation hold nor take adequate steps to preserve amounted to gross negligence and imposition monetary sanctions

2 Tr


Green v. Blitz U.S.A., Inc. 2011 U.S. Dist. LEXIS 20353 (E.D. Tex. Mar. 1, 2011)

Product liability case where court found defendant failed to preserve ESI (and even encouraging deletion in line with records policies); monetary sanction and order to provide Memorandum to opposing counsel in every lawsuit for forthcoming five years

5 LH

VENUE: E.D. Tex.JUDGE: T. John Ward

Philips Electronics North America Corp., et al. v BC Technical No. 2:08-CV-639-CW-SA, 2011 WL 677462 (D. Utah Feb. 16, 2011)

Copyright infringement and misappropriation of trade secrets; failure to issue timely litigation hold while key players “wantonly destroyed incriminating evidence”, resulting in sanctions and summary judgment for plaintiff

10 LH

VENUE: D. UtahJUDGE: Samuel Alba

Viramontes v. U.S. Bancorp 2011 WL 291077 (N.D. Ill. Jan. 27, 2011) The bank’s retention policy kept e-mails for 90 days, after which the e-mails were overwritten and destroyed. However, the retention policy would be promptly suspended on the occurrence of litigation or other triggering event. Because the bank followed its Record Retention Procedures in good faith, and suspended auto-deletion up on anticipation of litigation, it was protected from court sanctions under the Federal Rules of Civil Procedure 37(e) “safe harbor.”

7 Tr

United States v. Halliburton Co. 2011 WL 208301 (D.D.C. Jan. 24, 2011)

Plaintiff requested additional production of emails from an expanded list of custodians, despite significant production that had already been completed. The court determined that the plaintiff had failed to demonstrate that missing emails were crucial, and that additional discovery was not warranted.

DC

VENUE: D.D.C.JUDGE: John M. Facciola



CASE SUMMARIESOrbit One Communications, Inc. v. Numerex Corp. 2010 WL 4615547 (S.D.N.Y., Oct. 26, 2010)

Despite the failure to “engage in model preservation,” the court denied a motion for spoliation due to insufficient evidence that any lost ESI was relevant to the case (rejecting notion that failing to issue a written legal hold is “per se” gross negligence).

2

VENUE: S.D.N.Y.JUDGE: James Francis

McMillen v. Hummingbird Speedway, Inc., (C.C.P. Jefferson County, PA Sep. 9, 2010)

Ordering plaintiff to provide his Facebook and MySpace user names and passwords to counsel for defendants, rejecting plaintiff’s argument that communications shared among one’s “private” friends is somehow protected against disclosure in discovery and instructing “‘no social network site privilege’ has been adopted by our legislature or appellate courts.”

PA

Victor Stanley, Inc. v. Creative Pipe, Inc., et al. D.MD, Sept. 9, 2010 Copyright and patent infringement, unfair competition involving purposeful destruction and overwriting of files in order to obfuscate incriminating evidence, resulting in sizable monetary sanctions and default judgment on copyright infringement

4

VENUE: D. MDJUDGE: Paul Grimm

Medcorp, Inc. v. Pinpoint Tech., Inc. 2010 WL 2500301 (D. Colo. June 15, 2010) Case involving intentional destruction of 43 hard drives containing relevant information; finding negligence, court issued monetary sanctions and adverse inference instruction against Medcorp

10

VENUE: D. Colo.JUDGE: Kristen L. Mix

Jones v. Bremen High School Dist. 228 2010 WL 2106640 (N.D. Ill. May 25, 2010)

Wrongful termination where defendant failed to issue a litigation hold until well after trigger event, lack of meaningful guidance to key players, and continued automatic destruction of ESI (including backup tapes for email); finding gross negligence, sanctions included cost shifting and additional depositions

7

VENUE: N.D. Ill.JUDGE: Susan E. Cox

Passlogix, Inc.v.2FA Technology LLC, et al. 2010 WL 1702216 (SDNY Apr. 27, 2010)

Breach of contract case involving 2FA’s failure to issue a legal hold (despite being a small company) and intentional bad-faith spoliation resulting in prejudice; monetary sanction designed to punish bad actors directly

2

VENUE: S.D.N.Y.JUDGE: Peter K. Leisure

Merck Eprova AG v. Gnosis S.p.A. et al. 07 Civ. 5898 (SDNY Apr. 20, 2010)

Mislabeling of a nutritional agreement involving inadequate preservation efforts (lack of litigation hold, failure to suspend automatic email deletion and inadequate supervision of custodian search; finding of gross negligence and monetary sanctions and additional deposition

2 LH

VENUE: S.D.N.Y.JUDGE: Richard J. Sullivan

Crown Castle USA, Inc. v. Fred A. Nudd Corp. 2010 U.S. Dist. LEXIS 32982, (WDNY Mar. 31, 2010)

Product liability case involving gross negligence due to a failure to monitor the approach used to determine where and what to look for in terms of responsive documents; failure to suspend auto-delete of emails; and failure to issue legal hold (rejecting adverse inference due to lack of bad faith and prejudice)

2 LH


Rimkus Consulting Group Inc. v. Nickie G. Cammarata, et al., 07-cv-00405 (SDTX Feb. 19, 2010)

Non-compete and misappropriation of secrets; lack of written hold and willful destruction of evidence by the defendants after the duty to preserve had attached, resulting in monetary sanctions and adverse inference instruction

5 Tr

VENUE: S.D. Tex.JUDGE: Lee H. Rosenthal

Pension Comm. v. Banc of America Sec., LLC 685 F. Supp. 2d 456 (S.D.N.Y. 2010)

Complex litigation case where several plaintiffs were found to have failed to implement reasonable preservation efforts, including failure to issue written legal holds and other shortcomings resulting in finding of gross negligence

2 LH

VENUE: S.D.N.Y.JUDGE: Shira A. Scheindlin



CASE SUMMARIESEinstein v. 357 604199/07 (N.Y. Sup. Ct. November 4, 2009) Construction defect; plaintiff filed motion to compel discovery and misrepresentations; failure to implement any legal hold, make any attempt to investigate relevant data sources, and failure to preserve (e.g., due to email quota restrictions) deemed grossly negligent; monetary sanction and adverse inference

NY LH

VENUE: N.Y. Sup.JUDGE: Charles E. Ramos

Scalera v. Electrograph Sys., Inc., 2009 WL 3126637 (E.D.N.Y. Sept. 29, 2009) In this employment discrimination case, plaintiff moved for sanctions due to loss of allegedly relevant emails caused by failing to issue a litigation hold notice nor take other steps to preserve ESI; despite finding negligence for such missteps, the court denied request for an adverse inference due to lack of proving relevance.

2 Sc

VENUE: E.D.N.Y.JUDGE: A. Kathleen Tomlinson

Swofford v. Eslinger, 671 F. Supp. 2d 1274 (M.D. Fla. 2009)

In this personal injury suit, plaintiff sought sanctions for intentional destruction of ESI; the court agreed, finding bad faith and imposed both attorney fees and an adverse inference against the defendant.

VENUE: M. D. Fla.JUDGE: Mary S. Scriven

Major Tours v. Colorel, 2009 U.S. Dist. LEXIS 68128 (DNJ Aug. 4, 2009) Discrimination case where plaintiffs sought production of litigation hold letters; after concluding likelihood that spoliation had occurred due to delayed recognition of a triggering event and 30(b)(6) testimony provided, court agreed and ordered hold letters be produced

3 Tr

VENUE: D. N.J.

Pinstripe, Inc. d/b/a Acctknowledge v. Manpower, Inc., 2009 U.S. Dist. LEXIS 66422 (ND Okla. Jul. 28, 2009) The key takeaway from this case is the need to communicate, communicate and do some more communication when implementing a litigation / legal hold. A quick phone call confirming the steps being taken to implement the litigation hold would have saved over $30,000.00 in this case.

10

VENUE: N.D. Okla.

Phillip M. Adams & Associates, L.L.C., v. Dell, Inc. 2009 WL 910801 (D.Utah March 30, 2009)

Infringement case, moving for terminating sanctions due to spoliation; discussion of when trigger event occurred, with reasonable anticipation being based on multiple lawsuits arising out of the same issue (floppy disk errors) some five years earlier when industry was “sensitized to the issue” in the case)

10 Tr

VENUE: D. UtahJUDGE: David Nuffer

Synventive Molding Solutions v. Husky Injection Molding Systems, 2009 U.S. Dist. LEXIS 105306 (D. Vt. Mar. 13, 2009) Patent infringement lawsuit in which the Court ultimately orders plaintiff to implement a litigation hold as to personnel likely to possess discoverable information. The court also orders plaintiff to file a sworn declaration, including, among other things, a description of the “nature and extent of the litigation hold put in place in response to this Order, including the individual personnel affected by the hold.”

2 LH

VENUE: D. Vt.

Acorn v. County of Nassau 2009 WL 605859 (E.D.N.Y. Mar 9, 2009) Employment discrimination case where plaintiff sought actions against the county for failure to implement a timely hold nor adequately search for ESI (formal litigation hold issued 15 months after trigger event); finding of gross negligence and monetary sanction (but no prejudice; therefore no adverse inference)

2 Tr LH

VENUE: E.D.N.Y.

Keithley v. TheHomeStore.com 2008 U.S. Dist. LEXIS 61741 (Aug 12, 2008) Intellectual property infringement case; plaintiff filed motion claiming spoliation and discovery misconduct; court agreed that the “...failure to have an adequate litigation hold in place and the failure to issue reminders to employees regarding the duty to preserve evidence was at least grossly negligent” and resulted in spoliation of relevant ESI; $1.4M monetary sanctions and adverse inference

9 LH

VENUE: N.D. Cal.JUDGE: Elizabeth D. Laporte


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