eDiscovery

Federal Judge Sanctions Corporate Defendant and Its Counsel for Gross Negligence, Bad Faith, and Failure to Comply With Discovery Requests and Court Order

In Brown v. Tellermate Holdings Ltd., Tellermate Holdings, the defendant company, terminated two employees for allegedly failing to meet sales targets over several years.  The employees, feeling that they were wrongfully terminated due to their age, filed an employment discrimination action against the company as well as other entities and individuals associated with Tellermate. Throughout pre-trial proceedings, the case was plagued with numerous discovery mishaps.  The plaintiffs requested from the defendant company data stored and maintained by Salesforce.com,[1] which would, in theory, evidence plaintiffs’ sales records over the last few years in addition to allowing the plaintiffs to compare their sales figures with other (younger) employees.  However, even though numerous discovery conferences were held, numerous discovery motions filed with the court, and several discovery orders issued by the court, the defendant corporation failed to produce the requested data and documents.  Ultimately, the plaintiffs filed for judgment and sanctions under Federal Rule 37(b)(2); the court held a three-day evidentiary hearing on the matter. The presiding judge, United States Magistrate Judge Terence P. Kemp, identified three areas in which the defendant company or its counsel failed in its obligations to the plaintiffs and the court in relation to production of documents and data: Defendant’s counsel failed to understand how Tellermate’s data stored with Salesforce.com could be obtained and produced to plaintiffs, which resulted in counsel making false statements to the plaintiffs’ counsel and the court; By failing to understand how the defendant’s data was stored and maintained, defendant’s counsel took no steps to preserve the integrity of the information in Tellermate’s database located with Salesforce.com; Defendant’s counsel failed to learn of the existence of documents relating to a prior age discrimination charge until almost a year after plaintiffs requested the documents; Defendant’s counsel produced a “document dump” resulting from counsel’s use of an overly-broad keyword search that yielded around 50,000 irrelevant documents, which plaintiffs’ counsel could not review within the time period ordered by the court. The Salesforce.com Data Judge Kemp found that Tellermate’s failure to preserve and produce the data logged on Salesforce.com’s website irreparably deprived the plaintiffs of reliable information necessary in supporting their claims.  Although defendant’s counsel initially stated that Tellermate “does not maintain salesforce.com information in hard copy format,” “cannot print out accurate historical records from salesforce.com,” and that “discovery of salesforce.com information should be directed at salesforce.com, not Tellermate,” the court found such statements to be on their face false.  In fact, Tellermate did have access to the information sought by the plaintiffs as one, and sometimes two, of Tellermate's employees enjoyed the highest level of access to the Salesforce.com information.  The court determined that the information eventually produced by the defendants could not be trusted as “even a forensic computer expert has no way to detect hat changes, deletions[,] or additions were made to the database on an historical basis.”  Because of Tellermate’s failure to preserve the Salesforce.com data, Judge Kamp precluded Tellermate from providing evidence showing that the plaintiff-employees were terminated for their alleged underperformance. Counsel’s Obligations With Respect to ESI The court found that the defense’s counsel fell short of their well-established obligations[2] to critically examine the documents and data Tellermate provided to them.  Tellermate made false representations to its counsel about the data’s availability and therefore caused undue delay in document production as well as false and misleading arguments to be made to plaintiffs’ counsel and to the court.  Subsequently, the plaintiffs were forced to file discovery motions before the court to address these discovery issues which produced the Salesforce.com data that was never properly preserved albeit its significance to the plaintiffs’ case. Judge Kemp ultimately determined that counsel for the defendant conducted an inadequate investigation of Tellermate’s electronic data while simultaneously failing to understand the most basic concepts of cloud computing and cloud storage, which led to counsel’s failing to preserve key electronic data. Control of Data Stored in the Cloud As mentioned above, Tellermate and its counsel repeatedly represented to the plaintiffs and to the court that it did not possess and could not produce any of the Salesforce.com data requested by plaintiffs.  Additionally, the defendants asserted that in light of those facts, the defendants could not preserve the data stored on Salesforce.com’s databases at any point prior to litigation. Judge Kemp dismissed these claims.  The court concluded that, without any factual basis whatsoever, no substantive argument could be made that Tellermate was prohibited from accessing the information stored on the Salesforce.com databases or that Salesforce.com was responsible for preserving Tellermate’s information and data as it was the entity that maintained possession and control of the data. In reality, Tellermate was the custodian of the data stored on the Salesforce.com databases.  While information can be stored in locations outside the immediate control of the corporate entity by third party providers, it can still be under the legal control of the owner of the data and therefore must be produced by the owner under Federal Rule 34(a)(1)(A).  Additionally, had Tellermate’s counsel critically examined the agreement between Tellermate and Salesforce.com, it would have realized that Tellermate was the owner of all data created by its employees and that Tellermate could, at any time, download the data stored on the Salesforce.com databases for preservation and production purposes. Limitations on Document Production to Avoid “Document Dumps” Tellermate produced to the plaintiffs 50,000 pages of irrelevant documents, classified by Judge Kemp as a “document dump.”  Tellermate’s counsel refused to disclose which search terms it used in deciding which documents to produce to the plaintiffs, claiming that the search terms were privileged.  In actuality, the court discovered, Tellermate’s counsel only used the full names and nicknames of employees as its search terms, which obviously yielded irrelevant documents.  Without reviewing the returned documents, and because the court’s deadline for producing relevant documents was rapidly approaching, Tellermate’s counsel produced to the plaintiffs the documents as “Attorney’s Eyes Only.” The court recognized that a protective order was permitted only when counsel held a good faith belief that such information constituted a “trade secret or other confidential research, development, or proprietary business information, and that such material was entitled to a higher level of protection than otherwise provided in the protective order.”  Tellermate could not demonstrate entitlement to this level of protection with respect to the search terms used in procuring documentation for discovery: The alleged burden imposed by a high volume production does not provide the producing party or its counsel free reign to choose a given designation and ignore the Court’s order pertaining to that designation. First, the court looked to whether competitive harm would result from the disclosure of the types of documents produced by Tellermate to a competitor; however, Tellermate’s memorandum on the issue did not contain any evidence about the harm which might result if the plaintiffs were permitted to review any particular document that was labeled “Attorney’s Eyes Only.” Second, Tellermate’s argument as to the harm it would experience was entirely conclusory and was not supported by evidence: Apart from the general concept that disclosure of some types of sensitive information to a competitor may result in harm, it contains no particularized argument which is specific to [the plaintiff], the way in which he was competing with Tellermate, and how the disclosure of any one of the 50,000 pages marked as attorneys-eyes-only would harm Tellermate’s interests. The court was astounded that Tellermate continually failed to meet the burden required to designate the documents as “Attorney’s Eyes Only” and, up until the hearing date, made no effort the redesignate a single page of the 50,000 produced in order to permit the plaintiffs from viewing the documents. Sanctions The court had absolutely no qualms with an award of attorneys’ fees for all motion practice connected to the preservation and production of the Salesforce.com data.  “Had Tellermate and its counsel simply fulfilled their basic discovery obligations, neither of these matters would have come before the Court, or at least not in the posture they did.”  The court took great concern to the extraordinary lengths the plaintiffs had to go to in order to obtain the documents maintained by the defendant and, even after several rounds of motions, were not able to obtain all of them.  The “Attorney’s Eyes Only” designation on the 50,000 documents produced was also unfounded, the court held, and unduly precluded plaintiffs from necessary evidence that supported their case, which warranted fees under Federal Rule 37(a)(5)(A). Conclusion Tellermate provides a warning to all attorneys that the realm of technology in which their clients are constantly interact with is always changing.  Therefore, so does the practice of electronic discovery.  Counsel must always meet its duties with respect to ESI by engaging in discussions with its clients and opposing counsel about ESI; being aware, and perhaps even knowledgeable, of new and emerging technologies; and investigating and assessing with its clients the sources and status of potentially relevant ESI.  By forgoing these practices, counsel opens itself and its clients to easily avoided and costly sanctions. Daniel is the Editor-in-Chief of eLessions Learned and a third-year law student at Duquesne University.  To read more about him, click here. [1]       Salesforce.com is a cloud-based customer relationship management system with more than 100,000 corporate customers around the world.  Tellermate and its employees used Salesforce.com to track their sales and other interaction with customers.  The court recognized that each sales person using the Salesforce.com management system could add, remove, or otherwise change data on their sales account. [2]       See Zubulake v. UBS Warburg LLC, 382 F.Supp.2d 536 (S.D.N.Y. 2005) (counsel had an affirmative duty to monitor preservation an d ensure all sources of discovery information were identified).

Is Negligent Spoliation of Evidence Sufficient to Warrant Permissive Adverse Jury Instruction?

An employer doesn’t need an attorney to tell him or her that destroying evidence relevant to litigation may make the court very unhappy.  Often times, when a party acts in bad faith by intentionally destroying evidence, the court will impose a sanction such as an “adverse inference” jury instruction.  This type of instruction orders the jury to infer that the missing evidence would have been detrimental to the guilty party.  But what if a party did not intentionally destroy evidence in bad faith, but rather lost the evidence due to a negligent mistake?  Should the same adverse inference instruction be used? In Pillay v. Millard Refrigerated Services, the court held that even if a party is merely negligent in destroying evidence, a jury may presume that the evidence would have been unfavorable to that party.  This permissive adverse inference instruction differs from the circumstances where the court determines that the party acted in bad faith because the court gives the jury the option of making an adverse inference.  Typically, when bad faith is present, the court will instruct the jury that it should presume the missing evidence is detrimental to the party who destroyed it.  This instruction differs from the instruction in Pillay where the court gave the jury the option of making the adverse inference. The Pillay court imposed a permissive adverse inference jury instruction when an employer negligently deleted relevant information.  The employer claimed that it terminated an employee because the employee’s production levels were down.  The employee claimed that he was terminated for unlawful reasons and that the employer’s labor management system (“LMS”) would show that the employee’s production level exceeded expectations. The employer, however, no longer possessed the LMS data because of routine deletions of the data after one year.  The data was deleted despite opposing counsel’s numerous requests to preserve all relevant documents and evidence. The employer argued sanctions were not warranted because the LMS data was not deleted intentionally or in bad faith.  The court rejected this argument holding that even without a showing of bad faith, the court has the discretion to impose sanctions when a party’s negligence causes information to be lost.  The court sanctioned the employer with the following permissive adverse jury instruction: Pillay contends that Millard at one time possessed data documenting [an employee’s] productivity and performance that was destroyed by Millard.  Millard contends that the loss of data was accidental.  You may assume that such evidence would have been unfavorable to Millard only if you find by a preponderance of the evidence that (1) Millard intentionally or recklessly caused the evidence to be destroyed; and (2) Millard caused the evidence to be destroyed in bad faith. Moving forward, this case means litigants must be extra careful in preserving evidence that may be relevant to litigation.  One negligent misstep, even if done without any showing of bad faith, may be the cause of an adverse jury instruction that can potentially be the deciding factor in a lawsuit. E-DiscoParty, a Seton Hall University School of Law graduate (class of 2014), served on the executive board of the Seton Hall Law Review and is a member of the Interscholastic Moot Court Board. E-DiscoParty now clerks for a Justice on the Supreme Court of New Jersey. 

Don’t Bite Off More Than You Can Chew: Requesting Party Does NOT Always Bear the Production Costs Related to E-Discovery

The plaintiff, Country Vintner, had an agreement with a winery (Esmeralda, who was not named a party to the action) to be the exclusive wholesaler of Alamos, which is an Argentinean wine, in North Carolina. A few years later, the defendant, Gallo, started supplying the wine to a variety of other wholesalers, but not to Country Vintner. The plaintiff sued Gallo for violations of the North Carolina Wine Distribution Agreements Act and for violations of the N.C. Unfair and Deceptive Trade Practices Act. Inevitably, there were disagreements over discovery of Electronically Stored Information (ESI). The plaintiff wanted emails and other ESI that would establish that there had been some sort of collusion between Esmeralda and Gallo that ended up excluding Country from the distribution of Alamos. The parties agreed to narrow the discovery request to certain key words, date restrictions, employees, etc., in order to accommodate Gallo’s complaints of an undue burden and expense to produce the requested information.  After much deliberation, and accompanying motions, the district court decided to adopt Country’s proposal, ordering several search-narrowing guidelines. Gallo then collected more than 62 gigabytes of data and gave the data to their lawyers to process and review. The lawyers processed the data into a) searchable data, b) removed system files and exact duplicates, c) and ran several variations of the 19 proposed search terms and phrases. The district court eventually granted Gallo a motion to dismiss the complaint regarding the Unfair and Deceptive Trade Practices Act, and also granted them summary judgment for the remaining Wine Act complaint. Then, perhaps getting a little ahead of itself, Gallo sought to recover $111,047.75 for their eDiscovery work. They broke down the costs as follows: $71,910.00 – for “flattening” and “indexing,” basically making the files searchable and removing duplicate content; $15,660.00 – for extracting the metadata, facilitating data review and other such things; $178.59 – for the conversion from native format to a .tif or .pdf format; $74.16 – for electronically Bates stamping the information; $40.00 – for copying the data onto a disc; $23,185.00 – for ensuring the “quality” of the data and ensure proper preparation of the documents for opposing counsel. The court granted a drastically reduced ESI-related recovery in the amount of $218.59. This covered the costs for copying or duplicating the files but not for their preparation or anything else. The court relied on a 2012 Third Circuit decision (Race Tires Am., Inc. v. Hoosier Racing Tire Corp.) and interpreted the applicable statute (28 U.S.C. § 1920(4), a.k.a. the “taxation of costs” statute) to exclude ESI processing costs. When Gallo appealed this decision, the Fourth Circuit affirmed the lower court’s decision. The court proceeded to go through the history of taxation of costs, which hadn’t existed prior to 1853, and has been slowly added to our law over the years. The latest version of section 1920 was amended in 2008, and allowed for fees for “printed or electronically recorded transcripts necessarily obtained for use in the case;” and “fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.” The court cited a Supreme Court decision that discussed the purpose of section 1920, and said that taxable costs should be a small fraction of the overall costs in litigation, and therefore should be interpreted narrowly to include only what is written in the law. Therefore, “making copies” was interpreted quite literally to include only the costs of actually making the copies, which in this case meant conversion to PDF and TIFF formats, and copying them onto a CD/DVD. Interestingly, the court also responded to the claim that the current e-technology requires more extensive preparation and therefore greater costs, by saying that preparation of discovery documents was always a big cost, yet were not authorized by Congress to be “taxable.” Gallo also tried to argue that when the statute provided for “exemplification” to be included in taxable costs, that it would include the costs in this case, since they had to load the information onto a review platform. The court said that exemplification does not apply here, since it means “an official transcript of a public record, authenticated as a true copy for use as evidence.” In our case, the charges didn’t include either any public records to be authenticated, or any exhibits. So the costs did not qualify as exemplification. What can be learned from this case is that although there are many things that go into the preparation of any type of discovery, including ESI, the costs of that preparation are not always carried by the requesting party. Undoubtedly, the charges that the defendant was trying to tax onto the plaintiff were legitimate. However, the history of the taxable charges laws has shown that the costs of production of discovery have been greatly limited to the copying stage, and not to the production.  I would suggest, therefore, that before a party actually goes through the production and incurs its costs, perhaps they should include the costs into their discovery agreement. Akiva Shepard received his J.D. from Seton Hall University School of Law in 2014. Akiva has worked for a New York State Supreme Court Judge in Kings County and for a NJ real estate firm. 

Large Volumes of ESI Irrelevant in Determining Accessibility

In W Holding Co., Inc. v. Chartis Ins. Co. of Puerto Rico, the receiver of Westernbank, FDIC-R brought action under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) against the banks’ directors and officers (D & O’s) for gross negligence, breach of fiduciary duties, fraudulent conveyances, and adverse domination. Prior to discovery, FDIC-R proposed an order establishing a protocol for discovery of Wesernbank’s ESI and to reduce the number of written interrogatories it would receive. The D & O’s offered a competing protocol. The court denied FDIC-R’s request to alter the number of interrogatories and issued a separate order to establish ESI protocol. When FDIC stepped in as a receiver for Westernbank, it possessed 6.8 terabytes of ESI and over 900,000 paper documents. FDIC spent $2.1 million to put the ESI into a system called DMS iConnect (“DMS”), an internal database where the relevant paper documents were scanned into digital images and processed to generate searchable text. FDIC waned to use a second contractor-maintained system called Relativity to give its litigation opponents searchable access to selected data, which will cost $450 per gigabyte to move. FDIC-R wanted D & O to share in the costs. FDIC–R advanced three rationales in support of its proposal: (1) ESI production costs are analogous to “copying costs” borne by the requestor; (2) the Westernbank ESI is “not reasonably accessible” under Rule 26(b)(2)(B); and (3) the seven-factor test applied in Zubulake III requires cost-shifting in this case. The court disagrees with all three FDIC-R’s arguments. As to the argument that production costs are analogous to copying costs, the Court felt that FDIC-R failed to explain how those costs are outside the realm of gathering and preparation expenses customarily borne by responding parties. As for accessibility, the Court disagreed with FDIC-R’s position that Federal Rule of Civil Procedure 26(b)(2)(B) required cost-shifting when large volumes of ESI were involved. To be inaccessible, the FDIC-R would have to argue the “cost or burden” of production is tied to “some technological feature that inhibits accessibility.” However, the FDIC-R failed to raise any technological issues. The court further noted that the relevant data had already been uploaded into a searchable and organized retrieval system. The court also rejected FDIC-R’s third argument that the seven-factor test in Zubulake III requires cost shifting. Zubake also requires that the date in question be inaccessible, which the Court already stated was not. Finally, as to the request to limit the number of interrogatories, the Court believed the requests were “too speculative to merit a ruling at this time.” The Court felt that until the parties take more affirmative discovery steps, there is no ground for the Court to alter the defaults under the Federal Rules of Civil Procedure. Salim received his B.A. in Applied Communications, with a minor in Legal Studies, from Monmouth University. In 2014 he received his J.D. from Seton Hall University School of Law in 2014. Salim’s past experiences include interning for a personal injury law firm prior to attending law school, as well as judicial internships in the Civil and Family Divisions.

eDiscovery Expertise: Is Knowing Too Much A Ground For Judicial Recusal?

Just like TNT, the Second Circuit sure knows drama.  After years of protracted litigation, the Second Circuit finally put an end to an attempt to recuse a judge for knowing too much about eDiscovery and predictive coding. On April 10, 2013, in an incredibly brief order most likely meant to send a message deeper than its two sentences, a Second Circuit Judge denied a request for the recusal of Judge Andrew J. Peck from an ongoing employment discrimination case.  According to Judge Jane A. Restani, “Petitioners have not ‘clearly and indisputably demonstrate[d] that [Magistrate Judge Peck] abused [his] discretion’ in denying their court recusal motion… or that the district court erred in overruling their objection to that decision.” The contentious attempts to recuse Judge Peck stemmed from a discovery dispute after Judge Peck ordered the parties to use a method of predictive coding during discovery.  Although the parties seemed to agree that predictive coding should be used, they could not agree on the methods of predictive coding that would be implemented.  The plaintiffs believed that Judge Peck favored the defendants in his order, and therefore they moved to recuse the judge because of his established history with eDiscovery and more specifically, his history of actively advocating predictive coding. Judge Peck has a long history of participating in eDiscovery conferences  and was considered one of the Court’s “experts in e-discovery.”  National Day Laborer Organizing Netwrok v. U.S. Immigration and Customs Enforcement Agency, 2012 WL 2878130, 11 (S.D.N.Y. 2012).  Judge Peck was even involved in one of the first cases to order the discovery of electronic data.  Atlantic-Monopoly, Inc. v. Hasbro, Inc., 958 F.Supp 895 (S.D.N.Y. 1995). Despite the strong undertones of the order’s brevity, the plaintiffs continued to fight this seemingly uphill battle and later filed a cert petition to the Supreme Court. Rather than attacking Judge Peck’s background and connections to the eDiscovery community, the plaintiffs in this case should have instead accepted that judges need to actively participate in conferences and seminars to better understand the technology implicated in eDiscovery.  Just as attorneys can no longer ignore the ramifications of eDiscovery, judges too must enhance their knowledge to further develop this complicated area of law and readily adapt it to continually changing technology.  Judges should not be punished or accused of bias for engaging in programs geared towards teaching them about technology and its implications on eDiscovery.  If this were at all all permitted, judges would be afraid to participate in seminars and review panels, which would stagnate the development of the law, a process that is already far-behind the rapid progress experienced by technology. Jeffrey, a Seton Hall University School of Law graduate (Class of 2014), focused his studies primarily in the area of civil practice but also completed significant coursework concerning the interplay between technology and the legal profession.  He was a cum laude graduate of the University of Connecticut in 2011, where he received a B.S. in Business Administration with a concentration in Entrepreneurial Management. 

Request for E-Discovery Restart Because Defendant Used Keyword Culling is Shot Down by Seventh Circuit Judge

By the time In re Biomet made it in front of a Seventh Circuit Judge for a ruling, 2.5 million documents and attachments were produced to the plaintiffs in this large class action case against Biomet.  The plaintiffs wanted the judge to order the discovery of electronically stored information.  The plaintiff’s Steering Committee was unhappy with the amount of documents produced and claimed that it should have been almost five times that amount. The plaintiffs challenged the electronic discovery procedure that Biomet had undertaken.  Specifically, the plaintiffs wanted the judge to make a ruling that the defendant’s process was “tainted” by their use of keyword culling.  The judge disagreed and refused to make such a ruling, which would have thrown Biomet back to almost square one. Biomet went through an extensive process to cultivate documents to produce for the plaintiffs. Biomet first used “electronic search options, then predictive coding, and finally personal review.”  The plaintiff’s issue was primarily the first step that defendants irrevocably ruined the rest of their document production from the get-go. To first identify what documents would be relevant the defendant used a “combination of electronic search functions” which included keyword culling.  The defendant’s original pool consisted of 19.5 million documents and attachments which the first step narrowed down to 3.9 million (eventually getting to 2.5 million documents).  The plaintiffs thought they should have produced 10 million documents and said their keyword searches were the problem. The plaintiffs cited to a New York Law Journal article that said that keyword searches were “only 20 percent” responsive.  According to the plaintiffs, Biomet’s approach was flawed because it used the “less accurate” method of keyword search in the beginning instead of predictive coding.  They asked for the judge to rule that the defendants had to go back to the first step and use predictive coding with “plaintiffs and defendants jointly entering the ‘find more like this commands’. The judge found that the plaintiff’s journal article and one cited search claiming that Boolean and keyword searches are less effective at producing relevant documents were insufficient in proving that Biomet did not meet its discovery obligations.  Instead, the judge found that its procedure did comply with FRCP 26(b) and 34(b)(2).  The judge also refused to read into the rules that Biomet had to allow the plaintiffs to sift through possibly privileged documents with them. The judge also found that Biomet fulfilled their federal requirements as proven through their statistical sampling and confidence tests that they ran over their documents.  This sampling found that less than 1.34 percent of the documents that weren’t selected would be responsive and that between 1.37 and 2.47 of the original 19.5 were.  Biomet’s process singled out 16 percent out of that original. The judge cited heavily to FRCP 26 (b)(2)(C) and said that Plaintiffs’ request did not comport well with proportionality.  Biomet had already spent $1.07 million and “will total between 2 million and 3.25 million.”  Were Biomet to go back to their original bank of ESI, it would cost them in the low seven-figures.  The judge said that it would not make Biomet do that just to test the plaintiffs’ theory that more responsive documents would be found through predictive coding instead of keyword searches.

No such thing as Plain Language in E-Disco—Court Called on to Define “Making Copies.”

Phillips v. WellPoint, Inc., involved an application for costs by the prevailing defendant, WellPoint.  Among the costs sought to be recovered by WellPoint were $83,642.83 for "the process of scanning hard copy documents so that they could be produced in electronic format" and for services “for the preparation of native electronic files and documents for production in electronic format.”   WellPoint sought to recover these as costs of "making copies." Federal Rule of Civil Procedure 54(d)(1) provides that “[u]nless a federal statute, these rules, or a court order provides otherwise, costs—other than attorney's fees—should be allowed to the prevailing party.”  Those costs may include: (1) Fees of the clerk and marshal; (2) Fees for printed and electronically recorded transcripts necessarily obtained for use in the case; (3) Fees and disbursements for printing and witnesses; (4) Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case; (5) Docket fees under section 1923 of this title; (6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title. 28 U.S.C. § 1920 (emphasis added). In evaluating the extent to which costs associated with producing electronically stored information ("ESI") are recoverable, the court, with no in circuit precedent on point, analyzed and ultimately adopted the Third Circuit's reasoning from Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012).  In Race Tires, the Third Circuit found that the scanning of hard copy documents and the conversion of native files to TIFF were costs recoverable within the statutory meaning of “making copies.”  However, the Third Circuit further found that although “extensive ‘processing’” may be “essential to make a comprehensive and intelligible production” of ESI, not all costs of producing ESI—such as the preliminary steps in the discovery process, such as locating documents, travelling to the location of the documents, or screening potentially relevant documents for privilege—are recoverable. Applying these principles, the court found the majority of costs sought by WellPoint to be non-recoverable.  Only costs for imaging of hard copy files and conversion of documents into single TIFF images were recoverable.  Conversely, the following costs were not recoverable:  the extraction of document text; the process of rehabilitating documents in which the metadata fields and document text were damaged; applying bates stamp numbers; creating an image load file; creating a concordance-ready data load file; working with the clients in establishing production requirements; conducting quality control.  The result was WellPoint only recovered $26,711.00 of the $83,642.83 sought. Adam L. Peterson is a student Seton Hall University School of Law, Class of 2014 graudate.  At Seton Hall, Adam was a member of the Seton Hall Law Review and prior to law school Adam was an Environmental Analyst with the New York State Department of Environmental Conservation. 

Proof and Prejudice: Court Refuses Adverse Inference Sanction Due to Lack of Proof of Prejudice, Despite Proof of Spoliation

One might think that in a lawsuit if your adversary is caught breaking the rules there might be some penalty. However, in Cottle-Banks v. Cox Communications, the Honorable Gonzalo P. Curiel of the District Court for the Southern District of California held otherwise, allowing the defendant’s misconduct to go unpunished. This case started when Brittini Cottle-Banks alleged “that Cox has violated the negative-option-billing provision of the federal Cable Act by failing to disclose and obtain customers’ consent to be charged for monthly rental fees associated with their cable set-top boxes.” Due to this allegation, Cox had a duty to preserve any potentially relevant evidence. The evidence in question consists of records of telephone calls made to Cox by customers. Despite being put on notice that they had a duty to not record over the records of these calls, Cox did just that. This taping over resulted in about 6 months worth of calls being taped over. With proof of this spoliation of evidence, Cottle-banks moved for an adverse inference sanction; an order from the court instructing a jury to assume that whatever was deleted was evidence against Cox. However, the 9th Circuit does not have a rule on this sanction so Judge Curiel used the standard from the second circuit. For an adverse inference sanction a party must establish that their adversary: had control of the evidence, a culpable state of mind, and the spoiled evidence was relevant and supportive of a party’s claim or defense The evidence of these first two elements is clear. Cox clearly had control and their failure to preserve despite being put on notice is indicative of a culpable state of mind. However, because “the burden falls on the ‘prejudiced party’ to produce ‘some evidence suggesting that a document or documents relevant to substantiating his claim would have been included among the destroyed files.” Since Cottle-Banks had no proof that she was prejudiced by Cox’s spoliation of evidence, the Court refused to grant an adverse inference sanction. Thus, if you are going to move for an adverse inference sanction, be sure to have some proof of prejudice. Matthew G. Miller, a Seton Hall University School of Law student (Class of 2014), focuses his studies in the area of Intellectual Property. Matt holds his degree in Chemistry from the University of Chicago. Currently, Matt works as a legal intern at Gearhart Law.

Preserve Immediately or be Sanctioned!

In this case, the plaintiff, an inmate at Rikers Island, brought a motion for spoliation of evidence and alleged the defendants breached their duty to preserve evidence. The evidence in question is video footage relevant to the litigation regarding the assault on the plaintiff which occurred on May 24, 2011, by other prison inmates in a holding cell at the Bronx Criminal Courthouse. The defendants claim that they do not have a duty to preserve the surveillance footage because by the time they were given notice, the footage had been deleted. The defense states that even if they had a duty to preserve, they met this obligation by saving eight minutes of surveillance that they deemed to be relevant. On the day of the assault, the holding cell in which the plaintiff was placed in with approximately sixteen to seventeen other inmates was under twenty-four hour video surveillance.  That same day, Jacqueline Brantley, the former Assistant Deputy Warden Executive Officer at the Bronx Criminal Courthouse, reviewed the video footage to determine the course of events specifically for a period of three hours.  Brantley was the only person to view the three hours of footage and therefore she was the only one who could testify in court regarding this evidence. The three hours of video footage is extremely relevant to the case. The footage included evidence of not only the plaintiff’s injuries, but also how the Department of Corrections protected the inmates and how they responded to the incident. The tapes also show the presence and identity of possible witnesses to the assault and help create a visual timeline of events in the holding cell. The Southern District of New York stated that the defendants should have known within a week of the assault that the surveillance footage would be relevant to a future lawsuit. While the Department of Corrections destroyed the footage pursuant to the Department’s automatic video recycling procedures, prior to the filing of the claim by Taylor, the Department did manage to save eight minutes of footage. This begs the following question to be asked:  Why did the department not preserve the entire three hours of footage? As a result, the plaintiff in this case sought sanctions for spoliation of evidence with the deletion of the footage. A party seeking sanctions for the spoliation of evidence must establish the following three elements: The party having control over the evidence had an obligation to preserve it at the time it was destroyed; The records were destroyed with a culpable state of mind; and The destroyed evidence was relevant to the party’s claim… such that a reasonable trier of fact could find that it would support that claim. Residential Funding Corp. v. DeGeorge  Fin. Corp., 306 F.3d 99, 107 (2d. Cir. 2002). If the moving party can establish these three elements, then the court has the ability to impose sanctions under Rule 37 of the Federal Rules of Civil Procedure. The defendants here should have anticipated that the plaintiff would file a lawsuit against the Department for its failure for protect the plaintiff in the holding cell. Therefore, the defendants should have reasonably known that any evidence depicting the plaintiff’s treatment in the holding cell would be relevant to the litigation. The obligation to preserve the video footage in this case attached at the time of the assault due to its relevance. The defendants should have known that the entire three hours of footage would be relevant and that two four minute video clips would be insufficient. Since the entire footage has been destroyed, the defendants breached their preservation duty. The destruction of evidence by the defendants was done in a culpable state of mind and destroyed knowingly. Therefore, the defendants were negligent in allowing the footage to be deleted. However, the defendants were not grossly negligent in their failure to preserve, as no relevant evidence here has been claimed to have been destroyed after the plaintiff filed his Notice of Claim, approximately sixty-five days after the assault occurred. Additionally, the destroyed evidence would have been favorable and relevant to the plaintiff’s claims and defenses in this case. This evidence would have shown the three hour period of time the plaintiff was left injured in the holding cell as well as the failure of the Corrections Officers to protect him and remove him from the cell when he was covered in blood after the assault. The Court found that for these reasons the destruction of evidence prejudiced the plaintiff. Therefore, the following sanctions were ordered by the court: 1) the preclusion of Brantley from testifying about what she saw when she reviewed the deleted footage; 2) the use of an adverse inference jury instruction; and 3) the award of attorney’s fees and costs to the plaintiff. To avoid having a similar outcome, potential defendants should immediately preserve any relevant evidence in matters that they know or should reasonably know will give rise to litigation. Jennifer Whritenour received her B.S. in Political Science and History in 2011 from the University of Scranton. She is received her J.D. from Seton Hall University School of Law in May 2014. 

Court Denies Motion to Compel Forensic Computer Examination Based on Proportionality Grounds

A common problem in e-Discovery is what to do when your adversary is withholding relevant information.  An even worse problem is when you know your adversary is withholding relevant information, but you are not precisely certain what that information is.  This was the problem for the defendant in NOLA Spice Designs, LLC v. Haydel Enterprises, Inc. who sought—but was ultimately denied—a forensic examination of the plaintiff’s computers. In NOLA Spice Designs, a trademark infringement case, the defendant filed a motion to compel the plaintiff to submit its computers to forensic examinations.[1]  The plaintiff challenged the motion by arguing that the forensic examinations failed the proportionality requirement of Federal Rule of Civil Procedure 26(b)(2).  This rule prevents a party from requesting discovery when “the burden or expense of the proposed discovery outweighs its likely benefit.”  In the context of forensic computer examinations, the court explained such an examination will not be permitted when the request is overly broad and the connection between the computer and claims are “unduly vague or unsubstantiated in nature.”  Although the court noted that forensic computer examinations are not uncommon in civil discovery, the court clarified that a mere suspicion that your adversary is dishonestly withholding information is an insufficient basis to order a forensic computer examination. The defendant in NOLA Spice Designs requested the forensic computer examination on the basis that it “has good reasons to believe that something in Plaintiff’s statements is not true” and “that is has suspected all along that its opponents have records that they refuse to produce.”  The court characterized the defendant’s reasons as the precise type of skepticism and unwarranted suspicion of dishonesty that are insufficient to warrant an invasive computer forensic examination. Moving forward, litigants should be mindful that courts may be sensitive to confidentiality and privacy concerns when overly broad discovery is requested.  Although electronic discovery permits litigants to exchange massive amount of information, that exchange is still subject to the traditional rules of discovery, such as proportionality.  In order to combat the hurdle of proportionality, a party who is suspicious that an opponent is withholding information should limit its discovery requests to the specific information that is suspected of being withheld.[2]  If the requesting party obtains some information, then it will at least have a reasonable basis to proceed with broader discovery requests because the party can prove to the court that the opposing party has not been forthright.  This puts the requesting party in a far greater position than merely seeking an intrusive computer forensic examination with no basis other than mere suspicion of dishonest activity. Helvidius Priscus, a Seton Hall University School of Law graduate (class of 2014), served on the executive board of the Seton Hall Law Review and was a member of the Interscholastic Moot Court Board.  Helvidius now clerks for a Justice on the Supreme Court of New Jersey.  [1] “Computer forensics is the practice of collecting, analyzing and reporting on digital information in a way that is legally admissible.”  Forensic ctrl, Introduction to Computer Forensics, http://forensiccontrol.com/resources/beginners-guide-computer-forensics/ (last visited Feb. 12, 2014). [2] Of course, it is difficult to ask for something if you are not sure what exactly you are missing.  Nonetheless, the court in NOLA Spice Designs made clear that asking for everything is not the way to go.  Starting with small and specific discovery requests (even if they are shots in the dark) may be the better choice because a court is unlikely to find that such requests fail the proportionality requirement.