Ronnie Van Zant, Inc. v. Pyle, No. 17 Civ. 3360 (RWS), 2017 WL 3721777 (S.D.N.Y. Aug. 28, 2017)  

In this case, the Southern District of New York imposed an adverse inference against defendants for their failure to preserve text messages that were in the possession of a non-party.  Specifically, Judge Sweet imposed an adverse inference against defendants based upon the spoliation of non-party text messages after concluding that as a result of the non-party’s: close working relationship with the defendants; his prior production of documents in the litigation; and his financial interest in the at-issue film, defendants had the practical ability to obtain the text messages, irrespective of any legal right to those messages.

The underlying dispute involves certain prohibitions on the use of Lynyrd Skynyrd’s likeness and name. For the readers who may be too young to have a full appreciation of the band and its traumatic history, a brief factual background is provided.

On October 20, 1977, two members of the Lynyrd Skynyrd rock band, and a number of other people were killed in a plane crash in Mississippi.*  However, a number of people, including Artimus Pyle (“Pyle”) (the band’s drummer), survived the crash.  In the years that followed, the three surviving band members and Ronnie Van Zant’s surviving spouse (“Judy”) entered into what has been called a “blood oath.”  Under the blood oath, it was agreed that no surviving band member would ever perform again as Lynyrd Skynyrd.

In 1987, to commemorate the ten year anniversary of the crash, the band’s surviving members reunited for a tribute tour.  Judy disputed use of the band’s name and sought to enjoin use of the band’s name in the performance (the “1988 Lawsuit”).  The 1988 Lawsuit was resolved by the parties’ entry of a consent order, judgment and decree (the “Consent Decree”).  Pyle – who was represented by counsel in connection with the 1988 Lawsuit – was a signatory to the Consent Decree.  Among other things, the Consent Decree set forth various restrictions on the how the parties to the 1988 Lawsuit could use the name Lynyrd Skynyrd, and the name/image/likeness of Ronnie Van Zant and band member Steve Gaines, who also perished in the crash.  Among other restrictions, the parties were prohibited from commercially exploiting the history of Lynyrd Skynyrd without prior written approval.

In 2016, defendant Cleopatra Records, through one of its affiliate divisions (collectively, “Cleopatra”), sought to make a feature-length film based on the 1977 crash. Jared Cohn (“Cohn”) was hired as the director and writer for the proposed film.  Former Lynyrd Skynyrd drummer, Pyle, was hired to work on the script with Cohn and ultimately signed an agreement with Cleopatra that entitled him to 5% of the film’s net receipts.  Pyle also contracted to narrate the film, make a cameo appearance and contribute an original song to the film.  In the course of his work on the film (tentatively titled, Free Bird), Cohn (who was paid by, but not an employee of Cleopatra) worked closely with Pyle, relying almost exclusively on phone calls and text messages to communicate.

Around the end of June, 2016, Cleopatra put out press releases advertising the film and Pyle’s involvement.  On July 15, 2016, Plaintiffs** sent Cleopatra a cease and desist letter (“Letter”).  In the Letter, Plaintiffs requested a copy of the film’s script and outlined the various restrictions in the Consent Decree.  Soon thereafter, Plaintiffs sent Cleopatra a copy of the Consent Decree.  When, many months later, Plaintiffs discovered Cleopatra was proceeding with production, they filed an action in the Southern District of New York alleging a violation of the Consent Decree, seeking a permanent injunction against Cleopatra and an award of costs and attorneys’ fees (“SDNY Lawsuit”).

Cohn was not a party to the SDNY Lawsuit.

While the Opinion and Order of the Court (“Order”) determined the merits of the lawsuit (spoiler alert – Judge Sweet granted the permanent injunction and awarded attorneys’ fees to Plaintiffs), the balance of this blog discusses only that portion of the Order relevant to a party’s preservation obligations. (Ronnie Van Zant, Inc. v. Pyle, No. 17 Civ. 3360 (RWS), 2017 WL 3721777 (S.D.N.Y. Aug. 28, 2017)).

In May 2017 — after commencement of the SDNY Lawsuit — Cohn switched cell phone providers and began using a new phone.  “Although certain data on Cohn’s old phone was backed-up, such as pictures, other data was not preserved, such as Cohn’s text messages, including those sent and received from Pyle.”  As a result, Plaintiffs moved, “either pursuant to Federal Rule of Civil Procedure 37(e) or the Court’s inherent authority” for an adverse inference with respect to the unpreserved text messages between Cohn and Pyle.

In response to Plaintiffs’ motion, Cleopatra argued that it could not be sanctioned for the actions of Cohn (a non-party) because neither Cohn nor his phone were within its control.  The Court, however, disagreed with Cleopatra.  Specifically, Judge Sweet noted the “concept of control”—pursuant to which documents are considered to be under a party’s control—has been construed broadly and is satisfied “if the party has the practical ability to obtain the documents from another, irrespective of his legal entitlement.”  The Court continued:

Here, while Cohn is a non-party, his text messages were, practically speaking, under Cleopatra’s control. Cohn was contracted by Cleopatra to work on the Film, and the evidence has establishes [sic] that he worked closely with Cleopatra for over the past year. Over the course of the instant litigation, Cohn has participated by providing documents and took a deposition sought by Plaintiffs during discovery. As has been found relevant in other cases determining the relationship between a party and non-parties, Cohn also has a financial interest in the outcome of this litigation, since he is entitled to a percentage of the Film’s net receipts, which would be zero should Plaintiffs prevail. In sum, while determining practical control is not an exact science, “common sense” indicates that Cohn’s texts with Pyle were within Cleopatra’s control, and in the face of pending litigation over Pyle’s role in the Film, should have been preserved.

(Citations omitted.)

The Court further noted that Cohn’s actions (i.e., “getting a new phone after Plaintiffs brought the instant action and managing to back-up pictures but, somehow, not text messages”) demonstrate the “kind of deliberate behavior that sanctions are intended to prevent and weigh in favor of an adverse inference.” Docket No. 61, p. 28-29.  Ultimately, the Court concluded that an adverse inference would be presumed against Cleopatra as to the missing text messages.

CONCLUSION

Because this decision concludes a party can be sanctioned for the failures of a third-party, it is critically important to assess what third-parties, if any, you have a practical ability to secure documents/information from when issuing your hold notices.

For example, does your client have the “practical ability” to retrieve documents from its software vendor? From its payroll provider? From its accountant? If so, and that third-party may have responsive information, you should seek to preserve that information and give serious consideration to issuing a litigation hold to that non-party.

*Among those who lost their lives were lead singer and song writer, Ronnie Van Zant.

**Plaintiffs include Ronnie Van Zant, Inc., Gary R. Rossington, Johnny Van Zant, Barbara Houston as the Trustee of the Allen Collins Trust, and Alicia Rapp and Carinna Gaines Biemiller as personal representatives of the estate of Steven Gaines.

*** It is also interesting to note that there was no analysis of prejudice suffered, if any, by plaintiffs as a result of this preservation failure.  This is interesting in light of the fact that the 2015 Amendments to the Federal Rules of Civil Procedure were intended, in part, to allow a party to secure sanctions only when failures to preserve resulted in an actual prejudice or harm.  Here, the decision and order seems to infer there was prejudice – a inference more typically permitted under the pre=amendment rules.

I recently wrote about the importance of styling one’s litigation hold in a broad, but sufficiently specific way (See, “Your Litigation Hold Must be Generally Broad and Specifically Tailored”).  Some of you may be thinking, well, that’s all fine and good but what is a litigation hold? Why and when do I need one? And what should a litigation hold say?  If you have any of those questions, then continue reading.

Imagine your client was served with a complaint (or your client received a cease and desist letter or you learn it is reasonably foreseeable your client will be sued).*  What now?

Immediately, alarm bells should sound in your mind signaling you to take steps to preserve information relevant or potentially relevant to the lawsuit (or threatened lawsuit).    To this end, you want to draft and issue a written litigation hold notice (“Hold”).   While an oral directive may convey all the necessary information to the proper people, it is far better practice to paper your instructions.  Not only will a written document allow you to recall (perhaps years later) what information was subject to the Hold and who received the Hold, but it can also serve as a protective mechanism should information identified in the Hold as relevant slip through the cracks and be inadvertently deleted.** Thus, a critical function of the Hold is to serve as the means for proper compliance with one’s document preservation requirements and as the tool to avoid inadvertent destruction of evidence and potential sanctions.

It is helpful to envision the Hold as the catalyst that begins the process by which the client formally notifies key individuals that they must preserve relevant information.  Identifying who should receive the Hold can be a task in and of itself.  If, for example, your client is an individual sued in his/her individual capacity, the task is straightforward.  If, however, your client is a major financial institution with offices throughout the nation, the task of identifying the relevant custodians*** can be daunting.

Once you’ve identified the proper custodians (and who the custodians are for this purpose should be revisited throughout the litigation and supplemented as information is learned) and the sources of information they each may have, you must draft your Hold.   A well-drafted Hold need not be lengthy nor should it be replete with legal-ese.  In fact, the shorter, and more simple the better.  You do not want your audience bogged down in trying to figure out what exactly is being asked of them.  Likewise, you do not want to send a multi-page document if you can streamline the message into two pages or less.  That said, every Hold should contain at least the following information:

  1. Introduction: Explain why a Hold is being implemented so that the recipients understand the importance of compliance.  Explaining the general purpose of the Hold may also help the recipients identify relevant information.  The introduction does not have to detail the lawsuit /investigation /subpoena with granularity.  Rather, a general description is all that is necessary.  For example:

[CLIENT] recently received a subpoena requesting documents relevant to an ongoing investigation by the United States Attorney’s Office for the District of Columbia (hereinafter the “Investigation”). We intend to respond to the subpoena in due course, and we are asking for your help.  Due to this Investigation, [CLIENT] must take all reasonable steps to preserve records related to the 8 topics belowWe are in the process of identifying all paper and electronic documents that may be relevant to the matter . . . You have been identified as a person who has had involvement with the [deal], or may possess relevant documents or communications.  We request your attention and assistance in preserving this relevant information for our attorney’s use as appropriate. The records must be preserved in accordance with this Notice, and must be preserved until released by a subsequent written Release Notice.

  1. What is to be Preserved: The Hold becomes a checklist for the specific records you seek to preserve.  It is important that you include not only a broad description of the types of documents you seek, but also identify documents or locations with specificity to the greatest extent possible.  As mentioned in my August 16th post, if you seek to preserve web browsing/search histories you must specify that in your hold. It is likely not sufficient to simply say preserve all ESI. You should also include a temporal limitation for the information you seek to preserve and a description of the relevant categories of information.  In addition to delivering the Hold to key employees who have an involvement in or awareness about the issues in the lawsuit (or threatened suit), it is advisable to send the Hold to relevant personnel in IT and paper records departments who control the ability to suspend normal deletion policies.

Effective immediately, it is critical that none of our employees delete, over-write, or otherwise alter or destroy any documents (print or electronic), records, and data, including without limitation,  [INSERT SPECIFIC DOCUMENTS] . . ., including any drafts of such documents, records, and data, from any device.  Devices that may contain information subject to this preservation include laptops, PCs, handheld devices (such as a BlackBerry or iPhone), and other hardware provided to employees of [CLIENT], including USB drives, shared drives, home computers and/or personal email accounts (if used to store work-related documents), departmental, regional, or local email services, or any other local or centralized storage media which may be accessed by members of your department dated from [INSERT DATE RANGE], and relating in any way to:

  1. Mandatory Preservation: Emphasize that preservation is mandatory, and that failure to comply may compromise the company’s ability to prosecute its claims or defend itself in the lawsuit.

Preservation is mandatory.  Electronically stored information is an important and potentially irreplaceable source of discovery in this matter.  Failure to retain these documents or communications, whether intentionally or accidentally or to ignore this Notice may result in the Company’s inability to prosecute its claims or defend itself in this matter.  Failure to do so could also result in financial and legal penalties against the Company that could negatively affect the outcome of this legal matter. You must take every reasonable step to preserve this information until further written notice.  

I also tend to include the following language in the introduction to ensure we capture the recipient’s attention:

Failure to read and comply fully with this Notice could subject you and [CLIENT] to civil and criminal penalties and could result in disciplinary action

  1. Confidentiality: Stress the confidential nature of the lawsuit and the company’s expectation that employees not discuss the matter with one another or others (i.e., spouses, friends) unless doing so is approved by counsel.  The purpose of limiting one’s ability to discuss the matter is to minimize discoverable communications that could impact the outcome of the lawsuit.
  2. Further Distribution: The Hold should request the names of any additional individuals that the recipients believe may have relevant information and advise recipient(s) not distribute further on their own.

Further Distribution of This NoticeDO NOT DISTRIBUTE THIS NOTICE DIRECTLY. A distribution list is attached to this Notice.  Please notify [NAME] if you believe the Hold should be distributed further.  In addition, please contact [NAME] if you are aware of any relevant records that may be in the possession of someone who previously held your position.

  1. Duration of the Litigation Hold: The Hold should advise that individuals are required to preserve materials until they are notified in writing that the Hold has been released.
  2. Prompt for Questions: The Hold should provide the name and contact information for company counsel or another person designated to provide guidance and answer questions.
  3. Receipt and Acknowledgment: It is advisable to require recipients to respond in writing that they have read the Hold and will comply with its requirements.  I tend to embed both a read receipt in the Hold and an affirmative obligation to respond to me (or in-house counsel) in writing.  Responses can be sent by individual emails, or by embedding a voting button.  It is also wise to track each response and follow up as necessary with non-responsive recipients. 

In sum, a Hold should include at least the above essential information and should be drafted in a clear and comprehensive fashion such that recipients understand what is being asked of them.   The Hold will serve as the means for proper compliance with the client’s document preservation requirements.

* Different jurisdictions have different rules as to when one’s obligation to preserve information arises.  The most common standard however, and the one embraced in New York state and federal courts alike, is “Once a party reasonably anticipates litigation…”

** Because the inadvertent destruction of relevant evidence can (depending on the circumstances) lead to judicial sanctions or a judgment against the client, a Hold committed to writing will empower you to defend yourself and the client should inadvertent destruction occur.   

*** For purposes of this blog, “Custodians” is used to refer to the individuals / sources (i.e., shared drives, file cabinets) most likely to have potentially relevant information (i.e., related to the claims or defense in the lawsuit).

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!