Sanctions

Throwback to 1986: Court of International Trade Gets Discovery Rules Right

It seems that courts were ruling on the intersection of new technology and discovery practice back in the day. In 1986, the United States Court of International Trade decided motions to compel discovery regarding new technologies in Daewoo Electronics Co., Ltd. v. U.S. The court even noted that “[t]his controversy is a good example of how the development of new technology for using, storing and transmitting information allows parties to test the rules of disclosure or discovery.” There, the court grappled with whether the Department of Commerce met their burden of producing certain documents. The Department of Commerce was accused of committing three faux pas: (1) the tapes provided to the plaintiff was recorded at a much greater density than was stated, (2) data regarding the sale of two separate companies was requested, but not provided, and (3) the government failed to provide material known as an SAS data set. The government argued that they were in strict compliance with an earlier order mandating that they turn over certain evidence. However, the court expressed that it was troubled “by indications that [the government] took an inordinately restrictive view of its obligations under the order.” The government, when ordered to turn over certain tapes, turned over the tapes themselves (which the plaintiff was unable to read), as opposed to the data contained on the tapes. “To say that the data sets into which the computer tapes were transferred are not governed by an order speaking of computer tapes is as if someone has said at the dawn of the era of typewriters that types documents are not governed by a court order speaking of ‘writings.’” Further, the court noted that if the government was acting in earnest, then they had “taken unfair advantage of the court’s lack of familiarity with the variety of further electronic refinements and embodiments of taped information.” Thus, the court granted the plaintiff’s Motion to Compel, setting a precedent for reasonable interpretation of words surrounding new technologies. Matthew G. Miller, a Seton Hall University School of Law graduate (Class of 2014), focuses his practice in the area of Intellectual Property. Matt holds his degree in Chemistry from the University of Chicago. During law school, Matt worked as a legal intern at Gearhart Law, LLC.

Can a Court Sanction a Pro Se Party for Deleting Evidence? The Third Circuit Will, So Do Not Delete Your Data!

Whenever sanctions are involved, you can expect to see questionable behavior from one or more parties.  In this particular case, a pro se litigant tried to be cute and the court called him out for it.  The Appellant here used to own a company which provided consulting services to the Appellee.  Since the company became defunct, the owner became the only remaining party being sued. The district court had entered a discovery preservation order in which the parties agreed the appellant would return a laptop computer along with all of its data.  However, the appellant deleted data off the laptop minutes before signing the agreement.  Then the appellee initiated post-settlement litigation to obtain sanctions.  The appellant’s attorney then withdrew and the appellant continued pro se.  The judge found the appellant to be in civil contempt and awarded sanctions of over $50,000. The appellant raised three contentions on appeal.  First he argued sanctions under 28 U.S.C. § 1927 could only be awarded against attorneys, not pro se individuals.  Circuits are split on this issue.  The Third Circuit navigated around the issue, asserting that the district court judge could have justified its sanction under other grounds. Second, the appellant argues that monetary sanctions should not have been awarded because the information was deleted before the discovery agreement was signed.  The Third Circuit called out the argument as being a bit too clever and was not persuaded.  It all but accused the appellant of deliberately misleading the district court.  More damning was the actual language of the agreement.  It exposed the appellant to liability arising from the agreement itself, which governed the return of the laptop. Third, the appellant challenges the award for all attorneys' fees.  On this issue the Third Circuit remanded for a determination of what fees fairly reflect compensation for the appellant's contumacious conduct.  What is more vital here is the punishment for deleting data off the computer.  Those who try to outsmart the court will get their just deserts and acting pro se does not provide any sort of loophole.

Facebook Fails: Can I Delete my Facebook while a Lawsuit is Pending?

The defendant in personal injury litigation commonly requests discovery concerning a plaintiff’s Facebook account.  The reason such requests are made is that pictures on Facebook may reveal the “injured” plaintiff dancing on top of a bar table, skiing, traveling, etc.  These damaging photos may prove that the plaintiff’s injury is not as severe as he or she claims and could result in dismissal of the case.  Therefore, it is not uncommon for a plaintiff to delete his or her Facebook account in order to conceal any damaging pictures.  The deletion of a Facebook account, however, may result in sanctions such as an adverse inference jury instruction.[1] In Gato v. United Airlines, Inc., the plaintiff was injured while working for the defendant.  During the litigation, the plaintiff permanently deleted his Facebook account.  The defendant motioned for an adverse inference jury instruction claiming that the deletion of the Facebook account destroyed relevant evidence, thereby prejudicing the defendant. In granting the sanction, the district of New Jersey adopted a very low standard as to what a litigant must show in order to obtain an adverse inference jury instruction.  The court held that “so long as evidence is relevant, the offending party’s culpability is largely irrelevant, as it cannot be denied that the opposing party has been prejudiced.”  This seemingly simple sentence has enormous implications for litigants in the district of New Jersey for two reasons. First, it means that as long as the destroyed evidence was relevant, a litigant need not prove that the adversary intentionally (or even negligently) destroyed evidence.  The lack of state of mind requirement eliminates what is often the most difficult element to prove when seeking spoliation sanctions.  Without the need to prove a litigant’s culpability in destroying the evidence, the court seems to impose a form of strict liability upon the destroying party.  The only requirement imposed by the court is that the party seeking sanctions prove that the destroyed evidence was relevant.  This is a significant deviation from the traditional method employed by courts which requires proof that a party was at least negligent in destroying the evidence. Second, the court indicates that as long as the evidence is relevant, it will presume that the destruction of the evidence was prejudicial to the opposing party.  This eliminates the need for the party seeking sanctions to prove that it was prejudiced by the missing evidence.  Instead, the party only needs to prove that the evidence was relevant. Notably, the court explained that the defendants in Gato were “prejudiced because they have lost access to evidence that is potentially relevant to Plaintiff’s damages and credibility.”  In other words, the defendant in Gato did not have to even prove that the destroyed evidence was undoubtedly relevant—the defendant only had to prove that the evidence was potentially relevant. In sum, the District of New Jersey imposed an adverse inference jury instruction simply because the destroyed evidence was potentially relevant to the litigation.  The court did not require the defendant to show that it was prejudiced by the destruction, nor did the court require any showing as to the Plaintiff’s state of mind in destroying the evidence.  Moving forward, litigants must be extra careful in their efforts to preserve evidence relevant to litigation. 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.  Currently, E-DiscoParty clerks for a Justice on the Supreme Court of New Jersey.  [1] An adverse inference jury instruction is a powerful sanction where the court advises the jury to presume that any destroyed or missing evidence contained detrimental information about the party that destroyed or lost the evidence.

Employers—Got Resumes? Don’t Toss Them Just Yet

Plaintiff Erick Zayas joined with the Equal Employment Opportunity Commission (EEOC) to sue Ventura Corp. for employment discrimination on the basis of sex in 2007. In essence, Zavas complained that Ventura’s long-standing tradition of hiring women for the position he applied to was discriminatory. Furthermore, Zavas alleged that Ventura destroyed relevant evidence. In its answer, Ventura stated that the fact that no men have filed applications or have not met the position requirements did not support the plaintiffs’ assertion of discrimination. However, during limited discovery a list revealed that qualified men did in fact apply and accounted for 34.5 percent of qualified applicants. The central issue involved application materials received by Ventura. These included materials submitted by e-mail and hard copy resumes. The court first notes that spoliation is “the failure to preserve evidence that is relevant to pending or potential litigation.”  The duty to preserve relevant evidence arises once litigation is reasonably anticipated. The court noted that since Ventura was notified in 2007 that it was being charged with sexual discrimination, at that point Ventura should have reasonably anticipated litigation and was thus under the duty to preserve. Ventura attempted to make a statutory argument that resumes did not need to be preserved. The relevant statute, 29 CFR 1602.14 (see http://www.law.cornell.edu/cfr/text/29/1602.14), makes reference to “application forms” and “test papers.” Ventura argued that it required neither application forms nor test papers and that resumes were not mentioned. However, the court rejected this argument. The court noted that the statute also includes the language, “other records having to do with hiring.” The court ultimately held that resumes therefore clearly applied. Ventura’s Human Resource Analyst testified that certain documents were shredded or taken to a warehouse as a result of an office restructuring in 2009. Furthermore, the HR Analyst wasn’t able to find the said documents. The plaintiffs were therefore able to establish that Ventura either lost or destroyed the resumes between 2007 and 2010. Because Ventura was on notice since 2007, the disappearance of these documents constituted a violation of its duty to preserve relevant evidence. Soft copies of resumes delivered by e-mail were also lost in the same time period. In fact, th plaintiffs were able to produce a relevant e-mail to and from Ventura, while Ventura was not able to produce the very same e-mail. This e-mail alone and the fact that other relevant e-mails likely existed in the 2007-2010 period but were nowhere to be found, was sufficient to infer that Ventura likely destroyed them. The court held that sanctions were in order for Ventura’s violation of its duty to preserve. As a result of Ventura’s failure to preserve relevant evidence, the court imposed a “spoliation instruction” or adverse inference instruction. Such an instruction allows the trier of fact to infer that the content of the destroyed relevant evidence was damaging to Ventura’s case. Lesson learned? If you intentionally or unintentionally destroy relevant evidence while under a duty to preserve, an adverse inference instruction will likely bring swift defeat and sway the trier of fact against you. It’s best to preserve evidence and maintain your credibility with the court and trier of fact even with bad facts. Rocco Seminerio is a Seton Hall University School of Law graduate (Class of 2014). Mr. Seminerio focuses in the areas of Estate Planning, Elder Law, and Health Law. He graduated from Seton Hall University in 2011 with a degree in Philosophy. He also has an interest in the life sciences.

Defendant’s “Hands-Off” Approach Insufficient; Sanctions Ordered

In this case, Peerless Industries, Inc.  sued defendants Crimson AV, LLC claiming patent infringement and design patent infringement arising out of defendant’s manufacture and sale of certain TV mounts. While not a defending party, Sycamore Manufacturing Co., Ltd. (“Sycamore”) is plaintiff's former supplier of these TV mounts and played a vital role in the alleged infringement. Sycamore is located in China, while Peerless and Crimson are both located in the United States. Plaintiffs filed two motions: (1) a motion to compel the deposition of the Sycamore’s president, Tony Jin, and (2) a renewed motion for sanctions, both of which were granted. It was also determined in a previous case that Jin exercised managerial control over both Sycamore and Crimson. Therefore, plaintiff satisfied that Mr. Jin is a managing agent of Crimson. The court stated, “Plaintiff must simply show ‘that there is at least a close question as to whether the witness is a managing agent.’ We already found this to be the case. Furthermore, Mr. Jin clearly satisfies the ‘paramount test,’ which is whether the individual identifies with the corporation's interests as opposed to an adversary's.” The court further ordered that without any showing of hardship, Jin’s deposition would have to take place in the United States and not in China. As for the plaintiff’s renewed motion for sanctions, this motion marked the third time the plaintiff filed a motion regarding the same set of documents. The plaintiff argued that at the deposition of Crimson’s managing director, “it became clear that defendant did not conduct a reasonable investigation regarding Sycamore’s document production or Sycamore’s document retention for purposes of this litigation.” The plaintiff then filed a renewed motion for sanctions. The defendant and Sycamore asserted that certain documents in Sycamore’s possession had been produced. The plaintiff noted, that defendants did not represent that all requested documents were produced or that they were searched for but no longer existed. The plaintiff argued that the defendant wanted to rely on the same declarations as opposed to issuing more specific responses. The court stated that since it had determined Jin was principal of both Crimson and Sycamore and that he exercised a considerable amount of control over both corporations, that he was able to obtain all relevant documents from Sycamore. However, the court found that defendant took a “back seat” approach and instead used a third-party vendor to collect the documents. Finding that neither Crimson nor Jin had apart in the process of obtaining the requested discovery, the court granted the plaintiff’s motion for sanctions. The court held that this “hands-off’ approach is insufficient. “Defendants cannot place the burden of compliance on an outside vendor and have no knowledge, or claim no control, over the process. Finally, the court held that defendants must show that they in fact searched for the requested documents and, if those documents no longer exist or cannot be located, they must specifically verify that it is they who cannot produce. Salim received his B.A. in Applied Communications, with a minor in Legal Studies, from Monmouth University. 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. Currently, Salim is taking part in the Immigrants’ Rights/International Human Rights Clinic at Seton Hall Law.

Does a Litigation Hold Require the Preservation of Employee Text Messages? Big Problems in Little Packages: Lost Cell Phone Leads to Spoliation Sanctions

Big things can often come in small packages, especially in the field of eDiscovery.  In Christou v. Beatport, LLC, the defendants learned that something as small as a text message on a lost cell phone can lead to a bevy of headache-inducing preservation issues, even without proof that the lost texts actually contained relevant information. Originally, the two parties worked together to create Beatport, an online marketplace dedicated to promoting and selling electronic dance music.  When that relationship eventually fell apart, the plaintiff, a prominent nightclub owner, brought suit against Beatport and his former employee who, as a “talent buyer,” was responsible for attracting DJs to perform at the plaintiff’s venues.  The plaintiff claimed that since the falling-out, the former talent broker had been strong-arming DJs against performing at the plaintiff’s nightclubs by threatening to drop them from his now high-profile website. Soon after the case was filed, the plaintiff issued a litigation hold letter to the defendants seeking the preservation of electronically stored information.  Despite the fact that this letter specifically referenced text messages, the defendants made no effort whatsoever to preserve the text messages on the former employee’s cell phone.  Of course the phone was then lost, about a year and a half after the hold should have been instituted. The plaintiff sought spoliation sanctions in the form of an adverse jury instruction.  The defendants attempted to shelter themselves from punishment behind testimony that the former talent broker did not use texts to contact clients and no proof was offered that there was relevant evidence anywhere in the phone.  Thus, the defendants felt the plaintiff’s motion was entirely speculative. Given the disappearance of the phone, the court recognized that there was simply no way to know whether it contained any relevant evidence.  There was also no evidence that the defense had done their due diligence by reviewing the text messages to determine whether any were responsive to the plaintiff’s discovery requests. The court explained that spoliation sanctions are appropriate when “(1) a party has a duty to preserve evidence because it knew, or should have known that litigation was imminent, and (2) the adverse party was prejudiced by the destruction of the evidence.”  Here, there was no question that the defendants neglected their duties by failing to make any effort whatsoever to preserve the text messages. Because the loss of the phone was an accident, or at the most the result of negligence, an adverse jury instruction was unwarranted because it would be too harsh a punishment.   Instead, the court permitted the plaintiffs to present evidence at trial about the litigation hold and the defendant’s failure to abide by it.  Despite finding no foul play by the defendants, sanctions were necessary because “[a] commercial party represented by experienced and highly sophisticated counsel cannot disregard the duty to preserve potentially relevant documents when a case like this is filed.” The previous sentence best sums up the defendants’ actions.  They completely shirked all responsibility by failing to turn over the requested text messages or securing the phone itself.  Even though the phone was lost accidentally, spoliation sanctions were warranted because of the defendants’ complete disregard of their preservation duties.  The time and money spent belaboring this eDiscovery dispute could have  been completely avoided if the defendants simply preserved all of its electronically stored information, especially those documents specifically mentioned in a litigation hold.  Instead, the defendants suffered what probably turned out to be significant financial consequences fighting the motion and were left to combat incredibly damaging evidence at trial. Jeffrey, a Seton Hall University School of Law graduate (Class of 2014), focused his studies primarily in the area of civil practice but has 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. 

Think Plaintiffs Have All the Leverage? Not If They Spoliate.

Individual plaintiffs often exert settlement leverage against corporate defendants because, irrespective of the merits of the suit, the prospective costs of litigation coerce early settlement.  Therefore, an individual plaintiff often has nothing to lose.  Even if a plaintiff’s suit is meritless, often times the worst case scenario faced is dismissal of the suit.  Additionally, where a case is taken on a contingent fee basis, an individual plaintiff is merely left where they started.  However, Taylor v. Mitre Corp. shows that in some circumstances an individual plaintiff can in fact find himself or herself in a worse position than prior to litigation. In Taylor, the plaintiff of the same name filed suit against his former employer, The Mitre Corporation, alleging violations of the Family Medical Leave Act and Americans with Disabilities Act.  However, it was Taylor that was soon on the defensive.  First, Taylor was accused of spoliating evidence when he smashed a work computer with a sledge hammer.  It is not clear what sanctions resulted from this conduct; however, the court did not remain quiet following Taylor's later response to the Magistrate Judge's ordering Taylor to produce his laptop for inspection.  Upon issuance of the order, Taylor promptly ran specialized programs—Evidence Eliminator and CCleaner—on his computer for the clear purpose of deleting relevant data and information. Upon learning of Taylor's second act of spoliation, the court sanctioned Taylor by dismissing his suit.  A severe sanction, of course, but it is arguable whether dismissal alone serves as an effective deterrent to future spoliation of evidence.  After all, if a plaintiff has extensively spoliated evidence, it is likely that a plaintiff’s case was not meritorious in the first place.  Additionally, dismissing a non-meritorious suit will merely leave the plaintiff where he started and leave the defendant out a bundle of unnecessary litigation costs. Accordingly, the court not only dismissed Taylor's suit but also found him responsible for Mitre's reasonable fees and costs associated with the motion for sanctions—$202,399.66 in total.   The court arrived at this total by applying the lodestar methodology and was not swayed by Taylor's claim of financial hardship.  It is believable that an individual plaintiff will be hard-pressed to pay such costs; however, the court reasoned that reducing an award of fees and costs is appropriate where the full sanction will have a chilling effect on the filing of future, potentially meritorious, claims.  The court found that imposing sanctions for bad-faith spoliation would not have such a chilling effect, and therefore refused to reduce the award in favor of Mitre. So what's the moral of the story?  In many cases a plaintiff will have little to lose and the nuisance value of their suit places them in strong settlement position.  But conduct by the plaintiff in bad-faith can quickly shift this leverage. Adam L. Peterson is a graduate of Seton Hall University School of Law (Class of 2014).  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.  

Comply With Discovery, Or Pay The Price

While the practice of law, by nature, involves two parties facing off, there is no reason to make the job more difficult than it needs to be. The rules that govern court proceedings are in place to encourage cooperation between the parties and ensure that things “run smoothly.” When one party fails to abide by these rules, sanctions may be necessary. In Branhaven, the defendant’s counsel sought to prohibit the plaintiffs from using certain documents that were the product of a large last minute “document dump,” and award the defendants attorney’s fees and costs as a result of said production. The defendants also claimed that they were entitled to fees based on a Federal Rule 26(g) violation, in that plaintiff’s counsel had incorrectly certified by signing a response to defendants document requests on March 21 that such responses were “to the best of [his or her] knowledge, information and belief formed after reasonable inquiry.” Id. at 389. The defendants also claimed that counsel for the plaintiffs did not make reasonable efforts to ensure that the client has provided all the information and documents available that are responsive to the discovery demand. Additionally, for each request, the plaintiffs responded by stating that they would make the documents available at a mutually convenient time. In order to understand the egregious nature of the plaintiff’s conduct, we must look at the timeline of events. On January 31, 2012, requests were served on the plaintiffs, at which point its counsel claimed to have sent these requests to the client. On March 16, 2012, the plaintiff’s counsel claimed that the plaintiff had yet to be provided with responses.  The plaintiff’s counsel told the defendant’s counsel that they would be made available at a mutually agreeable time. The record reflects no action was taken until June. On June 14, 2012, the plaintiff’s counsel stated that the client had yet been provided any documents for production. The plaintiff assembled responsive pleadings based on that documents within the firms possession and sent same to the defendants. This amounted to about 388 pages in total. On July 20, merely days before depositions of the client were to begin, the plaintiff produced 112,106 pages apparently from overlooked e-mail servers and laptops. The plaintiff defend this conduct by stating that their servers were purchased as part of an asset sale and that passwords were not readily available, as the preference was to use in house IT staff prior to outsourcing. The court did not buy any of the plaintiff’s arguments stating that the plaintiff waited about five months prior to seeking the assistance of outside IT support. While a one month delay may have been reasonable, five months was not. Before one initiates suit, one should prepare for discovery as they would be subject to demands. The March 21 certification was made prior to any investigation by counsel that eventually turned up over 100,000 pages of documents. Therefore, the lack of access on the defendants stemming from the plaintiff’s conduct was punishable through attorney’s fees for the time spent converting the documents to a reviewable format as well as the time spent drafting and prosecuting for this motion for sanctions.

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.