United States v. New Mexico State Univ., No. 1:16-cv-00911-JAP-LF, 2017 WL 4386358 (D.N.M. Sept. 29, 2017)

This case, which arises from allegations of pay discrimination by New Mexico State University (“NMSU”) based on gender, in violation of Title VII, serves as an important reminder that all counsel – irrespective of one’s computer know-how – understand their ESI obligations and cooperate in good faith with opposing counsel when engaging in the process of retrieving electronically stored information (“ESI”).

BACKGROUND

In this pay discrimination case, the United States alleged that NMSU paid a female employee less than her male counterparts, although they were performing similar responsibilities for NMSU’s track and field program.  During discovery, plaintiff sought production of documents reflecting communications regarding her compensation; production of documents regarding her complaints concerning her pay; and production of documents regarding any other complaints of pay discrimination made by other coaches, trainers, etc.  Eventually, disputes arose over NMSU’s responses to plaintiff’s discovery requests and the United States filed a motion to compel.

In response, NMSU detailed the “more than 20” keyword searches it conducted (without conferring with plaintiff’s counsel) to locate documents responsive to the plaintiff’s requests.  Thereafter, the United States identified what it perceived to be inadequacies and deficiencies in NMSU’s searches notwithstanding the 14,000 pages of documents produced.  Before the Court could resolve the issue of the adequacy of searches, NMSU moved for a protective order to preclude further searching for responsive documents.

DECISION

Citing defense counsel’s failure to “adequately confer” before performing keyword searches that were “inadequate to reveal all responsive documents,” the Court concluded that “which searches will be conducted is left to the Court” and went on to order NMSU to conduct additional searches with specific terms.  The Court found defense counsel’s failure to confer with its adversary particularly troubling as “[t]he best solution in the entire area of electronic discovery is cooperation among counsel” and “[c]ooperation prevents lawyers designing keyword searches ‘in the dark, by the seat of the pants,’ without adequate discussion with each other to determine which words would yield the most responsive results.”

Here, the failure to adequately confer in good faith was the very reason for the inadequate searches.  The Court went on to observe:

Electronic discovery requires cooperation between opposing counsel and transparency in all aspects of preservation and production of ESI. Moreover, where counsel are using keyword searches for retrieval of ESI, they at a minimum must carefully craft the appropriate keywords, with input from the ESI’s custodians as to the words and abbreviations they use, and the proposed methodology must be quality control tested to assure accuracy in retrieval and elimination of “false positives.” It is time that the Bar—even those lawyers who did not come of age in the computer era—understand this.

[Citation omitted] [emphasis added].

CONCLUSION

While this decision does not actually state that counsel must disclose their ESI search terms to opposing counsel, it comes pretty darn close.  By commenting that transparency in all aspects of ESI preservation and production is necessary, this decision effectively obligates counsel to discuss with opposing counsel the intended search terms before executing on those terms.  Indeed, collaboration and cooperation are again held to be central to one’s discovery obligations.  And, here, counsel’s failure to meet and confer and engage the adversary in that process resulted in counsel earning the expensive right to repeat the process – this time with judicial weigh-in.  Perhaps equally important of a take-away from this decision – counsel’s lack of computer savvy does not extricate counsel from the obligation to understand one’s e-discovery obligations and attain competency in technological advances relevant to litigation in today’s E-centric world.

In past blogs, I have discussed the importance of issuing a litigation hold notice (“Hold”), as soon as a litigation is reasonably anticipated. I have also written about various best practices when drafting one’s Hold. [See Practical Tips For an Effective Litigation Hold Notice and Your Litigation Hold Must be Generally Broad And Specifically Tailored]. In an effort to avoid reiterating those blog posts in full, suffice it to say it is critically important to:

  1. provide custodians with detailed instructions on what they are expected to do upon receipt of the Hold; and
  2. ensure that the Hold sets forth the specifics of what information must be preserved, thus limiting any discretion vested in the recipients of the Hold.

A recent decision out of the District of New Mexico reminds us of these best practices.

In N.M. Oncology & Hematology Consultants v. Presbyterian Healthcare Servs., 2017 U.S. Dist. LEXIS 130959 (D.N.M. Aug. 16, 2017), the plaintiff moved the District Court for adverse inference sanctions against the defendants alleging defendants failed to implement a proper litigation hold (“Notice”) because, among other things, the Notice impermissibly gave discretion to employees to determine what information might be relevant to the lawsuit and thus subject to the Notice. Plaintiff contended that permitting such discretion was per se inadequate.

The Court, however, concluded that the discretion the employees were cloaked with in this specific instance was limited and, therefore, the Notice was not inadequate.  Specifically, the employees were directed to retain documents and data “that mention or discuss or relate to any of” an exhaustive list of subjects. The recipient-employees were also directed that if “you are unsure about the relevance of a document, be cautious and preserve it.”

In reaching its conclusion, the Court observed that defendant’s employees were not given a generic retain relevant documents instruction but rather one with sufficient specificity that the employees had little, if any, discretion, and were further instructed to err on the side of preservation.

While the Court further noted that allowing individual employees to exercise discretion as to whether to retain data is not, alone, indicative of bad faith nor does it render a Hold per se inadequate, the decision reminds us that generic “preserve all relevant data” instructions should never be the basis of one’s Hold. The decision also serves as an important reminder that one’s Hold should be drafted in a way that it effectively 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, thus eliminating discretionary decisions to the greatest extent possible.

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 – an inference more typically permitted under the pre-amendment rules.

Despite the existence of a stipulated clawback agreement (that was never presented to the Court to be So Ordered) that provided “[i]nadvertent production of privileged documents does not operate as a waiver of that privilege,” the Court found defendants’ claim to privilege was waived by the inadvertent and “completely reckless” production of privileged materials.  In reaching its conclusion, the Court declined to conclude a clawback agreement always protects against waiver, regardless of its terms.  Rather, like the Second Circuit’s approach, the Ohio State Court held that the heightened protection provided to producing parties under a clawback agreement is lost when the party’s disclosure is “completely reckless.”

Background

Plaintiff, Irth Solutions, LLC (“Irth”) filed this lawsuit in state court alleging contract and fraud based claims.  Eventually, Defendant Windstream Communications, LLC (“Windstream”) removed the action to the District Court for the Southern District of Ohio, based upon diversity jurisdiction.  Shortly after removal, Windstream advised the Court there was a discovery dispute involving an inadvertent production of privileged electronic communications.

At the heart of the decision (Irth Sols. LLC v. Windstream Commc’ns LLC, No. 2:16-CV-219, 2017 WL 3276021 [S.D. Ohio Aug. 2, 2017]) is the parties’ agreement concerning the production of electronically stored information (“ESI”) and an email memorializing that agreement.  As is relevant here, the parties agreed that a formal court order under Federal Rule of Evidence 502 was not necessary given the size of the dispute but nonetheless agreed among themselves:

  • If a producing party discovers that it has inadvertently produced a privileged document, the producing party will promptly notify the receiving party of the inadvertent production;
  • The receiving party will promptly destroy or return all copies of the inadvertently produced document; and
  • The inadvertent production of privileged documents does not operate as a waiver of the asserted privilege.

(Docket 45-1).

Discovery began and eventually (twenty-seven days after Irth alleges production was due) Windstream made a partial production of documents.  According to Windstream, that production contained 43 inadvertently produced privileged documents.  Approximately 12 days later, Windstream’s counsel realized the production issue and contacted Irth’s counsel demanding return of the privileged materials.    Irth’s counsel refused to return the documents, but sequestered them pending decision by the Court.  Irth’s position was that any claim of inadvertence was far-fetched given the small total production size (2200 pages), the inordinate time Defendant took to make any production of documents (3 months) and the firm’s reputation for excellence.

At the hearing on the issue, the Court noted that many of the documents contained clear indicia of potential privilege (e.g., 14 of the 43 documents contained the word “legal” and several identified the author with a signature block making plain her role as counsel: “Counsel to Director of Government Contract Compliance”).  Notwithstanding these privilege flags, defense counsel reaffirmed at the hearing that the documents had been subject to a dual step review process intended to capture privilege concerns.

While the matter was pending before the Court, Windstream produced the at-issue privileged documents again. That’s right – counsel produced the very documents in dispute a second time!  In that instance, defense counsel claimed the production was the result of an attempt to re-produce the prior production set, excluding the privileged materials, in a searchable format and accidentally the Firm’s litigation support team included the privileged materials, despite counsel’s efforts to ensure they were withheld.

Discussion

Taking up the issue, the Court discussed the question of what constitutes inadvertence and ultimately indicated that it would assume arguendo that Defendant had established inadvertence.

The Court then turned to the “impact” of the parties’ clawback agreement on the question of waiver, citing three frameworks applied by other courts: “(1) if a clawback is in place, it always trumps Rule 502(b); (2) a clawback agreement trumps Rule 502(b) unless the document production itself was completely reckless [as embraced by the Second Circuit]; and (3) a clawback agreement trumps Rule 502(b) only if the agreement provides concrete directives regarding each prong of Rule 502(b).”

The Court rejected the first approach, reasoning in part that it “undermine[s] the lawyer’s responsibility to protect the sanctity of the attorney-client privilege” and “runs the risk of undermining contract principles.”

The Court, however, expressed approval of both the second and third frameworks and reasoned it need not choose between them because “taking into account the careless privilege review [conducted by defense counsel], coupled with the brief and perfunctory clawback agreement [the parties drafted], following either [the second or third] approach leads to the same result: Defendant has waived the privilege.”  Applying the framework in this Circuit, the Court noted that “[i]nadvertent disclosure provisions in stipulated protective orders are generally construed to provide heightened protection to producing parties.” (citations omitted).  However, this heightened protection is lost where a disclosure is completely reckless.

In analyzing what constitutes “complete recklessness” the Court stated that various considerations come into the calculus including: the number of privileged documents inadvertently produced, the number of documents ultimately reviewed, and the type of review process engaged in by the producing party.  Applying those factors to the facts before it, the Court ultimately concluded each demonstrated a level of recklessness that supported waiver.  Indeed, the number of privileged documents produced (>10% of the production), the time taken for the review (“Defendant had months to produce the first production”), and the fact that the mistake was not “the result of a technical error or mistake born from hours and hours of review” but instead was the result of critical and reckless mistakes of counsel (i.e., counsel reviewed a limited number of documents and more than 1/3 of the documents prominently featured “Counsel” and a legal signature block) each supported a determination of recklessness.*

Although the Court was sympathetic that privileged documents will inevitably fall through the cracks and be produced inadvertently in today’s world that is replete with emails, the Court in its Opinion reminded the Bar of our responsibility to safeguard the attorney-client privilege.  Indeed, the Court wrote, “as the “guardian” of the attorney-client privilege, it is a lawyer’s responsibility to minimize the cracks through which privileged material might slip. The Court believes the second approach adequately recognizes an attorney’s responsibility to guard that privilege, and holds an attorney accountable when normal cracks become chasms—as was the case here.” (Citation omitted.)

Conclusion

There are many critical lessons to be internalized from this decision not the least of which is the importance of entering a robust and unambiguous claw back agreement that is So Ordered by the Court.  However, it is equally important that any privilege review be undertaken in a deliberate and comprehensive fashion and performed by an attorney capable of assessing privilege – not necessarily the lowest billing attorney assigned to the specific matter.   As the Court made clear, it is the attorney’s responsibility to hold sacred their client’s privilege.  To this end, when devising a review protocol for ESI, it is imperative that a well thought out privilege protocol is designed and implemented.  And, once privilege review is complete that key words and other quality control mechanisms are put in place to avoid the inadvertent production of privileged materials.

Full decision can be located here: https://www.ediscoverylaw.com/wp-content/uploads/2017/08/Irth-Opinion.pdf

* And to make matters worse, Windstream then produced the exact same documents again while asking the Court to protect its privilege.

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 this single-plaintiff employment discrimination case (Bailey v. Brookdale Univ. Hosp., 2017 U.S. Dist. LEXIS 93093 (E.D.N.Y. June 16, 2017)), counsel for the parties purportedly met and conferred as directed by the Court and, thereafter, entered into an ESI agreement (“Agreement”).  The Agreement was presented to the Court and represented to be the product of mutual negotiation.  As a result, the Court So-Ordered the Agreement and its terms.

During discovery, Bailey advised the Court that he was no longer able to comply with the Agreement because the data production costs would cause an economic hardship. Specifically, he claimed the cost of production – estimated at $2,000-$3,000 – was unduly burdensome in light of his personal financial situation, notwithstanding the Agreement.  At the Court’s request, Bailey submitted an affidavit estimating the cost of production and that such a cost would inflict a “severe financial hardship” on him given that he earned approximately $90,000 annually and was the sole provider for his family of five.  In evaluating Bailey’s grievance, the Eastern District considered cost-shifting to protect Bailey from incurring an undue burden or expense. For cost-shifting to be properly granted, however, there must be sufficient proof of economic hardship and evidence that the requested data is inaccessible.  The Court found neither was established by Bailey. Nonetheless, the Court found that the Agreement proposed by Defendants was of a type, “typically utilized in a more complex litigation involving multiple parties and corporate entities” and had no applicability to a single plaintiff.   As a result, the Court concluded that Bailey’s counsel did not engage in meaningful discussions with his client regarding the terms of the proposed Agreement and what costs might be incurred by producing the information in the format the defendants sought. Likewise, it further appeared to the Court that Bailey’s counsel did not engage in a meaningful meet-and-confer session with opposing counsel, and did not thoroughly review the Agreement prior to signing it.

The Court did not find sufficient grounds to terminate the Agreement, and instead ordered partial cost-shifting [so that Defendants received the form of production they negotiated for], requiring the defendants to bear 40% of discovery costs and Bailey’s counsel, rather than Bailey himself, to bear the remaining 60%.

This case serves as an important reminder of counsels’ obligation to engage in good faith in all aspects of the discovery process – including negotiating an ESI production protocol.  Here, the Court was unwilling to revise the Agreement, and instead required Bailey’s counsel to abide by the terms of the Agreement and pay for the production.  This case also serves as an important reminder of our duty, as lawyers, to be competent in the law and the technological world in which we practice.  Indeed, as attorneys practicing in today’s ever-increasingly electronic world, we must remain abreast of the intricacies involved in electronic production and the costs associated with that ESI.  (See earlier blogs discussing duty of competence)

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.

In a decision dated May 26, 2017, Justice Chan of the Supreme Court of the State of New York, New York County, struck the defendant’s answer.    Although the Court acknowledged that the imposition of this particular sanction was “severe,” Justice Chan deemed it warranted in light of the “egregious” and deliberate misconduct of the defendant.

The substantive allegations in the underlying lawsuit involve the parent company of an Indian programming channel (Mumbai-based Iris Mediaworks Ltd.,) accusing a former executive (“Vasisht”) and his company (“IKK Inc.”) of breaching fiduciary duties, competing unfairly and misappropriating trade secrets.  Specifically, the suit claims that Iris owned a South Asian entertainment channel called Get Punjabi that DISH broadcast on its satellite in the U.S., and that Vasisht set up IKK, Inc., a competitor that now broadcasts extensive programming previously shown on Get Punjabi. The complaint names six defendants and includes 12 causes of action.  That litigation was commenced on July 14, 2014.

The litigation was proceeding forward when, on October 26, 2016, the Chairman and Managing director of Iris (Rajendra Karnik) discovered that all the emails in his work account were being forwarded to another account (anonymous331100@gmail.com) without either his knowledge or his consent.    As a result, Karnik subpoenaed Google® requesting certain information about the anonymous331100@gmail.com account.   Karnik learned, among other things, that the “anonymous” account was created July 10, 2014 – four days prior to the instant lawsuit being commenced.

Karnik also learned – with the help of a computer forensic consultant – that the “auto-forward functionality” was enabled on his work email (without his knowledge or consent) to forward all of Karnik’ s emails to the “anonymous” account.  Therefore, every email in the Karnik account was simultaneously accessible by the “anonymous” account owner.   The consultant also determined that the “anonymous” account received Karnik’ s emails via the auto-forward functionality from July 10, 2014 through October 27, 2016 and, during that time forwarded 317 emails (including Karnik’ s communications with his attorney regarding the litigation strategy of this lawsuit) to another email account manish@a2zmediausa.com.    The consultant further demonstrated the existence of two other dummy accounts that received Karnik’ s emails and routinelyforwarded those emails to Vasisht.

Based upon the foregoing, plaintiffs moved by Order to Show Cause to have Vasisht’s Answer stricken based upon Vasisht’s intentional hacking of their emails and taking of protected materials.    In opposition, Vasisht did not offer any evidence to contradict the computer forensic consultant’s findings.  Rather, he interposed only a general denial of knowing about either the “anonymous” account or the dummy accounts, which Justice Chan categorized as “half-hearted.”

The Court in striking the answer, observed:

“There are no issues raised…as to whether the 2000 plus hacked emails were…protected material. However, even if there were an issue, the hacking of plaintiffs’ email during litigation can only be seen as an attempt to undermine plaintiffs’ case.  It is also indicative of…[a] disregard for the judicial process.  While striking a defendant’s answer is an extreme sanction, it is warranted here as hacking plaintiffs’ email to obtain information during litigation without going through proper discovery channels is an egregious act and sidesteps discovery procedures.” (internal citations omitted).

While this case is illustrative of unequivocal bad behavior that hopefully is infrequently encountered, it serves as an important reminder of the various sanctions – including the striking of a pleading – available to Judges.  When parties/counsel engage in conduct deserving of sanctions.