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Case Law

eDiscovery Case Law: Pension Committee

This holiday week, we’re taking a look back at some of the cases which have had the most significance (from an eDiscovery standpoint) of the year.  The first case we will look at is The Pension Committee of the Montreal Pension Plan v. Banc of America Securities, LLC, 29010 U.S. Dist. Lexis 4546 (S.D.N.Y. Jan. 15, 2010) (as amended May 28, 2010), commonly referred to as “Pension Committee”.

In “Pension Committee”, New York District Court Judge Shira Scheindlin defined negligence, gross negligence, and willfulness from an eDiscovery standpoint and cementing her status as the most famous “Judge Scheindlin” in New York (as opposed to “Judge Judy” Sheindlin, who spells her last name without a “c”).  Judge Scheindlin titled her 85-page opinion “Zubulake Revisited: Six Years Later”.  The

This case addresses preservation and spoliation requirements of the plaintiff and information which should have been preserved by the plaintiffs after the lawsuit was filed. Judge Scheindlin addresses in considerable detail, defining the levels of culpability — negligence, gross negligence, and willfulness in the electronic discovery context.

Issues that constituted negligence according to Judge Scheindlin’s opinion included:

  • Failure to obtain records from all employees (some of whom may have had only a passing encounter with the issues in the litigation), as opposed to key players;
  • Failure to take all appropriate measures to preserve ESI;
  • Failure to assess the accuracy and validity of selected search terms.

Issues that constituted gross negligence or willfulness according to Judge Scheindlin’s opinion included:

  • Failure to issue a written litigation hold;
  • Failure to collect information from key players;
  • Destruction of email or backup tapes after the duty to preserve has attached;
  • Failure to collect information from the files of former employees that remain in a party’s possession, custody, or control after the duty to preserve has attached.

The opinion also addresses 1) responsibility to establish the relevance of evidence that is lost as well as responsibility to prove that the absence of the missing material has caused prejudice to the innocent party, 2) a novel burden-shifting test in addressing burden of proof and severity of the sanction requested and 3) guidance on the important issue of preservation of backup tapes.

The result: spoliation sanctions against 13 plaintiffs based on their alleged failure to timely issue written litigation holds and to preserve certain evidence before the filing of the complaint.

Scheindlin based sanctions on the conduct and culpability of the spoliating party, regardless of the relevance of the documents destroyed, which has caused some to label the opinion as “draconian”.  In at least one case, Orbit One Communications Inc. v. Numerex Corp., 2010 WL 4615547 (S.D.N.Y. Oct. 26, 2010)., Magistrate Judge James C. Francis concluded that sanctions for spoliation must be based on the loss of at least some information relevant to the dispute.  It will be interesting to see how other cases refer to the Pension Committee case down the road.

So, what do you think?  Is this the most significant eDiscovery case of 2010?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Law: Spoliate Evidence and Go to Jail–OR NOT?!?

As previously referenced in eDiscovery Daily, defendant Mark Pappas, President of Creative Pipe, Inc., was ordered by Judge Paul W. Grimm to  “be imprisoned for a period not to exceed two years, unless and until he pays to Plaintiff the attorney’s fees and costs that will be awarded to Plaintiff as the prevailing party pursuant to Fed. R. Civ. P. 37(b)(2)(C).”.

Judge Grimm found that “Defendants…deleted, destroyed, and otherwise failed to preserve evidence; and repeatedly misrepresented the completeness of their discovery production to opposing counsel and the Court.”  As a result, he ordered “that Pappas’s pervasive and willful violation of serial Court orders to preserve and produce ESI evidence be treated as contempt of court”, resulting in the severe sanction.

Pursuant to Magistrate Judge Grimm’s September 9 decision and order and the relevant local rule, however, defendants were allowed to object to the same order. In that briefing, Mr. Pappas’ counsel argued that “[t]his Court’s power to impose a coercive civil contempt sanction … is limited by a party’s ability to comply with the order,” and further that, “[i]f the fee awarded is so large that Mr. Pappas is unable to pay it, the ordered confinement would not be coercive, but punitive, and could not be imposed without criminal due process protections.” Defendants thus requested that Magistrate Judge Grimm’s order be modified such that, following the quantification of the fee award, Mr. Pappas be permitted to demonstrate his inability to pay it, and further to provide that Mr. Pappas would only be confined if he is able to pay but refuses to do so. The District Court agreed with Mr. Pappas’ counsel and, on November 1, 2010, issued a Memorandum and Order holding as follows: “[T]he Court does not find it appropriate to Order Defendant Pappas incarcerated for a future possible failure to comply with his obligation to make payment of an amount to be determined in the course of further proceedings. Certainly, if Defendant Pappas should fail to comply with a specific payment order, the Court may issue an order requiring him to show cause why he should not be held in civil contempt for failure to comply with that payment order. Also, under appropriate circumstances, criminal contempt proceedings might be considered.”

That same day, the Court further ordered that defendants must pay plaintiff the amount of $337,796.37 by November 5 and, if such payment is not made, defendants must appear on November 8 for a civil contempt hearing. Moreover, if defendants failed to pay and Mr. Pappas failed to appear at the civil contempt hearing, “a warrant may be issued for his arrest so that he shall be brought before the Court as soon as may be practicable.” From the docket it appears that ultimately the parties resolved the issue between them without the need for a further contempt proceeding.

So, what do you think?  What will happen next?  Please share any comments you might have (including examples of other cases where sanctions included jail time) or if you’d like to know more about a particular topic.

Case Summary Source: E-Discovery Law Alert, by Gibbons P.C.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

eDiscovery Case Law: Discovery Compelled for Social Media Content

Discoverability of social-media usage continues to be a hot topic for eDiscovery.  Information for litigants’ LinkedIn, Facebook, Twitter and MySpace accounts can be the “smoking gun” for litigators looking to pursue or defend a claim.

In McMillen v. Hummingbird Speedway, Inc., No. 113-2010 CD (C.P. Jefferson, Sept. 9, 2010), defendant Hummingbird Speedway, Inc. sought to compel discovery of the plaintiff’s social network account log-in names, and passwords.  A copy of the opinion granting that Motion to Compel is available here.

The plaintiff was allegedly injured during a stock car race in the summer of 2007.  During the litigation that followed, defendant Hummingbird Speedway, Inc. requested production of plaintiff’s user names, log-in names, and passwords for any social network accounts – to which the plaintiff objected, arguing that the information was confidential.  Based on information in the public sections of the plaintiff’s social network accounts, the defendant filed a Motion to Compel.

In his opposition to the motion, the plaintiff argued that communications with friends via social media sites were private and protected from disclosure. The court disagreed, indicating that the plaintiff was essentially asking the court to recognize an evidentiary privilege for such communications, but that there is no “social media privilege” recognized by Pennsylvania’s court or legislature.

The court also noted that those communications were not privileged based on “Wigmore’s test for privilege”, which requires the plaintiff to establish four factors:

  • “His communications originated in the confidence that they would not be disclosed”;
  • “The element of confidentiality is essential to fully and satisfactorily maintain the relationship between the affected parties”;
  • “Community agreement that the relationship must be sedulously fostered”; and
  • “The injury potentially sustained to the relationship because of the disclosure of the communication outweighs the benefit of correctly disposing of litigation”.

Because the plaintiff failed to establish these factors, the court ultimately ruled that “Where there is an indication that a person’s social network sites contain information relevant to the prosecution or defense of a lawsuit…and the law’s general dispreference for the allowance of privileges, access to those sites should be freely granted”.

So, what do you think?  There have been other cases where the discoverability of social media was called into question – have you experienced any?  Please share any comments you might have or if you’d like to know more about a particular topic.

P.S. – For those (like me) who didn’t know what the word “sedulously” meant, I’ve provided a link to the definition above… 🙂

eDiscovery Case Law: Adverse Interference Sanction for Lost Text Messages

As the sources of electronic files continue to become more diverse, case law associated with those different sources has become more commonplace.  One ruling in a case last month resulted in an adverse instruction against the US Government for failing to preserve text messages.

In United States v. Suarez, (D.N.J. Oct. 21, 2010), United States District Judge Jose L. Linares considered adverse inference sanctions related to the Government’s failure to preserve text messages.  In this case, the F.B.I. should have retained text messages between a cooperating witness and F.B.I. agents because it was reasonably foreseeable that the text messages would be discoverable by defendants in later criminal proceedings. However, given the lack of evidence of Government bad faith in failing to impose a litigation hold on the text messages until seven months after its investigation ended, the court imposed the “least harsh” spoliation adverse inference instruction that would allow but not require the jury to infer that missing text messages were favorable to defendants.

A cooperating witness posed as a developer and, as instructed by Federal Bureau of Investigation agents, offered payments to local public officials in exchange for expediting his projects and other assistance. During the F.B.I. investigation, the witness exchanged Short Message Service electronic communications (text messages) with F.B.I. agents. In later criminal proceedings, the government notified the court that it had incorrectly stated that no text messages were missing. The court held a hearing at which F.B.I. agents and information technology specialists described F.B.I. procedures to preserve and retrieve data generated by handheld devices. Despite an F.B.I. Corporate Policy Directive on data retention and litigation hold policies, no litigation hold was in place when the cooperating witness was “texting” with agents.

In a “not-for-publication” decision, the court pointed out that the Government’s obligation under Fed. R. Crim. P. 16 to disclose information was more limited than its obligation under civil discovery rules. However, the text messages with the witness were “statements” under the Jencks Act that should have been preserved by the Government. The F.B.I. was “well-equipped” to preserve documents, and the U.S. Attorney “was aware of the importance of preserving documents relevant to the litigation and could have requested a litigation hold on the text messages from the inception of the investigation.” The request for a litigation hold was not made until seven months after the investigation ended and three months after the F.B.I. began searching its servers for missing text messages.

In determining sanctions, the court considered precedents in the civil cases of MOSAID Techs. Inc. v. Samsung Elecs. Co., 348 F. Supp. 2d 332 (D.N.J. 2004), and Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456 (S.D.N.Y. 2010). The court concluded there was “little evidence” of Government bad faith leading to loss of the text messages. On the other hand, evidence indicated the defense was prejudiced by the loss of text messages with the cooperating witness, whose credibility was “of paramount importance.” The court thus denied defendants’ request for the “relatively severe” sanction of suppression of the witness’s testimony and all tape recordings in which he was a party. However, an adverse inference instruction was appropriate under MOSAID criteria. The text messages had been within the Government’s control and were intentionally deleted by F.B.I. agents, and the U.S. Attorneys’ Office failed to take steps to preserve the messages. The messages were relevant to claims or defenses, and it was reasonably foreseeable by the Government that the messages would later be discoverable. The court concluded that the “least harsh” spoliation adverse inference jury instruction described in Pension Committee would be issued because Government bad faith had not been shown. Such an instruction would allow but not require the jury to infer that missing text messages were favorable to defendants.

So, what do you think?  Have you encountered a case where preservation of text messages was a critical component?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Case Law: Spoliate Evidence and Go to Jail?!?

One of the most well-known cases in eDiscovery is Victor Stanley (VSI) v. Creative Pipe (CPI) and is a prime example of what NOT to do when conducting a search for relevant ESI in litigation – Victor Stanley, Inc. v. Creative Pipe, Inc., 2008 U.S. Dist. LEXIS 42025 (D. Md. May 29, 2008), – including not testing the search methodology, resulting in inadvertent disclosure of 185 privileged documents, and the waiving of privilege of same. If you’re not familiar with this case, Google it and you’ll find plenty of sites/articles that discuss its significance.

If that was a blow to Creative Pipe and their president, Mark Pappas, the order issued on September 9th for that same case (now widely referenced as “Victor Stanley II”) makes the May 2008 order pale in comparison.

Judge Grimm found that “Defendants…deleted, destroyed, and otherwise failed to preserve evidence; and repeatedly misrepresented the completeness of their discovery production to opposing counsel and the Court.” As a result, he ordered “that Pappas’s pervasive and willful violation of serial Court orders to preserve and produce ESI evidence be treated as contempt of court, and that he be imprisoned for a period not to exceed two years, unless and until he pays to Plaintiff the attorney’s fees and costs that will be awarded to Plaintiff as the prevailing party pursuant to Fed. R. Civ. P. 37(b)(2)(C).”

Ouch!

Clearly, Judge Grimm felt that Pappas’ and CPI’s behavior in this case over four years represented intentional destruction of evidence and he ruled accordingly on plaintiff’s motion regarding same. Perhaps his view of their actions can be summarized by footnote 19 in the order:

“CPI named one of its product lines the “Fuvista” line. Pappas admitted during discovery that “Fuvista” stood for “F**k you Victor Stanley,” (Pappas Dep. 22:20-24, Pl.’s Mot. Ex. 5, ECF No. 341-5), demonstrating that Pappas’s wit transcended sophomoric pranks such as logging into VSI’s web site as “Fred Bass” and extended to inventing insulting acronyms to name his competing products. When disclosed, the meaning of this acronym removes any doubt about his motive and intent. No doubt Pappas regarded this as hilarious at the time. It is less likely that he still does.”

So, what do you think? Is this the start of a trend – prison sentences for evidence spoliation? Or, is this an extreme example of clear intentional evidence destruction? Please share any comments you might have (including examples of other cases where sanctions included jail time) or if you’d like to know more about a particular topic.

More to come on this case in the future…