In Eshelman v. Puma Biotechnology, Inc., No. 7:16-CV-18-D (E.D.N.C. June 7, 2017), Magistrate Judge Robert B. Jones, Jr., denied Plaintiff Eshelman’s motion seeking a jury instruction in response to Puma Biotechnology Inc.’s (“Puma”) failure to preserve (or identify in its litigation hold notice the need to preserve) internet web browser and search histories.  In denying Eshelman’s request, Judge Jones concluded that Eshelman was “not entitled to [either] a sanction pursuant to Rule 37(e)(1)” or “an adverse jury instruction as a sanction pursuant to Rule 37(e)(2).”

Case Background & Holding

This lawsuit involved alleged defamatory statements made by Puma in an investment presentation.  Eshelman brought a lawsuit and soon thereafter Puma issued a Litigation Hold Notice (“Notice”).  That Notice defined “documents” broadly to include electronically-stored information (“ESI”) but failed to reference specifically internet browser / search/or viewing histories.   The Notice did, however, advise Puma employees to err on the side of preservation if uncertain as to whether they were in possession of potentially responsive documents.   In May 2016, a few months after the allegedly defamatory investor presentation, Eshelman’s counsel sent a letter to Puma’s counsel requesting that Puma preserve, as relevant to this dispute, “web browser histories” of individuals involved in the drafting of the January 7, 2016 presentation.  Eshelman renewed this same request a few weeks later in his first demand for documents.

Puma’s counsel responded to the discovery demand that due to the internet browser the Company uses (i.e., Google Chrome®)  web browser history is automatically deleted after 90 days.  And so, the web browser history sought in the document demand was no longer available, nor did it exist at the time of the May preservation letter issued by Eshelman’s counsel.  Upon receipt of this response, Eshelman moved for “a jury instruction to mitigate the harm caused by the defendant’s failure to preserve electronically stored information.”

Judge Jones denied Eshelman’s motion concluding that “the plaintiff has not established one of the threshold elements of Rule 37(e)—namely, that the lost ESI ‘cannot be restored or replaced through additional discovery. . . .’”

Because Judge Jones believed “other avenues of discovery are likely to reveal information about the searches performed in advance of the investor presentation” the Judge concluded Eshelman was “not entitled to a sanction pursuant to Rule 37(e)(1).” Specifically, the Judge opined that Eshelman could seek information about the internet searches performed by the individuals who prepared the investor presentation through deposition testimony.

Moreover, Judge Jones further determined that a sanction was not warranted under 37(e)(1) or (2) because: (1) “the plaintiff has failed to make a sufficient showing of prejudice to support relief under Rule 37(e)(1)” and (2) Eshelman “failed to show that the defendant acted with the requisite intent to deprive him of the ESI in order to support the imposition of an adverse jury instruction under Rule 37(e)(2),” noting that “[a]t most, the circumstances indicate the ESI was lost due to the defendant’s negligence, but do not suggest the presence of intentional conduct. Negligence, however, will not support an award of sanctions under Rule 37(e)(2).”

Conclusion

This case serves as an important reminder that one’s legal hold notice must be drafted in a robust way (i.e., calling for all documents) that is also sufficiently granular such that it specifies exactly the types/categories of documents sought to be preserved.  Drafting an effective hold notice is an art that requires great thought.  Form/template notices –while a good starting point – should not be relied upon blindly.  Stay tuned for a coming blog on drafting effective hold notices.

Mueller v. Swift, (D. Col. 2017) 2017 WL 2362137

Some opinions just have it all, and Mueller v. Swift does not disappoint!  Indeed, in this lawsuit, Taylor Swift, the pop sensation who has been sweeping the nation, alleges she was the victim of sexual misconduct, assault, and battery.

What in the world do such allegations have to do with this blog you ask? Well, even the rich and famous sometimes have to confront issues of spoliated electronically stored information (ESI).

Relevant Facts: The scene is downtown Denver—the Pepsi Center—home of the Colorado Avalanche Hockey team, the Denver Nuggets Basketball team, and host to concerts and various social events year round. On June 2, 2013, it played host to one of the biggest stars of the last decade, Taylor Swift (“Swift”). KYGO radio station was one of the entities represented at a “meet and greet” with Swift just prior to Swift’s RED TOUR. The radio station representative, David Mueller (“Mueller”), was invited to pose for a photo with Swift during the meet and greet.   Swift alleges, and uses a photo as evidence, that Mueller reached up her skirt and touched her bottom inappropriately during the photo op.

As a result, KYGO was notified of the incident, and assured Swift’s entourage and representatives that an investigation would be undertaken and, Mueller dealt with accordingly.

Ultimately, Mueller was terminated from his position at KYGO and this civil suit ensued.

As it turns out, Mueller recorded his conversations with KYGO representatives during the meeting that ultimately led to his termination. When compelled to produce those recordings during discovery, it was revealed that Mueller edited the audio clips to reflect those portions he deemed “important.”

The Swift camp was not appreciative of Mueller’s editing “assistance” and advised the Court they were entitled to the 2 hours of audio recordings; not just the “important” soundbites. However, in response to Swift’s demand for the full audio recordings, Mueller interposed a number of reasons why that was not possible, many of which — in my opinion–defied reason.

First, the laptop, on which the recording was stored, was a casualty of Mueller’s early morning routine and suffered an untimely death by a raging torrent of coffee.  Muller, in a desperate attempt to save the data, ran to Apple to try and repair or salvage what he could. Unfortunately, despite the Apple genius bar’s attempt to resuscitate the laptop, the computer — and all of its content — was gone.  But of course a man who worked for a radio station in the digital age was well versed in the benefits of backing up his data so Mueller’s external hard drive — the backup for his laptops — would necessarily have the full recording. While one may expect the recording to reside on the external backup, Mueller advised the external hard drive was lost by him a year or so before the case was filed. As a result, the full audio recording was no longer available.

As a result, Swift’s legal team moved the court for spoliation sanctions against Mueller. Most importantly, Swift wanted an adverse inference jury instruction. In simplest form, the adverse instruction proposed was to allow the jury to infer that whatever was stored on any device that suffered an early fate, was detrimental to Mueller’s causes of action.

The Colorado District Court, however, ruled that spoliation sanctions were reserved for instances where “there is proof that the party who lost or destroyed evidence did so in bad faith.” Relying on Tenth Circuit precedent, the Court stated, “Mere negligence in losing or destroying records is not enough because it does not support an inference of consciousness of a weak case.” Turner v. Pub. Serv. Co. of Colo., 563 F.3d 1136, 1149 (10th Cir. 2009). So, while the incidents that led to the destruction of the evidence were convenient, to say the least, without any evidence the recording was destroyed/modified in bad faith, foreclosed any adverse inference instruction against Mueller.

What does this case mean for E-discovery?

So, what’s the lesson?  When moving for spoliation sanctions under current Rule 37, be mindful the court is looking to punish bad faith conduct not merely negligent behavior.  Therefore, understand the facts and circumstances underpinning the spoliation and, if appropriate, advance the necessary arguments to support a finding of bad faith.

But, this case also reminds us that E-Discovery and ESI issues are everywhere. Indeed, they are not unique to corporate America but plague Hollywood starlets, mom and pop business owners, and individual litigants alike.  In today’s increasingly electronic age, it is a rare few who do not create/receive and/or store information electronically.

*A special thanks to Farrell Fritz Summer law clerk Philip Merenda for his research and drafting assistance with Taylor Swift and the Java-Dump:  An E-Discovery Tale.  Philip is a student at Georgetown University Law and anticipates receiving his J.D. in 2018.

It is the beginning of a new year and I thought it the ideal time to list out those steps that are absolutely critical when an attorney is confronting his/her obligation to produce e-discovery in connection with a litigation.  Bear in mind, the below list is not exhaustive and each step is replete with technical and tactical sub-steps and decisions.  However, the nine steps below are a useful road map to get started.

  • Assess whether your case involves e-discovery. In today’s technology-laden world where emails are ubiquitous and many of us interface daily with the internet of things, chances are your case will involve e-discovery.
  • Implement (or cause to be implemented) a comprehensive and appropriate ESI preservation protocol.  Remember, it is wise to cast a large net when it comes to preserving data.  That strategy likely changes when it comes time to collect/process data.  Make sure to familiarize yourself with the client’s deletion policies, backup tapes, and shredding procedures.  See next step.  The scope of your hold notice is necessarily informed by your client’s data including its location.
  • Understand the client’s ESI systems and storage.  Remember, data maps can be helpful but are often out of date.
  • Understand (and educate your client about) the various options available for collecting ESI (i.e., self-collection vs retaining a vendor; targeted collection vs robust collection).
  • Identify the various custodians (and meet with/conduct collection interviews of live custodians) who may have potentially relevant ESI and understand the various media on which that ESI resides.
  • Meet and confer with opposing counsel to develop a mutually agreeable discovery plan that addresses common ESI issues including production costs and deduplication methods.
  • Collect ESI (ideally using a vendor especially when the custodians include complex or dynamic databases or servers) in a manner that is defensible and preserves the integrity of the data (for example, do not forensically image the hard drive of a Mac using a tool designed for Windows or run the risk of overwriting the hard drive’s boot sector).
  • Explore ways to minimize the review costs associated with reviewing for production the collected documents.
  • Finally, produce responsive non-privileged ESI in a recognized and appropriate manner.

As discussed in past blog posts, it is critically important for counsel to be involved in each step of the process as the recent case law makes plain that Courts expect counsel to be actively involved in collection/review and production.  Indeed, we have seen a spate of case law from 2016 where the Court imputes a client’s failures on counsel and sanctions both!  Finally, if you feel incapable of handling any of the above steps, get help!  Various ethics opinions (not yet adopted in New York) suggest an attorneys’ duty of competence owed to one’s client includes being competent in matters of ESI.

Lawyers often worry about their obligation to preserve relevant information.  As a result, one may direct their client to collect all potentially responsive information.  However, over-collecting is a significant cause of costly e-discovery.  So, what is a lawyer to do?

It is critical not to conflate preservation and collecting. 

While collecting is one way to preserve information, it is a very costly and inefficient preservation strategy.  Think of preservation as a means to ensure potentially relevant information is not deleted or discarded. This is a process driven exercise (i.e., suspend auto-deletion, cease recycling backup systems).   Collection, on the other hand, is a much more active exercise and should be thought of as the first link in a chain toward producing documents to your adversary.   In other words, collection involves “collecting” data from the universe of what has been preserved but it does not necessarily mean you will collect everything you preserved.   And, remember, not every document collected will be produced.  Rather, collected material must be processed, and then reviewed for responsiveness and privilege.   

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).

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.

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.

Earlier this summer, the California State Bar formally addressed the ethical obligations of counsel to be competent in matters of e-discovery and specifically established standards for counsel practicing in California.  (Formal Opinion No. 2015-193).  The Bar stated, “[e]lectronic document creation and/or storage, and electronic communications, have become commonplace in modern life…attorneys who handle litigation may not ignore the requirements and obligations of electronic discovery. A lack of technological knowledge in handling ediscovery may render an attorney ethically incompetent to handle certain litigation matters involving ediscovery, absent curative assistance.”  The Opinion went on to note that an attorney lacking the required competence for e-discovery issues has three options: (1) acquire sufficient learning and skill before performance is required; (2) associate with or consult technical consultants or competent counsel; or (3) decline the client representation. Lack of competence in e-discovery issues also may lead to an ethical violation of an attorney’s duty of confidentiality.

Although the State Bar’s Opinion is advisory only, it provides much needed structure in a field that has historically been faced with varied interpretations and even more varied levels of competence in the field.  Set within the parameters of a hypothetical bar exam question, the Opinion went on to discuss the 9 defined skills that attorneys should be able to perform in ediscovery (either “by themselves or in association with competent co-counsel”):

  1. Initially assess ediscovery needs and issues, if any;
  2. Implement/cause to implement appropriate ESI preservation procedures;
  3. Analyze and understand a client’s ESI systems and storage;
  4. Advise the client on available options for collection and preservation of ESI;
  5. Identify custodians of potentially relevant ESI;
  6. Engage in competent and meaningful meet and confer with opposing counsel concerning an ediscovery plan;
  7. Perform data searches;
  8. Collect responsive ESI in a manner that preserves the integrity of that ESI;
  9. Produce responsive non-privileged ESI in a recognized and appropriate manner.

Irrespective of whether the New York State Bar follows California’s lead, it is nonetheless critical for practicing attorneys (litigators in particular) to understand the intricacies of the ediscovery landscape and our many obligations in this area.   Ultimately, attorneys’ obligations evolve as new technologies develop and become integrated with the practice of law. Make sure you are staying up to speed!

AJ Holdings Grp. LLC v. IP Holdings, LLC, No. 600530/2009 (N.Y. Sup. Ct. Sept. 19, 2014) reversed by AJ Holdings Group LLC v IP Holdings LLC et al., (2015 NY Slip Op 04943 [1st Dept 2015]).

In this breach of licensing agreement dispute, the Defendants sought spoliation sanctions against the Plaintiff.  The sought-after sanctions included striking the complaint, dismissal of the suit, adverse inferences, and attorneys’ fees.  The Court declined to strike the Plaintiff’s complaint, but found an adverse inference appropriate both at summary judgment and at trial because Plaintiff failed to preserve critical emails, which caused the Defendants to be “at an undue disadvantage in establishing their defense.” The Court also ordered the Plaintiff to cover the cost of the forensic examination and the Defendants’ attorneys’ fees for both motions that sought sanctions.

In AJ Holdings, Defendants filed a motion to compel the Plaintiff to produce both paper and electronic discovery. In granting the motion, the Court ruled that the Plaintiff’s duty to preserve arose on September 29, 2008, the date Plaintiff’s counsel sent the Defendants an e-mail regarding the early termination of the license agreement. The Court’s ruling also allowed the Defendants’ forensic expert to examine the Plaintiff’s computers and devices to determine whether any information deleted after September 29, 2008 could be recovered. Because it was unclear whether any data had been lost, the Court found the Defendants’ request for spoliation sanctions premature but granted them the right to renew their request after the forensic examination.

The Defendants’ expert found that the Plaintiff did not institute a legal hold or take steps to collect or preserve e-mail on its e-mail servers.  Indeed, the Plaintiff’s IT manager testified that he was unaware of the lawsuit until the day before his deposition and that no one informed him that e-mail needed to be preserved. Therefore, all but a “handful” of e-mails sent between the time the duty to preserve arose and the filing of the lawsuit had been lost. Comparing that handful to the typical volume of e-mails sent by the custodians, the expert concluded that “a substantial number of mail items” had been destroyed. This problem was exacerbated by the Plaintiff’s replacement of the computers and Blackberry’s its principals used during the relevant time frame, so the expert could not examine them. Further, the Plaintiff’s employees used AOL accounts to exchange work-related e-mails, and without access to the hardware, the expert could not access any deleted messages.

After the forensic examination, the Defendants asked again for spoliation sanctions, and the Court granted their motion. Under the seminal case Zubulake v. UBS Warburg, the Court found the company should have preserved the e-mail of “key players” likely to have information relevant to the dispute. The five principals at issue had participated in the termination of the license agreement and “had control over relevant email.” Therefore, they had a duty to preserve evidence when litigation was reasonably foreseeable.

Despite this duty, the key players took no steps to preserve evidence: they did not institute a legal hold or prevent the automatic deletion of their e-mails from the servers, although their counsel had repeatedly warned them to do so. The principals “discussed” an oral legal hold but never implemented it. Thus, the Court found the principals were grossly negligent in the dereliction of their duty to preserve evidence. Because the destruction of the evidence was grossly negligent, the relevance of the evidence was presumed. The Court found that even if the spoliation had been merely negligent, the destroyed e-mail would have been relevant to the defense of the action.

In AJ Holdings Group LLC v IP Holdings LLC et al., (2015 NY Slip Op 04943 [1st Dept 2015]), the First Department reversed the Trial Court’s spoliation sanctions.  Stay tuned for our next blog post discussing that decision.

Novick v. AXA Network, LLC, 2014 WL 5364100 (S.D.N.Y. Oct. 22, 2014)

In this contract dispute case, the plaintiff made a motion for sanctions under Rule 37(b)(2) requesting the court strike the defendants’ answer and counterclaims, allow a negative spoliation inference against the defendants and order a monetary fine due to the plaintiff’s “repeated attempts to obtain the at-issue discovery and defendants’ failure to preserve the same.” The plaintiff alleged that the defendants had significantly delayed the discovery process by providing largely irrelevant emails, by withholding emails that were unfavorable to the defendants, by failing to preserve relevant emails and by failing to preserve 10 weeks of audio recordings that constituted “approximately one-third of the entire time period ordered.” The court found that “the defendants acted in bad faith respecting their production of e-mail messages, employed delay tactics, caused substantial costs to be incurred by the plaintiff and wasted the [c]ourt’s time.” The court also found that the defendants had acted in bad faith regarding the missing audio recordings. Thus, the court imposed an adverse inference jury instruction concerning the audio recordings, awarded the plaintiff reasonable attorney’s fees and ordered that certain depositions be retaken at the defendants’ expense.