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Court Recommends Finding of Intent to Deprive for Defendant’s Lost Text Messages: eDiscovery Case Law

Shark Week on the Discovery Channel continues, which means Case Week on the eDiscovery Channel (a.k.a., eDiscovery Daily) continues as well.  Today’s case opinion comes from March and resulted in a different opinion for failure to preserve text messages than this case we covered last week.  Enjoy!

In NuVasive, Inc. v. Kormanis, No. 1:18CV282 (M.D.N.C. Mar. 13, 2019), North Carolina Magistrate Judge L. Patrick Auld recommended that, “because the record supports but does not compel a ‘finding that [Defendant Kormanis] acted with the intent to deprive [Plaintiff] of the [lost text messages’] use in the litigation, the Court submit that issue to the ‘jury, [with] the [C]ourt’s instruction[s] mak[ing] clear that the jury may infer from the loss of the [text messages] that [they were] unfavorable to [Defendant Kormanis] only if the jury first finds that [he] acted with the intent to deprive [Plaintiff] of the[ir] use in the litigation’”.

Case Background

In this case filed against a former employee over breach of contract for promoting and selling a competitor’s products within his former territory, the plaintiff notified Defendant Kormanis in March 2018 (through counsel) of its “concern[ ] that [his] new position with Alphatech will lead to … violation[s] of his contractual obligations with Ino[S]pine” and advised him “to refrain from the destruction of relevant evidence … including … texts … and to take steps to preserve all such information”.  After the case was filed, the defendant wrote in response to the plaintiff’s production requests:

“As for text messages, due to space limitations on his iPhone, Defendant Kormanis only is able to keep data on his device from the previous 30 days. In order to comply with the litigation hold letter, Defendant Kormanis backs up his iPhone to his MacBook Air so that all messages are preserved. However, at this time, Defendant Kormanis has not been able to retrieve said messages from his personal devices. Once these communications are retrieved, they will be produced.”  The defendant ultimately produced text messages on October 5, 2018, but there were no text messages produced prior to August 5, 2018.  The defendant indicated that his vendor was unable to retrieve earlier text messages from his devices, but he declined to allow the plaintiff’s vendor to examine the devices.

In his subsequent affidavit and deposition, it became clear that the defendant failed to turn off the 30-day automatic delete function on his iPhone, leading to the loss of text messages after the defendant was advised of his duty to preserve them.  Despite the defendant’s argument that “[t]he Court should deny [the instant] Motion because [Plaintiff] has failed to demonstrate that any of the allegedly spoliated text messages … would be relevant to this action”, Verizon records demonstrated that the defendant had regular text message communications with key parties in the case during that period where text messages were lost.

Judge’s Ruling

Judge Auld agreed with the plaintiff that “the relevance of these [text messages] is evident” and also stated: “Nor does any material dispute remain as to whether the loss of relevant text messages resulted from Defendant Kormanis’s failure to take reasonable steps to preserve them.”  Judge Auld also noted that failure to follow the “simple steps” of suspending the auto-delete function on his phone and utilizing “relatively simple options to ensure that [his] text messages were backed up” was “sufficient to show that Defendant [Kormanis] acted unreasonably.”

As a result, Judge Auld granted the Plaintiff’s Motion for Imposition of Sanctions for Spoliation of Evidence in part.  Judge Auld gave the plaintiff additional time to depose and subpoena text messages from a key Alphatech contact beyond the discovery deadline and ordered Defendant Kormanis to pay plaintiff’s fees/expenses associated with that effort and also all fees/expenses associated with filing, briefing and arguing the Instant Motion.  He also issued the following recommendations:

“IT IS RECOMMENDED that the Court defer until trial the decision of whether other “serious measures are necessary to cure prejudice [from the loss of text messages], such as forbidding [Defendant Kormanis] from putting on certain evidence, permitting the parties to present evidence and argument to the jury regarding the loss of information, or giving the jury instructions to assist in its evaluation of such evidence or argument, other than instructions [that it may or must presume the lost text messages were unfavorable to Defendant Kormanis],” Fed. R. Civ. P. 37 advisory comm.’s note, 2015 amend., subdiv. (e)(1).

IT IS FURTHER RECOMMENDED that, because the record supports but does not compel a “finding that [Defendant Kormanis] acted with the intent to deprive [Plaintiff] of the [lost text messages’] use in the litigation,” Fed. R. Civ. P. 37(e)(2), the Court submit that issue to the “jury, [with] the [C]ourt’s instruction[s] mak[ing] clear that the jury may infer from the loss of the [text messages] that [they were] unfavorable to [Defendant Kormanis] only if the jury first finds that [he] acted with the intent to deprive [Plaintiff] of the[ir] use in the litigation,” Fed. R. Civ. P. 37 advisory comm.’s note, 2015 amend., subdiv. (e)(2).”

So, what do you think?  Did the spoliation warrant a possible adverse inference instruction?  Please let us know if any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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

No Proof of Intent to Deprive Means No Adverse Inference Sanction: eDiscovery Case Law

We’re catching up on a few cases from earlier this year in preparation for our Key eDiscovery Case Law Review for First Half of 2019 webcast next Wednesday.  Here is an interesting case ruling from April.

In DriveTime Car Sales Company, LLC v. Pettigrew, No.: 2:17-cv-371 (S.D. Ohio Apr. 18, 2019), Judge George C. Smith granted in part and denied in part the plaintiff’s motion for spoliation sanctions against defendant Pauley Motor, denying the plaintiff’s request for an adverse inference sanction by ruling that “DriveTime has not sufficiently demonstrated that Pauley Motor acted with the requisite intent” when Bruce Pauley failed to take reasonable steps to preserve text messages when he switched to a different phone.  Judge Smith did “order curative measures under Rule 37(e)(1)”, allowing the plaintiff to “introduce evidence at trial, if it wishes, of the litigation hold letter and Pauley Motor’s subsequent failure to preserve the text messages.”

Case Background

In this case where the plaintiff alleged the defendants were conspiring to purchase vehicles at above market rates from Pauley Motor, the plaintiff filed a motion for spoliation sanctions against Pauley Motor.  During discovery, Pauley Motor first stated in its interrogatory responses that no text messages between Pauley Motor representatives and defendant Pettigrew existed.  However, in his 30(b)(6) deposition, Bruce Pauley stated that he had exchanged text messages with Pettigrew, but he was ultimately unable to produce the content of the text messages because he had obtained a new phone and had not preserved the contents of his previous phone, despite being put on notice to do so in November of 2016 by a litigation hold letter issued by the plaintiff’s counsel.  As a result, the plaintiff requested that the Court impose a mandatory adverse inference that the content of the text messages was unfavorable to Pauley Motor.

Judge’s Ruling

In considering the motion, Judge Smith stated that “Pauley Motor does not dispute that it had an obligation to preserve text messages between its representatives and Pettigrew or that it failed to take reasonable steps to preserve them…DriveTime has also established that the text messages cannot be restored or replaced through additional discovery, because neither Pettigrew nor the wireless carriers for Pauley Motor’s representatives have access to them either…Thus, in order to obtain the mandatory adverse inference it seeks under Rule 37(e)(2), the only additional requirement under the Rule is that Pauley Motor acted with the intent to deprive DriveTime of the text messages’ use in the litigation when it failed to preserve them.”

However, Judge Smith also said: “Although Bruce Pauley failed to take reasonable steps to preserve the text messages when he switched to a different phone, there is no evidence that he did so intentionally beyond DriveTime’s speculation. This is not sufficient to impose a mandatory adverse inference under Rule 37(e)(2).”  As a result, Judge Smith found that “DriveTime has not sufficiently demonstrated that Pauley Motor acted with the requisite intent.”

But, Judge Smith noted that “less severe sanctions are available to DriveTime under Rule 37(e)(1) upon a finding of prejudice.”  As a result, he stated that “the Court will order curative measures under Rule 37(e)(1)… In this case, the Court finds it appropriate to order that DriveTime will be permitted to introduce evidence at trial, if it wishes, of the litigation hold letter and Pauley Motor’s subsequent failure to preserve the text messages. DriveTime may argue for whatever inference it hopes the jury will draw. Pauley Motor may present its own admissible evidence and argue to the jury that they should not draw any inference from Pauley Motor’s conduct.”

So, what do you think?  Did the judge go far enough or should the failure to preserve the evidence have been considered intent to deprive?  Please let us know if any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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

Simon Says – Once, Twice, Three Times a Spoliator: eDiscovery Case Law

OK, it’s not as catchy as Lionel Ritchie’s hit song, but it’s funny. :o)

In Univ. Accounting Serv., LLC v. Schulton, No. 3:18-cv-1486-SI (D. Or. June 7, 2019), Oregon District Judge Michael H. Simon granted in part the plaintiff’s Motion for Terminating Spoliation Sanctions Against Defendant Ethan Schulton, finding that the defendant “acted with the intent to deprive” the plaintiff of information that he deleted, but granted the plaintiff’s alternative motion for lesser sanctions, choosing to provide the jury with a permissive inference spoliation instruction against the defendant instead of case termination sanctions.

Case Background

In this dispute over a software platform provided to the plaintiff, named defendant Ethan Schulton was the lead software developer and chief architect of the software platform.  According to the plaintiff, in February 2016, named defendant ScholarChip told the plaintiff it would have to pay substantially higher fees if it wanted to continue using the software platform it developed.  In March 2016, Schulton recognized the possibility that the plaintiff might bring a lawsuit by asking ScholarChip’s CEO and CTO about giving the plaintiff the source code to avoid a lawsuit.  The following month, Schulton sent an email to his legal counsel, and copied others within ScholarChip, about forming a new legal entity.  The situation between the parties continued to deteriorate over the next several months, with the parties filing lawsuits against each other.

In July 2018, approximately seven months after Schulton voluntarily left ScholarChip’s employment, Schulton sent an email both to the plaintiff and the CTO of ScholarChip, where he announced his intent to create a loan servicing system that would compete directly with the plaintiff. He further said that he would create the system based on knowledge acquired during his 15 years at ScholarChip and added that he would be communicating with and soliciting business from the plaintiff’s customers that he learned about through his work at ScholarChip for the plaintiff.  The next month, the plaintiff filed this lawsuit.

On March 7, 2018, Schulton accepted service of a deposition and document subpoena to which he responded: “I left ScholarChip with nothing but the knowledge gained over 15 years of employment. To use definitions from my recent document subpoena, I have no ‘CLIENT DATA,’ ‘DELIVERABLES,’ ‘SOFTWARE,’ or ‘WORK PRODUCT.’”

Despite that, as the opinion noted, Schulton had previously acknowledged that he used a “mechanism called Take Out” to export his entire ScholarChip e-mail account, which included all of its contents dating back to 2014, to Schulton’s personal “One Drive” cloud storage account. He also saved a copy of his ScholarChip email account on his personal computer.  He also saved electronic copies of several webinars with the plaintiff’s clients to his personal computer, which he took with him and kept after he left ScholarChip’s employment.  And, the day before a hearing in August 2018, Schulton located and deleted the file known as UAS’s “Private Client List,” which listed the plaintiff’s clients in descending order by ScholarChip revenue.  In the hearing, he stated “I deleted the file as fast as I could, because I was petrified at its existence, because it’s exactly the type of damning information that UAS wants to catch me with.”

Judge’s Ruling

Noting that the information deleted was 1) electronically stored information, 2) that should have been preserved in the anticipation or conduct of litigation, 3) (that) is lost because a party failed to take reasonable steps to preserve it and, 4) cannot be restored or replaced through additional discovery, Judge Simon stated: “These four threshold or predicate conditions have been satisfied” (to impose sanctions).

Judge Simon summed up the spoliation, as follows:

“The Private Client List, the ScholarChip emails, and the webinar recordings are all electronically stored information. In March 2016, Shulton anticipated the possibility of litigation. By June 2017, litigation between UAS and ScholarChip had begun. In the fall of 2017, Schulton downloaded to his personal computer and personal cloud account the electronically stored information at issue. On March 7, 2018, with litigation pending between ScholarChip and UAS in federal court in New York, Schulton received a document subpoena, and his first act of spoliation occurred four days later, on March 11, 2018. Schulton’s second act of spoliation occurred on April 9, 2018. In August 2018, UAS commenced this lawsuit in federal court in Oregon and requested a TRO, which was scheduled for August 22, 2018. The day before the TRO, Schulton committed his third act of spoliation. The Private Client List, the ScholarChip emails, and the webinar recordings all appear to be relevant to the several lawsuits. Accordingly, they should have been preserved in the anticipation or conduct of litigation. Further, intentionally destroying evidence satisfies the standard for failing to take reasonable steps to preserve that evidence. Finally, UAS has attempted to restore or replace through additional discovery the deleted information but has been unsuccessful. Thus, UAS has satisfied the four threshold elements under Rule 37(e).”

As a result, Judge Simon granted in part the plaintiff’s motion, choosing to provide the jury with a permissive inference spoliation instruction against the defendant instead of case termination sanctions.

So, what do you think?  Should the defendant have received case termination sanctions?  Please let us know if any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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

This Blog Post Will Not Be Automatically Deleted, But Your Instant Message Might Be: eDiscovery Trends

The sources of electronically stored information (ESI) are more varied than ever.  Now, they routinely include text messages and messages from instant messaging apps.  But, depending on the instant message app – or the archive option for any messaging app, that ESI might not be available at litigation time.

In LegalTech® News (This Article Will Self-Destruct: Behind Ephemeral Messaging’s In-House Rise, written by Rhys Dipshan), the author notes that the rise of ephemeral messaging, self-erasing communications “have gone from spy movie lore to everyday consumer technology.”  That technology may be welcomed by privacy advocates, but not so much by those responsible for compliance, investigations and litigation efforts.  And, while ephemeral messaging was once only the focus of a handful of messaging apps, they’re now being offered by widely used services like Gmail and Facebook.

Remember the Waymo v. Uber case?  In that case, Waymo sought sanctions for Uber’s use of the ephemeral messaging app Wickr for communications, but California District Judge William Alsup ruled that Waymo could inform the jury of the situation and have them reach their own conclusions – in part, because Waymo also disclosed it used ephemeral messaging apps in-house as well.

Ephemeral messaging apps are becoming more prevalent – and they’re even becoming more accepted from a regulatory standpoint.  In April 2019, for example, the Department of Justice (DOJ) rescinded a policy requiring companies to restrict their employees’ use of ephemeral messaging apps if they wanted credit for cooperating with DOJ enforcement actions under the Foreign Corrupt Practices Act. The new DOJ policy now only requires companies to implement “appropriate guidance and controls on the use of personal communications and ephemeral messaging platforms.”

Gareth Evans, eDiscovery expert and partner at Redgrave, noted that one of the most fundamental uses for ephemeral messaging is to help organizations more easily delete data they shouldn’t be keeping in the first place.

“Simply, if there is no business purpose or business need for retaining the messaging, if there is no legal requirement to keep it, that in itself is a good reason not to be keeping it. And by keeping communications [you don’t need], you run certain risks.”

That’s great when there isn’t a duty to preserve (i.e., when you anticipate litigation).  But, what about when that duty exists?

For years, we’ve discussed the importance of suspending auto delete programs when anticipating litigation and we’ve discussed cases where failure to do so can lead to sanctions (like this one and this one).  Historically, those auto delete programs have been associated with email, but they are becoming more associated with text and other messaging apps, as well.  And, it’s important to note that while some messaging apps are ephemeral by default, most (if not all) messaging apps can be set to automatically delete messages after a period of time – including text messaging apps like the text message app for iPhones, which is set to retain messages “forever” by default, but can be changed to a 1 year or even 30 day retention period.  That’s why it’s become more important than ever to address automatic deletion for text and other messaging apps when litigation is anticipated to avoid potential spoliation.

So, what do you think?  Does your organization use ephemeral messaging apps?  If so, how does it handle the use of those apps during litigation?  As always, please share any comments you might have or if you’d like to know more about a particular topic.

Image Copyright © CBS Television Distribution.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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

Discovery “Cautionary Tale” Leads to Recommendations of Default Judgment Against Defendants: eDiscovery Case Law

In Abbott Laboratories, et al. v. Adelphia Supply USA, et al., No. 15 CV 5826 (CBA) (LB) (E.D.N.Y. May 2, 2019), New York Magistrate Judge Lois Bloom, noting that the plaintiff’s motion for case ending sanctions against H&H Wholesale Services, Inc., its principal, Howard Goldman, and its marketing manager and Mr. Goldman’s wife, Lori Goldman (“H&H Defendants”) for wide-scale discovery misconduct “presents a cautionary tale about how not to conduct discovery in federal court” recommended that the plaintiffs’ motion be granted, and that the Court should enter a default judgment against the H&H Defendants.

This case (covered here by Law360, subscription required; report and recommendation linked here) involves trademark and trade dress infringement, unfair competition, trademark dilution and other claims associated with the illegal sale of Abbott’s FreeStyle blood glucose test strips in the US.  Judge Bloom began the report and recommendations document with this statement:

“This motion presents a cautionary tale about how not to conduct discovery in federal court.”

Among the discovery issues according to Judge Bloom (and plaintiff allegations):

  • The documents the H&H defendants originally produced were printed “in hard copy, scanning them all together, and producing them as a single, 1941-page PDF file”;
  • H&H used search terms it knew wouldn’t turn up results (“such as ‘International’ and ‘FreeStyle,’ whereas H&H’s internal systems used item numbers and other abbreviations such as ‘INT’ and ‘INTE’ for International and ‘FRL’ and ‘FSL’ for FreeStyle”) and specifically removed other damning documents – particularly those involving Howard Goldman and Lori Goldman – and provided numerous false excuses for these omissions;
  • The testimony from H&H’s general manager regarding the discovery woes was “clearly inconsistent if not perjured from his deposition” opposing the sanctions motion, Howard Goldman’s testimony was “evasive and self-serving at best” and H&H’s corporate representative’s testimony was “clearly perjured”;
  • “H&H would have gotten away” with its fraud if not for Abbott being allowed to seize H&H’s computers as part of a related counterfeiting case, which allowed previously withheld documents to come to light.

“H&H only complied with the court’s orders and their discovery obligations when their backs were against the wall,” Judge Bloom wrote. “Their email server had been seized. There was no longer an escape from responsibility for their bad faith conduct … But for being caught in a web of irrefutable evidence, H&H would have profited from their misconduct.”

She added that the lies were part of a “calculated pattern of pervasive misconduct that started early on and continued even after defendants were caught red handed,” meaning the case must be ended with a victory handed to Abbott.

H&H had previously been sanctioned for its discovery misconduct, with Judge Bloom in 2018 blocking the supplier from raising attorney-client or work-product privilege defenses for a certain set of discovery production.

Even other companies that Abbott had also sued had gone after H&H and Kerr Russell for letting Goldman listen to remote depositions of other parties, in violation of a protective order.

In recommending that the plaintiffs’ motion for sanctions be granted and a default judgment being issued against the H&H defendants, Judge Bloom stated:

“The Court finds that the H&H defendants have committed a fraud upon the court, and that the harshest sanction is warranted. Therefore, plaintiffs’ motion for sanctions should be granted and a default judgment should be entered against H&H Wholesale Services, Inc., Howard Goldman, and Lori Goldman.”

So, what do you think?  Do you agree with the harsh sanction recommendations?  Please let us know if any comments you might have or if you’d like to know more about a particular topic.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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

With No Showing of Prejudice, Court Denies Spoliation Sanctions Against Defendant: eDiscovery Case Law

In Mafille v. Kaiser-Francis Oil Co., No. 18-CV-586-TCK-FHM (N.D. Okla. May 21, 2019), Oklahoma Magistrate Judge Frank H. McCarthy, finding that the plaintiffs “have not demonstrated they have been prejudiced” by the loss of the plaintiff former employee’s work computer, denied the plaintiffs’ motion for sanctions “without prejudice to reassertion of the motion if through discovery it is determined that some specific evidence is beyond Plaintiffs’ reach” for the defendant’s “clear failure” to preserve the computer.

Case Background

In this employment discrimination action filed by a former employee of the defendant who was terminated on July 5, 2018 for alleged performance issues, the plaintiff submitted an EEOC charge of discrimination on August 1, 2018 and issued a Right to Sue letter on August 15, 2018.  The plaintiffs commenced the action in October 2018 and the action was removed to federal court in November 2018.  On October 29, 2018, defendant’s counsel sent an email to plaintiffs’ counsel instructing them about plaintiffs’ obligation to preserve data on all electronic media and lectured plaintiffs about their duty to preserve evidence in a subsequent email.

However, an IT supervisor for the defendant stated in his deposition, that (the former employee) Mrs. Mafille’s computer was given to a charitable organization with other retired computers on November 3, 2018 and as a result the data contained on the computer was not preserved and presumably destroyed.  While Mrs. Mafille stated that she was “unaware of the extent of information that might have been on her [work] computer”, the plaintiffs nonetheless asserted that Mrs. Mafille’s workplace computer was willfully and intentionally destroyed, that it may have provided a “treasure trove” of information concerning her work performance over the entire term of her employment, and that as a result the plaintiffs had been irretrievably prejudiced.

Judge’s Ruling

Judge McCarthy stated: “In defense of its failure to preserve the computer, Defendant makes what the court views as an ill-considered assertion that if Plaintiffs had made a request for the computer earlier than they did, the computer could have been pulled and saved…As evidenced by the emails from Defendant’s attorney lecturing Plaintiffs about their obligation to preserve electronically stored evidence, it is abundantly clear that counsel was aware of Defendant’s own responsibility in this regard. The duty to preserve the electronically stored evidence exists independent of a specific request that the evidence be preserved. It is exceedingly poor form, and beyond zealous advocacy, for Defendant to attempt to blame Plaintiffs for its own obvious failing. The court finds that Mrs. Mafille’s work computer should have been preserved and further that Defendant is solely and entirely at fault for failing to take reasonable steps to preserve the computer.”

However, Judge McCarthy also observed that “Defendant asserts that sanctions are not appropriate because Plaintiffs have not demonstrated they have been prejudiced by the loss of Mrs. Mafille’s work computer. According to Defendant, a policy was in place requiring that materials be uploaded to Defendant’s LAN Server daily. As a result, there should not have been relevant materials on the subject computer that are not also accessible on the LAN Server. Defendant also asserts that it has requested Plaintiffs to identify what items were on Mrs. Mafille’s computer so an attempt can be made to recover the items from the LAN Server, but Plaintiffs have not identified any such items.”

Stating “[b]efore an order of sanctions may be entered, there must be a showing of prejudice”, Judge McCarthy denied the plaintiffs’ Motion for Sanctions “without prejudice to reassertion of the motion if through discovery it is determined that some specific evidence is beyond Plaintiffs’ reach because of what the court views as Defendant’s clear failure to preserve Mrs. Mafille’s work computer.”

So, what do you think?  Did the defendant get lucky there?  Please let us know if any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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

Court Sanctions US Government for Spoliation in Copyright Infringement Case: eDiscovery Case Law

In 4DD Holdings, LLC v. U.S., No. 15-945C (Fed. Cl. May 10, 2019), the US Court of Federal Claims, in an opinion issued by Judge Bruggink, “grant[ed] plaintiffs’ motion for sanctions because the government destroyed relevant evidence that it had a duty to preserve.”  The Court directed the plaintiffs to “file a motion, appropriately supported, seeking a recovery of its costs and fees related to the motion for sanctions and with respect to discovery prompted by the destruction of evidence” and indicated it would “defer until summary judgment or trial the application of the evidentiary implications of this ruling.”  The court also denied the defendant’s motion to dismiss “[b]ecause plaintiffs established that the government authorized or consented to SMS’s allegedly infringing activity when working in SMS labs.”

Case Background

In this copyright infringement case involving installation of the plaintiff’s software in excess of the purchased license, the DoD’s Defense Health Agency (“DHA”) “repeatedly” required its contractor Systems Made Simple, Inc. (“SMS”) to perform work using the plaintiff’s copyrighted software in the contractor’s own labs.  The agency purchased a software license from the plaintiff’s reseller for 64 cores and the plaintiff’s End User License Agreement (“EULA”) permitted “the agency to make ‘one (1) copy of the object code to [TETRA] solely for back-up purposes,’ which it could only use ‘if the original copy is damaged or destroyed.’”  The agency also required the plaintiff to disable its software tracking feature to inform it of a software installation.

However, the Chief Engineer on the project (David Calvin) acknowledged in both his July 2018 declaration and his October 2018 deposition that work by SMS would have involved cloning TETRA virtual machines in their labs.  And, in August 2014, the plaintiff contacted the Contracting Officer’s Representative (Sheila Swenson) alleging that more than 64 cores were in use.  In September, Calvin directed the removal of instances of the plaintiff’s software in certain environments.  By December 2014, the agency “identified an over deployment of 168 core licenses to development servers.”  Nonetheless, Swenson reported 64 cores in use because that was the number of cores the agency had originally paid for.  In March 2015, the agency modified the license to increase the licensed quantity by 168 cores.

The plaintiff filed suit in August 2015. On September 9, 2015, the Department of Justice sent a letter to alert DoD of its responsibility to provide a litigation report and to furnish all evidence in DoD’s possession, stating “all records storage centers and other facilities where records are kept be immediately notified to forthwith identify, physically segregate and withhold from destruction all documents and papers touching upon the claims set forth in the complaint.”  Nonetheless, the agency’s Development Test Center (“DTC”) proceeded with a shredding of hard drives later that same month.  In addition, most of the laptops in use related to the project were returned and reimaged months after the litigation hold notice was issued, destroying any data related to the case they might have contained.  As discovery wound down, plaintiffs filed a motion for sanctions in November 2018.

Court Ruling

The Court found that “SMS was acting (1) “for the Government” and (2) “with the authorization or consent of the Government” when it performed any infringing activity in SMS labs.”  As a result, the Court denied the defendant’s motion to dismiss.

With regard to the plaintiffs’ motion for sanctions, the Court said: “The parties agree on the key events: The agency deleted instances of TETRA during the true-up period without informing 4DD. The agency destroyed the DTC servers’ hard drives. The agency erased all the information on many laptops used on the DMIX project.”  With regard to the DTC servers, the Court ruled that “Mr. Calvin’s orders directing contractors to delete instances of TETRA in listed environments because of ‘a license issue’ is sufficient to demonstrate that he intentionally deprived 4DD of the use of that information in litigation.”  But, the Court also noted that the “DTC decommissioning and laptop reimaging are not as clear cut”, ruling that “communication failure is undoubtedly negligent but falls short of the intentional behavior expected under Rule 37(e)(2)”.

Nonetheless, the Court “grant[ed] plaintiffs’ motion for sanctions because the government destroyed relevant evidence that it had a duty to preserve” and directed the plaintiffs to “file a motion, appropriately supported, seeking a recovery of its costs and fees related to the motion for sanctions and with respect to discovery prompted by the destruction of evidence” and indicated it would “defer until summary judgment or trial the application of the evidentiary implications of this ruling.”

So, what do you think?  Do you think the court ruled correctly on the intent to deprive standard for Rule 37(e)(2) in this case?  Please let us know if any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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

Florida Appeals Court Upholds Ruling that Non-Party Had No Duty to Preserve Evidence: eDiscovery Case Law

In Shamrock-Shamrock, Inc. v. Remark, No. 5D18-1987 (Fla. Dist. Ct. App. Apr. 26, 2019), the District Court of Appeal of Florida, Fifth District affirmed the summary final judgment in favor of the Appellee, holding that Florida law does not impose a duty on nonparties to litigation to preserve evidence based solely on the foreseeability of litigation.

Case Background

In the case originally involving the Appellant’s suit against the City of Daytona Beach over zoning, the Appellee was never a party to the Appellant’s action against the City, but the Appellant’s operative complaint contained two references to the Appellee in its general allegations.  During the case, the Appellant sought to take the Appellee’s deposition and served several notices of deposition and subpoenas on the Appellee, beginning in May 2011 and ending ten months later with a sixth amended notice of taking deposition in March 2012, which was the only one that included a duces tecum request for documents to be produced at the deposition.

The Appellee’s deposition was taken in April 2012, where she testified that she had obtained a new desktop computer and had destroyed her old computer in December 2011. She did not preserve any records, documents, or emails from her old computer and did not inform anybody, including the City Attorney, that she was destroying it. Her testimony established that she destroyed her old computer after receiving the first deposition notice but before receiving the sixth amended deposition notice that for the first time included a duces tecum request.

The Appellant then filed a two-count complaint against the Appellee, alleging that she either intentionally destroyed her old computer or “negligently destroyed [it] in bad faith.” In that case, the Appellee and the Appellant filed competing motions for summary judgment regarding whether the Appellee had a duty to preserve her computer or its contents.  The Appellant argued, citing League of Women Voters of Florida v. Detzner, 172 So. 3d 363 (Fla. 2015), that the Appellee therefore had a duty to preserve evidence based on the foreseeability of litigation, but the trial court denied the Appellant’s summary judgment motion and granted the Appellee’s. It found that there was no genuine issue of fact that the Appellee had no statutory or contractual duty to preserve evidence; thus, the Appellant had to rely on a duty imposed by a discovery request.

Judge’s Ruling

In the opinion authored by J. Sasso, the court, after considering several cases cited by the Appellant, concluded that “no Florida court has yet recognized a common law duty for third-party preservation of evidence based on the knowledge or foreseeability of litigation”.  As a result, the court stated:

“In this case, there was no statute, contract, or discovery request that would impose a clearly defined duty on Remark to preserve any potentially relevant evidence. Thus, a duty would arise only through Remark’s purported knowledge of Shamrock’s pending litigation and her anticipation that something in her control could potentially be of use to that litigation. As such, Shamrock would like us to announce that Remark owed a duty to it based on the foreseeability of litigation. Considering the traditional approach to defining legal duty, we decline to do so. Indeed, such a broad pronouncement would be tantamount to declaring a general legal duty on any nonparty witness to anticipate the needs of others’ lawsuits. There are innumerable circumstances in which a nonparty to litigation may have evidence relevant to a case and may know of its relevance. But that knowledge, by itself, should not give rise to a duty to safeguard the evidence in anticipation of litigation…While we do not speculate as to every circumstance under which a third party to litigation may have a legal duty to preserve evidence, we hold that the trial court properly determined here that Remark did not owe a legal duty to Shamrock. The summary judgment in favor of Remark is affirmed.”

So, what do you think?  Would the decision be different in other jurisdictions?  Should it be different?  Please let us know if any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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

Simon Says Two Years After Spoliation is Discovered is Too Late for Sanctions: eDiscovery Case Law

Sorry, I couldn’t resist…  ;o)

In Wakefield v. Visalus, Inc., No. 3:15-cv-1857-SI (D. Or. Mar. 27, 2019), Oregon District Judge Michael H. Simon denied the plaintiff’s motion for sanctions against the defendant for automatic deletion of call records, ruling that since the plaintiff knew about the deletion of call records for over two years, her motion was “untimely”.

Case Background

In this class claim related to alleged violations of the Telephone Consumer Protection Act (“TCPA”), the defendant used an automated telephone system called the “Progressive Outreach Manager” (“POM”), which the plaintiff contended generated and maintained historical records of each calling campaign and each call attempted by the defendant.  The POM system’s ESI was programmed to be automatically deleted after three months and, even though the defendant was on notice since October 2015 that it had a duty to preserve the information contained in the POM system, the plaintiff claimed that the defendant failed to suspend the call records’ automatic deletion. The plaintiff pointed to statements made by the defendant’s corporate representative and compliance analyst, during his deposition in December 2016 as evidence that these call records had been automatically deleted.

For many of those calls, the defendant maintained contact information spreadsheets containing all of the POM system information, so that data was replaced through other sources. However, the plaintiff contended there were 1.7 million calls that were not within the contact information spreadsheets that were deleted from the POM system, asserting that the lost call records would have proven that 350,228 of those calls delivered a message using an artificial or prerecorded voice to class members. In February 2019, the plaintiff asked the Court to order sanctions against the defendant, including instructing the jury that the defendant deleted call records and that the lost information was unfavorable to defendant.  The defendant argued that the motion was untimely, among other arguments against the motion.

Judge’s Ruling

In evaluating the plaintiff’s motion, Judge Simon said: “Plaintiff learned no later than December 12, 2016 that Defendant’s system deleted POM call records every three months. Discovery closed in December of 2017, one year later, and at that point Plaintiff had in her possession all call records produced by Defendant. Plaintiff acknowledges that she was aware in late 2016 that the call record data generated by the POM system had been “destroyed,” but claims she continued to believe that the same information was available elsewhere. It was only when performing final trial preparation that Plaintiff organized her trial exhibits, compiled the evidence obtained in discovery, and realized that some of the call data ‘deleted’ from the POM system had not been produced through other sources…Only then did Plaintiff file her motion for sanctions.”

Judge Simon also observed: “Had Plaintiff timely undertaken to examine the evidence produced by Defendant, any deleted call records that could not be restored or replaced through additional discovery would have been apparent to Plaintiff at that time, and she could have sought sanctions for the alleged spoliation.”  Noting that “courts are cautioned to be ‘wary of any spoliation motion made on the eve of trial’”, Judge Simon stated in denying the plaintiff’s motion: “Plaintiff filed her spoliation motion more than a year after the close of discovery, more than two years after she first learned of the alleged destruction of call records, and less than two months before trial. Plaintiff’s motion is untimely.”

So, what do you think?  Was that the correct call or should the plaintiff have been given the time to determine what she was missing?  Please let us know if any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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

Appeals Court Reverses Jury Decision Based on Failure of Court to Issue Spoliation Sanction: eDiscovery Case Law

In Marshall v. Brown’s IA, LLC, No. 2588 EDA 2017 (Pa. Super. Mar. 27, 2019), the Superior Court of Pennsylvania, ruling that the trial court “abused its discretion in refusing the charge” of an adverse inference sanction against the defendant for failing to preserve several hours of video related to a slip and fall accident, vacated the judgment issued by the jury within the trial court for the defendant and remanded the case for a new trial.

Case Background

In this case where the plaintiff slipped and fell in one of the defendant’s ShopRite stores in August 2014, the plaintiff’s counsel sent a letter two weeks after the incident requesting that the defendant retain surveillance video of the accident and area in question for six hours prior to the accident and three hours after the accident. Additionally, the letter cautioned:

“If any of the above evidence exists, and you fail to maintain same until the disposition of this claim, it will be assumed that you have intentionally destroyed and/or disposed of evidence. Please be advised that you are not permitted, and are in no position, to decide what evidence plaintiff would like to review for this case. Accordingly, discarding any of the above evidence will lead to an Adverse Inference against you in this matter.”

Nonetheless, the defendant decided to preserve only thirty-seven minutes of video prior to the plaintiff’s fall and approximately twenty minutes after, and permitted the remainder to be automatically overwritten after thirty days.  The defendant’s Risk Manager (Matthew McCaffrey) testified that it was the store’s “rule of thumb” to preserve video surveillance from twenty minutes before and twenty minutes after a fall.  The plaintiff contended that the defendant’s conscious decision not to retain the video evidence constituted spoliation, and she asked the trial court to give an adverse inference charge to the jury.  But, the trial court concluded that there was no bad faith by the defendant and refused to give the requested adverse inference charge, but did agree, that the plaintiff’s counsel could argue to the jury that it should infer from the defendant’s decision not to retain more of the video prior to her fall that the video was damaging to the defendant.  Despite that, the jury returned a verdict in favor of the defendant, finding no negligence.

The plaintiff filed timely post-trial motions alleging that she was entitled to a new trial because the trial court erred in refusing to give the requested spoliation instruction to the jury, but the trial court did not rule on the motion, so she appealed, asking if the trial court abused its discretion by declining to read a spoliation of evidence instruction to the jury at trial.

Appellate Court’s Ruling

The opinion by J. Bowes noted that “[t]he duty to retain evidence is established where a party ‘knows that litigation is pending or likely’ and “it is foreseeable that discarding the evidence would be prejudicial” to the other party.”  The court also observed: “Although Mr. McCaffery testified that ShopRite’s rule of thumb was to retain only twenty minutes of tape prior to the fall and twenty minutes after the fall, it actually preserved thirty-seven minutes of footage prior to Ms. Marshall’s fall, and twenty minutes after the fall. He offered no explanation why ShopRite deviated from its typical practice herein.”  The court also observed that “conspicuously absent was testimony from anyone at ShopRite that he or she watched the video for the six-hour-period prior to the fall before determining that it did not contain any relevant evidence.”

Finding that “counsel’s letter placed ShopRite on notice to preserve the video surveillance prior to and after the fall as it was arguably relevant to impending litigation”, the court stated “we find that the trial court took an unreasonably narrow view of ‘relevant evidence’ in concluding that no spoliation occurred in this premises liability case. Relevant evidence is any evidence that ‘has any tendency to make a fact more or less probable.’…Furthermore, its finding of no bad faith on ShopRite’s part was relevant in determining the severity of the sanction to impose for spoliation, but it did not negate or excuse the spoliation that occurred.”

As a result, the court – in vacating the judgment and remanding the case for a new trial – ruled that “Ms. Marshall asked the court for the least severe spoliation sanction, an adverse inference instruction. On the facts herein, it was warranted, and the court abused its discretion in refusing the charge.”

So, what do you think?  Should the judgment have been thrown out over the defendant’s failure to preserve the rest of the video?  Please let us know if any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

Sponsor: This blog is sponsored by CloudNine, which is a data and legal discovery technology company with proven expertise in simplifying and automating the discovery of data for audits, investigations, and litigation. Used by legal and business customers worldwide including more than 50 of the top 250 Am Law firms and many of the world’s leading corporations, CloudNine’s eDiscovery automation software and services help customers gain insight and intelligence on electronic data.

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