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Case Law & Best Practices

Failure to Preserve Emails Results in Sanctions

Posted in Attorneys' Fees, Litigation Hold, Preservation, Sanctions, Spoliation

We all know that it can be damaging to one’s case if a party to a litigation fails to preserve relevant information.  But when, exactly, does one’s duty to preserve (potentially relevant information) arise?  And what type of sanctions are federal courts imposing under the amended federal rules for preservation failures?

When Does One’s Duty to Preserve Arise?

Different jurisdictions have different rules regarding when the duty to preserve arises but the most common standard is once that party “reasonably anticipates litigation.” This standard is well established in the federal courts and is embraced in New York (see, e.g., Voom HD Holdings LLC v EchoStar Satellite, (2010 NY Slip Op 33764(U)).

And, while it can (sometimes) be difficult to pinpoint precisely when one reasonably anticipates litigation, a recent case in the Northern District of California demonstrates one party’s blatant disregard for its obligation to preserve.  Specifically, in Mathew Enter. v. Chrysler Grp. LLC (No. 13-cv-04236-BLF, 2016 U.S. Dist. LEXIS 67561 [N.D. Cal. May 23, 2016]), the plaintiff made no effort to preserve its internal or external emails after threatening the defendant with litigation.  Not only did plaintiff affirmatively change the email system it utilized for its business and did so after threatening Chrysler Group, LLC with a lawsuit, but Mathew Enterprises also failed to notify its database vendor of the litigation it threatened to file against defendant.   As a result, potentially relevant emails continued to be deleted regularly per normal business practice.  Indeed, there was no suspension of the auto-delete functionality used by Mathew Enterprises and no efforts were taken to otherwise maintain the emails.

Resulting Sanctions?

The Chrysler Group, LLC moved for sanctions against the plaintiff for the loss of these potentially relevant emails, highlighting there was no effort made to preserve and urged the court to utilize spoliation sanctions. The judge, Magistrate Judge Paul Grewal, issued FRCP 37(e) sanctions.  Specifically, he expanded the scope of evidence the Chrysler Group, LLC was allowed to bring to trial and he awarded reasonable attorney’s fees.   Moreover, Judge Grewal stated, “[Plaintiff’s] lackadaisical attitude towards document preservation took away [defendant’s] opportunity. Not only has spoliation occurred, but it also has prejudiced [defendant].”

The Mathew Enterprise case is a good reminder that preservation obligations must be taken seriously as the ramifications for failing to preserve can be significant.  It is thus critical that our clients are properly advised of the need to begin preservation efforts as soon as litigation is reasonably anticipated.  (i.e., upon receipt or transmittal of a cease and desist letter, for example).

Any Reasonable Litigant Should Understand Not to Destroy Evidence.

Posted in ESI

In the well-known saga commonly referred to as “deflategate,” (NFL Mgmt. Council v. NFL Players Ass’n., 2016 WL 1619883 [2d Cir. Apr. 25, 2016]) the Second Circuit upheld the arbitrator’s decision to suspend Patriots’ quarterback, Tom Brady.  Specifically, Brady, was suspended for four games after it surfaced that he participated in deflating the footballs used in Superbowl XLIX below the regulation pounds per square inch (“PSI”).  In reaching that decision, the arbitrator considered several factors, including that Brady was uncooperative with the National Football League’s investigation insofar as he willfully destroyed his cell phone.  Perhaps not surprisingly, the arbitrator opined that the cell phone may have housed evidence (in the form of text messages or otherwise) of Brady’s involvement in deflating the footballs. In seeking to have the decision overturned, Brady argued that he had no idea that “destruction of the cell phone would even be at issue in the arbitration proceeding.” Because, however, Brady intentionally destroyed his cell phone, the arbitrator was able to infer that the cell phone did contain evidence which would be unfavorable to Brady.

The Second Circuit upheld the arbitration decision, noting that “any reasonable litigant would understand that the destruction of evidence, revealed just days before the start of arbitration proceedings, would be an important issue.”

The plain and simple message from this case – make sure to educate your clients about the importance of preserving – and refraining from any modification/destruction of – evidence that may be relevant to a litigation.  The panoply of sanctions available to the Court when one fails to abide by their preservation obligations is vast.

Relevant Social Media Posts Cannot be Destroyed Nor Can They Be Hidden

Posted in ESI

In Thurmond v. Bowman, 2016 WL 1295957 (W.D.N.Y. Mar. 31, 2016), a Fair Housing Act case, defendants moved for sanctions against the plaintiff alleging plaintiff deleted Facebook posts relevant to this lawsuit. The plaintiff argued that the posts were not deleted, but instead were “hidden” from public view.  Soon thereafter, plaintiff produced a printed set of most of the “missing” Facebook posts.  Three posts, however, remained missing. In denying defendants’ motion, the court found that the “missing” Facebook posts, because of their nature (photographs of the plaintiff’s children, supplied as “screen shots” by the defendants), were not relevant to the case. Moreover, the court noted the defendants failed to request the information through discovery. The court specifically noted that one’s claim that all social media posts are relevant “sweeps far too broadly” and discovery must be tailored to relevant information.  However, because the plaintiff did change privacy settings to the Facebook account in violation of a previous court order to maintain the “status quo” of social media accounts, the plaintiff was warned that further conduct in this manner could result in sanctions.

The takeaway from this decision is that social media is here to stay and can be relevant to – and thus subject to production in – a litigation.  When advising your client about preservation obligations, be certain to remind them that social media outlets (facebook, Instagram, SnapChat, Musically,….) are all potential caches for relevant information and must be preserved when litigation is reasonably anticipated.

Difficulty in Assembling Responsive Electronic Data an Insufficient Reason to Deprive Litigant of the Critical Information

Posted in ESI

In an insurance law class action suit pending in the Western District of Missouri (Labrier v. State Farm Fire & Cas. Co., 2016 U.S. Dist. LEXIS 61246 [W.D. Mo. May 9, 2016]), State Farm Fire & Casualty Company (“State Farm”) requested the district court vacate a Special Master’s discovery order. The plaintiff’s allegations were that State Farm depreciated much of its labor costs when calculating a home insurance claim payment. After State Farm objected to the class’s discovery requests, stating that access to its electronic claims system would violate trade secrets, the Special Master approved interrogatories, which requested information regarding an estimated 150,000 claims.  Resort to interrogatories resulted in State Farm having to utilize two separate databases for each claim. The district court rejected State Farm’s argument that to gather information in this matter is too burdensome, stating that “even if the matching must be done claim by claim, the time and cost involved does not justify preventing [the plaintiff] access to critical information.” The court denied State Farm’s motion to vacate the Special Master’s discovery order, explaining that “[a] litigant cannot keep its own system secret then refuse to gather the information itself.”

This decision reminds of us of the balance between providing a party with information necessary to the lawsuit and the burden of collecting/producing same.  Where, as here, the requested information is “critical,” the courts are less likely to sympathize with a party’s grievance that producing the same is time consuming and/or costly.  This was especially true in the Labrier case because State Farm sought to avoid allowing access to its confidential electronic claims system.  In doing so, State Farm was forced to resort to a far more time consuming and laborious process such that plaintiff was able to receive the information needed to prosecute the suit.

Lightning Strikes and Power Surges Insufficient to Insulate Defendant from Discovery Sanctions

Posted in Adverse Interference, ESI, Preservation, Sanctions, Spoliation

In a trademark infringement case pending in the Northern District of California (InternMatch v. Nxtbigthing, 2016 WL 491483 [N.D. Cal. Feb. 8, 2016]), plaintiff requested copies of any documents relating to the defendants’ defense that it had continually and pervasively used the trademark at issue.   The defendants were not able to produce many responsive documents and advised plaintiff that a lightning strike in 2011 and a subsequent power surge in April 2015, destroyed responsive documents, including relevant corporate records.  Defendants further noted that after the power surge, they discarded certain laptops and hard drives that were damaged by the event.

Believing defendants intentionally destroyed electronic versions of responsive documents, plaintiff sought sanctions against defendants.  The Court, following the newly amended FRCP 37(e), found defendants violated their duty to preserve relevant evidence.  The Court specifically noted that defendants failed to run diagnostics on the destroyed computer following the power surge to assess whether the files on the laptop’s hard drive could be recovered prior to discarding it.  Defendants failed to take any recovery efforts despite their claim that the only electronic copies of the marketing materials allegedly establishing “previous use” of the trademark existed on that computer. The Court also found the power surge to be an implausible claim. The Court held that “at the very least, [the] defendants consciously disregarded their obligations to preserve relevant evidence,” and granted the plaintiff’s request for an adverse inference instruction sanction.

This case reminds us that under the new Rule 37(e), courts are authorized to use specific measures, including adverse inference sanctions, if relevant information that should have been preserved is lost – irrespective of the mechanism that caused the loss. The decision also serves as a good reminder that electronic information is susceptible to destruction and modifications based upon uncontrollable events — like power surges — and we remain obligated to take prompt preservative/remedial measures upon learning of such events.

Defendants’ Proposal to Redact Non-Relevant Information Recently Upheld under Newly Amended Rule 26

Posted in FRCP

Chief Justice Roberts commented that the newly amended Federal Rule of Civil Procedure, Rule 26 “crystalizes the concept of reasonable limits in discovery through increased reliance on the common-sense concept of proportionality.”  This common sense approach was recently embraced by a Special Master, and then approved by the District Court Judge, in the products liability case In re Takata Airbag Prods. Liab. Litig., MDL No. 2599 (S.D. Fla. Mar. 1, 2016).

In that case, the defendants proposed to withhold or redact non-relevant information from their production of documents.  The proposal included redacting non-relevant parent emails from responsive families (i.e., if the email was not relevant but it’s attachments were, defendants proposed to redact the email, but produce the entirety of attachments).  Specifically, defendants proposed to redact information pertaining to seven discrete categories of information in an effort to balance their desire to protect highly confidential trade secrets while complying with their discovery obligations.

The District Court concluded the defendants’ proposal was appropriate and, quoting Chief Justice Robert’s comments about the then proposed amendments, highlighted that “a party is not entitled to receive every piece of relevant information,” and therefore “it is only logical” that “a party is similarly not entitled to receive every piece of irrelevant information in responsive documents if the producing party has a persuasive reason for why such information should be withheld.”  This “common Sense” approach is a fair and balanced way to proceed with discovery, especially when responsive information is mixed with non-responsive information.

While not discussed in the In re Takata case, query whether a redaction log – comparable to a privilege log — is advisable when applying responsiveness redactions to one’s production.  Such a log may prevent against gamesmanship and over-designations.  I, myself, have had occasion to apply responsiveness redactions to productions and have made it my practice to create a redaction log, which articulates – in a summary fashion – the reason for the redaction (i.e., redaction of information relevant to a contract other than the one at issue in this litigation).

What is a Data Map, Anyway?

Posted in ESI, Preservation, Preservation Obligation

When dealing with a lawsuit that inevitably will require the production of electronically stored information (“ESI”), one of the first things we (as counsel) have to do is figure out where that ESI resides.   But how, exactly, does one begin to determine where responsive data exists?  Well, consider the client’s data map.

Some of you may be thinking, what the heck is a data map?

A data map is just as it sounds – it is a way to understand the specifics of where responsive electronic information resides within a company/corporation’s infrastructure.  It often does not exist at the inception of a lawsuit, but instead is “drawn” by counsel after engaging in interviews with a client’s information technology (“IT”) represen­tative, the client’s general counsel, and/or  the individuals at the client who are most likely to have information responsive to the lawsuit (i.e., the custodians).  The resulting “map” should list as much information as possible about what electronic information exist (email, Excel documents, accounting reports), on what devices (lap top, shared drive, desktop, the cloud, backup servers), under whose care (custodian vs. IT), and how the data may be accessed.

It is critical to note though, the map that you create today, may not be accurate in a week.  Specifically, if a server fails, or a laptop crashes, for example, then data that existed in location “A” today, may reside at location “B” next week, and therefore, the data map from last week is no longer accurate.  The point being – even if a client hands you a data map at the inception of a litigation – you should confirm it is current and accurately reflects the existing infrastructure.

While this post is not intended to discuss litigation holds, suffice it to say that a data map can help focus a litigation hold (i.e., what media needs to be preserved and for which custodians) because the better you understand where the data resides, the easier it is to identify what needs to be preserved.

Some critical items to think about and discuss when meeting with the client/IT representative and endeavoring to create a data map.

What is the physical infrastructure in place at the client:

  1. Location
  • Where is the client’s datacenter?
  1. Specifics of infrastructure
  • Identify and secure server names, server location, and IP addresses of servers.
  • Make sure you understand the operating system in use, and whether the servers are backed up.
  1. Email specifics –
  • What application is used (i.e., Microsoft Exchange, Googlemail)?
  • Where is the email hosted (i.e., internally or elsewhere, are they stored locally or at server level)?
  • Are Emails backed-up? If so, with what frequency?
  • Where do those backups reside?
  • Is there an auto-delete functionality in place?
  • Is there a mailbox size limitation?
  1. Custodians –
  • Who are my custodians?
  • Where do they work?

For each custodian ask:

  • What computer(s) do they use
  • What is the name/IP address/operating system in use
  • What is the custodian’s email address
  • Custodian documents – can they be stored locally? Or must they be saved on a server share?  Here it is critical that you understand whether the custodian can write/store files to his/her local drive (as compared to whether the Company discourages it)?

Interviews with custodians are critically important.  Aim to understand the practice of each individual – how and where they store their emails/e-docs.

  1. Other Devices –
  • Does the custodian have their own mobile device/tablet?
  • Is it company issued?
  • Is it used at all for work purposes?

You must likewise explore the specifics of each device upon which work related tasks were performed.

The more detailed of a map you can create, the more informed you will be when trying to scope your project and assess the various electronic information that you may need to collect.

The Christopher Carmicle Case – The Hits Keep Coming!

Posted in Sanctions, Spoliation

In Brown Jordan Int’l v. Carmicle, 2016 WL 815827 (S.D. Fla. Mar. 2, 2016) – a case previously written about on February 11, 2016 the Court was required to determine whether certain actions taken by Christopher Carmicle (“Carmicle”), a high-ranking employee running two subsidiaries of an international furniture company,  warranted termination of his employment for cause.  In particular, the Court was required to determine whether Carmicle’s repeated access of other employees’ email accounts (including the CEO, CFO and General Counsel of the parent company) amounted to gross negligence or willful misconduct.  In connection with determining that larger issue, the Court had to resolve multiple factual and legal issues including whether Carmicle violated federal law (see BLOG Is Your Spouse’s Phone Subject to Production Under Federal Rule 45? ).  While familiarity with my prior posts is assumed, the consolidated cases were tried in a bench trial from October 27, 2015 through October 30, 2015, continued from November 2, 2015 through November 6, 2015 and then again from November 9, 2015 to November 10, 2015.  The Court ultimately concluded that Carmicle’s employment was properly terminated for cause.  Today’s blog, however, deals with the discreet issue that arose when Carmicle sought the return of his personal laptop from the company plaintiffs, who refused to release the laptop unless Carmicle could prove he paid for it with his own money.  Presumably frustrated and seeking to similarly frustrate his former employer, Carmicle remotely locked a company laptop he had in his possession, and refused to provide a password to unlock it throughout the case proceedings, rendering the laptop and its contents inaccessible.  The defendant also claimed to have lost a personal tablet and other devices containing screenshots of emails and other data.  The plaintiffs filed a motion for sanctions under the newly amended Rule 37(e) for spoliation of evidence.

It should come as no surprise that the Court determined that litigation was reasonably anticipated when the defendant destroyed or withheld data, and that he knew or should have known of his duty to preserve. Therefore, the court held that the defendant had acted with intent to deprive plaintiffs of information, and accordingly ordered an adverse inference instruction for the jury.

Even when emotions run high, it is critical that we – as counsel – remind our clients of their obligation to timely and fully comply with their discovery obligations.  The failure to timely preserve and produce all relevant data carries significant ramifications under the amended federal rules.

Documents Identified by Agreed Upon Search Terms Do Not Necessarily Require Production of Those Documents

Posted in ESI, Search Terms

In Gardner v. Continental Cas. Co., (2016 WL 155002 [D. Conn. Jan. 13, 2016]), the District Court was called upon to decide two different issues raised by Plaintiffs in a motion to compel.  The case itself concerned the long term care insurance coverage for five Connecticut residents for stays at Connecticut Managed Residential Care (“MRC”) facilities.  As is relevant here, after some negotiation, counsel agreed to a list of search terms to use to search the emails of twenty-three custodians.   The result was the return of approximately 38,000 documents.  Defendants reviewed the documents for relevance and privilege and produced 2,214 pages of documents – many of which were copies of the complaint and other filings in the lawsuit.  Plaintiffs sought to compel the production of the balance of the 38,000 documents, all of which were found using the agreed-upon search terms, and argued the smaller production was the result of defendant “cherry-pick[ing]” documents.  Plaintiff also agreed it should not be forced to accept the “just trust us” approach defendant endorsed. Further, the plaintiffs argued that the purpose of the agreed-upon search terms was “to avoid prolonged and detailed debate over what ESI documents [were] ‘responsive’ . . .” The plaintiffs supported their position regarding the scant production by pointing out that the defendant’s third-party claims adjustor submitted a “far more comprehensive and informative” production, while the defendant argued that it had already provided “extensive discovery” and that it had spent “significant resources” reviewing the documents from the agreed-upon search terms.

This discovery issue arises with much consistency in cases with extensive electronically stored information (“ESI”).  Overwhelmingly courts conclude that the position taken by plaintiffs is “simply untenable” – the defendant is not obligated to turn over all 38,000 documents, especially where issues of privilege abound.  The court did, however, recognize plaintiffs’ “legitimate concern” regarding the limited production, and ordered opposing counsel to confer and discuss approaches for addressing the potential need to turn over results of the search hits including—“sampling and iterative refinement.”

This decision raises an interesting issue.  It would seem obvious that only relevant non-privileged documents would be produced irrespective of how many documents (i.e., false responsive or privileged) “hit” upon a search term.  However, to avoid motions to compel and protracted discovery disputes, this case reminds us all to spell out precisely what we are agreeing to do when we enter into ESI protocols.

Why Every Litigator Must Understand the New Federal Rules

Posted in Amendments to FRCP, Rule 45

It can hardly be denied that no lawyer wants to apply the wrong legal standard in papers or be criticized by the Judge before whom they are appearing.  Regrettably, just that occurred in Henry v. Morgan’s Hotel Group, (15-cv-1789), and Magistrate Judge Cott (SDNY) was quick to point out defense counsel’s errors.  In doing so, the Judge reminded all practitioners that it is critical to remain abreast of the changes in the law – most relevant here – the amendments to the Federal Rules of Civil Procedure, which took effect December 1, 2015 (“Amendments”).

In one of the first decisions in which the Southern District applied the Amendments and explained the import of them, Magistrate Judge Cott criticized a defense firm for issuing third-party subpoenas to plaintiff’s former employers.  Specifically, Judge Cott indicated that attorneys for Morgan’s Hotel Group ran afoul of civil procedure rules—including the Amendments which were passed, in part, to prevent “fishing expeditions”—when they tried to secure background information on plaintiff Philip Henry.

Background

Plaintiff, Henry, a gay, African American male, worked for two years as a server at the former Isola restaurant in the Mondrian Soho Hotel.  Henry brought a lawsuit against the Morgan Hotel Group for discrimination wherein he alleged that his supervisor Akihide Suzuki subjected him to racial and homophobic abuse.  He further alleged that when he complained to more senior supervisors, Suzuki retaliated and gave Henry fewer, less desirable shifts, more banal tasks and subjected Henry to needless disciplinary measures.  Henry alleged that the restaurant director, Greg Cau, joined in the harassment and disciplined Henry for various unfounded grievances.

On December 24, 2015, defense counsel served subpoenas on third parties—each prior employers of Henry’s—wherein counsel sought all documents and communications relating to Plaintiff “including but not limited to personnel files, disciplinary files or any other employment documents or records.”

Henry’s attorneys moved to quash the subpoenas, and Magistrate Judge Cott granted that motion.  In doing so, Judge Cott stated a number of bases for doing so.  First, Judge Cott found that filing subpoenas on third parties and plaintiff’s counsel at the same time violated Federal Rule of Civil Procedure 45, which requires that plaintiff’s counsel be notified of defendant’s intention to subpoena non-parties.  Judge Cote observed, “[t]he subpoenas were served on Christmas Eve (an arguably sharp tactic to begin with) on both third-party employers and Henry’s counsel” and noted that, “[s]ome courts have quashed subpoenas due to untimely notice” only.

Judge Cott further stated that other courts require in addition to untimely notice, a showing of prejudice to the Plaintiff before they will quash the subpoena.  Here, Judge Cott found, Henry made a showing of prejudice.  Specifically, the subpoenas were sent to restaurant groups that own more than a dozen establishments in New York City and, if Henry were to apply for employment with any of these restaurants/hotels, his chances of securing employment could be compromised.  Judge Cott stated specifically, “the court would hardly be surprised that, if defendant (or any other establishment) knew that an applicant for employment had bought a lawsuit against another restaurant for discrimination, it might take that into account in the hiring process.”

Nonetheless, the Court found the subpoenas could be quashed on other grounds. “The scope of the subpoenas themselves is problematic, to say the least,” he said. “Blanket requests of this kind are plainly overbroad and problematic.”  Moreover, Defendant “mistakenly invoked the ‘reasonably calculated to lead to the discovery of admissible evidence’ standard of the prior version of Rule 26(b)(1)….That rule was amended last year and this language, long relied on by counsel to seek wide-ranging discovery, has now been eliminated.”  Ouch.  Motion to quash granted and a written decision noting defense counsel’s error.

Judge Cott went on to note that the new rule requires proportionality such that the information sought must be “proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to the relevant information, the parties resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.”  The purpose of the Amendments was to discourage overuse of broad reaching discovery by considering “proportionality” before ordering production of the requested material and here Defendant fails the analysis.

The Court noted that “[t]he issue presented here is whether defendant’s actions directed toward Henry were based on valid considerations or violated the discrimination laws.”  Judge Cote noted that “Henry’s prior employment has little if any bearing on this issue.”

So what’s the moral of the story?  If nothing else, the Henry case is important reminder that we must understand and invoke the new federal rules and stay abreast of the case law interpreting those rules.