eDiscovery Daily Blog

Failure to Preserve Cloud-Based Data Results in Severe Sanction for Defendant – eDiscovery Case Law


In Brown v. Tellermate Holdings, 2:11-cv-1122 (S.D. Ohio Jul 1, 2014), Magistrate Judge Terence Kemp granted plaintiffs’ motion for judgment and motion to strike, ruling that the defendant could not “present or rely upon evidence that it terminated the Browns' employment for performance-related reasons” and enabling the plaintiffs to use documents produced by the defendant “designated as attorneys'-eyes-only” to be used by the plaintiffs “without restriction”, due to the defendant’s failure to preserve or produce data from their Salesforce.com database.

You have to love an opinion that begins like this:

“There may have been a time in the courts of this country when building stone walls in response to discovery requests, hiding both the information sought and even the facts about its existence, was the norm (although never the proper course of action). Those days have passed. Discovery is, under the Federal Rules of Civil Procedure, intended to be a transparent process.”

That’s how this lengthy opinion began in this case where the plaintiffs, former sales agents, sued the defendant for age discrimination after they were terminated.  The defendant responded by arguing that the terminations were performance related.  To address that argument, the plaintiffs sought records from the defendant’s through salesforce.com to demonstrate that they consistently met or exceeded their quotas. In response, the defendant “with the participation of its counsel, either intentionally or inadvertently failed to fulfill certain of its discovery obligations, leading to a cascade of unproductive discovery conferences, improperly-opposed discovery motions, and significant delay and obstruction of the discovery process.”  As Judge Kemp described, the defendant’s counsel:

  • “failed to uncover even the most basic information about an electronically-stored database of information (the ‘salesforce.com’ database);
  • as a direct result of that failure, took no steps to preserve the integrity of the information in that database;
  • failed to learn of the existence of certain documents about a prior age discrimination charge (the "Frank Mecka matter") until almost a year after they were requested;
  • and, as a result of these failures, made statements to opposing counsel and in oral and written submissions to the Court which were false and misleading, and which had the effect of hampering the Browns' ability to pursue discovery in a timely and cost-efficient manner (as well as the Court's ability to resolve this case in the same way).”

One of the defendant’s attorneys went so far as to provide these reasons to the plaintiffs as to why they could not produce the information from Salesforce.com:

  • "Tellermate does not maintain salesforce.com information in hard copy format."
  • "Tellermate cannot print out accurate historical records from salesforce.com. . . ."
  • "[D]iscovery of salesforce.com information should be directed to salesforce.com, not Tellermate."

The defendant later claimed that it was “contractually prohibited from providing salesforce.com information” and that it “cannot access historical salesforce.com data” – both of which were untrue.

Ultimately, it became clear that the defendant had not exported or preserved the data from salesforce.com and had re-used the plaintiffs’ accounts, spoliating the only information that could have addressed the defendant’s claim that the terminations were performance related (the defendant claimed did not conduct performance reviews of its sales representatives).  As a result, Judge Kemp stated that the “only realistic solution to this problem is to preclude Tellermate from using any evidence which would tend to show that the Browns were terminated for performance-related reasons” and issued the following severe sanctions:

“Tellermate shall not, in connection with either the pending summary judgment motion or at trial, be entitled to present or rely upon evidence that it terminated the Browns' employment for performance-related reasons. The documents produced by Tellermate in April, 2013 and designated as attorneys'-eyes-only may be used by the Browns without restriction, subject to Tellermate's ability to redesignate particular documents as confidential under the existing protective order, provided it does so within fourteen days and has a good faith basis for so designating each particular document. Tellermate shall produce the remaining Frank Mecka documents to the Browns within fourteen days. Finally, Tellermate and its counsel shall pay, jointly, the Browns' reasonable attorneys' fees and costs incurred in the filing and prosecution of those two motions as well as in the filing of any motions to compel discovery relating to the salesforce.com and Frank Mecka documents.”

So, what do you think?  Do the sanctions fit the activities by 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 Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.