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Sanctions Ordered for Failure to Adequately “Preserve, Search for, and Collect Potentially Relevant Information” : Electronic Discovery Law

December 9, 2011 By Leave a Comment

Naaco Materials Handling Group, Inc. v. Lilly Co., No. 11-2415 AV, 2011 WL 5986649 (W.D. Tenn. Nov. 16, 2011)

In this case, the court found that defendant “failed to take reasonable steps to preserve, search for, and collect potentially relevant information . . . after its duty to preserve evidence was triggered by being served with the complaint” which may have resulted in the destruction of relevant evidence.  Further, defendant failed to present an adequately prepared and knowledgeable 30(b)(6) deponent.  Accordingly, sanctions were imposed, including, among other things, additional discovery, additional forensic imaging at defendant’s expense, and monetary sanctions.

Plaintiff accused defendant of illegally accessing its proprietary website on over 40,000 occasions.  Early in the litigation process, the court granted plaintiff’s motion for expedited discovery which  resulted in an order allowing plaintiff’s expert to conduct a forensic examination of defendant’s computers to determine which, if any, were used to access plaintiff’s proprietary information and to make a copy of any hard drive on which such access was detected.  Evidence of access was found on 17 of the 35 computers subject to examination.  As litigation progressed, and in particular following the deposition of defendant’s 30(b)(6) deponent, plaintiff became concerned that relevant information had been lost and moved to prevent further spoliation and for defendant to bear many discovery-related costs.

The court’s opinion identified several discovery violations, including defendant’s failure to adequately and timely disseminate a legal hold notice; defendant’s failure to “to prevent emails from being deleted, to prevent data from being overwritten, or to identify and preserve backup tapes which might contain the only electronic evidence of access to [plaintiff’s] secure dealer website;” and defendant’s failure to “collect evidence from the key players or to search key players’ computers to see if ESI existed or had been deleted.”  Further, defendant “left collection efforts to its employees to search their own computers without supervision or oversight from management” and took no effort to follow up with its employees or to document any of its search and collection efforts.  Defendant also failed to provide an adequately prepared 30(b)(6) deponent.  Accordingly, the court determined that defendant was “at a minimum, negligent in discharging its discovery obligations.”  The court noted, however, that plaintiff did not produce proof that relevant evidence was in fact destroyed and that the extent of prejudice was therefore in question; more substantial sanctions were therefore not warranted.  Nonetheless, the court found that lesser sanctions were appropriate.

via Sanctions Ordered for Failure to Adequately “Preserve, Search for, and Collect Potentially Relevant Information” : Electronic Discovery Law.

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For Key Employees’ Bad Faith, Intentional Spoliation, Court Imposes Adverse Inference and Monetary Sanctions : Electronic Discovery Law

August 16, 2011 By Leave a Comment

E.I. Du Pont De Nemours & Co. v. Kolon Indus., Inc., No. 3:09cv58, 2011 WL 2966862 (E.D. Va. July 21, 2011)

The court found that defendant breached its preservation duty when key employees intentionally deleted ESI in bad faith.  Acknowledging Kolon’s (insufficient) attempts to place a litigation hold, the court declined to impose default judgment, but ordered sanctions in the form of attorneys’ fees, expenses and costs related to the motion, and an adverse inference instruction.  In so doing, the court rejected arguments that plaintiff suffered no prejudice and that because many of the files were recovered, there was no spoliation.

In this case, plaintiff alleged trade secret misappropriation, theft of confidential business information, conspiracy, and other business torts.  Defendant received plaintiff’s complaint on February 4, 2009.  On February 6th, defendant issued a litigation hold order to certain upper-level employees.  On February 10th, a second litigation hold notice, written in English, was distributed to all employees, most of whom did not speak English.  A third litigation hold was later issued to the IT department, but had little effect on the outcome of the spoliation motion.

Despite knowledge of the relevant complaint and/or receipt of a litigation hold notice, many of defendant’s key employees deleted relevant information from their computers and email accounts.  These deletions were discovered as the result of defendant’s production of several screen shots with handwritten notes that appeared to identify certain files for deletion (e.g., files were marked “Need to Delete,” “Remove All,” “Get Rid Of,” etc.).  Suspicion of spoliation was also raised by the “suspiciously low document production totals” for key employees and the deposition testimony of employees “which assertedly showed that Kolon failed to instruct key employees on their preservation duties. . .”  The extent of the deletions, however, was uncovered only upon the court’s request for additional discovery into the apparent spoliation.  Forgoing the voluminous details of the spoliation, it suffices to say that plaintiff’s expert concluded that defendant’s employees had deleted at least 17,811 files and email items, many of which were highly relevant to the issues of the case.

via For Key Employees’ Bad Faith, Intentional Spoliation, Court Imposes Adverse Inference and Monetary Sanctions : Electronic Discovery Law.

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Court Orders Monetary Sanctions Against Client and Counsel for Discovery Violations, Including Counsel’s Failure to Make “Reasonable Inquiry” : Electronic Discovery Law

June 17, 2011 By Leave a Comment

Play Visions, Inc. v. Dollar Tree Stores, Inc., No. C09-1769 MJP (W.D. Wash. June 8, 2011)

For discovery violations, including (among others) false certification that all relevant records were kept in paper format, delayed and inadequate production and failure to search for documents in a timely manner, and counsel’s failure to adequately familiarize himself with his client’s document retention practices or to assist in the production of documents, the court imposed monetary sanctions equal to the amount expended because of plaintiff’s discovery abuses, to be born by plaintiff and its counsel jointly and severally.

Despite its confidence early in the litigation, plaintiff eventually moved to voluntarily dismiss its case with prejudice.  While defendants did not oppose dismissal, they sought sanctions for plaintiff’s alleged pattern of discovery abuses.

The myriad of details surrounding the alleged discovery abuses need not be repeated in full.  Rather, to summarize broadly, plaintiff’s initial claim that it maintained all relevant documents only in hard copy and later representation that its production was complete turned out not to be true.  Indeed, it was revealed in the deposition of plaintiff’s CFO that the existence of electronically stored information was discovered months after receipt of the initial requests for production (and plaintiff’s initial responses), upon simply asking the IT consultant if he could search for and produce electronic records – a question no one had initially “bothered to ask.”  According to the CFO, “it was simply [Plaintiff’s] failure to ask [the consultant] or anyone else to run the electronic search that delayed the location and disclosure of the additional invoices.”  The CFO also revealed in deposition that “counsel provided little assistance … in making responsive discovery productions” and that counsel “was not involved in identifying records custodians, did nothing to familiarize himself with [Plaintiff’s] document retention and destruction policies, and did not assist in searching for or responding to Defendants’ first or second request for production.”  The deposition affirmed defendants’ understanding that “Plaintiff’s counsel relied on his client entirely to make responses to discovery requests.”

Defendants also came to learn that much of plaintiff’s expert report had in fact been written by counsel and then “approved” by the expert and that plaintiff had violated the court approved protective order by sharing confidential information with an “expert” that had not been properly disclosed.  Additionally, the court was troubled by attempts to change unfavorable deposition testimony regarding the expert report after the fact by using the “change sheet.”

via Court Orders Monetary Sanctions Against Client and Counsel for Discovery Violations, Including Counsel’s Failure to Make “Reasonable Inquiry” : Electronic Discovery Law.

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Agent’s Spoliation Results in Serious Sanctions : Electronic Discovery Law

March 23, 2011 By Leave a Comment

Rosenthal Collins Group, LLC v. Trading Techs. Int’l, No. 05 C 4088, 2011 WL 722467 (N.D. Ill. Feb. 23, 2011)

In this case, the court ordered default judgment, ordered plaintiff to pay $1,000,000 in monetary sanctions, and ordered counsel to pay “the costs and attorneys fees incurred in litigating this motion” where plaintiff’s agent modified metadata related to relevant source code and wiped several relevant disks and devices prior to their production and where the court found counsel participated in “presenting misleading, false information, materially altered evidence and willful non-compliance with the Court’s orders.”

After plaintiff filed for summary judgment its retained consultant admitted in deposition that he had modified relevant source code prior to its production.  Upon defendant’s motion for sanctions, the court declined to order default judgment but imposed monetary sanctions, struck the consultant’s declaration in support of summary judgment, and struck plaintiff’s motion for summary judgment.

Thereafter further spoliation was revealed.  Specifically, the consultant admitted to “turning back the clock” to change the “last modified” date on the previously modified source code to make it appear that the modifications had occurred much earlier and to wiping 6 of 7 disks produced for inspection (while the seventh disk was also wiped, it remained unclear who was responsible).  It was also discovered that “various disks, USB drives and computers that RCG finally produced had been ‘wiped’” prior to production and that the hard drive produced in the “test machine” had been manufactured in 2008 (much later than would be expected in light of relevant time frames).  Accordingly, defendant moved for additional sanctions.

In its defense, “RCG [did] not dispute any of the new allegations of misconduct” but instead sought to distance itself from “its own agent, employed for the purposes of pursuing this litigation” and disavowed any “actual knowledge” of wrongdoing.  RCG’s counsel similarly disavowed “any personal wrongdoing and any actual knowledge of any wrongdoing, while unequivocally distancing themselves and RCG from [the consultant].”

via Agent’s Spoliation Results in Serious Sanctions : Electronic Discovery Law.

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Court Sanctions Plaintiff and Counsel for Misuse of Discovery Process, Including Failing to Reveal That Relevant Cell Phones were Discarded : Electronic Discovery Law

March 14, 2011 By Leave a Comment

Moreno v. Ostly, No. A127780, 2011 WL 598931 (Cal. Ct. App. Feb. 22, 2011)

After initially resisting discovery, plaintiff produced a laptop and cellular phone for examination.  Upon inspection, it was discovered that neither device was in use during the relevant time period.  Moreover, the relevant devices were no longer in plaintiff’s possession.  When challenged as to why this was not disclosed initially, counsel explained that he was torn between his “competing duties” of protecting his client and candor to the court.  Rejecting plaintiff’s and her counsel’s explanations, the court entered monetary sanctions against them.  On appeal, the sanctions were affirmed.

In this case in which plaintiff alleged sexual harassment, retaliation, and failure to pay back wages, defendants sought to discover relevant emails and text messages sent between plaintiff and her alleged harasser and specifically requested production of plaintiff’s computer and cell phone for examination.  Plaintiff objected, arguing that the discovery was overly broad.  Following a court order to produce plaintiff’s personal computer and cell phone, however, plaintiff’s counsel agreed to deliver them to defendants.  Upon inspection of the devices produced, defendants discovered that neither was from the relevant time period and that, in fact, the cellular phone had not even been manufactured until after the relevant period had ended.  When challenged, plaintiff’s counsel indicated that “he always understood” the request to be for the devices currently in plaintiff’s possession.  When pressed to identify how many computers and cell phones had been used during the relevant period, when plaintiff used them, and what happened to them, plaintiff’s counsel took the position that defendants would have to conduct further discovery.  Thereafter, defendants filed a motion for sanctions.

It was eventually revealed that plaintiff used two different cell phones during the relevant period but that neither remained available for inspection.  Plaintiff admitted that one had been discarded but, as the court noted in its analysis, it remained “unclear” what had happened to the other.  For his part, counsel stated that he had not revealed what he had learned from his client about her cell phone because of attorney-client privilege.  Expanding upon that explanation at a hearing on the issue, counsel explained that “he felt he had a ‘competing set of duties’”, namely his obligation to protect his client, who could be accused of spoliation, and his duty of candor to the court and opposing counsel and that he “felt like he was walking a tightrope” trying to advocate for his client “while at the same time be[ing] candid.”

via Court Sanctions Plaintiff and Counsel for Misuse of Discovery Process, Including Failing to Reveal That Relevant Cell Phones were Discarded : Electronic Discovery Law.

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Serious Consequences for E-Discovery Wrongdoing | Boston Technology & Internet Law Blog

January 17, 2011 By Leave a Comment

According to a recent article and study by King & Spaulding, which examined numerous 2009 federal decisions addressing e-discovery violations and sanctions, the study’s authors found that “sanction awards for e-discovery violations have been trending ever-upward for the last 10 years and have now reached historic highs.”  Sanctions included susbstantial monetary awards (bad enough), adverse jury instructions (very bad), and case dismissals (the worst).  The monetary sanctions were as high as $5 million in some instances.  That’s serious pocket change no matter who you are and indicates how seriously courts view a party’s compliance obligations.

According to the study, defendants were sanctioned almost 3 times as often as plaintiffs were.  That’s not really a shocker.  Defendants don’t enjoy being sued (not surprisingly) and will put up all sorts of obstacles during the discovery process.  Smart and ethical defense counsel will try not to let that happen, but I’ve seen instances where defendants aren’t even honest with their own attorneys when it comes to giving them the information they need to comply with their own discovery obligations.

The most common misconduct identified in the study was failing to preserve electronic evidence, failing to produce the records altogether, or delaying the production.  Lawyers were typically sanctioned along with their clients, and the sanction included payment of the opposing party’s attorneys’ fees and costs (which ranged from $500 to $500,000). 

By sanctioning attorneys as well, courts are sending a very clear message that the lawyers must be actively involved in the discovery process and must, of course, act properly throughout.  And the discovery process can at times be daunting given the huge number of e-mails, instant messages, and other e-documents—which could easily be in the millions in some large cases—that may have to be produced.  Nevertheless, counsel must be engaged in the process throughout.  It’s easy to see how litigation can get so costly, isn’t it (even without the sanctions)?

via Serious Consequences for E-Discovery Wrongdoing | Boston Technology & Internet Law Blog.

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Ignorance May be Bliss but not When it Comes to E-discovery

November 14, 2010 By Leave a Comment

Like most cases with a substantial e-discovery element, In Re: A & M Florida Properties II was a web of complex and intertwined legal and technological issues. Unfortunately for plaintiff’s counsel, untangling this web was a bit more than they could muster. Miscommunication between plaintiff and counsel aggravated matters, and the result has become a finger-pointing contest, pitting client against counsel.

Arising from a dispute over the terms of a purchase and sale agreement for property, A & M Properties claimed that defendants, American Federated Title Corporation, failed to disclose key information about the sale of the property. During discovery, the defendant requested emails and other electronically stored information (ESI) from the plaintiff. Several missteps in the e-discovery process resulted in only partial production of the requested material. The defendants cried foul, and after further computer forensic examination, plaintiffs turned over more than 9,500 additional emails.

In a move of bold honesty, counsel fell on its sword claiming that it did not fully “understand the technical depths to which electronic discovery can sometimes go.” If ignorance truly is bliss, then counsel for the plaintiff must be in pure heaven. Unfortunately, Judge Arthur Gonzalez does not seem to share this view. He ordered an award of monetary sanctions to cover the cost of both defendant’s attorney and the computer forensic expert. Adding insult to injury, Gonzalez has ordered plaintiff and counsel to split the cost of the award between them.

For A & M Properties and their attorneys the damage is already done. For the rest of us, there are several lessons we may learn from their mistakes.

via Ignorance May be Bliss but not When it Comes to E-discovery.

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In “‘David-And-Goliath-Like’ Struggle for Electronic Discovery”, Court Orders Adverse Inference, Monetary Sanctions for Spoliation and Delay : Electronic Discovery Law

August 28, 2010 By Leave a Comment

Harkabi v. Sandisk Corp., 08 Civ. 8203 (WHP) (S.D.N.Y. Aug, 23, 2010)

For failing to preserve the laptops issued to plaintiffs while working for defendant, the court found defendant was “at a minimum” negligent and indicated that an adverse inference would be crafted after all the evidence had been received.  For “prolonged delay” in producing relevant emails the court denied terminating sanctions but ordered monetary sanctions in the amount of $150,000.

This opinion begins:  “Electronic discovery requires litigants to scour disparate data storage mediums and formats for potentially relevant documents.  That undertaking involves dueling considerations:  thoroughness and cost.  This motion illustrated the perils of failing to strike the proper balance.”

Plaintiffs were fired by defendant and thereafter brought suit for breach of contract, among other things.  With the dispute “brewing”, plaintiffs’ counsel sent defendant a preservation letter.  Accordingly, a “Do-Not-Destroy” memorandum was distributed by defendant and the laptops issued to plaintiffs while employed with defendant were secured in storage.  Later, however, following installation of a new email archive service, the laptops were imaged and the data was saved on a file server.

via In “‘David-And-Goliath-Like’ Struggle for Electronic Discovery”, Court Orders Adverse Inference, Monetary Sanctions for Spoliation and Delay : Electronic Discovery Law.

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Compliance Week: First Half Trends in Electronic Discovery Sanctions

July 27, 2010 By Leave a Comment

It’s been a busy year already in the world of electronic discovery. Among other things, the first half of 2010 brought a number of new rulings related to e-discovery sanctions.

So far, litigants are seeking sanctions in fewer cases than in 2009, but sanctions are being awarded at almost the same rate, according to a mid-year update on e-discovery developments and trends by Gibson Dunn & Crutcher.

Of 103 e-discovery opinions issued from Jan. 1 – June 17 that were analyzed by GDC, litigants sought sanctions in 30 percent, or 31 cases, compared to 42 percent in all of 2009. They received sanctions in 68 percent (21) of those cases, compared to 70 percent in all of 2009.

Costs and fees associated with the discovery dispute itself were the most frequently awarded sanctions, imposed in 14 of the 21 cases in which courts imposed some kind of sanction. Adverse inference instructions were imposed in 4 cases, while other monetary sanctions were imposed in three cases.

via Compliance Week: The Filing Cabinet – » First Half Trends in Electronic Discovery Sanctions.

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Court Orders Monetary Fine for Gross Negligence and Intentional Spoliation of ESI, Including Emails, Text-Messages, and Skype Messages : Electronic Discovery Law

May 12, 2010 By 1 Comment
A little diagram of an IP address (IPv4)
Image via Wikipedia

Passlogix, Inc. v. 2FA Tech., LLC, 2010 WL 1702216 (S.D.N.Y. Apr. 27, 2010)

Upon finding that defendants spoliated relevant information, including emails, Skype messages, and computer logs, the court declined to order an adverse inference, to preclude defendants from the presentation of arguments implicating the discarded documents, or to order defendants to pay plaintiff’s costs, but ordered monetary sanctions in the amount of $10,000, after balancing “2FA’s litigation conduct with its status as a small corporation.”

In this opinion, the court addressed plaintiff’s allegations that defendants, specifically defendant Gregory Salyards, committed fraud on the court by creating and sending an anonymous email “in an effort to expand discovery, cause Passlogix competitive harm, and garner a favorable settlement.”  Defending against the accusation, Salyards proffered the affirmative defense of IP spoofing, “stating that a Passlogix employee may have ‘spoofed’ his IP address in an effort to impersonate him on the internet.”  Passlogix also sought spoliation sanctions arguing that defendants failed to implement a legal hold and took part in intentional spoliation of data, including emails and text messages.

Although beyond the scope of this summary, the court’s lengthy discussion of the anonymous email(s) and Salyards’ defense of “IP spoofing” is fascinating and showcases how ever-advancing technology has created scenarios for consideration that, not long ago, seemed more the stuff of spy novels than of litigation in our federal courts.

via Court Orders Monetary Fine for Gross Negligence and Intentional Spoliation of ESI, Including Emails, Text-Messages, and Skype Messages : Electronic Discovery Law.

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