Authored By: Jessica K. Rauskolb

Citation: F.T.C. v. First Universal Lending, LLC, 2011 WL 673879 (S.D.Fla.)

Employee/Employer Implicated: Outside Counsel, Miscellaneous

e-Lesson Learned: If you scrub the data off your computers, you can’t blame the other side for destruction of evidence. Your adversary does not have to make sure that you have information to establish your defense.

Tweet This: No Bad Faith? No sanctions. Especially not where the accused party never had control of the later scrubbed PCs

Don’t blame others for your mistakes! If you are given permission by a court appointed receiver to scrub relevant data off your computers to eventually sell them, you can’t blame the other side for spoliation of relevant data that you need to establish your defense - especially not if the other side never had control over the computers with the relevant data! You will not be able to succeed, just ask the defendants in F.T.C. v. First Universal Lending, LLC. In F.T.C. v. First Universal Lending, the F.T.C. investigated the defendants for their mortgage modification practices by alleging that defendants had violated the Federal Trade Commission Act and that defendants had acted in violation of the Telemarketing Sales Rule. For the duration of the investigation, the court appointed a temporary receiver who took control of defendants’ business premises.

Authored By: Michael Zoller

Citation: Columbia Pictures Industries v. Bunnell, 2007 WL 2080419 (C.D.Cal., 2007)

Employee/Employer Implicated: Owner/Operator

e-Lesson Learned: Even though data is not maintained permanently, but instead only stored in a web server’s RAM for a matter of hours, it is the operator of the server’s responsibility to preserve that information permanently for the purpose of discovery.

Tweet This: Torrent Website must 'RAM' up its production of electronically stored data

Everybody likes movies. Problem is not everybody likes paying $12+ to see one. As movie prices have gone up, viewers have turned to torrent websites as a way to download and watch movies for free from the comfort of their own homes. Of course not everyone, especially the movie studios, like these websites and the free content they deliver. As a result, movie studios have turned to the courts to try to stop these websites from violating their copyrights. To no one’s surprise electronic discovery is a big component of these cases.   In Columbia Pictures Industries v. Bunnell, the defendant operated a torrent website that allowed its viewers to download and watch movies without paying for them. Columbia pictures sued for violation of its copyrights in the various films. To prove its case Columbia had to show the website directly or vicariously infringed by assisting users in using copyrighted material without permission.   The site operates by allowing a user to click on a link or search for a film and the site will then find the movie online where it can be downloaded to the user’s computer. To complete its process, the site records the request information in its RAM (random access memory). This information is stored only for a short amount of time and then deleted. There is no permanent record of the data.   In order for Columbia to show copyright violation, it needed this search information so it made a discovery request. The defendant argued that due to the RAM’s temporary nature, there was no record to be turned over. The court found otherwise. The court held, “the data in issue which was formerly temporarily stored in the defendant’s RAM constituted “electronically stored information” within the control of the defendant.” As such it was the defendant’s responsibility to preserve the information and produce it for the plaintiff.   A warning for torrent site users, for the defendant to meet the court’s demands, it now has to permanently store all the information, including the IP addresses, on who uses their site and how they use it. While this information is not initially turned over to the movie studio, it now exists in permanent form and someday could be turned over. So if you are going to violate a studio’s copyright in a movie, just know they now have the ability to discover who you are.   Michael Zoller received his B.A. in Political Science from Johns Hopkins University. He is currently a third-year law student at Seton Hall University School of Law, he will be receiving is J.D. in May ’11. Want to read more articles like this? Sign up for our post notification newsletter, here.  

Authored By: Michael Paragano

Citation: Cache La Poudre Feeds LLC v. Land O’Lakes, Inc., F.244 R.D. 614 (D. Colo. 2007)

Employee/Employer Implicated: Outside Counsel, Misc. Employee

e-Lesson Learned: The duty to preserve evidence is not necessarily dependent on the tender of a preservation letter, but the duty to preserve must be predicated on something more than just mere discontent.

Tweet This: Be Clear That You Are Suing, and The Other Side Will Have to Preserve!

The duty to preserve evidence is normally triggered by the filing of a lawsuit. However, the duty may arise even earlier when there is a mere “possibility” of a lawsuit. Problems arise because the legal system has grown more and more every day and lawsuits are always a “possibility”. Thus, courts have found that when there is an unequivocal notice of litigation, the party absolutely has a duty to preserve but there must be more than just a mere “possibility” of a lawsuit for the duty to be triggered. Courts will determine when that duty arises based on the facts of each individual case.

Authored By: Shaun Salmon

Citation: Rimkus Consulting Group, Inc. v. Cammarata, 2010 WL 645253 (S.D. Tex. Feb. 19, 2010)

Employee/Employer Implicated: Employees

e-Lesson Learned: Even if the court doesn’t instruct the jury on intentional destruction of evidence, the court will leave it up to the jury to decide if the destruction was willful, so don’t implement policies that may delete potentially relevant documents.

Tweet This: Rimkus: Let the people decide!

In 2006, a group of employees at Rimkus Consulting left the company and, in an attempt to circumvent their non-compete agreements, filed suit seeking a declaratory judgment that the forum selection, choice-of-law, non-competition, and non-solicitation provisions in the agreements they signed with Rimkus were unenforceable. In a countersuit, Rimkus Consulting stated that the former employees violated the non-competes in question, stole “trade secrets and proprietary information,” and also allegedly violated non-solicitation agreements by joining forces with other employees and forming a competitive company. The illegal acts alleged in Rimkus were specific to intentional destruction of ESI, unlike in previous cases (think Pension Committee), and included: deleting emails directly relevant to impending litigation, failing to undertake steps to preserve ESI fol­lowing the commencement of litigation, providing inconsistent testimony regarding preservation and spoliation of ESI, giving away or destroying laptops that con­tained ESI, conducting only a ‘‘superficial’’ search, even after numerous discovery requests and court orders, making no effort to identify alternate sources of ESI, producing ESI years after applicable requests, and producing a key email in a format that left no indication that six documents had been at­tached and were not produced.

Authored By: Edward J. Piasecki

Citation: Gyrodata Inc. v. Gyro Technologies, Inc., 2010 U.S. Dist. LEXIS 120084 (D. Conn. Nov. 12, 2010)

Employee/Employer Implicated: Information Technology Staff

e-Lesson Learned: E-mail filter systems with a drop box remain effective devices of preservation, despite their potential to trigger return receipt messages that might suspiciously look like violations of a protective order.

Tweet This: Return receipt messages and suspicion, without more, is NOT evidence of a violation of a protective order.

It is common practice in litigation between industry competitors that litigants will seek protective orders from the court to ensure that in the exchange of discovery, neither party’s trade secrets are revealed or inadvertently made public. It is also common practice for companies to go to great lengths to ensure that they do not destroy any evidence that might be pertinent to the litigation. One method used in preservation is an email filter, whereby incoming and outgoing emails with certain words are copied into a drop box without the sender or receiver ever knowing. This is generally a very effective method. But what happens if a sender’s email has a return receipt on it? Is the jig up? Or even worse, what if the sender, although not a party to the litigation, is not supposed to receive correspondence regarding the litigation because there is a protective order in place?

Authored By: M.J.R.

Citation: Jannx Medical Systems, Inc. v. Methodist Hospitals, Inc., 2010 WL 4789275 (N.D. Ind., Nov. 17, 2010)

Employee/Employer Implicated: Outside Counsel, In-house Counsel, Senior Management, information technology manager

e-Lesson Learned: Discoverable data must be produced in a reasonably usable form in which it is ordinarily maintained and not in a format more difficult for the requesting party to use in litigation.

Tweet This: Indiana Court hands down a harsh punishment for shady electronic discovery practices!

Not only was Jannx scolded by the District Court on three separate issues, they are now responsible for significant legal fees, and lost a motion to protect their own data. It’s safe to say the Indiana District Court was not impressed with the Jannx legal team. Basically, this case involves a dispute over pre-trial discovery motions between the plaintiff, Jannx Medical Systems and defendants, Methodist Hospital, Crothall Healthcare, Inc., and Propoco Professional Services. The Court issued an opinion and order on Defendant’s motion to get Jannx to comply with electronic discovery and Jannx’s motion to withhold electronic data from discovery by reason of trade secrets, etc.

Authored By: Eric Abes

Citation: Gallagher v. Crystal Bay Casino, LLC et al., 2010 U.S. Dist. LEXIS 124421 (D. Nev. Nov. 8, 2010)

Employee/Employer Implicated: Owners; Executives; Counsel

e-Lesson Learned: Failure to preserve evidence can be fatal, financially and judicially.

Tweet This: Whether a company keeps everything, or waits until a trigger to begin preservation, they should consult a lawyer to develop the proper plan for their company.

When I was a kid, every year at Hanukah, my mom had a one in one out policy for toys. If I got a new Transformer, I had to donate an old toy to Goodwill. It taught me two important lessons: always think of those less fortunate and try to keep the clutter in your home to a minimum. My fiancé cannot bear to part with anything. About five years ago she lost weight and went from a size 14 to a size 8. Today, half of her closet is filled with clothes that are 6 sizes too big for her. Which one would you rather have for a client?

Authored By: S.S.K.

Citation: Estate of Davis v. Spriggs, 2010 WL 4817348 (Delaware County Nov. 19, 2010)

Employee/Employer Implicated: Miscellaneous employees

e-Lesson Learned: Having an “Evidence Eliminator” program which destroys electronic data on a computer upon start-up can justify incidental deletion of evidence when your job involves sensitive information.

Tweet This: OH AppCt: It’s legal to destroy incriminating evidence on your computer! (Sometimes.)

Again with the scandalous sex tapes? Seriously? With all the publicity surrounding leaked sex tapes coupled with the prevalence and ease of digital communication, one cannot honestly believe such a tape will remain a well kept secret. You’ll receive no sympathy on this blog for your escapades, and you’ll receive no sympathy in the Ohio court system, either. In Davis v. Spriggs, Spriggs was suing her former husband (Davis) for posting pictures and video on an adult website after the divorce settlement, signed a few months prior, specifically prohibited such distribution. Spriggs discovered these pictures after logging into a members-only adult website which sent her enough email spam she just had to check it out. Whilst cruising the racy adult website she also discovered pictures of her ex’s new girlfriend.

Authored By: Shaun Salmon

Citation: Orbit One Communications v. Numerex Corps., 2010 U.S. Dist. LEXIS 123633 (S.D.N.Y. Oct. 26, 2010)

Employee/Employer Implicated: Executives

e-Lesson Learned: No matter how inadequate a party’s efforts at preservation may be, sanctions are not warranted unless there is proof that some information of significance has been lost.

Tweet This: No adverse inference unless the destroyed evidence adversely infers something

In 2000, David Ronsen launched Orbit One Communications, Inc., a corporation that sold satellite communications services and manufactured tracking devices reliant on satellite technology. In 2006, Numerex Corp., another satellite communications company, initiated negotiations to acquire Orbit One. These negotiations resulted in a 2007 agreement for Numerex to acquire Orbit One’s outstanding assets. Numerex asked the three executives that were also equity owners in Orbit One, (Ronsen, Scott Rosenzweig, and Gary Naden) to continue to run Orbit One as a division of Numerex, to the tune of over $6 million in “incentives,” meaning that if certain projected earnings targets were met, they would receive “earn out” payments. But April Fools! Big bonuses did not come as promised.

Authored By: Danielle Y. Alvarez

Citation: In re Oracle Corp. Sec. Litig., 627 F.3d 376 (9th Cir. 2010)

Employee/Employer Implicated: Chief Executive Officer

e-Lesson Learned: Even if you produce what seems like a lot of documents, failing to preserve potential evidence could still give your adversary the benefit of an adverse inference instruction which may go a long way toward proving their case.

Tweet This: Producing 2 million docs still not enough when failing to preserve other evidence --> http://ellblog.com/?p=2259

Preserve all potential evidence for a lawsuit. This is discovery 101, isn’t it? Apparently not. The CEO of Oracle Corporation deleted email files and audiotapes, and this blunder could have cost him and his company a substantial lawsuit. Oracle is the second largest software producer in the world, and Larry Ellison is Oracle’s Chief Executive Officer. In 2001, Oracle missed its forecasted earnings and its stock price dropped. Several analysts blamed it on the burst of the dot-com bubble. Not surprisingly, purchasers of Oracle common-stock were not satisfied with chalking their losses up to the economy.