There is an ever-increasing volume of data generated by businesses.  In an effort to reduce storage costs and ameliorate privacy concerns, companies have embraced ephemeral, or self-destructing messaging.  And, while ephemeral messaging may solve one set of problems, it has the potential to create preservation issues when legal matters arise.

Recently, the Sedona Conference released the “Commentary on Ephemeral Messaging” (the “Commentary”). The Commentary analyzes the benefits and risks attendant to ephemeral messaging and provides several guidelines intended to tailor ephemeral messaging applications to comply with preservation obligations.

Although courts and attorneys are wary that the use of an ephemeral messaging application allows a party to conceal misconduct and may protect a party in a litigation setting, the authors of the Commentary opine that with the proper application, the benefits of ephemeral messaging are substantial.  For example, there is significant business value attendant to ephemeral messaging, including the elimination of costly storage and retention of data that lacks any business value.

Additionally, many ephemeral messaging applications have legal-hold capabilities.  And so, companies that opt to implement these applications can incorporate a customized legal hold policy that sets retention periods for documents, and allows one to disable the deletion functionality for communications related to a litigation hold.  That said, while ephemeral messaging can save businesses from expenses associated with storage and data, and applications with legal hold capabilities exist, these applications leave many a litigator thinking the applications do little more than facilitate the deletion of otherwise relevant data.

Looking forward for those companies who will embrace ephemeral messaging applications, it is critical to implement best practices relating to document retention to mitigate any potential spoliation or preservation risks.  These practices include, but are not limited to, (i) implementing clear and robust document retention policies; (ii) selecting an application that allows for legal-holds to be implemented and customized; (iii) training relevant employees on the proper uses of ephemeral messaging applications; and (iv) monitoring the use of the applications.  Therefore, as noted by the Commentary, “[i]n the absence of contrary circumstances, courts may consider a litigant’s use of ephemeral messaging that accords with [the guidelines] as being reasonable and executed in good faith.”

Thank you to second year associate, James Maguire in the Firm’s Uniondale office, for his research assistance related to today’s blog.

Historically, the legal profession has been reluctant to embrace technology and electronic discovery in the practice of law.  Indeed, practitioners often still exchange discovery in paper format or ignore, altogether, medium, like text messages, that may be repositories of relevant information.  A recent case — In DR Distributors, LLC v 21 Century Smoking, Inc. – is an example supporting the belief of judges “that too many attorneys pay too little heed to both the spirit and the letter of procedural rules addressing e-discovery.”  This decision, which focuses on the basic duties and fundamentals of handling electronically stored information (“ESI”) during all stages of litigation, is a must read for litigators appearing in Federal courts.

Background:

In DR Distributors, LLC v 21 Century Smoking, Inc. is a trademark dispute involving electronic cigarettes branded under similar marks. In late 2012, Brent Duke (“Duke”), one of the defendants and the principal of defendant 21 Century Smoking (“21 Century” and with Duke “Defendants”) met with his attorneys to draft initial disclosures.  During the meeting, Duke explained he used two email accounts (Yahoo! and GoDaddy) and chat applications for business and personal purposes.

Although Defendants’ attorneys purportedly advised Duke to preserve all potentially relevant emails from both of his accounts, they failed to issue a litigation hold or to instruct Duke to disable automated deletion features on the account that would auto-delete emails or chats.  Further, Defendants’ attorneys were under the mistaken assumption that they could obtain all necessary emails from Defendants’ computer servers, when in reality, these “web-based emails and messages” were stored online.

Adding insult to injury, Defendants’ attorneys then allowed Duke to self-collect emails and communications relevant to the litigation.  At no time did Defendants’ attorneys monitor or supervise the searches performed by Duke.  And so, three years later, after the close of fact discovery and various allegations that Defendants withheld relevant communications, Defendants’ reengaged an ESI vendor, who found over 15,000 responsive documents that were never collected or produced.  And, Defendants were unable to recover additionally potentially relevant emails because many had been deleted by the automated deletion feature that was never disabled.

Ultimately, Plaintiff filed a motion for sanctions based on Defendants’ failures and the failures of their former counsel to timely produce ESI and for spoliation of ESI.  As part of its motion, Plaintiff requested a wide range of sanctions, including civil contempt and monetary sanctions.

The Court was deeply troubled that Defendants’ former counsel lacked the basic knowledge, training, and skills to handle properly ESI.  Specifically, Judge Johnston detailed the myriad mistakes made by defense counsel including counsel’s: (1) argument that “because this is a trademark case, ESI was unimportant;” (2) failure to provide a litigation hold; and (3) allowing unsupervised self-collection of relevant documents by Duke.  Notably, the Court was particularly annoyed with counsel’s attempt to shift blame to the ESI vendor for failing to properly identify and produce relevant emails and communications.  According to the Court, it is a lawyer’s responsibility to have “a reasonable understanding of the[ir] client’s information systems” and that such “ understanding of the client’s information systems allows counsel to create a systematic process and plan for responding to discovery requests.”

In sum, the Court granted Plaintiff’s motion and imposed several sanctions including pursuant to Rule 26(g) and 37 of the Federal Rules of Civil Procedure, monetary sanctions, and required Defendants’ former counsel to attend “at least eight hours of continuing legal education.(CLE) on ESI.”

Conclusion:

As noted by Judge Johnson, “[i]t is no longer amateur hour. It is way too late in the day for lawyers to expect to catch a break on e-discovery compliance because it is technically complex and resource-demanding.”  And so, let this case serve as an important reminder to all lawyers of their obligation to be competent in ESI or to engage an attorney who is.

Thank you to second year associate, James Maguire in the Firm’s Uniondale office, for his research assistance related to today’s blog.

Data destruction is the process of removing information in a way that renders it unreadable (paper) or irretrievable (digital data). And, while it is critically important for companies to manage data in a way that is effective, defensible, and efficient, people/companies are often hesitant to dispose of data.  The cause of the hesitance is varied:  why get rid of our beloved data when storage space is inexpensive and retention is easy; how do I determine which data no longer has business value; how do I analyze which data is subject to regulatory obligations or litigation holds in place; who has the time/money to assess these questions.  And yet, with data breaches on the rise (See Some Cyber-Musts For Maximizing Security ), the SHIELD Act soon to be in effect (See What is New York’s Data Breach Notification Statute? And Does it Impact Me? ), and the cost of e-discovery in litigation substantial, it is important (and seemingly required by SHIELD) for companies to implement a data disposal policy and practice.

The benefits of having a consistent data destruction policy cannot be overstated. A proper destruction policy will minimize the chances of having to preserve, collect and review inordinately large volumes of data.*  In turn, less data to preserve, collect, and review means less expense.  Additionally, many of the new data privacy laws require destruction.  For example, the SHIELD Act requires the implementation of reasonable safeguards to protect the private information of New York residents.  Among the safeguards defined in the Act is a procedure to dispose of private information within a “reasonable amount of time” after it is no longer needed for business purposes.  And so it appears that a data destruction policy for companies obligated to comply with SHIELD may be required.  And having less data retained means less data is potentially compromised in the event of a breach.

Although every company should consider implementing a destruction policy, whether your company is obligated to take certain steps in destroying that data depends on the regulations that apply to your company. For example, depending on the industry in which you operate, you may have to look to HIPAA, Sarbanes-Oxley, Gramm-Leach-Bliley, the Fair and Accurate Credit Transactions Act, or the Department of Financial Services for guidance.**

*Often the volume of data subject to a litigation hold (and thus potentially collected, reviewed and produced) is substantial.   Many companies have the proverbial packrat – the employee who has not deleted an email since s/he first started working at the company.  Because in today’s e-centric world it is not uncommon to have tens of thousands of emails involved in a small litigation, where the entity has a documented destruction policy, imagine the volume when individuals or companies do not have, or do not follow, a data destruction policy.

** These laws, among other things, dictate the period of time for which you need to retain data.

Whether we like it or not, a reality of today’s world is that often important business is conducted by text messages. And so, when it is time to issue a litigation hold notice, you must include an instruction to preserve text messages as well as the devices from which they are sent/received (i.e., smartphones).  Your failure to do so can be a costly mistake as learned by defendants in the Paisley Park case — a litigation involving the Estate of the late musical artist known as Prince — in the district of Minnesota.

In Paisley Park Enters. v. Boxill, No. 0:17-cv-01212, (D. Minn., 3/5/19) (copy here: Prince_Discovery_Order), Magistrate Judge Tony N. Leung reminded us of the obligation to preserve electronically stored information (“ESI”) that is relevant to the lawsuit, including text messages.* 

Simply stated, Plaintiffs claimed they were deprived of relevant discovery; defendants argued they did what was required by the law (i.e., preserve emails and computer data).  Defendants claimed ignorance that they had any obligation to preserve their text messages.

In reaching the merits of the spoliation motion filed by Plaintiffs, the Court concluded that Defendants’ failure was intentional and sanctions appropriate.  In reaching this conclusion the Court made a number of salient observations.

First, the Court observed that the executives – as principals of the corporate defendant – were they types of individuals likely to have relevant information.

Next, the Court observed that the text messages of the individual defendants were likely to contain relevant information because, as demonstrated by text messages secured by Rule 45 subpoena, the executives often discussed the very matters in the lawsuit by text message.  The Court therefore concluded that under the Federal Rules the parties were required to take reasonable steps to preserve ESI, including text messages (which are included in the standard, expansive term “documents”).**

Despite this obligation to take reasonable steps to preserve relevant information, the Court observed the defendants failed entirely to take any reasonable steps.  Indeed, the defendants failed to take any number of simple, basic steps including:

  • the executives did not suspend the auto-delete functionality on their respective phones —  a failure that the Court observed “takes, at most, only a few minutes” to implement;
  • the executives did not put in place a litigation hold to ensure that they preserved text messages; and
  • the executives failed to take any number of  “relatively simple options to ensure that their text messages were backed up to cloud storage” – processes that would have cost “little, particularly in comparison to the importance of the issues at stake and the amount in controversy here.”

The Court concluded that defendants’ failure to follow these simple steps alone was sufficient to show defendants acted unreasonably.   However, if the defendants’ absence of reasonable efforts was not enough, the evidence submitted demonstrated the defendants each wiped and intentionally destroyed their phones after the lawsuit was commenced (and, in the instance of one executive, he wiped a second phone and discarded it after the Court ordered the parties to preserve all relevant electronic information and after receipt of a letter advising of the need to produce text messages).

And so, having concluded both that the defendants failed to take reasonable steps to preserve relevant information and intended to destroy relevant ESI, the Court analyzed the prejudice caused to plaintiff.  Specifically, was the destroyed ESI able to be replaced from any other source Fed. R. Civ. P. 37(e).

Defendants argued there was no prejudice because plaintiffs were able to secure from third-parties some text messages sent to or received by the executive defendants.  The Court dismissed this argument and observed  these were “scattershot texts and [e-mails],” rather than “a complete record of defendants’ written communications from defendants.”  According to the Court, Plaintiffs were, for example, unable to recover text messages that the two individual defendants sent only to each other.  The Court therefore concluded the missing text messages could not be replaced or restored by other sources making it “impossible to determine precisely what the destroyed documents contained or how severely the unavailability of these documents might have prejudiced [Plaintiffs’] ability to prove the claims set forth in [their] Complaint.” Telectron, Inc. v. Overhead Door Corp., 116 F.R.D. 107, 110 (S.D. Fl. 1987).  Therefore, the Court concluded sanctions were appropriate under Rule 37(e)(1).

Because the Court concluded that the executive defendants acted with the intent to deprive Plaintiffs of evidence, the Court ordered sanctions, pursuant to each of Rules 37(b)(2)(C), 37(e)(1), and 37(e)(2) and directed the executive defendants to pay reasonable expenses, including attorney’s fees and costs, that Plaintiffs incurred as a result of the defendants’ misconduct.  The Court further directed the defendants pay into the Court a fine of $10,000.

While this case is an egregious example of discovery violations, the message to internalize is to include text messages (and other forms of messaging) in your hold notice.

*For those of you interested in the specifics of the lawsuit, the case involved the Estate of the late Prince Rogers Nelson (“Prince”) and the Estate’s interest in various songs created by Prince, including certain ones not released to the public.

**In rendering his decision to impose sanctions, Judge Leung provided a useful summary of the relevant law:

The Federal Rules of Civil Procedure require that parties take reasonable steps to preserve ESI that is relevant to litigation. Fed. R. Civ. P. 37(e). The Court may sanction a party for failure to do so, provided that the lost ESI cannot be restored or replaced through additional discovery. Id. Rule 37(e) makes two types of sanctions available to the Court. Under Rule 37(e)(1), if the adverse party has suffered prejudice from the spoliation of evidence, the Court may order whatever sanctions are necessary to cure the prejudice. But under Rule 37(e)(2), if the Court finds that the party “acted with the intent to deprive another party of the information’s use in the litigation,” the Court may order more severe sanctions, including a presumption that the lost information was unfavorable to the party or an instruction to the jury that it “may or must presume the information was unfavorable to the party.” The Court may also sanction a party for failing to obey a discovery order. Fed. R. Civ. P. 37(b). Sanctions available under Rule 37(b) include an order directing that certain designated facts be taken as established for purposes of the action, payment of reasonable expenses, and civil contempt of court.

Have questions?  Please contact me at kcole@farrellfritz.com.

This is Part 2 in a multi-part blog discussing various core requirements that can serve as the road map to allow a lawyer to fulfill his/her duty of technological competence. [Click here to read Part 1]

2.  Implement Appropriate Preservation Procedures

ESI spoliation remains a real issue that lawyers must confront.  The best way to prevent spoliation is to take deliberate and prompt preservation steps.

So, the first question to ask yourself is has my duty to preserve data arisen?  While different jurisdictions have different rules, the federal standard, and the one New York subscribes to, was announced in Zubulake v. UBS Warburg LLC (“Zubulake IV”), 220 F.R.D. 212, 218 (S.D.N.Y. 2003).  That case stands for the proposition that one’s duty to preserve potentially relevant information begins “once a party reasonably anticipates litigation.”

Assuming your duty to preserve has been triggered, now what?

A lawyer must issue an effective litigation hold notice.  I have written previously on how to draft an effective hold [See Litigation Hold Notices Should Not Cloak the Recipient with Discretion Over What Documents to Preserve, Practical Tips For an Effective Litigation Hold Notice, and Your Litigation Hold Must Be Generally Broad and Specifically Tailored] and refer you to those posts, but note it is critically important that the Hold is clear, comprehensive and provides a resource for questions.  Minimally it should provide custodians with detailed instructions on what they are expected to do upon receipt of the Hold; and 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.  Additionally, prior to issuance, an attorney must identify which custodians/entities are receiving the Hold; what third-parties over whom the client has practical control, if any, should receive the Hold; and what procedures will you implement to audit compliance with the Hold.

 

Often viewed as a necessary evil, the Rule 26(f) conference can serve as an invaluable opportunity to meaningfully discuss discovery such that the process is streamlined and seeks to avoid unnecessary (and often costly) disputes.   Generally speaking, Rule 26(f), among other things, sets the deadline for the conference as soon as practicable and at least 21 days before the scheduling conference, and lists several required topics for the conference, including preserving discoverable information. Although a litigant should use the Rule 26(f) conference to reduce the risk of spoliation claims through agreements on preservation, as well as reduce costs by limiting the scope of e-discovery, achieving results is almost entirely dependent on the attorney’s preparation.  Indeed, being well informed about your client, its documents ‒ including ESI ‒ and its goals will allow for a productive discussion rather than an empty formality.  But, how exactly do you prepare and what should you think about before the conference?

To prepare for the conference, it helps to think about the end game and to formulate the steps necessary to get there.  The below thoughts on preparation/topics are intended merely as a guidepost and are not exhaustive.

  • Understand your client’s ESI:  What kind of ESI is required to prosecute the client’s claims and defend against those of the adversary?  Where does that ESI reside?  To this end, it is important to become familiar with your client’s network architecture, including what hardware exists, and where.   You should strive to understand the client’s knowledge management (when/how is ESI stored), system knowledge (what is stored and where) and who is responsible for maintaining and storing data.  For example, are there physical email servers on site, or are the servers virtual?  What is necessary to access and collect data from each server?  Relatedly, give thought to addressing admissibility and how authenticity may be established over the documents (See The New Rules of Federal Evidence Have Arrived“).
  • Identify Custodians:  Take time to identify employees/custodians likely to have potentially responsive ESI.  Preservation comes at a cost and if you fail to understand your custodians, you may over-preserve.  Consider, for example, if the client is a national organization with offices throughout the U.S.  If all of the relevant custodians work out of the Omaha office, with all of the potentially responsive data located on a particular server, is there need to preserve the content of all other servers?  Consider interviewing those custodians to identify other relevant custodians.
  • Understand the timing and execution of Hold Notices, and Related Thorny Issues: At the conference the parties should determine the scope of the duty to preserve.  For example, be prepared to disclose (and ask adversary about) the status of the litigation hold.  Has one been issued?  If so, when and who received it.  If not, why not?  You may even seek to inquire about what subjects and sources the Hold covers and if there is any procedure in place for auditing compliance.  Are there any time-sensitive data sources involved and if so, have auto-delete and auto-archive functions been turned off for those data sources?  Is data from third-parties potentially responsive?  And, if so, what steps, if any, have been taken to preserve that data?   Have any key custodians left the company or potentially leaving?  If so, what steps are being taken to preserve his/her data?  Because of the large increase in e-data and the various locations where that data may reside, think about ways to narrow defensibly the scope of what you preserve.
  • Understand Collection:   While you may agree to preserve all of Katy Cole’s emails from 2010 to the present, that doesn’t mean you are agreeing to review for production all of that data.  What will be done to identify the materials that will be reviewed?  Can the parties agree upon search terms, date delimiters and other methodologies to limit the universe of material? Consider entering an agreement as to appropriate date ranges, custodians, systems, file types, and search terms.
  • Understand Privilege Obligations:  You should also discuss privilege during the Rule 26 conference.  Consider seeking a stipulation or Rule 502(d) order stating that disclosure of privileged information does not constitute a waiver of the attorney-client privilege in the instant or another proceeding.  Discuss whether a traditional privilege log is practical or burdensome for large volumes of ESI. Would it be preferable to log privileged emails by thread groups (i.e., a message and its attachments; related messages in a string of replies and forwards)?  Or are categorical logs (i.e., those that describe withheld categories instead of listing withheld records) preferable?
  • Understand Production Format:  Don’t leave format to the whim of your adversary.  Discuss expectations.  Indeed, there is little worse than receiving a thumb drive that contains various unsearchable PDFs (well, maybe a paper production is worse).  Discuss your production specifications and be prepared to produce in the same format you demand production.  Relatedly, is there any paper in the production?  If so, be certain to request that Optical Character Recognition (OCR [i.e., the process by which paper documents are converted into editable, searchable computer files]) be applied for ease text-search ability.  And, are you producing in a fell swoop or will the parties engage in phased discovery?

A meaningful and productive Rule 26(f) conference can streamline discovery, avoid unnecessary costs and avoid spoliation concerns.  It should be embraced as an opportunity to reach agreement and engage in a cooperative discovery process that will promote proportionality.

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.

Recently, two separate New York courts (the First Department and the Southern District) issued decisions imposing sanctions upon litigants who failed to comply with preservation obligations.  While a summary of those decisions and hyperlinks to the full decisions follow, attorneys should take heed that it is critical to timely and properly issue litigation hold notices when litigation is reasonably anticipated.   Irrespective of whether we are practicing in State or Federal court, our obligations to preserve potentially relevant information are not to be taken lightly.

Appellate Division, First Department Upholds (and Modifies) Sanctions Imposed by Trial Court Because of Plaintiff’s Failure to Timely Issue Litigation Hold.

This decision, issued on June 28, 2016, by the Appellate Division, First Department discusses what sanctions are appropriate when a party fails to comply with its preservation obligations.  Specifically, before the First Department was an Order of the Supreme Court, New York County (Carol R. Edmead, J.), which granted defendant’s renewed motion for spoliation sanctions, and dismissed plaintiff’s complaint.  The First Department unanimously modified the trial court’s decision to dismiss the complaint and instead awarded defendant an adverse inference charge at trial as to the spoliated evidence.

The factual underpinnings of the lawsuit involve allegations of legal malpractice against defendant Herrick, Feinstein LLP (Herrick) in connection with Herrick’s representation of plaintiff in negotiating a high rise construction loan with a developer.  The loan closed on May 8, 2007.  After a series of mishaps, including permit revocations and a crane collapse at the construction site, plaintiff retained counsel in June 2008 in connection with its potential claims against Herrick.  Thus, plaintiff’s obligation to preserve evidence arose at least as early as June 2008 (i.e., when it reasonably anticipated litigation).  In May 2010 – almost two years later –plaintiff finally issued a litigation hold.  As a result of this 23 month delay, plaintiff’s record destruction policies (including recycling of backup tapes, routine deletion of emails, and erasure of hard drives/email accounts upon an employee’s departure from the firm), went unsuspended until May 2010.  Plaintiff ultimately commenced its malpractice suit in 2011.

In or about June 2014, Herrick filed a motion seeking dismissal of plaintiff’s complaint as a sanction for plaintiff’s failure to preserve evidence. The trial court found plaintiff’s failures constituted ordinary negligence, and granted Herrick’s motion only to the extent of directing that Herrick be entitled to an adverse inference at trial.  Later that summer, plaintiff produced additional documents that identified various other custodians who likely had information relevant to the lawsuit.  Plaintiff claimed that its failure to produce these materials earlier was inadvertent.  In or about January 2015, Herrick moved to renew its spoliation motion, based on the new documents, including the identification of additional custodians, much of whose electronic records had been destroyed by plaintiff, either due to its failure to timely institute a litigation hold, or deliberately.  Plaintiff cross moved for fees.   Upon renewal, the trial court dismissed the complaint, and denied plaintiff’s cross motion for attorneys’ fees and costs.  This appeal ensued.

The First Department found that the motion court properly granted defendant’s renewal motion but held the trial court’s decision to dismiss the complaint as a spoliation sanction was an abuse of discretion.

The Court noted,“[F]ailures which support a finding of gross negligence, when the duty to preserve electronic data has been triggered, include: (1) the failure to issue a written litigation hold []; (2) the failure to identify all of the key players and to ensure that their electronic and other records are preserved; and (3) the failure to cease the deletion of e-mail” (VOOM HD Holdings LLC v EchoStar Satellite, LLC, 93 AD3d 33, 45 [1st Dept 2012]).  Thus, per prior decisional law, the trial court’s determination that plaintiff’s destruction was grossly negligent was upheld.  However, the First Department found dismissal of the complaint an improper sanction.  Specifically, the Court noted dismissal is warranted only where the spoliated evidence constitutes “the sole means” by which the defendant can establish its defense (Alleva v United Parcel Serv., Inc., 112 AD3d 543, 544 [1st Dept 2013]), or where the defense was otherwise “fatally compromised” (Jackson v Whitson’s Food Corp., 130 AD3d 461, 463 [1st Dept 2015]) or defendant is rendered “prejudicially bereft” of its ability to defend as a result of the spoliation (Suazo v Linden Plaza Assoc., L.P., 102 AD3d 570, 571 [1st Dept 2013] [internal quotation marks omitted]).  Because the record before the Appellate Division demonstrated a massive document production and many key witnesses available to testify, an adverse inference charge was appropriate.

The full decision of the First Department can be accessed here: http://www.courts.state.ny.us/reporter/3dseries/2016/2016_05065.htm

The Southern District of New York Imposes Severe Sanctions Upon Village Due to Village’s Failing to Issue a Litigation Hold

In a separate decision from the Southern District, Judge Karas similarly imposed severe sanctions – an adverse inference and more than $40,000 in attorneys’ fees – against the Village of Ponoma for failing to timely issue a litigation hold.  That decision, and my colleagues’ blog about that decision can be read here:

For more on this topic See Facebook Posts And Text Messages Result In Monetary And Other Sanctions Being Imposed Against A Municipality 

 

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.