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Rambus’ “Shred Days” Result in Sanctions Yet Again – eDiscovery Case Law

During this Thanksgiving week, we at eDiscovery Daily thought it would be a good time to catch up on some cases we missed earlier in the year.  So, we will cover a different case each day this week.  Enjoy!

By the way, the Rambus cases are among the most “famous” from an eDiscovery spoliation standpoint.  As you’ll see from the description below, Rambus is still paying for activities way back in 1998 that have been ruled to be spoliation of data.

In Hynix Semiconductor Inc. v. Rambus, Inc., No. C-00-20905 RMW, 2012 U.S. Dist. (N.D. Cal. Sept. 21, 2012), California District Judge Ronald Whyte used his discretion to fashion an appropriate fact-specific sanctions award after it found a party willfully destroyed evidence despite reasonably foreseeable litigation, it destroyed such evidence in bad faith, and the opposing party suffered prejudice.

In this discovery dispute over spoliation and sanctions in a patent lawsuit, the district court reconsidered this case after its previous decision was vacated by the Federal Circuit and remanded. Previously, in this court, Hynix Semiconductor Inc. et al. (Hynix) had “unsuccessfully urged” that Rambus, Inc. (Rambus) had engaged in the spoliation of evidence, and “its ‘unclean hands’ warranted dismissal of its patent infringement claims.” On appeal, however, the Federal Circuit remanded the case so that the district court could consider it under a different spoliation test, which had been applied in another case presenting an identical spoliation issue, Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011) (Micron II).

Therefore, the court had to analyze whether “Rambus destroyed records at a time when litigation was reasonably foreseeable. If so, the court will determine whether Rambus acted in bad faith. Next, the court will determine the nature and extent of any prejudice suffered by Hynix as a result of the spoliation. Finally, the court will decide what sanction is appropriate, if any.”

The court found that Rambus engaged in spoliation of evidence when it destroyed documents on “Shred Days” in 1998, 1999, and 2000 when it invited an outside company to Rambus to shred documents that employees provided for shredding in accordance with the company’s document retention policy. The court found that on those Shred Days, litigation was reasonably foreseeable. Noting that the “important question” was not when Rambus’s duty to preserve arose, “but rather the binary question of whether litigation was reasonably foreseeable by the date on which documents were destroyed,” the court found that although litigation was not foreseeable when Rambus destroyed some of its back-up tapes in July 1998, it was reasonably foreseeable by the time of Shred Day 1998.

At the time the back-up tapes were destroyed in July, the court pointed to numerous questions that existed about the success of Rambus’s patented product and what features the existing patents covered. Management had only held hypothetical discussions about potential targets of litigation, and they had not discussed in depth budgeting for litigation. Destruction of back-up tapes was done “primarily” for “housekeeping” purposes.

By the time Shred Day 1998 occurred, however, Rambus “anticipated instituting litigation.” A Rambus officer, Joel Karp, whom the company hired in 1997 to assess whether competitors were infringing on Rambus’s patents, had advised employees of the company’s documentation retention policy, and “the fact that he advised them to discard documents that questioned the patentability of ideas suggests he had litigation on his mind.” Moreover, a litigation strategy was being “aggressively developed,” and Rambus was turning its attention heavily toward a certain part of its business, which it believed it had to fight to protect.

Thus, finding that Rambus had engaged in spoliation beginning with Shred Day 1998, the court turned to analyze whether Rambus acted with “unclean hands.” The court set forth the applicable standard: “To find bad faith in the spoliation context, ‘the district court must find that the spoliating party intended to impair the ability of the potential defendant to defend itself.’” While Rambus asserted that it conducted document destruction only to execute its “neutral” document retention policy, Hynix argued that regardless of Rambus’s compliance with its own document retention policy, Rambus knew litigation was reasonably foreseeable and destroyed documents in bad faith “to gain a litigation advantage.” In addition, Hynix argued that Karp ordered Rambus employees to destroy documents selectively, keeping ones that would protect their patents and destroying ones that would cause difficulty in litigation.

Parsing the evidence, the court found:

“Although the evidence does not support a conclusion that Rambus deliberately shredded documents it knew to be damaging, the court concludes that Rambus nonetheless spoliated evidence in bad faith or at least willfully. This conclusion is based upon the facts that: (1) Rambus destroyed records when litigation was reasonably foreseeable; (2) Karp, the officer in charge of the destruction, was experienced in litigation and undoubtedly knew that relevant documents should not be destroyed when litigation is reasonably foreseeable; (3) the destruction was part of a litigation plan; (4) one of the motives of the destruction was to dispose of potentially harmful documents; and (5) Rambus shredded a huge number of documents without keeping any records of what it was destroying.”

The court then turned to the issue of whether Rambus’s bad faith spoliation of evidence had prejudiced Hynix. The Micron II court set forth the applicable standard for evaluating prejudice: “‘Prejudice to the opposing party requires a showing that the spoliation materially affect[s] the substantial rights of the adverse party and is prejudicial to the presentation of his case.’ (citation omitted) ‘In satisfying that burden, a party must only come forward with plausible, concrete suggestions as to what [the destroyed] evidence might have been.’” Moreover, if the spoliation had already been determined to have been in bad faith, the spoliating party had a heavy burden to show its document destruction had not prejudiced the other party. Yet, the court cautioned, “the alleged misconduct by the spoliator . . . must relate directly to an issue concerning which the complaint is made.”

Here, Hynix had claimed that Rambus’s patents were invalid, and the court explained, “the invalidity defenses of anticipation and obviousness depend upon how one of ordinary skill in the art would have understood the prior art.” In this case, all prior art was accessible to Hynix and therefore the document destruction did not prejudice Hynix. The other defense of “inadequate written description” similarly turned on information that was available to Hynix. As such, the court found that Hynix’s invalidity defenses were not prejudiced by Rambus’s spoliation of evidence.

On the other hand, however, the court found that Rambus did not overcome Hynix’s allegations of prejudice based on its unenforceability complaint against Rambus. The court found that “it appear[ed] plausible that spoliated evidence might have shed additional light on the scope” of certain disclosure obligations that Rambus had with respect to its patents. Because this allegation offered a concrete suggestion for Hynix as to what the destroyed evidence could have been, Rambus had a heavy burden to disprove prejudice, which the court found it could not overcome.

Having concluded that Rambus “spoliated documents in bad faith and that Hynix has established prejudice,” the court then considered sanctions, noting it had “wide discretion whether to hold the patents-in-suit unenforceable pursuant to Hynix’s unclean hands defense, or to impose a different sanction.”

The court used the following analysis to evaluate the appropriateness of sanctions:

“In gauging the propriety of the sanction, the district court must take into account

“(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.” (citation omitted) The sanction ultimately imposed must be commensurate with the analysis of these factors.”

In examining the Rambus’s degree of fault, the court found that

“Rambus’s fault was significant but not as great as that of a spoliator who knows of adverse evidence and specifically alters, hides or destroys that evidence. There is a possibility that Rambus did not destroy any evidence that would have been beneficial to Hynix’s litigation position. However, because Rambus is the party that destroyed documents by the box and bag without keeping any record of what was destroyed, Rambus must suffer the consequences of that uncertainty.”

Hynix’s degree of prejudice was significant, the court held, because it “was arguably prejudiced in its ability to litigate its equitable claims and defenses,” and if it had been able to better litigate them, it possibly could have avoided a royalty fee that was awarded against it based on a previous determination that Rambus’s patents were valid.

Therefore, the court “conclude[d] that the sanction most commensurate with Rambus’s conduct and [the fact that a royalty rate was previously awarded] is to strike from the record evidence supporting a royalty in excess of a reasonable, nondiscriminatory royalty. Such a remedy recognizes that Rambus’s patents have been determined to be valid while at the same time recognizing that Rambus’s spoliation of evidence should preclude it from entitlement to a royalty that places Hynix at a competitive disadvantage.” The court decided to use its discretion to fashion a sanction, noting that “a retrial of the case with either an adverse jury instruction or an evidentiary exclusion order would involve considerably more delay and expense,” and there had already been great delay in reaching a final determination in the case.

So, what do you think?  Was it appropriate to issue sanctions at this point and, if so, were they harsh enough?  Please share any comments you might have or if you’d like to know more about a particular topic.

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

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

Defendant Claiming Not Reasonably Accessible Data Has Some ‘Splaining To Do – eDiscovery Case Law

In Murray v. Coleman, No. 08-CV-6383, 2012 U.S. Dist. (W.D.N.Y. Sept. 12, 2012), the plaintiff alleged harassment and retaliation in connection with his employment with the New York State Department of Correctional Services (DOCS). This discovery dispute arose when the plaintiff requested access to certain electronic records, alleging that the defendants withheld them.

In his motion, the plaintiff asserted that the defendants “never provided a ‘chronological e-mail history of any kind.’” In response, defense counsel “simply aver[red] that after plaintiff filed this motion to compel, he provided plaintiff with…‘the documents sought’ and, therefore, plaintiff’s motion is ‘moot.’” The plaintiff responded to the defendant’s reply, asserting that “‘virtually no electronic records [were] included’ in defendant’s discovery responses.”

Because the defense counsel’s response to the plaintiff’s motion was “terse,” New York Magistrate Judge Jonathan Feldman stated that it was “difficult . . . to determine whether defendants have in fact produced all relevant electronic records and e-mails as demanded by plaintiff.” Lacking in defense counsel’s response were “details regarding how and where electronically stored information (“ESI”) is held, what efforts were made to preserve relevant ESI, and the method used by defendants to locate, search and produce relevant ESI.”

As such, Judge Feldman “construe[d the defendants’] response as a claim that ESI, including e-mails, [were] not . . . produced because the data demanded [was] destroyed or [was] not ‘reasonably accessible’” pursuant to Rule 26(b)(2)(B) of the Federal Rules of Civil Procedure, which requires a producing party to “show that the information is not reasonably accessible because of undue burden or cost.”

Therefore, because the defendants had not sufficiently demonstrated that the ESI was not reasonably accessible, Judge Feldman ordered as follows:

“Defense counsel shall file an affidavit of a person with direct knowledge of DOCS’s document and e-mail retention system stating: (1) the document/e-mail retention policy used by DOCS currently and during the relevant time periods, (2) the dates of e-mails “reasonably accessible” for production in this litigation, (3) the back up or legacy system, if any, used by DOCS to preserve or archive e-mails that are no longer “reasonably accessible” and whether responsive documents or data may potentially be found on such back up or legacy systems, (4) whether accessing archived or back up e-mails would be unduly burdensome or costly and why, and (5) the date when a litigation hold or document preservation notice was put in place by DOCS regarding this matter and either a copy of or a description of the preservation or litigation hold utilized by DOCS.”  [emphasis added]

Judge Feldman ordered the defense to provide this affidavit within 30 days.

So, what do you think?  Was this an appropriate ruling given the situation?  Or did the defendant deserve sanctions?  Please share any comments you might have or if you’d like to know more about a particular topic.

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

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

Cloning of Computer Files: When There’s a Will, There’s a Way – eDiscovery Case Law

In Matter of Tilimbo, No. 329/M-2007, 2012 N.Y. Misc. (Surr. Ct., Bronx Cnty. Aug. 22, 2012), a court held it was permissible to order cloning of computer files where doing so did not place an unreasonable burden on a nonparty, appropriate steps were taken to protect any privileged information, and the nonparty had not previously produced the requested information in hard copy.

In this claim based on a will contest, the plaintiffs moved for an order permitting their computer forensic expert to examine the personal computer hard drive of a nonparty witness, the deceased’s attorney Patrick Wynne, limited to finding and reviewing documents related to Rose Tilimbo, her will, as well as a deed transfer from her to Salvatore Tilimbo that formed the basis of the will contest. Wynne objected on the basis that he had already, at the court’s direction, been deposed on the subject and “provided an affirmation stating that he conducted the requisite diligent search of his ‘computer files and any other [additional] relevant files’ and did not find responsive documents or computer files.” He argued that “a balancing of the sanctity of the attorney-client privilege against the scope of permissible discovery warrant[ed] the denial of the motion.”

Noting that ESI of a nonparty is discoverable, the court held that so long as it did not place an unreasonable burden on Wynne, a solo practitioner, the examination and cloning of Wynne’s computer was permissible. Although Wynne had produced in hard copy all of the documents he said he possessed, the court pointed out that such disclosures did not prevent the ESI itself from being sought. In addition, Wynne had not been able to produce any documents related to the deed transfer at issue, and any such documents that existed would clearly be material and relevant to the case. Therefore, the court offered the following parameters for the cloning:

“The court finds that the cloning would not place an unreasonable burden upon Wynne if all of the computers can be cloned at his office in four hours or less on a date and at a time that he selects, which may include in whole or in part a time after normal business hours. Alternatively, the cloning will be allowed outside of Wynne’s office if it can be done by removing the computer(s) on a Saturday at any time selected by Wynne and returned to his office by Monday between 8:30 and 9:00 a.m. If Wynne prefers, the computer(s) may be removed from his office on any other day, provided the computer(s) are returned to his office within 24 hours. If the cloning is to be done outside of Wynne’s office and more than one computer is to be cloned, then at Wynne’s option, only one computer may be removed from his office at a time. In the event that the cloning can be accomplished within the time allocated herein either at Wynne’s office or by removal of the computer(s), Wynne shall have the right to select whether or not he wants the cloning to be done at his office. In the event that the cloning requested by the movants cannot be performed within the time frame provided herein, the court finds that the disruption to Wynn’s practice of law outweighs the benefits that the movants might obtain from the information provided by the cloning. Furthermore, should a computer be removed from Wynne’s office and not returned within the time provided herein, the movants shall pay Wynne $200 for each hour or part thereof that the return is delayed.”

In addition, the forensic analysts were limited to locating documents likely to lead to discoverable evidence related to the decedent and were given specific instructions on what to do with any unrelated documents that were accidentally uncovered.

So, what do you think?  Should cloning of the computer have been allowed?  Please share any comments you might have or if you’d like to know more about a particular topic.

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

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

Defendant Appeals Sanctions, Only to See Sanction Amount Raised on Appeal – eDiscovery Case Law
 

In Multifeeder Tech. Inc. v. British Confectionery Co. Ltd., No. 09-1090 (JRT/TNL), (D. Minn. Sept. 18, 2012), the defendant had been previously sanctioned $500,000 ($475,000 to the plaintiff and $25,000 to the court) and held in contempt of court by the magistrate judge for spoliation, who also recommended an adverse inference instruction be issued at trial.  The defendant appealed to the district court, where Minnesota District Judge John Tunheim increased the award to the plaintiff to $600,000.  Oops!

Background

In this breach of contract case, the magistrate court granted the plaintiff’s motion in 2010 to compel discovery of several specific document requests after the defendants failed to comply with those requests.  After the defendant had still failed to comply six months later, the plaintiff motioned the court for sanctions due to the defendant’s failure to comply with the court’s previous 2010 order. While granting the plaintiff’s motion for sanctions, the magistrate judge also ordered that the parties try to cooperate to agree on the handling of eDiscovery in the case. Failing an agreement, each side would then be permitted to submit a proposal for the court to use to establish an eDiscovery protocol.

Forensic Examination of Defendant’s Computers

When the parties could not come to an agreement, they did so, and the court chose the plaintiff’s proposal, appointing a computer forensic expert to image and examine the defendant’s computers, allocating the forensic discovery costs between the parties.  The forensic examination identified several occurrences of spoliation by the defendant, including commercial wiping software found on one custodian’s computer with “six deletions occurring after both the commencement of the lawsuit and issuance of the ESI Protocol Order” and concealment of an encrypted volume and deletion of a PST file by a vice president of the company.

Sanctions Ordered by Magistrate Court

After reviewing the facts and sanctions at the Court's disposal, the Magistrate Judge recommended that:

(1)   An adverse inference instruction be given with regard to the defendant’s destruction of evidence;

(2)   The defendant be held in civil contempt, and ordered to pay $25,000 to the Court and $475,000 to the plaintiff.  With regard to the $475,000, the Court found that amount to constitute reasonable expenses under Fed. R. Civ. P. 37(b)(2)(C) because "it encompasses much of CFS's current unpaid invoices, some past paid amounts by Multifeeder to CFS, and reasonable legal fees and costs for litigating this discovery debacle."

Both Parties Object to Sanction Amount

The defendant objected with regard to the finding of spoliation by the two individuals, objected that the $475,000 sanction was too high because the plaintiff was partly responsible for the “massive” costs for the forensic examination and appealed to the district court.  In turn, the plaintiff also objected to the sanction amount, indicating that the “award fails to adequately cover the reasonable expenses it incurred as a result of [the defendant’s] conduct” and asked that the total amount be raised to over $692,000.

Sanction Amount is Increased, not Decreased

Judge Tunheim upheld the finding of spoliation against the two individuals.  With regard to the sanction amount, Judge Tunheim noted that “the recommended $475,000 sanction is insufficient” and found as follows:

“The Court has also considered that this is not the first sanctions order in this case; British's repeated violations of the Court's discovery orders warrant significant sanctions to deter British from further misconduct. Therefore, the Court finds that a sanction of $600,000 represents reasonable expenses and attorneys' fees because it encompasses much of CFS's current unpaid invoices, at least some past paid amounts by Multifeeder to CFS, and reasonable legal fees and expenses in litigating this discovery dispute.” [emphasis added]

Judge Tunheim also ordered the defendant to pay “half of the sanctions award, $300,000, within 90 days of the date of this Order. The second half of the sanctions award will be payable no later than 120 days of the date of this Order.”

So, what do you think?  Should the defendant appeal again or quit before they get further behind?  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.

eDiscovery Daily is Two Years Old Today!
 

It’s hard to believe that it has been two years ago today since we launched the eDiscoveryDaily blog.  Now that we’ve hit the “terrible twos”, is the blog going to start going off on rants about various eDiscovery topics, like Will McAvoy in The Newsroom?   Maybe.  Or maybe not.  Wouldn’t that be fun!

As we noted when recently acknowledging our 500th post, we have seen traffic on our site (from our first three months of existence to our most recent three months) grow an amazing 442%!  Our subscriber base has nearly doubled in the last year alone!  We now have nearly seven times the visitors to the site as we did when we first started.  We continue to appreciate the interest you’ve shown in the topics and will do our best to continue to provide interesting and useful eDiscovery news and analysis.  That’s what this blog is all about.  And, in each post, we like to ask for you to “please share any comments you might have or if you’d like to know more about a particular topic”, so we encourage you to do so to make this blog even more useful.

We also want to thank the blogs and publications that have linked to our posts and raised our public awareness, including Pinhawk, The Electronic Discovery Reading Room, Unfiltered Orange, Litigation Support Blog.com, Litigation Support Technology & News, Ride the Lightning, InfoGovernance Engagement Area, Learn About E-Discovery, Alltop, Law.com, Justia Blawg Search, Atkinson-Baker (depo.com), ABA Journal, Complex Discovery, Next Generation eDiscovery Law & Tech Blog and any other publication that has picked up at least one of our posts for reference (sorry if I missed any!).  We really appreciate it!

We like to take a look back every six months at some of the important stories and topics during that time.  So, here are some posts over the last six months you may have missed.  Enjoy!

We talked about best practices for issuing litigation holds and how issuing the litigation hold is just the beginning.

By the way, did you know that if you deleted a photo on Facebook three years ago, it may still be online?

We discussed states (Delaware, Pennsylvania and Florida) that have implemented new rules for eDiscovery in the past few months.

We talked about how to achieve success as a non-attorney in a law firm, providing quality eDiscovery services to your internal “clients” and how to be an eDiscovery consultant, and not just an order taker, for your clients.

We warned you that stop words can stop your searches from being effective, talked about how important it is to test your searches before the meet and confer and discussed the importance of the first 7 to 10 days once litigation hits in addressing eDiscovery issues.

We told you that, sometimes, you may need to collect from custodians that aren’t there, differentiated between quality assurance and quality control and discussed the importance of making sure that file counts add up to what was collected (with an example, no less).

By the way, did you know the number of pages in a gigabyte can vary widely and the same exact content in different file formats can vary by as much as 16 to 20 times in size?

We provided a book review on Zubulake’s e-Discovery and then interviewed the author, Laura Zubulake, as well.

BTW, eDiscovery Daily has had 150 posts related to eDiscovery Case Law since the blog began.  Fifty of them have been in the last six months.

P.S. – We still haven't missed a business day yet without a post.  Yes, we are crazy.

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

eDiscovery Milestones: Our 500th Post!

One thing about being a daily blog is that the posts accumulate more quickly.  As a result, I’m happy to announce that today is our 500th post on eDiscoveryDaily!  In less than two years of existence!

When we launched on September 20, 2010, our goal was to be a daily resource for eDiscovery news and analysis and we have done our best to deliver on that goal.  During that time, we have published 144 posts on eDiscovery Case Law and have identified numerous cases related to Spoliation Claims and Sanctions.   We’ve covered every phase of the EDRM life cycle, including:

We’ve discussed key industry trends in Social Media Technology and Cloud Computing.  We’ve published a number of posts on eDiscovery best practices on topics ranging from Project Management to coordinating eDiscovery within Law Firm Departments to Searching and Outsourcing.  And, a lot more.  Every post we have published is still available on the site for your reference.

Comparing our first three months of existence with our most recent three months, we have seen traffic on our site grow an amazing 442%!  Our subscriber base has nearly doubled in the last year alone!

And, we have you to thank for that!  Thanks for making the eDiscoveryDaily blog a regular resource for your eDiscovery news and analysis!  We really appreciate the support!

I also want to extend a special thanks to Jane Gennarelli, who has provided some wonderful best practice post series on a variety of topics, ranging from project management to coordinating review teams to learning how to be a true eDiscovery consultant instead of an order taker.  Her contributions are always well received and appreciated by the readers – and also especially by me, since I get a day off!

We always end each post with a request: “Please share any comments you might have or if you’d like to know more about a particular topic.”  And, we mean it.  We want to cover the topics you want to hear about, so please let us know.

Tomorrow, we’ll be back with a new, original post.  In the meantime, feel free to click on any of the links above and peruse some of our 499 previous posts.  Maybe you missed some?  😉

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

eDiscovery Trends: Charges Against Suspect Dismissed Partially Over Storage of Two Terabytes
 

Law Technology News had an interesting article regarding a DEA criminal case written by Ryan J. Foley (Two Terabytes Too Much Evidence for DEA).  Here’s the scenario.

Fugitive Miami doctor Armando Angulo was indicted in 2007 in a multimillion dollar scheme that involved selling prescription drugs to patients who were never examined or even interviewed by a physician.  He fled to his native Panama in 2004 after the Drug Enforcement Administration began its investigation of him.  While the US does have an extradition treaty with Panama, Panamanian authorities say they do not extradite their own citizens.

The case led to conviction of 26 defendants (including 19 doctors) and recovery of $7 million, but Angulo remains at large.  Information related to the case took up two terabytes of hard drive space – 5 percent of the DEA's worldwide electronic storage (which would mean the DEA only has 40 total terabytes worldwide?).  Other case information also included “several hundred boxes of paper containing 440,000 documents, plus dozens of computers, servers, and other bulky items.”

As a result, noting that “[c]ontinued storage of these materials is difficult and expensive”, Stephanie Rose, the U.S. attorney for northern Iowa, dropped the charges, calling the task "an economic and practical hardship".  U.S. District Judge Linda Reade dismissed the case with prejudice; therefore, it cannot be refiled.  However, Angulo is still wanted for separate Medicaid fraud and narcotics charges in Florida, so he’s not completely “off the hook” with regard to criminal investigations.

Does it seem unbelievable that the DEA is walking away from a case for which storage to support it could be purchased from Best Buy for less than $100?  It’s probably safe to assume that the requirements for storage of criminal evidence must meet certain requirements for security and chain of custody that makes the cost for two terabytes in the DEA server environment considerably more expensive than that.  In the LTN article, University of Iowa computer scientist Douglas Jones notes that it’s possible that the DEA’s server is small and needs replacement, but that doing so while maintaining integrity of the data may be costly and risky.

I have not worked for a government agency supporting prosecution of criminal cases, but I would imagine that records management and preservation requirements are at a completely different level than those of many organizations managing data to support their civil litigation docket.  Criminal cases can go on for years or even decades through appeals, so I would think it’s a unique challenge for these agencies.  So, it surprises me that the DEA only has 40 terabytes of storage worldwide.

So, what do you think?  Do you work for a government agency prosecuting criminal cases?  How does your organization handle records management and preservation?  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.

eDiscovery Case Law: Pension Committee Precedent Takes One on the Chin
 

In Chin v. Port Authority of New York and New Jersey, No. 10-1904-cv(L), 2012 U.S. App. (2d Cir. July 10, 2012), the Second Circuit Court of Appeals ruled it was within a district court’s discretion not to impose sanctions against a party for its failure to institute a litigation hold.

In its ruling, the appellate court rejected “the notion that a failure to institute a ‘litigation hold’ [at the onset of litigation] constitutes gross negligence per se” and therefore automatically subjects a violating party to sanctions.

The defendant destroyed files in this employment discrimination case relating to its promotion process after a duty to preserve them had attached, but the Second Circuit declined to follow a bright line rule set forth by U.S. District Court Judge Shira Scheindlin of the Southern District of New York in Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, which considered it to be grossly negligent for a party not to institute a litigation hold at the onset of discovery. The appeals court stated, “Rather, we agree that ‘the better approach is to consider [the failure to adopt good preservation practices] as one factor’ in the determination of whether discovery sanctions should issue.”

With regard to the factors a party must establish for an adverse inference instruction, the court noted:

“[A] party seeking an adverse inference instruction based on the destruction of evidence must establish (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a culpable state of mind; and (3) that the destroyed evidence was relevant to the party's claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.”

Standing by its own precedent in Residential Funding Corp. v. DeGeorge Financial Corp., the court held that the district court had not abused its discretion:

“[A] finding of gross negligence merely permits, rather than requires, a district court to give an adverse inference instruction…Even if we assume arguendo both that the Port Authority was grossly negligent and that the documents here were ‘relevant,’ we have repeatedly held that a “case-by-case approach to the failure to produce relevant evidence,” at the discretion of the district court, is appropriate. In this case, the district court concluded that an adverse inference instruction was inappropriate in light of the limited role of the destroyed folders in the promotion process and the plaintiffs’ ample evidence regarding their relative qualifications when compared with the officers who were actually promoted.”

So, what do you think?  Should either court have followed the precedent of Pension Committee or was the decision appropriate?  Please share any comments you might have or if you’d like to know more about a particular topic.

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

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

eDiscovery Case Law: More Sanctions for Fry’s Electronics
 

In E.E.O.C. v Fry’s Electronics, Inc., No. C10-1562RSL, 2012 U.S. Dist. (W.D. Wash. July 3, 2012), Washington District Judge Robert S. Lasnik ordered several sanctions against the defendant in this sexual harassment case (including ordering the defendant to pay $100,000 in monetary sanctions and ordering that certain evidence be considered presumptively admissible at trial), but stopped short of entering a default judgment against the defendant.  This ruling came after having previously ordered sanctions against the defendant less than two months earlier.

Prior Sanctions

On May 10, Judge Lasnik granted in part plaintiffs' motion for sanctions in this case, finding that the defendant had spoliated evidence, including data and computer hard drives. In that ruling, Judge Lasnik believed that the prejudicial effect of the spoliation could be counteracted by “(a) instructing the jury that one of the justifications for firing [one of the plaintiffs] was pretextual and (b) allowing plaintiff considerable leeway in arguing what information might have been gleaned from the computer hard drives had they not been destroyed by defendant”. At the time, Judge Lasnik also indicated “some concern regarding the efficacy and thoroughness of defendant's searches” which led to more information being discovered after he ordered a second search.

Additional Spoliation and Misconduct

During a Rule 30(b)(6) deposition held on May 30, the plaintiffs learned for the first time that the accused individual had previously been accused of sexual harassment in 2001 and that an investigation had been conducted. According to Judge Lasnik, the defendant “intentionally withheld this information and the related documents from discovery by raising unfounded objections and ‘negotiating’ a narrowing of the discovery requests” and found the defendant's conduct to be “unfair, unwarranted, unprincipled, and unacceptable”.

Misconduct by the defendants noted by Judge Lasnik also included the redaction of responsive information, “[e]ven after defendant's objections to certain discovery requests were overruled”, as well as production of hundreds of pages of information with the “fallacious argument” that they were relevant to the claims.

Consideration of Default Judgment Sanction

Judge Lasnik noted that it is “once again left to determine whether to strike defendant's answer and enter default judgment against it”, but noted that dismissal is a “harsh sanction” and the following factors must be considered when determining “whether a dispositive sanction is appropriate under either its inherent powers or Rule 37(b): (1) the public's interest in the expeditious resolution of litigation; (2) the Court's need to manage its docket efficiently and effectively; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy in favor of considering cases on the merits; and (5) the availability of less drastic sanctions.”  While finding that the first three factors supported a dispositive sanction, Judge Lasnik ruled against a dispositive sanction in factor 4, indicating that “[t]he public has an interest in a determination of those issues based on the facts, rather than by judicial fiat”.

Lesser Sanctions Ordered

Instead, Judge Lasnik ordered lesser sanctions, indicating that “Defendant's affirmative defenses related to (i) its efforts to prevent and correct harassment in the workplace, (ii) plaintiffs' failure to utilize protective and corrective opportunities provided by defendant, (iii) its good faith and/or privilege to act as it did in this case are STRICKEN.” He also stated that certain documents and testimony related to “other complaints or reports of sexual harassment” at the company were “presumptively admissible at trial”. He also ordered sanctions of $100,000 “to offset the excess costs caused by defendant’s discovery violations, to punish unacceptable behavior, and as a deterrent to future bad conduct” to be split evenly between the two individual plaintiffs, the EEOC and the Court Clerk.

So, what do you think?  Are you surprised that the defendant didn’t receive a default judgment sanction?  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.

eDiscovery Case Law: No Sanctions When You Can’t Prove Evidence Was Destroyed
 

In Omogbehin v. Cino, No. 11-2223, 2012 U.S. App. (3d Cir. June 20, 2012), the plaintiff claimed that the District Court erred in denying his motion for spoliation sanctions and appealed to the US Third Circuit Court of Appeals, but lost as the appellate court upheld the rulings by the district judge and magistrate judge.

In this employment discrimination case, the plaintiff (Stephen Omogbehin) filed a motion for adverse inference jury instructions with the belief that the defendants destroyed or suppressed certain eMails during discovery. Unfortunately for the plaintiff, he not only failed to demonstrate evidence of spoliation, he also could not even prove that the alleged eMails existed. Two of the defendants claimed no such eMails existed, with support from their IT experts, who explained that all eMails from the relevant time frame had been produced.

Four-Prong Test

The appellate court upheld the rulings by the district judge and magistrate judge, who had used the four-prong test to determine whether spoliation occurred, requiring the plaintiff to demonstrate that “[1] the evidence was in the party’s control; [2] the evidence is relevant to the claims or defenses in the case; [3] there has been actual suppression or withholding of evidence; and, [4] the duty to preserve the evidence was reasonably foreseeable to the party.” Only after establishing that spoliation occurred, would a separate analysis be conducted to determine whether sanctions are appropriate. To obtain an adverse inference instruction, a party must show “there has been an actual suppression or withholding of the evidence.”

The Magistrate Judge denied Omogbehin's motion because he had failed to show that the emails were actually sent or received, let alone that that any spoliation occurred, much less that it was done intentionally.  The District Court affirmed the Magistrate Judge, concluding that Omogbehin had not satisfied his burden of establishing facts from which the court could "at least infer that the evidence existed in the first place."

The appellate court noted that the defendants “produced the information and documents that Omogbehin requested; that they did not contain what he had hoped or expected is not sufficient to satisfy his burden. He must provide some proof that what he seeks actually existed, but failed to do so.”

Compare to Zubulake

This is an interesting contrast to the Zubulake case, which was also an employment discrimination case.  In that case, Laura Zubulake preserved and produced her own copies of emails that the defendants failed to produce (at least initially) which led to the court’s decision to order discovery from backup tapes that led to additional productions of relevant emails.  Due to the fact that tapes from some key individuals were missing and that the other tapes had led to discovery of additional relevant emails, the court ultimately concluded that the destruction of those tapes resulted in spoliation of relevant evidence.  Zubulake was able to prove a pattern of spoliation that Omogbehin was unable to prove.

So, what do you think?  Have you ever pursued, or been forced to defendant against, spoliation sanctions?  Please share any comments you might have or if you’d like to know more about a particular topic.

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

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