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.
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).
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