2009-01-31 Two Decisions: Preservation and Spoliation of Tansitory Evidence, and an ESI Privilege Decision (4th Circuit)

Another week, another adverse inference imposed in a spoliation case involving “transitory” evidence. The second case involves the FOIA equivalent of a privilege log dispute, and imo, provides good guidance in connection with seeking native format data of the metadata used to create privilege log.

Advance warning: This digest is lengthy.

All errata acknowledged in advance.

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Case: Arista Records, LLC, et al. v Usenet.com, Inc. et al.
Citation: 2009 WL 185992 (SDNY 2009)
Date: 2009-01-26
Topics: Second Circuit spoliation standards, duty to preserve, scope of preservation, retention trigger date, preservation of transitory evidence, expert testimony, broadening application of Fed. R. Civ. P. Rule 37(e).

This copyright infringement case was brought against a provider of access to internet newsgroups by a slew of content provider (record companies, etc.).
At issue is the alleged spoliation by defendant of:

1) “Usage Data,” which Plaintiffs define as “pre-existing records from Defendant[s'] computer ‘servers' reflecting actual requests by Defendant[s'] paid subscribers to download and upload digital music files using Defendant[s'] service;” FN3

2) “Digital Music Files,” which Plaintiffs define as “the physical digital copies of the copyrighted sound recordings at issue in this case and related information hosted on computer servers operated by or on behalf of Defendant[s]”; FN4 and

3) “[h]ighly incriminating promotional materials previously available on the Usenet.com website.” (Pl. Sanctions Mem. at 1, 3.) FN5 Plaintiffs contend that Defendants deliberately destroyed this material even though it had been the subject of discovery requests, and that it would have provided evidence of wide-scale infringement of Plaintiffs' copyrighted sound recordings. (

Some definitional positions by the parties: Defendant Usenet.com defines “usage data” as “log files,” and refer to Digital Music Files as articles”

An initial what-not-to-do in connection with a party’s discovery posturing. Not a good sign when this is discussed at the beginning of a spoliation decision:

“Defendants initially provided false written discovery responses, in which they claimed not to own their servers and, therefore, claimed they could not access the Usage Data. ( See id. ¶ 4 & Ex. 3.) Defendants then changed their tact, claiming that they did own the servers but did not know how to produce the requested log data. Plaintiffs contend that they explained how the Usage Data could be produced and suggested that Defendants provide access to their servers so that Plaintiffs could collect the Usage Data themselves. Defendants first offered, and then withdrew their offer, to provide Plaintiffs direct access to the data.”

“Notwithstanding counsel's commitment, on March 8, 2008, Defendant Reynolds affirmatively disabled user access to what Plaintiffs estimate to be 900 Music Groups, without preserving the Usage Data. ( See Horowitz Decl. ¶¶ 31-32; Servodidio Decl. Ex. 26 (“Reynolds Dep.”) at 83:18-84:19.)”

“The following business day, Defendants produced “junk” Usage Data to Plaintiffs, reflecting subscribers' failed attempts to access the Music Groups.”

“On or around March 11, 2008, Plaintiffs learned of Defendant Reynolds's actions. ( See id. ¶ 8.) In an e-mail to Defendants' counsel, Plaintiffs objected to the disabling of the Music Groups, and reminded Defendants that those files “are the subject of outstanding discovery requests.”

“Plaintiffs followed-up via e-mail, on March 12, and through a formal letter request on March 21, demanding that Defendants preserve the Digital Music Files. ( See id. ¶ 9 & Exs. 9 & 11.) FN7”

Footnote 7 is telling:

“FN7. At this point, the Usage Data had already been lost.”

The spoliation allegations continue apace:

“Despite Defendants' assurances, Defendants did not preserve copies of the Digital Music Files for the disabled groups, nor did they re-enable all the Music-related Groups that had been disabled.FN8 ( See Pl. Sanctions Mem. at 9.) In fact, Plaintiffs claim that Defendants took affirmative steps to delete the Digital Music Files on March 10, and then Defendants reconfigured their system in order to write-over the Digital Music Files, making them irretrievable. ( See Pl. Supp. Mem. at 2-4.) Plaintiffs estimate that only 78 of the 900 Music Groups once available on Defendants' servers were re-enabled to receive articles after March 8, 2008. ( See Pl. Sanctions Mem. at 9; see also Horowitz Decl. ¶ 33.) FN9”

It seems that in spoliation hearings, the really devastating material (check out this testimony) is relegated to footnotes. Another what-not-to-do:

“FN8. Defendant Reynolds testified at his deposition that Defendants took no steps to prevent the Digital Music Files from expiring off the system. ( See Reynolds Dep. at 87:10-89:17; 92:24-94:9.) Defendant Reynolds was asked to explain why he did not preserve the Digital Files. He first stated that it was impossible, then conceded that they “could have been” preserved, but explained “there was no request to produce the articles or to save them.” (Id. at 92:19-20.)”

Could things get any worse? Did they? Yes, and yes. Enter the ubiquitous “server crash:”

“On March 24, Defendants' server crashed and stopped populating the re-enabled newsgroups; Defendants have not offered Music-related Groups on their system since that date. ( See Pl. Reply Mem. at 13; see also Def. Opp. Mem. at 8-9.) Thus the newsgroups that Defendants did re-enable after March 12, received files for only approximately ten days. ( See Pl. Sanctions Mem. at 9.)Moreover, the newsgroups that had been re-enabled “did not ‘re-populate’ in a manner consistent with the normal functionality of these groups.” ( Id.)”

“A snapshot of the so-called Digital Music Files flowing through the server at the time of the crash was captured, and Defendants produced this data to Plaintiffs on June 19, 2008. ( See Def. Opp. Mem. at 9-10.) As a result of the server corruption, however, Defendants were unable to extract the log data. ( See id. at 10.)”


Web Page Deletion - Attempt to Cure or Spoliation

Defendant claims it removed the web site. Plaintiff asserts that removal did not mean destruction of evidence (the web page data):

“Plaintiffs claim that Defendants have either destroyed other inculpatory evidence or misrepresented that it does not exist. ( See Pl. Reply Mem. at 15.) For example, Plaintiffs contend that Defendants destroyed highly incriminating promotional materials that were previously available on theUsenet.com website. FN10 ( See Pl. Sanctions Mem. at 3.) Defendant Reynolds testified at his deposition that it was not until after the commencement of the litigation that he personally removed the webpages, and failed to retain copies. (Fabrizio Decl. Ex. 11 (“Reynolds Oct. 8, 2008 Dep.”) at 1039:12-1041:21.) Plaintiffs argue that this controverts Reynolds's Declaration indicating the materials were simply removed from public access before the case was filed.FN11 ( See Declaration of Gerald Reynolds in Support of Defendant Usenet.com, Inc.'s Opposition to Plaintiffs' Motion for Sanctions, dated Sept. 29, 2008 (“Reynolds Decl.”) ¶22.) Although Defendants have offered to authenticate Plaintiffs' copies of the webpage containing the promotional materials, Plaintiffs take issue with this cure since they are unable to ascertain what other incriminating webpages Defendants destroyed. ( See Pl. Reply Mem. at 15-16 n. 8.)”

Defendants' position: The evidence Plaintiff sought not only was “difficult, if not impossible” to extract, but also no relevant. For example, Defendant claims that user logs only show that “some user requested some article at some time” but did not prove infringement, and that the Articles downloaded are only “text files” that needed to be combined and converted in order to create a music file playable on a downloader’s computer. We’re obviously off to a bad start.

Using the term “necessarily” -- From bad to worse: Defendant further claimed that while the logs identify the name of the article uploaded or downloaded, the article’s name did not “necessarily reveal the contents of the requested file.”


“Transitory” Electronic File Requests:

“From the commencement of discovery, Plaintiffs requested a wide array of electronic files, including the articles (Digital Music Files) and log data (Usage Data). ( See id. at 6.) Defendants repeatedly explained why it was not technologically feasible to produce these potentially responsive documents. ( See id.) Because of the volume of information requested and the fact that Defendants' system was not capable of capturing and storing the majority of this information, the parties discussed protocols and logistics for trying to extract and produce this information.”

If Defendants’ claim of ephemerality of the electronic file requests seems reminiscent of Columbia v Bunnell, read on...

“Defendants argue that the data Plaintiffs seek is transitory in nature, meaning that in-flow of new articles pushes out old articles present on the Usenet. ( See id. at 6.)”


Expert Testimony: Being Good Distinguished from Doing “Good” (quotes mine)

Plaintiffs moved to exclude the testimony of noted technology expert Professor David Farber “proffer expert conclusions or opinions about Defendants' system.” It appears that the Defendant hired Professor Farber on a whim, and the Court just wasn’t in a whimsical mood on decision day. Moreover, although his qualifications were not in dispute, the substantive quality of his investigation was called into question by the Court:

"Here, however, Professor Farber has offered opinions about the capacity and capabilities of Defendants' servers and software, which are the matters largely in contention, by simply accepting what Defendant Reynolds told him. The underlying premise of allowing expert testimony is that “scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue.” Fed.R.Evid. 702. An expert who simply regurgitates what a party has told him provides no assistance to the trier of fact through the application of specialized knowledge. Cf. United States v. Mejia, 545 F.3d 179, 197-98 (2d Cir.2008) (although an expert may rely on hearsay in forming his expert opinions, “[t]he expert may not, however, simply transmit that hearsay to the jury. Instead, the expert must form his own opinions by applying his extensive experience and a reliable methodology to the inadmissible materials. Otherwise, the expert is simply repeating hearsay evidence without applying any expertise whatsoever”) (internal quotation marks and citations omitted); Robinson v. Sanctuary Record Groups, Ltd., 542 F.Supp.2d 284, 292 (S.D.N.Y.2008) (expert whose methodology was founded on hearsay supplied by the party itself, rather than “a source of first-hand, independent expert knowledge,” did not provide reliable evidence).FN23


The Court held a better opinion of Plaintiff’s expert:

“FN23. By contrast, Plaintiffs' expert, Ellis Horowitz, engaged in a detailed analysis of Defendants' system and the data available on that system. The Court finds Horowitz's conclusions about Defendants' system to be deserving of substantial weight.”

Wait, wait, there’s more:

“By his own admission, the following represents the sum of Professor Farber's investigation. In preparation for his Declaration, Professor Farber received, but only “scanned” notes from Mr. Reynolds ( see id.). He also “reviewed the operations manual for Surgenews” FN21 and performed Internet research on the Surgenews software.FN22 ( See Def. Strike Mem. at 6.) Professor Farber did not download any articles from the Usenet in preparation for his Declaration, but he was a heavy Usenet user beginning in the late 1990's. Nevertheless, he has used the Usenet only on a couple of occasions each year since 2000. ( See id.; Farber Dep. 36:8-38:13.) Professor Farber had discussions with Defendant Reynolds concerning the Usenet.com system, the software, the age of the servers, which Professor Farber accepted as reasonable information based on his experience.”

“Professor Farber's Declaration is replete with opinions and conclusions which appear to be nothing more than information supplied to Professor Farber by Defendant Reynolds. The Court acknowledges that “disputes as to the validity of underlying data [relied upon by an expert] go to the weight of the [expert's] evidence” rather than its admissibility. Raskin, 125 F.3d at 66. Even if the Court were to deny Plaintiffs’' Daubert motion, however, and were to consider the conclusions in Professor Farber's Declaration, it would accord them little weight insofar as they purport to describe the capabilities of Defendants' system. As has been discussed, and will be described further, Defendant Reynolds's contentions about his system, which Professor Farber relied upon, have been shown to be misleading and erroneous.”

“Nevertheless, Farber does not simply rely on erroneous data; his opinions are merely a restatement of Defendant Reynolds's views and are not the product of independent analysis."

The coup de grace:

“An expert who simply repeats the hearsay of the client who retained him, without any independent investigation or analysis, does not assist the trier of fact in understanding matters that require specialized knowledge. That, in fact, is what Professor Farber has done in offering opinions about Defendants' system. The Court, therefore, grants Plaintiffs' Motion to Strike those portions of the Declaration that purport to describe the capabilities of Defendants' system. Those portions of the Declaration that are based on Professor Farber's expert knowledge of the Usenet in general and Usenet technology will not be stricken.”


Spoliation

As no motion to compel was pending, the Court’s inherent powers were invoked as the basis for Plaintiff’s spoliation motion. The Court then provide a good overview of the 2d Circuit’s spoliation approach:

“Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.” West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir.1999) (citation omitted). “[A] court may impose sanctions on a party for misconduct in discovery under its inherent power to manage its own affairs.” FN30 Residential Funding Corp. v. Degeorge Fin. Corp, 306 F.3d 99, 106-107 (2d Cir.2002); see also Reilly v. Natwest Markets Group Inc., 181 F.3d 253, 267 (2d Cir.1999) (a district court has wide discretion in sanctioning a party for discovery abuses); see also Metro. Opera Ass'n. v. Local 100, Hotel Employees & Rest. Employees Int'l Union, 212 F.R.D. 178, 219 (S.D.N.Y.2003). Due to the “potency of the court's inherent power, courts must take pains to exercise restraint and discretion when wielding it. Accordingly, [the Second Circuit] has required a finding of bad faith for the imposition of sanctions under the inherent power doctrine.” DLC Mgmt. Corp. v. Town of Hyde Park, 163 F.3d 124, 136 (2d Cir.1998) (citing United States v. Int'l Bhd. of Teamsters, 948 F.2d 1338, 1345 (2d Cir.1991)). Bad faith can be shown by (1) “clear evidence” or (2) “harassment or delay or ... other improper purposes.” Int'l Bhd. of Teamsters, 948 F.2d at 1345 (internal quotation marks and citation omitted).”

The Court then provides a review of what a party asserting spoliation must demonstrate in the 2d Circuit:

“The party bringing a spoliation motion must demonstrate:

1) that its adversary had control of the evidence and a duty to preserve it at the time it was lost or destroyed;

2) that the adversary had a “culpable state of mind” when the evidence was lost or destroyed; and

3) that the lost or destroyed evidence was “relevant” to the moving party's claims such that a reasonable trier of fact could find that it would support a claim. See Residential Funding Corp., 306 F.3d at 107; see also Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 220 (S.D.N.Y.2003) (citing Byrnie v. Town of Cromwell, Bd. Of Educ., 243 F.3d 93, 107-12 (2d Cir.2001)).”


Obligation to Preserve:

Citing Judge Scheindlin’s decision in Zubulake, Magistrate Judge Katz then describes triggering events for a duty to preserve involve a determination of when the duty attaches and what must be preserved:

“Identifying the boundaries of the duty to preserve [evidence] involves two related inquiries: when does the duty to preserve attach, and what evidence must be preserved.” Zubulake, 220 F.R.D. at 216. A party is obligated to preserve evidence when it “has notice that the evidence is relevant to litigation ... [or] should have known that the evidence may be relevant to future litigation.” Kronisch v. United States, 150 F.3d 112, 126 (2d Cir.1998) (citations omitted); accord Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 436 (2d Cir.2001).


Relevant Date May be Triggered by the Nature of the Evidence: Transitory Evidence:

After reciting the well established doctrine that a duty to preserve is triggered no later than the date on which an action is initiated, or the date when litigation was reasonably anticipated, the Court notes that under certain circumstances, the relevant date may be determined by the “nature of the evidence”

“Nevertheless, when the duty to preserve evidence arises may, under certain circumstances, be dependent upon the nature of the evidence. For example, among other things, Plaintiffs in this action sought e-mails and other communications from Defendants' employees, customers, and business associates, discussing or referring to the Music Groups on Defendants' servers and the uploading and downloading of Music-related files. Defendants were on notice to preserve such documents by no later than the date on which the Complaint was filed, and perhaps earlier, when Plaintiffs notified Defendants of the alleged infringement.”

The Court applies the “nature of the evidence” test to Usage Logs and Music Files contained on defendant’s servers. In acknowledging this ESI as “transitory” Magistrate Judge Katz finds that even though this information was transitory, and not routinely created or maintained by Defendants for their business purposes, the existence of a triggering event (here a specific request by Plaintiff) required that Defendants take to retrieve and store:

“”Some of the other evidence at issue in the instant motion, such as Usage Logs and Music Files contained on Defendants' servers, is transitory in nature, is not routinely created or maintained by Defendants for their business purposes, and requires additional steps to retrieve and restore. Arguably, Defendants may not have had an obligation to preserve such evidence until placed on notice that Plaintiffs considered it relevant and were requesting it. However, Plaintiffs explicitly requested the Usage Data on January 7, 2008. Moreover, there can be no doubt that the Digital Music Files are highly relevant to this case, and Defendants should have been aware of their relevance no later than the date on which the Complaint was filed. In any event, Plaintiffs specifically requested, and sought assurances on March 11, 2008, that these files would be retained.”


Scope of Preservation

The Court then finds that the defendants had actual notice, and that actual notice was sufficient to trigger a duty to preserve, attempt to preserve, or negotiate the protocols for preservation of even transitory data, which they failed to do:

“…once Defendants had actual notice that Plaintiffs were requesting the data, Defendants had the obligation to preserve it, if possible, or to at least negotiate in good faith what data they could produce.FN31 Plaintiffs specifically requested the Usage Data in their document requests ( see Servodidio Decl. Ex. 2), and they reminded Defendants that they had requested the Digital Music Files, on both March 11 and March 12 ( see id. Exs. 8 & 9).FN32 The parties were in negotiations concerning production of the Usage Data ( see, e.g., id. Ex. 4), and Defendants counsel affirmatively advised Plaintiffs in a March 8, 2008 e-mail that Defendants would extract and produce Usage Data for newsgroups that contain the words “mp3” or “sound.” ( See id. Ex. 6.) Nevertheless, after giving that assurance, Defendant Reynolds disabled the Music Files and failed to preserve the Usage Data.”


Broadening Application of Fed. R. Civ. P. 37(e)

In another interesting footnote, the Court likens the duty to preserve in this case to a failure to cease routine and ordinary ESI destruction referred to in Fed. R. Civ. P. Rule 37(e):

“FN31 Although Federal Rule of Civil Procedure 37(e) is not cited by the parties, and does not apply under the circumstances of this case, by analogy the Rule is useful in understanding what steps parties should take to preserve electronic evidence.”

The Court distinguishes two other cases cited by Defendants where preservation of transitory evidence was not required. The distinguishing factor in both cases was that a specific request was made in the instant case:

“Defendants cite two cases for the proposition that they have no duty to preserve the “transient electronic data at issue.” (Def. Opp. Mem. at 14.) In Convolve, Inc. v. Compaq Computer Corp., 223 F.R.D. 162 (S.D.N.Y.2004), the court denied sanctions for alleged spoliation of wave forms. See id. at 176-77. In its analysis, the Convolve court distinguished between e-mails, which have a “semi-permanent existence” and “are recoverable as active data until deleted,” and “ephemeral” data which “exist only until the tuning engineer makes the next adjustment, and then the document changes.” Id. at 177. The court held that under a general litigation hold, and absent a preservation order, sanctions were not warranted. See id. at 177. Similarly, in Healthcare Advocates, Inc. v. Harding, Earley, Follmer & Frailey, 497 F.Supp.2d 627 (E.D.Pa.2007), the court held that sanctions for spoliation were not warranted where a party failed to preserve temporary cache files, since the party did not affirmatively destroy the evidence and the cache files may have been emptied dozens of times before the request for production was made. See id. at 641-42. Defendants reliance on these cases is misplaced because, unlike the instant case, the lost data was not specifically requested prior to its destruction. See Convolve, 223 F.R.D. at 176-77 (parties were under a general litigation hold); Healthcare Advocates, 497 F.Supp.2d at 642 (“To impose a sanction on the Harding firm for not preserving temporary files that were not requested ... does not seem to be a proper situation for an adverse spoliation inference.”).

The Court rules that Defendants had an obligation to preserve and produce:

“In sum, the Court concludes that Defendants did have an obligation to preserve and produce the requested Usage Data and Digital Music Files. A litigant “is under a duty to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.” Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 72 (S.D.N.Y.2001); see also Whitney v. Jetblue Airways Corp., No. 07 Civ. 1397(CBA), 2008 WL 2156324, at *4 (E.D.N.Y. Apr. 29, 2008) (finding that defendant had a clear obligation, no matter its document retention policy, to put a litigation hold on any and all documents relating to claim); Zubulake, 220 F.R.D. at 217 (a litigant is under a duty to retain relevant evidence that is likely to be requested and/or is the subject of a pending discovery request).FN36 Here, the discovery in issue was the subject of discovery requests, and Defendants' counsel assured Plaintiffs' counsel that the Usage Data would be produced. ( See Servodidio Decl. Ex. 6.) See Langley v. Union Elec. Co., 107 F.3d 510, 513-14 (7th Cir.1997) (affirming district court's decision to sanction party where counsel agreed to produce evidence, but failed to actually produce it); see also In re Bristol-Myers Squibb Sec. Litig., 205 F.R.D. 437, 444 (D.N.J.2002) (enforcing discovery agreement and stating that “[i]t is essential to our system of justice that lawyers and litigants, above all, abide by their agreements and live up to their own expectations.”)”


Usage Log Preservation

In yet another significant footnote, the Court states that the preservation of usage logs is no stranger to copyright infringement suits. Note the reference to the Bunnell case:

FN36. Courts have recognized the relevance of user log data and infringing digital files in copyright infringement actions, and they have ordered litigants to preserve and produce such data. See Viacom Int'l v. YouTube Inc., 253 F.R.D. 256, 261-62 (S.D.N.Y.2008) (compelling production of user log data and alleged infringing video files in copyright infringement action); see also Columbia Pictures, Inc. v. Bunnell, No. 06 Civ. 1093(FMC)(JCX), 2007 WL 2080419, at *13 (C.D.Cal. May 29, 2007) (requiring production of server log data stored in RAM, and denying sanctions for spoliation, in part, because data was not specifically requested); Twentieth Century Fox Film Corp. v. iCraveTV, No. Civ. A. 00-120 & 00-121, 2000 WL 255989, at *6 (W.D.Pa. Feb. 8, 2000) (relying on log data to demonstrate that users accessed video stream of copyrighted works).


Culpability

This may stand for the proposition that it is unwise to proclaim a lack of decisional authority in connection with an issue to be decided pursuant to a Court’s “inherent powers”:

Defendants’ contention:

“Defendants also argue that “there is no authority to support the culpability of a party in a situation where the alleged despoiled data is of a transitory nature and where no mechanism exists for saving or backing up the massive amount of data and information that is flowing through the server at any given moment.” ( See Def. Opp. Mem. at 15-16.) Defendants contend that they do not have back-up tapes, a back-up mechanism like those present for e-mail servers, or hard copies of the relevant data. (See Reynolds Decl. ¶ 14.) In short, Defendants claim that their actions cannot even be considered negligent since they “cannot reasonably compile the requested information.” (Def. Opp. Mem. at 16.)”

The Court was having none of it:

“The Court cannot accept this position when Defendants concede in their submissions that they later produced Usage Data and Digital Music Files to Plaintiffs. ( See id. at 11; see also Fabrizio Decl. Ex. 7 (“Reynolds Dep. Aug. 13, 2008”) 112:14-112:18 (admitting that Defendants are able to produce log data from “front end” servers without adverse impacts on the functionality of the servers).)”

Surprisingly enough Defendants’ backup claims relied on analogy to the safe harbor provisions of Fed. R. Civ. P. Rule 37(e). Again, the Court turned a deaf ear:

“Defendants further argue that the Digital Music Files expired off their server in the normal course of business, and, therefore, the evidence was not destroyed with a culpable state of mind. Defendant Reynolds testified that no commands that he knew of would change the expiration rate of the Files. ( See Declaration of Charles S. Baker in Support of Defendant's Response in Opposition to Plaintiff's Motion for Sanctions, dated Sept. 29, 2008 (“Baker Decl .”) Ex. 5 (“Reynolds Dep.”) at 89:11-89:25.) The Court disagrees. The evidence submitted by Plaintiffs' expert demonstrates that Defendants took affirmative steps to both change the retention time of the data, and to permanently delete it.FN40”


Additional evidence of culpability


“The analysis of raw data produced from Defendants' spool 2 server establishes that Defendants engaged in a calculated reconfiguration of their servers, which caused the Digital Music Files to expire in an expedited manner.“

“Plaintiffs' analysis establishes that the Digital Music Files expired off the system almost immediately because Defendants took affirmative steps to delete them.”

“A status report for spool 2 from March 10, at 10:16 p.m., shows that spool 2 was storing only about 2 million articles-meaning that almost all of the Digital Music Files had been deleted in approximately 17 hours.FN41 (See Supp. Horowitz Reply Decl. ¶ 13 & Ex. 3.) A status report on March 12, at 2:22 a.m. shows 0% of the storage space being used by mp3 or Music-related articles-indicating that the remaining Digital Music Files had been deleted. ( See id. ¶ 13 & Ex. 3.) After deleting the Digital Music Files, Defendants reconfigured the spool 2 server in order to make sure the deleted files would be written-over and thus irretrievable."

“In addition, Defendants manipulated the Music Group retention times [post-notice to preserve] so that they were reduced to just a few days.” (Bracketed comments added)

“Finally, Defendants have destroyed highly incriminating promotional materials that were previously available on the Usenet.com website. For example, all references to “Music” and “mp3s” were deleted from a promotional webpage on Defendants' website, sometime after March 13, 2008. Defendants destroyed all copies of this webpage, and only produced the sanitized version of it to Plaintiffs during discovery.”


The Court continues:


“The data produced to Plaintiffs post-March 8, however, is not comparable to the data destroyed as a result of Defendants' decision to disable the Music-related Groups, and provides a distorted picture of the activity occurring on Defendants' system.”

This reasoning is emblematic of Defendants’ activities for which the Court ruled that had acted in bad faith:

“It is clear that, Defendants took affirmative steps to disable the Music Groups; they then changed their server configuration, which caused the Digital Music Files to expire at a faster pace, and, ultimately, failed to preserve the requested Usage Data and Digital Music Files. Moreover, defendants' production of the post-March 8 data does not serve to cure their discovery abuses because it is not substantially equivalent to the destroyed data. Finally, Defendant Reynolds has provided, at best, misleading information to this Court concerning Defendants' webpages.”

“The Court, therefore, finds that Defendants' failure to preserve the requested discovery material was in bad faith.”


Relevance

Judge Katz then finds that the “despoiled” evidence was relevant. The following analysis of 2d Circuit (and District Court) decisional authority is instructive:

“The Court must next determine whether the despoiled evidence was “‘relevant’ to the party's claim or defense such that a reasonable trier of fact would find that it would support that claim or defense .” Residential Funding, 306 F.3d at 107; accord Zubulake, 220 F.R.D. at 221. The Second Circuit has explained:

"[R]elevant in this context means something more than sufficiently probative to satisfy Rule 401 of the Federal Rules of Evidence. Rather, the party seeking an adverse inference must adduce sufficient evidence from which a reasonable trier of fact could infer that the destroyed [or unavailable] evidence would have been of the nature alleged by the party affected by its destruction. Courts must take care not to hold[ ] the prejudiced party to too strict a standard of proof regarding the likely contents of the destroyed [or unavailable] evidence, because doing so would subvert the ... purposes of the adverse inference, and would allow parties who have ... destroyed evidence to profit from that destruction. Residential Funding, 306 F.3d at 108-09 (quoting Kronisch, 150 F.3d at 127-28 and Byrnie, 243 F.3d at 110) (internal quotation marks omitted).””


The Court follows in lockstep with 2d Circuit precedent and notes that a finding of bad faith can (and in this case does) create an inference of relevance:

“When evidence is destroyed in bad faith, that alone is sufficient to support an inference that the missing evidence would have been favorable to the party seeking sanctions, and thus relevant. See Residential Funding, 306 F.3d at 109; see also M & T Mortgage Corp. v. Miller, No. 02 Civ. 5410, 2007 WL 2403565, at *10-11 (E.D .N.Y. Aug. 17, 2007) (finding that the “missing documents [were] clearly critical to plaintiff's claims,” and imposing sanctions for spoliation because “defendants acted in bad faith in destroying the documents.” “[S]uch improper conduct alone is sufficient to support a finding that the documents were unfavorable to” defendants). By contrast, when the destruction of evidence is negligent, relevance must be proven through extrinsic evidence by the party seeking sanctions. De Espana, 2007 WL 1686327, at *6. “This corroboration requirement is ... necessary where the destruction was merely negligent, since in those cases it cannot be inferred from the conduct of the spoliator that the evidence would even have been harmful.” Zubulake, 220 F.R.D. at 221 (quoting Turner, 142 F.R.D. at 77.) However, “a showing of gross negligence in the destruction or untimely production of evidence” will support an inference that the evidence would have been unfavorable to the spoliator. Residential Funding, 306 F.3d at 109."


The Penultimate Hammer Blow

“The circumstances here warrant a finding that Defendants' destruction of evidence was in bad faith, or, at a minimum, grossly negligent; however, even assuming this was not the case, Plaintiffs present sufficient extrinsic evidence to confirm the relevance of the spoliated evidence.”


The Court’s Ruling:

Adverse inference instruction and award of attorneys fees and costs.


“Although the spoliated evidence would have assisted Plaintiffs in quantifying the amount of infringing activity occurring through the use of Defendants' service, allowing the adverse inference that the spoliated evidence would have been unfavorable to Defendants, with respect to the contentions Plaintiffs seek to advance, should serve the remedial function of restoring Plaintiffs to the same position they would have been in absent the wrongful destruction of evidence by Defendants. See Kronisch, 150 F.3d at 126.”

“As a consequence of Defendants' actions, Plaintiffs have been forced to expend substantial resources investigating and analyzing Defendants' misconduct. ( See Servodidio Decl. ¶ 31.) The Court finds, therefore, that Plaintiffs are entitled to an award of attorneys' fees and costs incurred in connection with determining that there had been a spoliation of evidence, as well as in connection with this motion. Attorneys' fees and costs “may be appropriate to punish the offending party for its actions or to deter [the] litigant's conduct, sending the message that egregious conduct will not be tolerated ... [S]uch an award serves the remedial purpose of making the opposing party whole for costs incurred as a result of the spoliator's wrongful conduct.” Chan v. Triple & Palace, Inc., 03 Civ. 6048(GEL)(JCF), 2005 WL 1925579, at *10 (S.D.N.Y. Aug. 11, 2005) (internal quotation marks and citations omitted); see also Phoenix Four, Inc. v. Strategic Res. Corp., 05 Civ. 4837(HB), 2006 WL 1409413, at *9 (S.D.N.Y. May 23, 2006) (while denying evidentiary sanctions, ordering the award of attorneys' fees and costs); Pastorello v. City of New York, 95 Civ. 470(CSH), 2003 WL 1740606, at *13 (S.D.N.Y. Apr. 1, 2003) (awarding costs, as well as permitting an adverse inference instruction); Turner, 142 F.R.D. at 78 (awarding attorneys' fees since defendant's spoliation caused “plaintiff to expend time and effort in attempting to track down the relevant information. It then caused the expenditure of additional resources by misleading the plaintiff and the Court ...”).”



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Case: Rein v. United States Patent & Trademark Office
Citation: --- F. 3d. --- 2009, WL 188993 (4th Cir. 2009)
Date: 2009-01-28
Topics: eDiscovery and FOIA requests, FIOA Vaughn index requirements, Vaughn index requirements comparison with privilege log requirements, specificity and particularity requirements in 4th and District of Columbia Circuits for both Vaughn indexes and privilege logs

This case involves an action against the U.S. Patent Office in connection with re-examination of NTP’s patents at issue in the ongoing litigation between RIM and NTP. A FOIA request for documents in connection with the U.S.P.T.O.s re-examination. Someone (the Court appears to take pains not to identify which party below was the appellant requestor) and was dissatisfied, with the FOIA production made by the Patent Office. The District Court affirmed the sufficiency of the Patent Office’s search, production and withholding of documents pursuant to the exemption provided by FOIA. A central issue was whether the “Vaughn Index” (described below) provided by the Patent Office satisfied the particularity and specificity requirements required by both FOIA and decisional authority. The 4th Circuit Court of Appeals reversed in part, holding that the “Vaughn Index” provided by the Patent Office did not meet the “specificity” and “particularity” requirements required, thereby preventing the District Judge from making a reasoned decision as to whether the information (note I did not say “documents”) to which the asserted Section 5 Exemption as well as attorney-client and deliberative process privilege, were justified:


“We reverse the district court's grant of summary judgment with regard to the documents R & HW challenged based on Vaughn index descriptions that do not include author, recipient, or necessary factual descriptive information."


FOIA Requests and eDiscovery

First, it is still unclear whether the Fed. R. Civ. P.’s eDiscovery rules will be applied to FOIA requests. Here, the 4th Circuit appears to be leaning away from application, relying on the Supreme Court’s decision in Mead Data Central, Inc. v. U.S. Dep't of the Air Force, 566 F.2d 242 (D.C.
Cir. 1977):

“FN25. ‘Although Congress clearly intended to refer the courts to discovery principles for the resolution of [Exemption 5] disputes, the situations are not identical, and the Supreme Court has recognized that discovery rules should be applied to FOIA cases only ‘by way of rough analogies.’ “ Mead Data Cent., Inc., 566 F.2d at 252.”

That said, the identical logical argument could be made in favor of applying eDiscovery principles to FOIA proceedings.


FOIA “Vaughn Indexes” and §5 Exemptiona, Attorney-Client and Deliberative Process Privileges

A Vaughn index was provided in the Rein case. The production of a Vaughn Index is the required alternative production where an agency chooses to withhold document:

“…the Agencies elected to provide a Vaughn index in lieu of producing withheld documents for in camera review by the district court. See Vaughn, 484 F.2d at 827. To substitute for in camera review, a Vaughn index must describe the withheld material with “reasonable specificity” so that the reviewing court can determine whether the exemption from disclosure applies. Ethyl Corp., 25 F.3d at 1249-50; see also Miscavige v. Internal Revenue Serv., 2 F.3d 366, 367-68 (11th Cir.1993).”

The Court then describes a Vaughn Index:

“A Vaughn index is a list describing the documents an agency withholds. The list must include sufficiently detailed information to enable a district court to rule whether the document falls within a FOIA exemption. The Vaughn index received its name from the decision in which the use of such an index was first discussed, Vaughn v. Rosen, 484 F.2d 820 (D.C.Cir.1973).”

Imo, the contents of Vaughn index may be seen to be analogous to those of a privilege log required by Fed. R. Civ. P. 26(b)5 in non-FOIA cases:

“…the Agencies submitted a Vaughn index FN6 identifying the documents withheld, in whole or in part, based on the claim that the documents were exempt from the FOIA's disclosure requirements. The Vaughn index lists each document by number, and contains columns for reporting the document type (e.g ., e-mail; report), date, employees (authors and recipients), document description/subject, number of pages, whether the document was withheld in whole or in part, the exemption claimed, and any other descriptive remarks.”


FOIA Section 5 Exemptions, Deliberative Process and Attorney Client Privilege

Both agency-specific deliberative process as well as garden variety attorney-client privilege issues are subsumed within a FOIA statutory exemptions analysis In FOIA cases, an agency seeking to withhold a documents under a Section 5 privilege assertion must provide information justifying the assertion of either privilege in its Vaughn index” which is then used by a Court to determine if an exemption (justifying the withholding of information) applies. The Rein court provides a good analysis of the process:

“Exemption 5 [of FOIA] permits an agency to withhold “inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency.” Id. It encompasses, inter alia, the deliberative process and attorney-client privileges.FN18 The government bears the burden of demonstrating that a requested document falls under the exemption. 5 U.S.C. § 552(a)(4)(B).

FN17. FOIA specifies nine exemptions from its general disclosure provisions. § 552(b). The only provision of that statute before us in this appeal is (b)(5). All of the § 552(b) exemptions are designed to safeguard public interests against the harms that could arise from overly broad disclosure. FOIA exemptions are, however, narrowly construed to favor the Act's presumption of disclosure. Bowers v. U.S. Dep't of Justice, 930 F.2d 350, 354 (4th Cir.1991). FN18. See infra section III.B.2.“

The burden placed on the agency seeking to withhold documents is relatively heavy:

“These principles led the Court in Ethyl Corporation to find the Vaughn index provided in that case to be insufficient because entries “articulate[d] the Exemption 5 privilege in general terms, using FOIA language, and couple[d] the statement of privilege for each document with a general description of the document.” Id. at 1249. Similarly, the Court of Appeals for the District of Columbia Circuit has observed:

“[C]onclusory assertions of privilege will not suffice to carry the Government's burden of proof in defending FOIA cases. A typical line from the index supplied in this case identifies who wrote the memorandum, to whom it was addressed, its date, and a brief description of the memorandum such as “Advice on audit of reseller whether product costs can include imported freight charges, discounts, or rental fees. Sections 212.93 and 212.92.” ... That is all we are told, save for the affidavits submitted by the regional counsel which repeat in conclusory terms that all the documents withheld fall within one or another of the exemptions.”

“Such an index is patently inadequate to permit a court to decide whether the exemption was properly claimed.... Contrast the index submitted by the agency and described in Mead Data Central, Inc. v. U.S. Dep't of the Air Force, 566 F.2d 242 ( [D.C. Cir.] 1977), which clearly describes the characteristics of the documents which the agency felt brought them within the exemption claimed, and which was still inadequate to permit the court to determine whether all elements of the privileges were present in each document. Coastal States Gas Corp. v. Dep't of Energy, 617 F.2d 854, 861 (D.C.Cir.1980); see also City of Virginia Beach, Va. v. U.S. Dep't of Commerce, 995 F.2d 1247, 1253-54 (4th Cir.1993) (“the burden is on the agency to correlate, with reasonable specificity, materials within a document with applicable exemptions”); Mead Data Cent., Inc., 566 F.2d at 251 (“[W]hen an agency seeks to withhold information[,] it must provide a relatively detailed justification, specifically identifying the reasons why a particular exemption is relevant and correlating those claims with the particular part of a withheld document to which they apply.”).”

The Rein court finds that the Vaughn index produced was inadequate, providing insufficient information for the District Court to determine the applicability of FOIA’s Section 5 Exemption justifying the withholding of
information:

“R & HW claim the district court erred in finding the Vaughn index entries were sufficient for “at least 334 documents” that do not identify their author, recipient, date of origin, or source. We have reviewed both the Vaughn index and Fawcett's declarations regarding the compilation of materials on the index. Almost all of the documents cited by R & HW state “n/a” in the index column devoted to identifying the “employees” authoring or receiving the listed document.FN20 We agree with R & HW that the Vaughn index documents that fail to include information about their author and recipient, or which fail to provide an explanation that adequately substitutes for this information, do not contain adequate information for the district court to have determined whether they were properly withheld.”

Notably, the Court indicated that the failure to include a document’s date did not render a Vaughn index entry automatically inadequate, although “in many situations the date of a document may be a critical factor” In an interesting twist, the Court also notes that the date of a document may play a supporting role in determining a chronology to demonstrate whether a document in question is pre-decisional (and thereby satisfying an element necessary for a successful assertion of the deliberative process privilege).

The Court also notes that an agency may means other than the date of a document to show deliberative process.

The foregoing excerpt may provide the basis for a comparison between a court’s requirement to scrutinize a Vaughn index in connection with a Section 5 FOIA Exemption assertion with that of a court’s privilege log analysis conducted in connection with non-FOIA civil actions:


Circling the Metadata of Privileged Documents Issue

If a privilege log in a non-FOIA case must meet the “particularity and specificity” tests, then a cogent argument may be made to the effect that the metadata of a document (or, information, record or other ESI, if the request is properly worded) in connection with which a privilege is asserted is not privileged, because it is the metadata (and not a party’s interpretation thereof) that provides the Court with the necessary and sufficient information to render a decision as to the applicability of the privilege asserted.

The information the Rein court rules must be disclosed is metadata, or information about information:

“R & HW further assert the Agencies improperly redacted the subject lines of e-mails, file names to documents attached to e-mails, patent claim reference numbers, meeting agenda topics, and other identifying “factual” information that was not subject to the deliberative process privilege. Given the FOIA's strong preference for disclosure, factual information that does not compromise the exempt portions of the documents should be disclosed. [Envtl. Prot. Agency v. Mink, 410 U.S. 73 (1973) at 91.”

The foregoing excerpts provide some ammunition for the argument that native metadata for a privileged document is discoverable. It is also notable that the 4th Circuit in Rein relies on the D.C. Circuit’s seminal decision in Mead Data Central, Inc. v. U.S. Dep't of the Air Force, 566 F.2d 242 (D.C. Cir. 1977) in acknowledging both the distinction between “documents” from “information” and the implied acknowledgement that the latter encompasses the former:

“Because the FOIA focuses on information rather than documents, “[a]ny reasonably segregable portion of a record shall be provided to any person requesting such record after deletion of the portions which are exempt ...." § 552(b) (emphasis added)


Takeaway: If a properly phrased ESI production request asks for “information” and not documents per se, a requesting party might rely on this decision to demand native format metadata of privileged information Why? The real information giving the context in connection with which a privilege is asserted lies in the native format data, the metadata, and not in a second or third order “view of a view of a view” of what an attorney wishes to interpret as context information. Assertions of “deliberative process” “work product” or “attorney client” privilege to metadata may well fail, because metadata is (almost always) context, and not content information. Accordingly, the argument the Rein decision supports the position that any assertion of privilege first requires a showing, by way of a privilege log, “specificity” and “itemization” sufficient for a Court to make a proper analysis and decision. The argument here is that the “specificity” and “itemization” requirements in turn necessitate that the production native format metadata of privileged document.

SWT