Friday, May 30, 2008

2008-05-30 Spoliation: "Flagrant Reformatting," Tampering, and Backdating - Oh My!

In a May 16 opinion in the case of Johnson v Wells Fargo Home Mtg., Inc. 2008 WL 2142219 (D. Nev 2008), the Court found the plaintiff (who had asserted a Fair Credit Reporting Act violation against defendant) had spoliated digital evidence on his two laptops containing undisputedly relevant evidence, and sanctioned plaintiff by directing that an adverse inference instruction to a jury be made at trial in connection with the computer information contained on those computers. In an interesting twist of the "safe harbor" provisions of Fed. R. Civ. P. 37, the Plaintiff claimed that the reformatting/reinstallation was routine and necessitated (coincidentally, just after demand for them was made and noticed) because the laptops were infected with viruses spy-ware.

Defendant claimed severe prejudice and sought dismissal. Specifically, Defendant asserted (and had expert testimony corroborate) that it "has been prejudiced by Plaintiff's willful acts because relevant information that it could have used in defending against this lawsuit [was] forever lost.

The actions admitted to by plaintiff, or testified to by defendant's expert, pretty much cover the "what not to do" punch list in order to avoid a finding of discovery abuse. Note that some points are direct quotes from the decision:

1. Defendant contends Plaintiff supports his FCRA claim with various letters he drafted on his two laptops, which rest at the very foundation of Plaintiff's claim. Defendant further contends computer evidence reveals Plaintiff may have manufactured these documents to support his claim and then flagrantly reformatted the hard drives on these laptops shortly after Defendant informed him that they had been formally requested and were relevant to the case.

2. "Plaintiff claim[ed] that before this procedure is performed, data on the hard drive is backed up and saved and then downloaded back onto the hard drive after the operating system is reinstalled." Plaintiff failed to produce the backs ups themselves.

2. Plaintiff objected to the request for the laptops and instead offered to produce documents
specifically identified by defendant.

3. Plaintiff repeatedly refused to come to agreement concerning the hard drives, resulting in Defendant's filing of a motion to compel production of hard drives, which was granted.

4. After "eventually" receiving the hard drives, defendant's forensic expert determined that both had been re-formatted or "reinstall[ed]" prior to production.

5. Plaintiff claimed that his "original" files had been backed up, but did not provide the saved backups (created prior to the reformatting-reinstallation) themselves.

Defendant's Expert Testimony

1. Defendant's expert testified that the reformatted drives were not "searchable."

2. Plaintiff altered numbers on correspondence and checks, fabricated evidence to bolster his position.

3. Plaintiff both deleted files and then reformatted them. One laptop was reformatted by Plaintiff's wife, using telephonic instructions given to her by a computer technician.

4. "Within five (5) days of being notified that Defendant intended to file a motion to compel, Plaintiff reformatted his first hard drive ( Id., Exh. 1). Then within ten (10) days of reformatting his first hard drive, Plaintiff reformatted his second hard drive ( Id.). During this entire period of time, Defendant sent numerous e-mails to Plaintiff attempting to settle the dispute over production of the hard drives."

Spoliation: Motion to Dismiss Pursuant to Fed. R. Civ. P. Rule 37, and the Court's Inherent Power

Defendant requested dismissal for discovery violations pursuant to Fed. R. Civ. P. 37 and the Court's "inherent powers." The Court's analysis is instructive. The Court first explains that there are two ways in which a spoliation claim may be decided:

A Court may "...levy sanctions" in response to abusive litigation practices, and the availability of sanctions under Rule 37 against a party who ‘fails to obey an order to provide or permit discovery.’ ” Leon v. IDX Systems Corp., 464 F.3d 951, 958 (9th Cir.2006) (citing Fjelstad v. Am. Honda Motor Co., 762 F.2d 1334, 1337-1338 (9th Cir.1985); Fed R. Civ. P. 37(b)(2)(C)). "

In this case, there was no outstanding discovery order, and accordingly, the Court conducted its spoliation analysis based on it's "inherent powers."

The Court's Analysis:

The Court found that Plaintiff's actions were willful, that it had notice of the relevancy of the information contained in the hard drives that were reformatted,

Willfulness and Notice of Relevancy: The Court noted that,

"[T]he totality of the circumstances indicates Plaintiff's conduct was, in fact, willful. Plaintiff was clearly on notice that Defendant was seeking relevant information on his hard drives. “A party's destruction of evidence qualifies as willful spoliation if the party has ‘some notice that the documents were potentially relevant to the litigation before they were destroyed.’ ”Leon, 464 F.3d at 959 (citing United States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir.2002) (emphasis added) (internal quotation marks and citation omitted))."

The Timing of Plaintiff's Acts was Suspect

"The timing of Plaintiff's reformatting of his hard drives is also very suspect. Plaintiff reformatted both hard drives within a few days of each other, not only during the period of time he knew Defendant sought production of the hard drives, but also after Defendant informed Plaintiff, on September 20, 2007, that it intended to file a motion to compel production of the hard drives."

The "Virus and Spy-Ware" Claims "Not Helpful" to Show Absence of Willfulness/Bad Faith

"Plaintiff's explanation that he reformatted his hard drives because they were infected with viruses and spy-ware and then he downloaded all the files back onto the hard drives is of little help to the court in finding an absence of willfulness or bad faith."

The Court also pointed out that at not time during demand for production or discussions held in connection therewith was this issue raised by Plaintiff. Another reason to find bad faith or willfulness.

Relationship Between Misconduct and Matters in Controversy

The Court found a clear relationship between Plaintiff's reformatting of the hard drives and the controversy.

Prejudice to Non-Spoliating Party:

The Court first sets out the elements for a finding of prejudice in the 9th Circuit:

“A defendant suffers prejudice if the plaintiff's actions impair the defendant's ability to go to trial or threaten to interfere with the rightful decision of the case.” Malone v. United States Postal Service, 833 F.2d 128, 130 (9th Cir.1987), cert. denied sub nom, Malone v. Frank, 488 U.S. 819, 109 S.Ct. 59, 102 L.Ed.2d 37 (1988). “Whether prejudice is sufficient to support an order of dismissal is in part judged with reference to the plaintiff's excuse for the [conduct].” Id. (citing Nealey v. Transportac ion Maritima Mexicana, S.A., 662 F.2d 1275, 1280 (9th Cir.1980)). Delay alone has been held to be insufficient prejudice; however, failure to produce documents as ordered is considered sufficient prejudice. Adriana Intern. Corp. v. Thoeren, 913 F.2d 1406, 1412 (9th Cir.1990), cert. denied, Lewis & Co. v. Thoeren, 498 U.S. 1109, 111 S.Ct. 1019, 112 L.Ed.2d 1100 (1991)."

The Court first points out that the issue being decided one of destruction of evidence rather than of a failure to produce:

"Here, we are not dealing with a failure to produce documents as ordered because Plaintiff reformatted his hard drives prior to the court ordering production of said hard drives."

The Court finds prejudice in part relying on the testimony of Defendant's expert:

"Defendant has shown some prejudice, nonetheless, based on expert testimony suggesting Plaintiff may have altered or manufactured relevant documents and that some documents may be missing."

The Court found that Plaintiff had spoliated computer generated evidence, and arguably the hard drive containing that evidence. The Court finds, however, that the spoliation by Plaintiff did not warrant the extreme sanction of dismissal, and conducted a "less drastic sanctions" analysis under 9th Circuit standards:

"In considering less drastic sanctions for spoliation of evidence, “[a] federal trial court has the inherent discretionary power to make appropriate evidentiary rulings in response to the destruction or spoliation of relevant evidence. Such power includes the power where appropriate to order the exclusion of certain evidence.” Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir.1993). “Short of excluding the disputed evidence, a trial court also has the broad discretionary power to permit a jury to draw an adverse inference from the destruction or spoliation against the party or witness responsible for that behavior.” Id. (citing Akiona v. United States, 938 F.2d 158 (9th Cir.1991)). A finding of “bad faith” is not a prerequisite to this corrective measure; a finding of “willfulness or fault by the offending party” will suffice. Unigard v. Lakewood, 982 F.2d 363, 368-370 & n. 2 (9th Cir.1992)."

The Court found first described the rationale for imposition of an adverse jury instruction sanction on a spoliating party:

The adverse inference is based on two rationales, one evidentiary and one not. The evidentiary rationale is nothin [sic] more than the common sense observation that a party who has notice that a document is relevant to litigation and who proceeds to destroy the document is more likely to have been threatened by the document than is a party in the same position who does not destroy the document.... The other rationale for the inference has to do with its prophylactic and punitive effects. Allowing the trier of fact to draw the inference presumably deters parties from destroying relevant evidence before it can be introduced at trial. [Citation omitted]"

The Court then imposed an adverse inference instruction finding as the appropriate sanction in this matter:

Here, an adverse jury instruction creating a presumption in favor of Defendant that the spoliated evidence was unfavorable to Plaintiff is an appropriate, less drastic sanction for several reasons set forth below."

The reasons?

"First, Defendant's forensic computer expert found evidence that Plaintiff tampered with the hard drives (Doc. # 129 at 6). Plaintiff does not dispute reformatting his hard drives during the period Defendant was requesting production of the hard drives. Although Plaintiff suggests he saved and backed up the data on his hard drives, he has failed to produce any saved, back-up files proving he did so. Plaintiff's credibility is solely within the province of the jury and the jurors will be able to draw they're own inferences based on the timing of Plaintiff's conduct and the failure to produce any saved back-up files."

"Second, Defendant's expert did retrieve two (2) letters from Plaintiff's hard drives, which, according to Defendant, “rest at the very foundation of Plaintiff's FCRA claim.” ( Id. at 3). Defendant's expert will apparently testify that Plaintiff created these documents more than one (1) year after Plaintiff claims he created them ( Id. at 8). Defendant's expert's analysis suggests Plaintiff created both of these documents just five (5) days before Plaintiff's counsel sent a letter to Defendant threatening suit and just one (1) month prior to Plaintiff filing this action (Doc. # 129 at 8). Plaintiff argues the allegation that the documents were created after the dates indicated on them is pure speculation and “completely meaningless unless it is known whether the date and time set on the computer were correct when the documents were created.” (Doc. # 133 at 5). However, as previously stated, Plaintiff's credibility is solely within the province of the jury and Defendant will have the opportunity to present evidence from its computer expert indicating Plaintiff backdated the letters. The jury can then weigh the evidence and determine whether Plaintiff's argument is credible, given the totality of the circumstances."

"Third, Defendant asserts that its computer expert retrieved information that shows Plaintiff may have been creating other documents in anticipation of litigation and backdating them to fit his theory of liability."

At first, I thought this Plaintiff must have been pro se. Incredibly, not so.