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Sanctions

Denial of Motion for Spoliation Sanctions Leaves Plaintiff Less Than Glad: eDiscovery Case Law

In Gladue v. Saint Francis Medical Center, 1:13-CV-186-CEJ (E.D. Mo. Mar. 24, 2015), Missouri District Judge Carol E. Jackson denied the plaintiff’s motion for evidentiary and monetary sanctions due to spoliation of evidence, finding that the defendant did not have a duty to preserve emails deleted as part of routine IT operations, had diligently attempted to recover deleted emails and that the plaintiff failed to show that any of the unrecovered emails were relevant to her claims.

Case Background

In this employment case, the plaintiff’s employment was terminated in December 2011. As part of the defendant’s routine IT operations, the plaintiff’s email account was purged in March 2012. At that time, plaintiff had not filed either a lawsuit against the defendant or a charge of discrimination with the Equal Employment Opportunity Commission – the defendant was first contacted by the plaintiff’s then-attorney in June 2012 regarding the plaintiff’s employment discrimination claims.

On June 16, 2014, after this lawsuit was filed, the plaintiff submitted a request for production of all of her work emails and her calendar. Because her account had been purged, the defendant undertook several efforts to retrieve the emails, including conducting a search for all emails sent to or received from plaintiff in the accounts of every employee identified in the parties’ Fed. R. Civ. P. 26 disclosures. The defendant ultimately produced over 24,600 pages of emails and related documents to the plaintiff in two productions (nearly three months before the close of discovery), but acknowledged that there were no guarantees that every lost item was retrieved. The plaintiff filed a motion for evidentiary and monetary sanctions due to spoliation of evidence.

Judge’s Opinion

Finding that a “litigation hold was not required at the time plaintiff’s e-mails were deleted”, Judge Jackson ruled that the defendant “has shown that plaintiff’s e-mails were deleted as part of a routine maintenance procedure, rather than in bad faith. Moreover, defendant has diligently attempted to recover the missing documents.”

Judge Jackson also noted that the defendant produced documents to the plaintiff “nearly three months before the close of discovery and almost four months before the deadline for filing dispositive motions. Thus, as to the timing of the productions, no exceptional circumstances justify sanctions.” She also found that “plaintiff has failed to show that any of the unrecovered e-mails are relevant to her claims” and noted that “plaintiff is incorrect in her contention that defendant is at an advantage because it can use the undisclosed e-mails in this litigation” as “Fed. R. Civ. P. 37(c)(1) forbids defendant from using any document that has not been produced to plaintiff at summary judgment or trial.”

As a result, Judge Jackson ruled that “plaintiff is not prejudiced and no exceptional circumstances exist to justify sanctions” and denied her motion for sanctions.

So, what do you think? Did the plaintiff’s motion really ever stand a chance? 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.

How Blue Was My Valley? Not Blue Enough to Cite the Defendant for Discovery Violations: eDiscovery Case Law

In Malone v. Kantner Ingredients, 4:12CV3190 (D. Neb. Mar. 31, 2015), Nebraska Magistrate Judge Cheryl R. Zwart denied the plaintiffs’ motion to show cause, finding that the defendant “the plaintiffs have presented no evidence” that the defendant “destroyed, hid, or purposefully (or even recklessly) failed to produce responsive ESI” in the case.

Case Background

Over two years, the defendants had produced documents from various sources, including 140,000 electronic files located on a computer image of the data stored on the defendant’s file servers. Despite that, multiple conferences were held with the court regarding the parties’ discovery disputes and the plaintiffs filed five motions to compel additional documentation from the defendant.

In October of 2014, the plaintiffs claimed the defendants failed to produce all documents responsive to the plaintiffs’ discovery requests, particularly sent emails and invoices of transactions between Blue Valley Foods and the defendants. In an attempt to quell the plaintiffs’ ongoing distrust of the defendants’ discovery efforts, the defendants were ordered to locate their servers and determine if the server imaging performed by the defendants at the outset of the case was a full and complete imaging, as well as produce responsive invoices and sent mail from those servers.

In response to that order, the servers were received by defense counsel, who confirmed that the data image from the shared server data received by defense counsel at the outset of the case matched the data set and data amount on the servers. The servers were sent to the defendants’ forensic expert, who fully imaged them and provided a full copy of that imaging to the plaintiffs’ forensic expert. After receiving the server imaging, the plaintiffs’ forensic expert performed a word search of the data and located some documents containing the words “Blue Valley” that were not previously disclosed by the defendants in an electronic format. The plaintiffs presented evidence that some of those documents were responsive to production requests served by the plaintiffs, but they were not previously disclosed to the plaintiffs in an electronic format.

The plaintiffs moved for an order to show cause, alleging the defendants, their counsel, and counsel’s paralegal failed to comply with the order, “destroyed or tampered with evidence, and provided untruthful information to the court regarding the existence of discovery requested by the plaintiffs.”

Judge’s Opinion

Judge Zwart noted that, after receiving the actual servers, “the defendants did not repeat their search of the server data for responsive discovery…But the order required the defendants to determine if the server imaging performed by the defendants at the outset of the case was a full and complete imaging: It did not require the defendants to repeat their ESI review and production if the 2012 initial data imaging appeared to be full and complete.”

She continued: “By providing the full image of the servers to Plaintiffs’ expert, the defendants produced the emails, invoices, and associated metadata as required under the court’s order. While the plaintiffs incurred expense for forensic review of that data, the plaintiffs’ use of their own forensic expert was reasonable—and perhaps necessary—to bring some closure to the ongoing ESI discovery battle… The defendants allowed Plaintiffs to ‘see for themselves’ whether any additional documentation was on the Kantner servers. And the court is convinced this was the only means of convincing Plaintiffs that they had received everything. Had the parties discussed how to collect, review and produce ESI at the outset, perhaps the cost of two experts, and other discovery-related fees and costs, could have been avoided. But those discussions never occurred.”

With regard to the missed documents discovered by the plaintiff, Judge Zwart, referencing several sources for best practices for searching, indicated that “At most, the plaintiffs offered evidence of mistakes made during defense counsel’s 2012 manual review of the electronic files. Manual review is still considered by many as the ‘gold standard’ for electronic document review. But human error is common when attorneys are tasked with personally reviewing voluminous electronically stored information.” She also cited Reinsdorf v. Skechers (2013), which stated: “The discovery process relies upon the good faith and professional obligations of counsel to reasonably and diligently search for and produce responsive documents…However, while parties must impose a reasonable construction on discovery requests and conduct a reasonable search when responding to the requests, the Federal Rules do not demand perfection.”

Given that standard, Judge Zwart denied the plaintiffs’ motion to show cause.

This isn’t the first time we’ve covered rulings by Judge Zwart: click here, here, here and here to review previous rulings with eDiscovery impact that we’ve covered.

So, what do you think? Was that the right call or should the defendants have been held to a higher standard? 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. eDiscoveryDaily 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.

Discarding a Relevant Computer Results in Adverse Inference Sanctions, Not Default Judgment: eDiscovery Case Law

In Grady v. Brodersen, No. 13-cv-00752-REB-NYW (D.Colo. Mar. 23, 2015), Colorado Magistrate Judge Nina Y. Wang granted the plaintiff’s motion for sanctions against the defendant in part for failing to produce a computer that the defendant ultimately acknowledged that he discarded, but denied the plaintiff’s request for a default judgment sanction, opting for the less severe adverse inference instruction sanction.

Case Background

In this copyright infringement case filed in March 2013 due to publication of disputed images on the defendant’s web site, the District Court of Colorado entered a scheduling order on February 20, 2014, ordering Defendant to preserve all electronically stored information (ESI), including metadata, and to identify his relevant devices. A week later, on February 27, the defendant submitted his initial disclosures to the plaintiff, in which he acknowledged his computer equipment was relevant to this litigation, identified himself as custodian of the equipment, and represented that “a search through computer equipment for any discoverable material has [sic] and is ongoing. Defendant will supplement its response [sic] if necessary.”

But, on August 9, the defendant amended his initial disclosures “after discussion with lawyers regarding the whereabouts of the computer and request for additional information by Plaintiff”, stating that the computer he had owned and used during the relevant time period “died” prior to notice or anticipation of any legal action and was discarded in July 2013 (four months after the case was filed) because it was “broken”. He also stated that he had searched USB/Flash drives owned and controlled by him during the relevant time and found no relevant data. Subsequently, the defendant acknowledged in his deposition that he did not attempt to have the hard drive repaired before discarding the computer. On August 18, the plaintiff moved to compel, and the court granted the motion, ordering the defendant to produce his new computer hard drive for forensic inspection and copying.

Following the court’s order compelling the defendant to produce the new computer, the plaintiff’s forensic experts determined that the defendant began using that computer in November 2013, which was a few months after the defendant discarded the old computer and also discovered that the new computer had received a transfer of 10,091 images on January 19, 2014, nine days after the court recommended denying Defendant’s Motion to Dismiss. The experts noted that the approximately 10,000 images had a range of file modification dates reaching as far as February 2011. The plaintiff filed the motion for sanctions in November 2014.

Citing the four factor test in Ehrenhaus v. Reynolds, 965 F.2d 916, 920 (10th Cir. 1992), the plaintiff argued that:

  1. The discarded computer was the only source of evidence relating to the alteration of his Copyrighted works, so it was “severely prejudicial” to him;
  2. The defendant interfered with the judicial process when he lied under oath on his initial 26(a)(1) disclosures;
  3. The defendant was highly culpable as he discarded the equipment after the commencement of litigation; and
  4. A court-issued warning of dismissal is not necessary where the violation is severe.

Judge’s Opinion

For the most part, Judge Wang agreed with the plaintiff, stating “I find that Mr. Brodersen despoiled relevant evidence that he had an obligation to preserve. I further find that Mr. Brodersen violated Rule 26(g) by not specifying in his Rule 26(a)(1) disclosures dated February 27, 2014 which computer equipment was in his custody and control.” She also ruled that “This court finds sufficient evidence in the record before it to demonstrate that Defendant acted intentionally and with bad faith in discarding the old computer.”

As for the appropriate sanction, however, Judge Wang did not agree with the plaintiff, stating “However, in heeding the direction of the Tenth Circuit to consider the efficacy of lesser sanctions, I find that an entry of default judgment is too severe. The dual objective of protecting a litigant’s right to obtain discoverable evidence and punishing the disobedient party to deter future violative conduct is met by imposing an adverse jury instruction regarding the despoiled evidence.” So, she granted the plaintiff’s motion for sanctions in part ordering the adverse inference instruction sanction as well awarding as the plaintiff’s reasonable attorney fees and costs incurred in pursuing the motion.

So, what do you think? Was the sanction severe enough? 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.

Free Trojans with Your Document Production: eDiscovery Trends

By “trojans”, I mean “malware”, not the other type of “trojans”… 🙂

An Arkansas lawyer representing three Fort Smith police officers in a whistleblower case is seeking sanctions after his computer expert found malware on an external hard drive supplied in response to a discovery request, according to a story by the Northwest Arkansas Democrat Gazette.

According to the story, Attorney Matthew Campbell in North Little Rock has been representing three current and former Fort Smith police officers in the lawsuit since January 2014. He requested emails from the Fort Smith Police Department, and Sebastian County Circuit Judge James O. Cox ordered on May 9, 2014, that they be provided to Campbell as part of discovery in the case. The documents were produced in June 2014. It’s how they were produced that aroused Campbell’s suspicion.

Douglas Carson, the attorney representing Fort Smith and its Police Department, sent Campbell a computer hard drive with the production by Federal Express. According to the story, Campbell said the defendants normally had provided him with requested documents via email, the U.S. Postal Service or through a cloud-based Internet storage service.

So, Campbell decided to have his information technology expert, Geoff Mueller of Austin, Texas, check out the drive first. Guess what he found? Four “Trojans,” one of which was a duplicate.

A “trojan” or “trojan horse” appears to be a legitimate program which unleashes the malware when you are tricked into running it. They can be quite tricky as I reported a few years ago when it happened to me.

“One would have kept my Internet active even if I tried to turn it off, one would have stolen any passwords that I entered in, and the other would have allowed the installation of other malicious software,” Campbell said. “It’s not like these are my only clients, either. I’ve got all my client files in my computer. I don’t know what they were looking for, but just the fact that they would do it is pretty scary.”

In an affidavit filed with the motion Friday, Mueller stated: “Upon informing Mr. Campbell of the presence of these Trojans, he provided me with information that the Fort Smith Police Department claimed to be running a secure system with real-time virus and malware protection. In my experience, if the FSPD system is actually as described, these Trojans would not exist on the system.”

Mueller said the placement of the Trojans in a subfolder named “D:Bales Court Order,” and not in the root directory, “means the Trojans were not already on the external hard drive that was sent to Mr. Campbell and were more likely placed in that folder intentionally with the goal of taking command of Mr. Campbell’s computer while also stealing passwords to his account.”

In addition to the malware found on the drive, Campbell’s motion for sanctions alleges that entire email accounts were deleted, that emails which could have been recovered were purged from the system, and that emails which were previously provided in response to Freedom of Information Act (FOIA) requests had improper deletions. Campbell also states in the motion that the police department’s IT specialist attended a convention ten days after the court granted Campbell’s motion to compel evidence last May. According to Campbell, the expert took classes on secure data deletion, whistleblower investigation and monitoring employee activity, but did not take classes offered on eDiscovery and preservation of evidence.

Campbell is asking for a default judgment for his clients and that the defendants be held in criminal contempt of court, among other sanctions.

So, what do you think? Do you check data produced to you for the presence of malware? 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 Awarded Sanctions and Reimbursement of Some eDiscovery Costs: eDiscovery Case Law

In Engineered Abrasives, Inc. v. American Machine Products & Service, Inc. No. 13C7342 (N.D. Ill. Mar. 18, 2015), Illinois District Judge Sara L. Ellis awarded the plaintiff damages, attorneys’ fees and some requested costs, as well as granting the plaintiff’s motion for sanctions and ordering the defendants to reimburse the plaintiff $12,800 for the cost of conducting a forensic computer examination, which the plaintiff maintained was necessitated by Defendants’ evasive and incomplete responses and their failure to produce documents during discovery.

Case Background

The plaintiff sued the defendants, former employees of the plaintiff, claiming that the defendants were misrepresenting themselves as representatives of the plaintiff’s company and unfairly competing with EA. After the defendants failed to answer the complaint, they were found to be in default. “Extensive” discovery was conducted on the plaintiff’s damages and an evidentiary hearing was held in November 2014 on the plaintiff’s request for relief, which included monetary damages and reimbursement of attorneys’ fees and other costs, including eDiscovery costs. This opinion and order was based on the “evidence presented at that hearing and the parties’ other submissions”.

Judge’s Opinion

After some analysis, Judge Ellis awarded the plaintiff $207,257 in monetary damages and $499,088.80 in attorneys’ fees, which included PACER costs. Of most of the other costs that Judge Ellis considered, she allowed reimbursement of the $400 filing fee for initiating the action, $165 for service of the Complaint and $55 for one hour for service of summons or a subpoena and disallowed all other requested costs.

As for the eDiscovery costs, Judge Ellis stated that Section 1920 does “not expressly provide for the recovery of e-discovery costs, meaning that the only route to recovery of these costs must pass through the strictures of 28 U.S.C. § 1920(4), which allows for the recovery of ‘fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.’” She also noted that “this Court will follow those courts that have found compensable the costs ‘associated with the conversion of [electronically stored information] into a readable format, such as scanning or otherwise converting a paper version to an electronic version or converting native files to TIFF’ but not the ‘costs related to the `gathering, preserving, processing, searching, culling and extracting of [electronically stored information].’”

As the plaintiff requested compensation for several charges associated with eDiscovery, including for “OCR & TIFF Conversion,” “process[ing] native files through ESI utility to allow for capturing of metadata/indexing of material,” “load[ing] into Summation,” and “prepar[ing] search filters and sav[ing] shared set to database for review team,” Judge Ellis found that “[o]nly the first $48.24 charge is properly compensable, as it involves the conversion of documents into a readable format.” (emphasis added)

Judge Ellis next considered whether the defendants could be sanctioned for their “evasive and incomplete responses and their failure to produce documents during discovery” which led to the plaintiff’s computer forensic examination. With regard to that, Judge Ellis stated: “The Court agrees with EA that Defendants’ conduct during the discovery process warrants sanctions. Defendants’ actions during the discovery process cannot be said to have been done in good faith. They unnecessarily prolonged this case, necessitating the Court’s intervention on several occasions and multiplying the costs involved in the litigation.” As a result, Judge Ellis ordered the defendants to reimburse the plaintiff $12,800 for the cost of conducting the forensic computer examination.

So, what do you think? Was the court right to grant the motion for 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.

Defendant Does Not Take the Fall for Spoliation in Slip and Fall Case: eDiscovery Case Law

In Harrell v. Pathmark et al., Civil Action No. 14-5260 (E.D.Penn. Feb. 26, 2015), Pennsylvania District Judge Gene E. K. Pratter, after a hearing to consider whether to draw an adverse inverse instruction due to the defendant’s possible spoliation of video evidence, determined that “a spoliation inference would not be appropriate here”. Finding that the plaintiff had presented no evidence that the defendant had constructive notice of a dangerous condition resulting in her slip and fall, Judge Pratter also granted the defendant’s motion for summary judgment.

Case Background

The plaintiff filed suit claiming the defendant’s negligence “resulted in her slipping on a dangerously slick surface” in the defendant’s store in May 2013. The defendant moved for summary judgment arguing that the plaintiff failed to prove that the defendant had actual or constructive notice of the wet condition of the floor.

The plaintiff’s memorandum opposing the summary judgment noted that the defendant had working security cameras in the store, but the video footage from the time and date of the accident was recorded over and not preserved. As a result, the Court sua sponte scheduled a hearing to prompt the parties to address the issue on whether the Court could or should draw an adverse spoliation inference due to the absence of video evidence.

Judge’s Opinion

Stating that “Ms. Harrell has not presented the Court with evidence from which a reasonable jury could infer that Pathmark had constructive notice of the wet condition of the floor”, Judge Pratter turned to the potential spoliation of video evidence, noting that “although Ms. Harrell does not specifically invoke the issue, one could read the concluding paragraphs of her Memorandum opposing summary judgment as contending that the Court should draw an adverse spoliation inference against Pathmark.”

Judge Pratter found that the plaintiff “has not satisfied her burden of demonstrating that the video footage would have been relevant” and also determined that the court “cannot conclude based on the evidence before it that the video evidence was actually suppressed or withheld. Nor can it conclude that litigation was reasonably foreseeable at a time when the video footage presumably still existed.” His ruling quoted Bull v. United Parcel Service, Inc., 665 F.3d 68, 77 (3d Cir. 2012) as follows:

“Ordinary negligence does not suffice to establish spoliation. The party asserting spoliation must prove that evidence was intentionally withheld, altered, or destroyed. Thus, no unfavorable inference of spoliation arises if the evidence was lost, accidentally destroyed, or where the failure to produce it is otherwise properly accounted for.”

With regard to this case, Judge Pratter remarked “Here, Ms. Harrell has not presented evidence of bad faith. Even in a highly litigious community or culture, just because a person falls in a grocery store does not mean that litigation is imminent. Here, the lawsuit was not filed until August 2014, over a year after the incident and far past the maximum of about 90 days that the video footage would have survived before being automatically re-recorded. While the incident itself did cause Mr. Lewis to create an incident report, nothing about it was so immediately dramatic to create an objectively foreseeable likelihood of litigation…Pathmark’s actions, in this context, appear to the Court to be at the very most mere inadvertent negligence.”

Therefore, Judge Pratter determined that “a spoliation inference would not be appropriate here” and with no evidence to support the plaintiff’s claim, granted the defendant’s motion for summary judgment.

Click here and here for a couple of previous slip and fall cases we’ve covered where potential spoliation of video evidence was debated.

So, what do you think? Was the court right to grant the motion for summary judgment? 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 Rules that Australian Company’s Duty to Preserve Only Begins when US Court Has Jurisdiction: eDiscovery Case Law

In Lunkenheimer Co. v. Tyco Flow Control Pacific Party Ltd., No. 1-11-cv-824 (S.D. Ohio Feb. 12, 2015), Ohio District Judge Timothy S. Black ruled that the duty to preserve for the defendant (an Australian company with offices and facilities only in Australia) did not begin until the complaint was filed in US courts in December 2011, denying the assertion of the intervenor/counter defendant that the duty to preserve arose in 2002.

Case Background

The intervenor/counter defendant alleged that the defendant refused to fully comply with the court’s October 2014 discovery order by failing to preserve, or satisfactorily search for and produce, evidence relating to the case and requested sanctions including striking the defendant’s counterclaims and what amounted to a summary judgment in favor of the plaintiff for $24.7 million.

With regard to the duty to preserve, the intervenor/counter defendant argued that the defendant’s duty to preserve began no later than October 1, 2002, about a month after the License had been signed, when an email from an executive at the defendant company questioned ownership of the assets and intellectual property associated with the license and the intervenor/counter defendant claimed that, from at least that date, the parties were in constant dispute over the existence of, and the defendant’s compliance with, the License.

The defendant argued that any duty to preserve under U.S. law could not have arisen before August 3, 2012, the date when the defendant answered the complaint and consented to U.S. jurisdiction, and, even if it had, it was not before the defendant was served on December 8, 2011. The defendant also noted that, throughout the nine years prior to Plaintiffs’ filing of this lawsuit, the plaintiffs continued to accept regular royalty payments of over $1.6 million for the first five years, took no action for another four years while the defendant continued to use the IP and never sent a dispute notice or termination notice during that time.

Judge’s Opinion

Citing In re Uranium Antitrust Litigation, 480 F. Supp. 1138 (N.D. Ill. 1979) in a footnote, Judge Black stated the following:

“The power of a U.S. Court to require compliance with U.S. discovery obligations does not arise until and unless the Court has jurisdiction.”

Judge Black noted that the defendant “is an Australian company with offices and facilities only in Australia”, that “Australian Law governs the License and was the anticipated jurisdiction for License-related disputes” and that “[n]o significant sales of Licensed Products were made into the U.S.” While acknowledging that the defendant “is not excused from an obligation to preserve evidence simply because it is a foreign company”, Judge Black ruled that “the only place litigation might at some point have been anticipated was in New South Wales, Australia—not Ohio or anywhere else in U.S. Accordingly, notwithstanding the fact that it may not have had jurisdiction over the PFCP until 2012, and in the absence of evidence that PFCP should have reasonably anticipated litigation in the United States any earlier, the Court finds that the duty to preserve began on December 8, 2011.”

So, what do you think? Do you agree that the defendant did not have a duty to preserve any earlier than the filing of the complaint? 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 Awards Attorney Fees to Defendant After Delayed Production by Plaintiff: eDiscovery Case Law

In Michigan Millers Mutual Insurance Co. v. Westport Insurance Corp., 1:14-cv-00151 (USDC W.D. Mich. Nov. 7, 2014), Michigan Magistrate Judge Phillip J. Green awarded some (but not all) of the attorney fees requested by the defendant after the plaintiff “made repeated promises to produce the subject documents”, but “failed to do so for nearly three months after the deadline for responding to Westport’s Rule 34 request” and “compliance was obtained only after Westport filed its motion to compel”.

Case Summary

In the reinsurance dispute described by the judge as a “document-intensive case”, the parties filed a Joint Status Report on May 7, 2014 in which they agreed “to make available” by May 28, certain identified documents without the need of a formal request for production. The deadline for voluntary production was extended at the plaintiff’s request to June 4 and the defendant completed its voluntary production of documents on that date. However, the plaintiff failed to do so.

The defendant sent the plaintiff inquiries as to the status of its production on June 10, 12 and 16. After receiving no response, on June 17, the defendant served a Rule 34 request for a production of documents, including those identified by the plaintiff for voluntary disclosure. The Rule 34 request incorporated the parties’ previous agreement to produce electronic documents in single page TIFF format with DII load file or native format within their original file structure. The defendant sent a reminder to the plaintiff on July 11 of their agreement to voluntarily produce the documents identified in the Joint Status Report and “specifically asked MMMIC’s counsel to advise if that understanding was incorrect”, which the plaintiff apparently never did.

The parties agreed to give the plaintiff an additional 14 days to produce responsive documents and, on August 1, the plaintiff responded to the Rule 34 request, indicating that “many documents [were] ready for production,” but also requested a protective order to prevent dissemination of the documents to persons not involved in the case. On August 6, the parties filed a joint proposed protective order regarding the handling of “Discovery Material”, but reminders from the defendant to the plaintiff to produce documents on August 6, 11 and 14 received no reply from the plaintiff, so on August 25, the defendant filed a motion to compel. After further back and forth, the parties agreed to an order on October 2, which noted that the production would be made no later than October 10. On October 13, the plaintiff finally produced 66,000 pages of documents in electronic format on three CDs.

Judge’s Decision

Judge Green stated that “MMMIC made repeated promises to produce the subject documents, beginning with the May 7, 2014, Joint Status Report, but it failed to do so for nearly three months after the deadline for responding to Westport’s Rule 34 request, and more than four months after the deadline for voluntary production set by the Court in the Case Management Order. Even then, compliance was obtained only after Westport filed its motion to compel, and on the eve of the scheduled hearing.

That constitutes a sufficient basis for awarding reasonable attorney’s fees and expenses to Westport.”

The defendant sought $10,399.75 in attorney’s fees and expenses under Rule 37(a)(5)(A), but Judge Green, after a detailed review of the hours expended (and factoring in a 7.5% discount), awarded $3,180.72.

So, what do you think? Should the fees have been awarded for the plaintiff’s late production? 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. eDiscoveryDaily 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. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Plaintiff Sanctioned for Late Production, But Not for Failure to Produce Data Held by Outside Vendor: eDiscovery Case Law

In Ablan v. Bank of America, 11 C 4493 (N.D.Ill. Nov. 24, 2014), Illinois Magistrate Judge Daniel G. Martin recommended that the defendant’s Motion for Sanctions should be granted in part and denied in part, recommending that the plaintiffs be barred from using any new information at summary judgment or at trial that was contained on eight CD-ROMs produced late, but recommending no sanctions for failing to produce or make available documents held by the plaintiff’s outside vendor.

Case Summary

The plaintiffs had been previously sued in state court by third party Tax Strategies Group, LLC (“TSG”), claiming that plaintiff Ablan violated their Financial Representation Agreement with TSG by interfering with TSG’s efforts to obtain financing for the acquisition of a group of CarMax dealerships. The plaintiffs filed this litigation against the defendants in July 2011, while the State Court Litigation was still pending (it was settled a few months later).

The defendants’ current motion was originally a motion for evidence spoliation based upon the plaintiffs’ representations that the documents they received from TSG in the State Court Litigation no longer existed. After the defendants filed their motion, “Plaintiffs located eight (8) CD-ROMs containing discovery produced to Ablan by TSG in the State Court Litigation.” On June 26, 2014, over three months after discovery closed, the plaintiffs produced to the defendants the TSG documents contained on the eight (8) CD-ROMs, which contained over 14,000 pages of documents.

With the documents produced, the defendants were no longer seeking sanctions for spoliation, but did seek sanctions based on the plaintiffs’ failure to timely produce and supplement and identified two alleged discovery violations by the plaintiffs: “(1) Plaintiffs’ failure to timely produce 14,000 pages of TSG documents contained on the eight (8) CD-ROMs in their possession and (2) Plaintiffs’ failure to produce 350,000 TSG documents in the possession of their vendor, Protek”. The defendants requested that the plaintiffs pay defendants’ attorneys’ fees in bringing the motion as well as the defendants’ expert costs associated with reviewing the recently located TSG documents; and that the plaintiffs be barred from relying on or introducing any of the recently located TSG documents at summary judgment or trial.

Court Recommendation

Stating that there is “no explanation in the record as to why Plaintiffs’ initial search failed to uncover the eight (8) CD-ROMs of TSG documents”, Judge Martin found “that Plaintiffs violated Rule 26(e) by failing to timely supplement their production in response to Defendants’ First Set of Requests for Production of Documents. Thus, Rule 37 prohibits Plaintiffs from using any new information on the eight (8) CD-ROMS”. He also found that “Defendants would be prejudiced if Plaintiffs were allowed to rely on new information disclosed for the first time in their untimely production of TSG discovery documents to defeat summary judgment or at trial” and recommended that they be barred from doing so.

Regarding the documents held by the plaintiff’s outside vendor, Judge Martin stated that, although (under Rule 34) parties must produce data within their custody and control (even when not in their physical possession), that the plaintiffs never had possession, custody, or control of the data and did not have the legal right to obtain the data. He disagreed with the defendant that the plaintiffs should be required to subpoena the TSG documents from the vendor, instead finding that “Defendants did not seek an extension of the discovery deadline so that they could subpoena the information from Protek” and stating that “Such a request would very likely have been granted”. Judge Martin also rejected the defendant’s request that the plaintiff pay the defendants’ expert costs associated with reviewing the recently located TSG documents, stating that “there is no evidence that Plaintiffs’ tardy production caused Defendants’ excess expert costs”.

As a result, Judge Martin recommended that the plaintiffs pay defendants’ attorneys’ fees in bringing the motion, but NOT the defendants’ expert costs associated with reviewing the recently located TSG documents, and that the plaintiffs be barred from relying on or introducing any of the recently located TSG documents at summary judgment or trial.

So, what do you think? Should the plaintiffs have had to produce data held by their outside vendor, or was Judge Martin correct in ruling that they did not have custody and control? 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. eDiscoveryDaily 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. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Payday Loan Company Sanctioned for Discovery Violations: eDiscovery Case Law

In James v. National Financial LLC, C.A. 8931-VCL (Del Ch. Dec. 5,2014), Delaware Vice Chancellor Laster granted the plaintiff’s motion for sanctions after determining that the defendant’s “discovery misconduct calls for serious measures”. However, the plaintiff’s request for a default judgment was not granted, but lesser sanctions that included attorneys’ fees and a ruling that the lack of information contained in the requested document resulted in an admission.

Case Summary

On May 7, 2013, the plaintiff borrowed $200 from the defendant, which does business in multiple locations in Delaware under the name Loan Till Payday LLC. The plaintiff needed the $200 to pay for rent and groceries. The loan agreement, which consisted primarily of boilerplate provisions, imposed onerous terms. It contemplated twenty-six bi-weekly payments of $60 with a final balloon payment of $260. The total repayments added up to $1,620, for a cost of credit of $1,420 and an APR of 838.45%. Yikes. The standard loan agreement signed by the plaintiff gave her sixty days after signing the agreement to opt out of the mandatory arbitration provision, which she did and filed a verified class action complaint against the defendant, claiming unconscionable lending practices.

During discovery, the plaintiff asked the defendant to provide information about loans it made, including the annual percentage rates (“APRs”). After the defendant moved for a protective order, the court ordered the defendant to produce certain categories of information, including the APRs. The defendant produced a spreadsheet containing some of the categories but not others. When the plaintiff checked the APRs against the few loan documents she had, they differed and the defendant’s principal ultimately agreed that the data contained errors. The court ordered the defendant to produce an updated spreadsheet (which they did) and an affidavit from an IT consultant attesting to the procedures used to populate the spreadsheet (which they did not), and the spreadsheet omitted information required by the court’s order. As a result, the plaintiff moved for default judgment sanctions against the defendant.

Court Ruling

Noting that “[t]he court expects Delaware counsel to play an active role in the discovery process, including in the collection, review and production of documents”, Vice Chancellor Laster granted the plaintiff’s motion for sanctions, but not the requested default judgment sanctions, stating that “National’s discovery misconduct calls for serious measures. Although I believe that entry of a default judgment would be warranted on these facts, I will not grant that remedy in light of the Delaware Supreme Court’s guidance about invoking the ultimate sanction and the availability of less punitive consequences.” Instead, the Vice Chancellor awarded attorneys’ fees and ruled that the lack of information contained in the requested document resulted in an admission.

So, what do you think? Should the default judgment sanction have been awarded? Please share any comments you might have or if you’d like to know more about a particular topic.

Click here to see our previous story about the Delaware Court of Chancery amending its Rules regarding discovery two years ago.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine. eDiscoveryDaily 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. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.