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Apparently, in Discovery, Delta is Not Ready When You Are and It Has Cost Them Millions: eDiscovery Case Law

A few years ago, we covered a case law decision in the Delta/Air Tran Baggage Fee Antitrust Litigation, where Delta was ordered to pay plaintiff attorney’s fees and costs for eDiscovery issues in that litigation.  Apparently, Delta’s difficulties in this case have continued, as they have been ordered this week to pay over $2.7 million in sanctions for failing to turn over ESI, to go along with more than $4.7 million in sanctions for earlier discovery violations.

According to the Consumerist (Delta Hit With Another $2.7M In Sanctions In Years-Old Baggage-Fee Collusion Case, by Chris Morran), U.S. District Court Judge Timothy Batten imposed the sanction of $2,718,795.05 against Delta, which was higher than the $1.86 million sanction amount recommended by the Special Master in the case.

In his ruling, Judge Batten stated that: “Since discovery commenced in February 2010, this case has been plagued by a veritable deluge of discovery disputes and a corresponding succession of motions for discovery sanctions against Delta. It is not hyperbolic to say that this lawsuit has turned into litigation about litigation: the time, energy, and resources spent on discovery abuses equals or exceeds those that have been dedicated to litigating the merits of the case. Plaintiffs filed four sanctions motions in as many years, with each motion building on its predecessors.”  Judge Batten also noted that “Delta’s discovery practices have time and time again been shown to be ineffective, inefficient, and inept. Throughout this litigation, Delta’s left hand has not known what its right hand was doing, and ‘it often times appears that this litigation was conducted in an Inspector Clouseau-like fashion.’”

Delta had already been sanctioned $1.3 million for failing to turn over 60,000 pages of documents to the plaintiffs that were found in a box of previously undiscovered backup tapes and another $3.49 million, mostly to cover the cost of hiring an independent researcher to scan through and restore another batch of 29 backup tapes that was eventually discovered.

Summing up the lengthy and difficult discovery period to date, Judge Batten stated: “Without question, it is Delta’s ineptitude and missteps that have caused the vast majority of the excessive time, expenses, and energy that the parties have expended in discovery for the last five years…Delta’s discovery misconduct has rendered the Court’s attempts to manage this litigation and move it toward a resolution on the merits as futile and maddening as Sisyphus’s efforts to roll his boulder to the top of the hill.”

To make matters worse for Delta, Judge Batten also granted class-action status to the case this week.  Of course, as the article notes, Delta made more than $860 million off baggage fees in 2014 alone, so they can afford to fight.

So, what do you think?  Should Delta have received such severe sanctions?  Please share any comments you might have or if you’d like to know more about a particular topic.

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 Denies Request for Sanctions for Routine Deletion of Files of Departed Employees: eDiscovery Case Law

In Charvat et. al. v. Valente et. al., 12-5746 (N.D. Ill. July 1, 2015), Illinois Magistrate Judge Mary M. Rowland denied the plaintiff’s request for spoliation sanctions for the defendant’s admitted destruction of computer files belonging to two departed employees, finding that the plaintiff did not provide any evidence that the defendant acted in bad faith.

Case Background

In this case about consumer complaints regarding alleged improper telemarketing activities by a company affiliated with Carnival Corporation, the defendant investigated the allegations and produced most of the documents relating to its investigation.  However, the defendant withheld 14 documents as privileged, because they “relate specifically to legal advice sought by Carnival from outside counsel”.  Judge Rowland conducted an in camera review of the documents described on the Privilege Log and ruled that the defendant must produce two of the documents, but determined that “[a]ll other documents on the Privilege Log are protected from disclosure by the attorney-client privilege and the work product doctrine.”

The plaintiff also requested spoliation sanctions or instructions given the defendant’s admitted destruction of computer files belonging to two departed employees.  The defendant acknowledged deleting the computer files belonging to the two departed employees consistent with its routine business practices of deleting files 30 days following termination of employment. The two employees left in September and October 2011 and the defendant’s investigation into the consumer complaints concluded in July 2011, so the defendant asserted that “at the time of their respective departures from the company, Carnival had completed its investigation of RMG and did not anticipate any imminent litigation against the travel agency.”  The plaintiff countered by arguing that the defendant could not contend that certain documents authored by the two departed employees were “work product” created in “anticipation of litigation” while also asserting that it routinely deleted their computer files because it did not “anticipate any imminent litigation.”

Judge’s Ruling

Noting that “work product is exempt from mandatory disclosure regardless of the status of the anticipated litigation” and “work-product protection continues even after the prospect of anticipated litigation disappears”, Judge Rowland stated that “although Carnival was free to delete Morales’s and Hernandez’s files in September and October 2011 because there was no reasonably foreseeable litigation at that time, their emails prepared as part of the RMG investigation remain privileged.”  She also then stated that “[i]n any event, Plaintiff has not provided any evidence that Carnival acted in bad faith”, determining that “[t]here is no evidence that Carnival’s routine deletion of former employees’ files in accordance with an established document retention policy was done for the purpose of hiding adverse information.”  As a result, the plaintiff’s request for sanctions was denied.

So, what do you think?  Should the defendant have been able to delete the files of the departed employees?  Please share any comments you might have or if you’d like to know more about a particular topic.

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 Denies Plaintiff’s Request for Spoliation Sanctions, as Most Documents Destroyed Before Duty to Preserve: eDiscovery Case Law

In Giuliani v. Springfield Township, et al., Civil Action No. 10-7518 (E.D.Penn. June 9, 2015), Pennsylvania District Judge Thomas N. O’Neill, Jr. denied the plaintiffs’ motion for spoliation sanctions, finding that the duty to preserve began when the case was filed and finding that “plaintiffs have not shown that defendants had any ill motive or bad intent in failing to retain the documents which plaintiffs seek”.

Case Background

In this harassment and discrimination case, the plaintiff owned land within the defendant’s township and alleged that the defendant’s zoning decisions violated the plaintiff’s civil rights violations. In June 2009, the defendant withdrew its opposition to the plaintiffs’ application for use of the property and its Zoning Hearing Board granted the plaintiffs’ zoning appeal, ending the zoning dispute.   The plaintiff then filed this new complaint against the defendant in January 2011.

The plaintiffs contended that the defendants’ production had been deficient because defendants “provided a miniscule number [of emails] in response to Plaintiffs’ [discovery] request[s] – just 24 emails spanning a seventeen-year period of near-constant controversy.”  In response, the defendants noted that, during the time period relevant to this case, it did not generate large volumes of email and also cited it’s document retention policy, which stated that “e-mail messages and attachments that do not meet the definition of records and are not subject to litigation and other legal proceedings should be deleted immediately after they are read”.

The defendants also did not preserve data relating to the case until the case was filed in 2011, believing that all of the outstanding issues related to the plaintiffs’ land development applications had finally been resolved after the zoning dispute was resolved in 2009.  The plaintiffs disputed that interpretation of when the duty to preserve arose and also pointed out instances where the defendants failed to instruct key custodians to preserve data related to the case.

Judge’s Ruling

With regard to the beginning of the duty to preserve by the defendants, Judge O’Neill stated that “Plaintiffs’ arguments are not sufficient to meet their burden to show that defendants’ duty to preserve files related to other properties, emails or planning commission board minutes was triggered at any time prior to the commencement of this action. They have not set forth any reason why I should disbelieve ‘the Township’s assertion that it had absolutely no reason to anticipate litigation until it was served with the Complaint on January 7, 2011,’…and that in June 2009, ‘with the property being leased in its entirety to one tenant, the Township . . . believed that all disputes with the Giulianis had come to an end.’”

As for alleged preservation failures after the duty to preserve commenced, Judge O’Neill determined that “Plaintiffs have not met their burden to establish that defendants actually suppressed the evidence they seek. At most, defendants lost or deleted the evidence plaintiffs seek as the result of mere inadvertent negligence. Plaintiffs have not set forth any proof that defendants in fact failed to preserve emails, documents relating to other properties or Planning Commission Board Minutes at any time after January 7, 2011…Further plaintiffs have not shown that defendants had any ill motive or bad intent in failing to retain the documents which plaintiffs seek.”  As a result, Judge O’Neill denied the plaintiffs’ motion for spoliation sanctions.

So, what do you think?  Should the duty to preserve have been applied earlier?  Please share any comments you might have or if you’d like to know more about a particular topic.

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.

Similar Spoliation Case, Somewhat Different Outcome: eDiscovery Case Law

Remember the Malibu Media, LLC v. Tashiro case that we covered a couple of weeks ago, which involved spoliation sanctions against a couple accused of downloading its copyrighted adult movies via a BitTorrent client?  Here’s a similar case with the same plaintiff and similar spoliation claims, but with a somewhat different outcome (at least for now).

In Malibu Media, LLC v. Michael Harrison, Case No. 12-cv-1117 (S.D. Ind. June 8, 2015), Indiana District Judge William T. Lawrence denied the plaintiff’s motion for summary judgment, upholding the magistrate judge’s ruling which found an adverse inference instruction for destroying a hard drive with potentially responsive data on it to be not warranted, and ruled that “it will be for a jury to decide” if such a sanction is appropriate.

Case Background

The plaintiff alleged that the defendant installed a BitTorrent Client onto his computer and then went to a torrent site to upload and download its copyrighted Work, specifically, six adult films (or portions thereof).  As in the Tashiro case, the plaintiff used a German company to identify certain IP addresses that were being used to distribute the plaintiff’s copyrighted movies, and the defendant was eventually identified by Comcast as the subscriber assigned to this particular IP address.

After the lawsuit was filed, in January 2013, the defendant’s hard drive on his custom-built gaming computer crashed and he took it to an electronics recycling company, to have it “melted”. He then replaced the gaming computer’s hard drive. In addition to his gaming computer, the defendant also had another laptop. During discovery, that laptop and the new hard drive were examined by forensic experts; while the laptop revealed extensive BitTorrent use, it did not contain any of the plaintiff’s movies or files and the new hard drive did not reveal any evidence of BitTorrent use.  Nonetheless, because of the destroyed hard drive, the plaintiff filed a motion for sanctions for the Intentional Destruction of Material Evidence, as well as a motion for summary judgment.

In an evidentiary hearing in December 2014, the magistrate judge recommended that the motion for sanctions be denied, concluding that the defendant “did not destroy the hard drive in bad faith”, that “[h]ad [Harrison] truly wished to hid adverse information, the Court finds it unlikely that [Harrison] would have waited nearly five months to destroy such information” and noted that he found the defendant’s testimony to be credible.  The plaintiff filed an objection to that report and recommendation, arguing that “bad faith should be inferred from the undisputed evidence.”

Judge’s Ruling

Regarding both the summary judgment motion and the motion for sanctions, Judge Lawrence stated the following:

“The Court agrees with Magistrate Judge Dinsmore that default judgment was not warranted in this case. That said, Magistrate Judge Dinsmore found an adverse inference not to be warranted because he found Harrison’s testimony to be credible. While the Court does not necessarily disagree with Magistrate Judge Dinsmore—in that it is certainly possible a jury would find Harrison’s testimony to be credible—ultimately, the Court believes this is an issue best left for a jury to decide. Malibu Media has presented sufficient evidence to the contrary, and in light of the fact that Malibu Media’s motion for summary judgment was denied on the same grounds, the Court believes leaving the issue of spoliation to the jury to be the best approach. Accordingly, at trial the Court will instruct the jury that if it finds that Harrison destroyed the gaming computer’s hard drive in bad faith, it can assume that the evidence on the gaming computer’s hard drive would have been unfavorable to Harrison.”

So, what do you think?  Should this case have been handled the same way the Malibu Media, LLC v. Tashiro case was handled?  Please share any comments you might have or if you’d like to know more about a particular topic.

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.

Plaintiff Once Again Sanctioned with an Adverse Inference Instruction, But Still No Complete Dismissal: eDiscovery Case Law

In Lynn M. Johnson v. BAE Systems, Inc. et. al., Civil Action No. 11-cv-02172 (RLW) (D.D.C. May 27, 2015), District of Columbia District Judge Robert L. Wilkins granted the defendants’ motion for summary judgment with respect to the plaintiff’s claims for negligence, battery, and defamation, but chose to “impose lesser, but nonetheless severe, sanctions” in the form of an adverse inference instruction for her remaining claim for intentional infliction of emotional distress.

Case Background

The plaintiff, a U.S. government employee deployed in Iraq, sued the defendants for actions taken by its employee during a project that they worked on together, alleging “severe physical and emotional health problems”.  During discovery, the defendant requested medical records in preparation for an expert witness’s examination of the plaintiff – she provided the defendant with falsified medical records which she had edited in an effort to eliminate references to health issues that predated her deployment to Iraq. The defendant filed a motion for sanctions seeking dismissal and the Court granted in part and denied in part the motion, sanctioning the plaintiff and her counsel with fees and an adverse inference instruction.

Then, on September 25, 2013, the defendant requested a forensic examination of the plaintiff’s computer.  That evening, the plaintiff contracted with a local computer technician who performed various maintenance functions, which included running a program called CCleaner that is capable of permanently deleting files.  Subsequent forensic analysis showed that several Microsoft Outlook .pst email storage files were placed into the recycling bin and deleted on September 27.  The technician testified that the plaintiff did not tell him she was in litigation, she did not ask him not to delete anything from her computer and he did not place the Outlook files in the recycle bin. The defendants also requested Facebook messages, and the court found evidence that the plaintiff had tampered with those messages, as well.

Judge’s Ruling

Regarding the latest activities by the plaintiff, Judge Wilkins stated that “The Court finds by clear and convincing evidence that Ms. Johnson destroyed, attempted to destroy, or caused to be destroyed files on her computer with potential relevance to this case”, noting that “under no circumstances should Ms. Johnson have contracted with a computer technician to ‘clean up’ a computer sought for forensic imaging, particularly without making a disk image or even informing the technician of ongoing litigation. That she chose to do so is very troubling.”  Judge Wilkins expressed similar concern by the plaintiff’s failure to produce Facebook messages from earlier than February 2013.

Summarizing the behavior by the plaintiff, Judge Wilkins stated “Over the course of this suit, Ms. Johnson has repeatedly obfuscated the truth. She has altered medical records, contradicted herself in depositions and testimony before the Court, and failed to preserve and produce relevant documents during discovery.”  Still, Judge Wilkins could not bring himself to dismiss the case, stating “Although it is an exceedingly close question, the Court concludes that Ms. Johnson’s conduct does not merit this most serious of remedies.”

As a result, Judge Wilkins awarded the defendant an adverse inference instruction sanction against the plaintiff, awarded the forensic expert’s fees spent by the defendant’s expert and dismissed the plaintiff’s claims for negligence, battery, and defamation.

So, what do you think?  Should the repeated violations by the plaintiff have led to full dismissal?  Please share any comments you might have or if you’d like to know more about a particular topic.

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.

Judge Recommends Default Judgment Sanctions Against Defendants, Even Though Some Deleted Files Were Recoverable: eDiscovery Case Law

In Malibu Media, LLC v. Tashiro, Case No. 13-cv-00205 -WTL-MJD (S.D. Ind. May 18, 2015), Indiana Magistrate Judge Mark J. Dinsmore issued a Report and Recommendation on Plaintiff’s Motion for Sanctions, recommending that the Court grant the plaintiff’s motion against the defendants for spoliation of evidence and perjury and enter default judgment against the defendants.

Case Background

In 2013, the plaintiff retained a German company to investigate whether certain internet users were infringing plaintiff’s copyrights by uploading and/or downloading its copyrighted adult movies via a BitTorrent client and, after monitoring the BitTorrent file distribution network, the provider identified certain IP addresses that were being used to distribute Plaintiff’s copyrighted movies.  The plaintiff initially filed suit against an unidentified defendant, but amended the complaint to name the defendants after the plaintiff subpoenaed the alleged infringer’s ISP.

During discovery, one of the defendants agreed to provide her computer hard drives for forensic imaging.  The plaintiff’s expert examined each of the images of the hard drives for evidence of BitTorrent use, finding evidence on one drive that the “hard drive was repeatedly used to download BitTorrent files and also had BitTorrent software installed on the hard drive.”  He also determined that numerous files and folders associated with BitTorrent use had been deleted the night before the drive was turned over for imaging.  In addition, the expert determined that three additional drives had been connected to the defendant’s laptop computer, but had not been turned over for imaging.  As a result, the plaintiff filed a motion for sanctions alleging spoliation of evidence and perjury in the form of misrepresentations by defendants at their depositions and in their responses to various discovery requests.  The defendants argued that because the files were recoverable, spoliation had not occurred, but the contention that all the deleted files were recoverable was disputed by the plaintiff.

Judge’s Ruling

With regard to the recoverability of the files, Judge Dinsmore stated “Based on the relative credentials of the parties’ experts, the Court concludes that Patrick Paige’s testimony is more accurate and more credible. As such, the Court finds it highly likely that thousands of files were deleted and were unrecoverable. This confirms that Defendant Charles did not temporarily delete relevant evidence; instead, he permanently destroyed that evidence. As a result, Charles is liable for spoliation.”  He also noted that “even if the files that Charles deleted had been recoverable, this would not absolve Charles of liability” as the metadata associated with those recovered files would have been altered, which “would impede Plaintiff’s use of those files in proving its underlying claim of copyright infringement”.

As for the perjury claim, while finding some of the defendants’ answers not to constitute perjury, Judge Dinsmore failed to reach that conclusion regarding at least one of the drives that the defendant failed to disclose.  He stated that “At best, her omission of the XPS 600 from her discovery responses resulted from an egregious failure to reasonably investigate whether her interrogatory answers were complete. At worst, her failure to include the XPS 600 was a knowing and intentional omission that indicates that she did in fact commit perjury.”

Finding that “a sanction short of default would not appropriately address the goals of deterrence and punishment”, Judge Dinsmore recommended that the Court grant the plaintiff’s motion against the defendants for spoliation of evidence and perjury and enter default judgment against the defendants.

So, what do you think?  Was the recommendation of severe sanctions appropriate in this case?  Please share any comments you might have or if you’d like to know more about a particular topic.

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.

New York Supreme Court Sanctions Two Attorney Defendants for “Egregious Misconduct” in Spoliation of Data: eDiscovery Case Law

In HMS Holdings Corp. v. Arendt, et al., 2015 NY Slip Op 50750(U) (Sup. Ct., Albany County, May 19, 2015), the New York Supreme Court in Albany County ordered a mandatory adverse inference instruction so that the trier of fact could “draw the strongest possible adverse inference from defendants’ bad faith and intentional destruction, deletion and failure to produce relevant evidence”. The court also awarded attorney fees, and forwarded a copy of the order regarding Defendant Lange to the New York State Committee on Professional Standards for attorneys.

Case Background

In this business litigation against the defendants who were former employees of the plaintiff, the parties to this case entered into a stipulation in September 2014 providing that defendants would forensically image all personal and work computers, flash or zip drives, and all mobile devices in their possession, custody or control. After the defendants provided the forensic images to the plaintiffs and their forensics expert for review, the plaintiffs’ expert alleged that defendants Curtin and Lange (both licensed attorneys) had intentionally and deliberately destroyed relevant electronically stored information. The instances of spoliation as alleged by the plaintiff’s expert were as follows:

  • Curtin used the Secure Erase wiping software on his laptop six times in September 2014, after the litigation hold had gone into effect – he claimed that he did so to improve the performance of his laptop;
  • Curtin also failed to produce a Toshiba hard drive (to which he was found to have copied a considerable volume of confidential defendant business materials the day before he terminated his employment with the defendant) claiming he could not find the drive;
  • “Shadow Copies” on Lange’s laptop revealed that there were documents in a directory of Lange’s hard drive containing the term “HMS” that no longer were present on September 15, 2014, when the computer was produced for forensic imaging;
  • Lange also failed to produce text messages from her iPhone 4, which she replaced in August 2014. She claimed that the store where she purchased it could not transfer data to her new phone; however, the plaintiff’s expert found data from her personal computer indicating that she had backed up her old iPhone to the computer after she purchased the new phone.

The plaintiffs requested sanctions against those defendants. In a Decision & Order dated March 2, 2015, the Court held as follows:

“Through the affidavit of its computer forensics expert and the documentary evidence submitted in support of the motion, HMS has made a prima facie showing that Curtin and Lange engaged in the spoliation of potentially relevant ESI with a culpable mental state during the pendency of this action.”

The court called for an evidentiary hearing, which was held on March 24, 2015, to hear the testimony of defendants and the parties’ computer experts.

Court’s Ruling

Noting the options that Curtin had selected with the Secure Erase software (“Erase” instead of “First Aid”, “Most Secure” instead of “Fastest”), the Court stated that it “does not find Curtin’s explanation for his use of Secure Erase to be worthy of belief.” Also, noting that Curtin “failed to disclose the existence of the Toshiba drive in response to HMS’s interrogatories” and “acknowledged the existence of the drive only after being confronted with HMS’s forensic proof of the same”, the Court ruled that it “does not find his explanation for failing to produce the Toshiba external drive to be credible.”

As for files deleted from Lange’s hard drive, the Court found “that Lange was under a duty of preservation at all pertinent times with respect to the alleged spoliation of ESI” from the laptop and found it to be “intentional and willful”. And, with regard to the iPhone, the Court concluded “that Lange knowingly gave false testimony regarding the destruction and disposition of her iPhone 4” when she testified that she disposed of her old iPhone on August 8, 2014, but actually backed it up on August 15, 2014.

As a result, the Court ruled:

“Given the willful and deliberate nature of defendants’ misconduct, imposition of a mandatory presumption is warranted. The trier of fact should be permitted to draw the strongest possible adverse inference from defendants’ bad faith and intentional destruction, deletion and failure to produce relevant evidence Thus, the trier of fact should be instructed as a matter of law that defendants engaged in the intentional and willful destruction of evidence, advised of the extent of each defendant’s proven spoliation, and permitted to presume that the evidence spoliated by each defendant was relevant to this action, would have supported HMS’s claims against the defendant and been unfavorable to the defendant.”

The court also awarded attorney fees, and forwarded a copy of the order regarding Defendant Lange to the New York State Committee on Professional Standards for attorneys.

So, what do you think? Was that the right amount to award? Or should the judge have awarded a lesser amount? Please share any comments you might have or if you’d like to know more about a particular topic.

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 Plaintiff for Failing to Preserve Audio Recording: eDiscovery Case Law

In Compass Bank v. Morris Cerullo World Evangelism, Civil No. 13-CV-0654-BAS(WVG)(S.D. Cal. May 8, 2015), California Magistrate Judge William V. Gallo ruled that the plaintiff “wilfully engaged in the spoliation of relevant evidence”, and “has demonstrated a pattern of recalcitrant behavior during discovery in this litigation” and awarded an adverse inference jury instruction sanction against the plaintiff as well as defendant’s attorney fees and costs.

Case Background

During discovery in this case, the defendant issued two sets of document requests (in April and October 2014, respectively) which included all audio recordings relating to a letter of credit at the center of the dispute, allegedly issued on behalf of the plaintiff by its former branch manager. The plaintiff did not produce any audio recordings during discovery. Then, on February 12 of this year, the defendant took the deposition of the plaintiff’s Rule 30(b)(6) witness, during which she stated that during a phone call with the former branch manager in February of 2013, he admitted that he issued the letter of credit. She also testified that the plaintiff automatically records all of her phone calls in the regular course of business, and automatically records the calls of all its Trade Service Division officers. During her deposition, the plaintiff’s Rule 30(b)(6) witness stated, “our lines in international trade services and the letter of credit are recorded 24/7.”

The defendant immediately requested that the plaintiff produce the audio recording of the subject call. In a letter dated March 6, 2015, the plaintiff informed the defendant that it could not locate any such recording. The defendant subsequently filed a motion for sanctions, requesting either terminating or adverse inference jury instruction sanctions against the plaintiff, presenting evidence that the plaintiff had only searched one of the witness’s work phone numbers, when she actually had two phone numbers.

Judge’s Ruling

Because one of the main disputes in this case is whether the plaintiff issued the letter of credit and the audio recording seemed to verify that, Judge Gallo ruled that “the relevance of this evidence cannot reasonably be disputed”. He also ruled that the plaintiff had a duty to preserve the recording, noting that even though “the subject call occurred prior to Plaintiff filing the Complaint, Plaintiff has previously argued to this Court that it reasonably anticipated litigation regarding the letter of credit in February of 2013.”

With regard to whether the evidence was lost or destroyed with a culpable state of mind, based on the fact that “no evidence has been presented to the Court that Plaintiff initiated a litigation hold” and that “not only did Plaintiff not produce the recording of the subject call or any other calls, it utterly failed to even disclose that such calls were recorded”, Judge Gallo found that “Plaintiff wilfully failed to produce the recording in response to discovery requests, wilfully failed to conduct a diligent search in an effort to locate the recording, and wilfully withheld the recording from Defendant”. Judge Gallo also noted that the plaintiff “has a history of being recalcitrant and failing to produce relevant discovery” for failing to produce an Interview Summary of the former branch manager under the work product doctrine that ultimately proved to be clearly not protected.

As a result, Judge Gallo, while declining to award terminating sanctions, awarded a “less drastic” adverse inference jury instruction sanction against the plaintiff as well as ordered the plaintiff to reimburse defendant’s attorney fees and costs to be determined after a review the defendant’s detailed time calculations and declaration(s).

So, what do you think? Do you agree that the audio recording was lost or destroyed with a culpable state of mind? Please share any comments you might have or if you’d like to know more about a particular topic.

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.

Tired of the “Crap”, Court Sanctions Investors and Lawyers for Several Instances of Spoliation: eDiscovery Case Law

In Clear-View Technologies, Inc., v. Rasnick et al, 5:13-cv-02744-BLF (N.D. Cal. May 13, 2015), California Magistrate Judge Paul S. Grewal sanctioned the defendants $212,320 and also granted a permissive adverse jury instruction that allows the presumption that the defendants’ spoliated documents due to a series of “transgressions” by the defendants and their prior counsel.

You’ve got to love an order that begins this way:

“Deployment of ‘Crap Cleaner’ software—with a motion to compel pending. Lost media with relevant documents. False certification that document production was complete. Failure to take any steps to preserve or collect relevant documents for two years after discussing this very suit. Any one of these transgressions by {the defendants} and their prior counsel might justify sanctions. Taken together, there can be no doubt.”

This case arose from the defendants’ alleged conspiracy with certain former plaintiff’s employees to take over the plaintiff’s company or, failing that, to divert their personnel, intellectual property and investors to a competing enterprise to commercialize the plaintiff’s alcohol tracking product known as the “BarMaster”. As early as May 2011, the plaintiff threatened Defendants with litigation for interfering with the plaintiff’s operations, ultimately filing suit in June 2013.

After the plaintiff’s discovery requests yielded just 422 pages produced by the defendants (including no communications solely between defendants and virtually no communications between defendants and any “co-conspirator” identified in the plaintiff’s requests) the plaintiff moved to compel further production and in September 2014, the court granted the motion and ordered that “(i) Defendants appear by September 23 for depositions regarding ‘document preservation and production,’ and (ii) the parties meet and confer in order to submit to the court by September 30 ‘a plan to retain an independent consultant to do a limited forensic collection and analysis of the media associated with each named defendant.’”

During the depositions, the individual defendants admitted having deleted numerous emails and text messages, failing to preserve devices that potentially responsive data was stored on, failing to search key media and failing to use obvious search terms in the searches that they did perform. Meanwhile, in October 2014, per the parties’ joint agreement, the Court selected the a digital forensics firm (at the defendants’ expense) to perform a forensic analysis of Defendants’ media and email accounts, with the order calling for the defendants to produce over 40 specified electronic media and email accounts for forensic imaging.

The digital forensics firm ultimately found 2,593 relevant documents totaling 12,467 pages – over 12,000 pages more than the defendants had previously produced and also determined that “four separate system optimization and computer cleaning programs were run” (including CCleaner, aka “Crap Cleaner”) on one defendant’s laptop. These programs were loaded onto his laptop and executed on July 22, 2014 – just six days after the filing of the plaintiff’s motion – and resulted in the deletion of “over 50,000 files”. For that and other apparent instances of spoliation of data among the defendants, the plaintiff requested monetary sanctions, an adverse inference instruction and terminating sanctions.

Judge’s Ruling

With regard to the duty to preserve, Judge Grewal stated that “Once upon a time, the federal courts debated exactly when the duty to preserve documents arises. No more. “The duty to preserve evidence begins when litigation is `pending or reasonably foreseeable.’”

Finding that the defendants “were on notice of foreseeable litigation well before spoliation occurred”, that their “spoliation occurred with the required culpable mindset” and that they “failed to produce thousands of documents that contained key terms that the parties designated as relevant to the litigation”, Judge Grewal ruled that “In sum, sanctions are warranted. The only question is what kind.”

Ultimately, Judge Grewal awarded “expenses and fees in this discovery dispute under Fed. R. Civ. P. 37(b)(2)(C)” of $212,320 and granted the request for an adverse instruction that the unproduced material may be deemed to support the plaintiff’s contentions. He also ruled that “Defendants’ prior counsel also must be sanctioned for improperly certifying Defendants’ discovery responses, and for subsequently failing to intervene even after ‘obvious red flags’ arose, such as Defendants’ failure to produce incriminating documents CVT obtained from their third parties.” Also, based on information that the defendants had “stiffed on the bill” for the digital forensics firm, Judge Grewal ruled that “Defendants shall show cause why they should not face further sanctions for this failure.”

Judge Grewal, however, declined to recommend terminating sanctions “in light of public policy and the sufficiency of monetary sanctions and an adverse jury instruction”.

So, what do you think? Should the request for terminating sanctions have been granted? Please share any comments you might have or if you’d like to know more about a particular topic.

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 Upholds “Death Penalty Order” Sanction That Leads to Multi-Million Dollar Judgment: eDiscovery Case Law

In Crews v. Avco Corp., No. 70756-6-I (Wash. Ct. App. Apr. 6, 2015), a Washington Court of Appeals upheld a “death penalty order” against the defendant for discovery violations, including the failure to produce relevant information, but remanded for amendment of the final judgment of over $17.28 million to reflect any offsets for settlements with other defendants.

Case Background

In this product liability case related to a faulty carburetor that was associated with a plane crash in which several people were killed, the defendant failed to satisfy the plaintiffs’ discovery demands from October 2010 into February 2013, often objecting to most, if not all, of the requests. During part of that time, the defendant relied in part upon its document retention policy and, after being held in contempt, the defendant submitted a declaration from counsel describing its efforts to comply with the court’s order to produce. While not providing the policy itself, counsel explained that “pursuant to company policy” certain categories of documents were “retained only for fixed periods of time” and stating that many of the documents supplied by another defendant were “beyond the various retention periods” in the policy. Ultimately, the plaintiffs’ filed a motion for default against the defendant.

On February 4, 2013, the first day of trial, the judge held oral argument on the plaintiffs’ motion for default, during which the defendant’s counsel finally produced a copy of the records management policy. After reviewing the policy, the judge found that it was unclear whether the policy extended to the documents requested by the plaintiffs and orally granted the plaintiffs’ motion to sanction the defendant. The next day, the judge entered a written order granting the plaintiffs’ motion. The order stated that there was substantial evidence that the defendant did not comply with the plaintiffs’ discovery requests and the court found that the withheld discovery tied directly to the plaintiffs’ burden of proof regarding the defendant’s violation of federal regulations and punitive damages.

The court found that the defendant’s “continued disregard and violation of the discovery and contempt orders is without reasonable excuse and is willful. [Avco] has and continues to substantially prejudice plaintiffs’ preparation for trial and presentation at trial, on issues of liability, causation, and punitive damages.” As a result, the court ruled that “All of each plaintiff’s allegations in their respective operative Complaints against [Avco] are deemed admitted, and all of [Avco’s] defenses, if any, are stricken.”

The jury considered compensatory damages and punitive damages in two separate phases of trial, returning a verdict for the plaintiff of $17,283,000; $6 million of which was in punitive damages. The defendant appealed on multiple grounds, arguing that the order violated due process and that the trial court abused its discretion in imposing the most severe sanctions possible when lesser sanctions would have sufficed and also challenged specific sanctions.

Appeals Court Analysis

Assessing the defendant’s objections, the appellate court described the requirements to justify harsh sanctions – that the discovery violations were willful or deliberate, that the opposing party was substantially prejudiced, and that the trial court explicitly considered lesser sanctions. Following considerable analysis, the appellate court found that the trial court did not abuse its discretion in its findings that the violation of the discovery order was willful, that the plaintiffs’ case was prejudiced and that lesser sanctions would not be adequate for a fair trial.

With regard to the records management policy, the appellate court, while observing that the policy was not part of the record, agreed that the “scope and operation of the policy is unclear and unsupported” and that the defendant “did not submit any other evidence, such as employee affidavits, about how the policy applied to the requested documents and their destruction”.

Though the appellate court essentially affirmed the sanctions imposed, it did remand the case for “amendment of the final judgment to reflect any offsets authorized pursuant to chapter 4.22 RCW.”

So, what do you think? Were the sanctions appropriate or should the court have considered lesser sanctions against the defendant? Please share any comments you might have or if you’d like to know more about a particular topic.

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.