Saturday, March 14, 2009

2009-03-14 [Another] Spoliation Decision, Non-Party eDiscovery, and a Database Discourse

A trio of decisions this week, and yes; another week, another spoliation decision (this from the Eastern District of New York). A second case from the Eastern District of Louisiana involves a motion to compel non-party eDiscovery, and a third addresses the issues of a database as... a business record.


Case: ACORN, et al., v County of Nassau
Citation: 2009 WL 605589 (EDNY 2009)
Date: 2009-03-09
Topics: Spoliation, Second Circuit spoliation standards, duty to preserve; failure to implement litigation hold, gross negligence, failure to search for electronic documents, counsel's requirement to manage discovery, "manual" search of electronic files, imposition of attorneys fees and costs.

In this decision from the Eastern District of New York, U.S Magistrate Judge Wall rules on a letter application seeking sanctions (including adverse inference, striking of pleadings, costs and (I like this) any other sanctions against defendant Nassau County. A quick aside: By operation of local rules, some District Courts (including the Eastern District of New York) require that prior to filing a motion for discovery sanctions pursuant to Fed. R. Civ. P. Rule 37, that the movant instead write a letter to the Court seeking permission to file same. What has evolved is actually an efficient truncation of the rather laborious steps needed to draft a formal motion to compel or for sanctions. The Courts have been treating these letters as motions for virtually identical (with Rule 37) or inherent powers-based relief. Ok, back to the decision...

The plaintiff's claims for sanctions were based on defendant's failure to implement a litigation hold, to suspend routine document destruction, and to conduct a search of electronic documents for potentially responsive material. The documents in question were missing emails.

The following excerpt will help give a sense of the tenor of the Court's view of defendant's evidence (mis)management:

"No matter how it is dressed up or characterized-as confusion or inconvenience or indifference or incompetence-the County's position is that it had no obligation to preserve discoverable materials until after the motion to dismiss was decided. This position is indefensible and is in direct contradiction with clearly established law. The court finds that from June 2005 until September 2006, the County breached its duty to preserve."

Spoliation and Failure to Implement Litigation Hold

The following excerpts illustrate that spoliation analysis in the Eastern (and Southern) District of New York follows precedent virtually graven-in-stone:

West v Goodyear - Spoliation in the Second Circuit:

"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 and Rubber Co., 167 F. 3d 776, 779 (2d Cir. 1999)

Zubulake V - Spoliation Inferences:

"If evidence is relevant to a party's claim, its spoliation can "support an inference that the evidence would have been unfavorable to the party responsible for its destruction." Zubulake v. UBS Warburg LLC (“Zubulake V), 229 F.R.D. 422, 430 (S.D.N.Y.2004) (quoting Kronisch v. United States, 150 F.3d 112, 126 (2d Cir.1998))"

Zubulake V - Adverse Inferences Requirements:

"A party seeking an adverse inference instruction (or other sanctions) based on the spoliation of evidence must establish the following three elements: (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a ‘culpable state of mind’ and (3) that the destroyed evidence was ‘relevant’ to the party's claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.” Zubulake V, 229 F.R.D. at 430. The court will address those elements in turn."

Zubulake IV - Duty to Preserve Evidence

"The duty to preserve evidence “arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.”Zubulake v. UBS Warburg LLC (“Zubulake IV”), 220 F.R.D. 212, 216 (S.D.N.Y.2003) (quoting Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423, 436 (2d Cir.2001). Once the duty to preserve arises, a litigant is expected, at the very least, to “suspend its routine document and retention/destruction policy and to put in place a litigation hold.” Zubulake IV, 220 .R.D. at 218."

Duty to Preserve is Affirmative

Magistrate Judge Wall also relies upon a recent District Court of Connecticut decision in pointing out the "a party needs to take affirmative acts to prevent its system from routinely destroying information" (Doe v. Norwalk Cmty Coll., 2007 U.S. Dist LEXIS 51084 (D. Conn. 2007).


Having been served with the complaint, the defendant County Attorney allegedly sent the complaint to the appropriate Nassau County government offices, and [in 2005] "gave them a verbal hold." The County argued that it was "difficult to pinpoint who the individuals were at the inception of the complaint...who were responsible for what actions" and the County "couldn't just put a blanket hold throughout the County."

Despite (or perhaps on account of) a stay of discovery granted in this matter, the Court found that "there is no indication that Nassau County took any steps whatever to prevent the routine destruction of documents prior to [the implementation off a formal litigation hold in] September 2006.

"Further, the County apparently did not take any action regarding the location, protection, or restoration of electronic materials until December 22, 2006, five months after the motion to dismiss had been decided, and over a year and a half after the complaint was served.

The Court found defendant Nassau County's preservation efforts more than a bit unacceptable...see the opening excerpt that begins with "No matter how it is dressed up..." The result: A finding that defendant breached its duty to preserve.

Zubulake V and Residential Funding - Spoliation, Culpable State of Mind, and Ordinary Negligence

The Court undertakes the (by now) well recognized standard for a finding of spoliation in the Second Circuit. A party seeking spoliation sanctions must show that the spoliator had a culpable state of mind (citing Zubulake V), and that

"[I]n this circuit, this prong of the spoliation test can be 'satisfied by showing that evidence was knowingly...or negligently' destroyed. Residential Funding v DeGeorge Fin. Corp., 306 F. 3d 99 108 (2d Cir. 2002)."

Failure to Implement Litigation Hold at Outset of Litigation Supports a Finding of Gross Negligence

The Court finds no difficulty in escalating the behavior of defendant past an ordinary negligence threshold. The Court states that well settled case law finds that a "failure to implement a litigation hold at the outset of litigation amounts to "gross negligence. * 7 (S.D.N.Y. Aug.11, 2005); Zubulake IV, 220 F.R.D. at 221."

Counsel's Requirement to Oversee Discovery Compliance

In fact, once a litigation hold is implemented, counsel is required to oversee compliance with the litigation hold and to monitor the party's efforts to retain and produce relevant documents. Zubulake V, 229 F.R.D. at 432." Again, the Court noted defendant Nassau County's counsel failure-set: Verbal hold only, no formal hold, no supporting affidavits, and no follow up. No finding of ordinary negligence here:

"Nassau County admits there was no “formal” hold, but claims that a “verbal” hold was communicated to the agencies associated with the complaint by Ms. Miller. The County did not submit an affidavit from Ms. Miller, and there is nothing in the record to indicate exactly who received this direction or when it was received. Significantly, there is no indication that Ms. Miller or anyone else in the County Attorney's Office followed up to ensure that relevant documents were being retained. The court finds the County's failure to implement a proper litigation hold amounts to gross negligence."

The Court divided its [post-duty to preserve finding] negligence analysis into two parts. Magistrate Judge Wall first found that the County's actions (or, as the Court notes, "inactions") concerning a litigation hold amounted to "gross negligence," and that the County's conduct "regarding the preservation of electronic evidence was, at the very least, negligent."

The second Zubulake V/West requirement of culpability [the first is the duty to preserve] was therefore met.

Relevance - Where Culpability Does Double Duty

The Court first discusses relevance, which comprises the third prong of a West/Zubulake V spoliation analysis:

"To satisfy the third prong of the spoliation claim, the plaintiffs must establish that the missing e-mails were relevant evidence, and that the destroyed evidence would have been favorable to them. Residential Funding Corp., 306 F.3d at 109 (citing Kronisch, 150 F.3d at 126); see also Zubulake V, 229 F.R.D. at 430. In this context, the term “relevance” “means something more than sufficiently probative to satisfy Rule 401 of the Federal Rules of Evidence.” Residential Funding Corp., 306 F.3d at 108-09."

Here's where relevance analysis becomes somewhat, er, um, recursive. Or, as it appears, the concept of culpability serves two purposes; the first being a standalone requirement for a finding of spoliation, and the second is to offer an alternative method for a inferential finding of relevance. The Court points out that "relevance may be demonstrated in two ways."

"First, it may be inferred if the spoliator is shown to have a sufficiently culpable state of mind. Triple 8 Palace, 2005 WL 1925579, at * 8."

The second way to establish relevance: extrinsic evidence to prove the negative:

"The second way to establish relevance is for the moving party to submit “extrinsic evidence tending to demonstrate that the missing evidence would have been favorable to it.” Triple 8 Palace, 2005 WL 1925579, at * 8 (citation omitted). In order to obtain an adverse inference, the destroyed evidence must “have been of the nature alleged by the party affected by the destruction.”Id.

"In other words, the plaintiffs here must present extrinsic evidence tending to show that the destroyed e-mails would have been favorable to their case. Zubulake IV, 220 F.R.D. at 221"

Insufficient Showing that Deleted Electronic Data Would Have Been Favorable to Plaintiff

The Court finds here that there was insufficient extrinsic evidence in the record to conclude that the existence of additionally relevant emails would have been more favorable to plaintiffs:

"While it is certainly theoretically possible that some electronic data may have been deleted, there is no reason to believe that those materials would have provided any additional support for plaintiffs' claims. The court finds that the plaintiffs have not sufficiently demonstrated that any destroyed or lost materials would have been favorable to them, and thus, to the extent plaintiffs' motion seeks an adverse inference instruction, it is denied."

Blognote and opinion: Neither the opinion, nor those portions of the record disclosed therein discuss what forensic activity was undertaken by Plaintiff, and I suspect that very little, or none was. No mention is made of any discovery preservation protocol agreed upon by the parties, nor does it appear that any attempt to request a forensic examination of the relevant computers or other storage devices was discussed or requested by plaintiffs.

Blognote: There really are three ways to show relevance: The Court notes in dicta that the Plaintiff did not argue that relevance was shown as a matter of law due to Nassau County's gross negligence, and apparently leaves the door open such assertions to be made:

"Plaintiffs do not argue that relevance has been shown as a matter of law due to Nassau County's gross negligence in failing to institute a litigation hold. While a showing of gross negligence may, in some circumstances, support a claim that missing evidence was relevant to the movant's case, the circumstances in this case do not require such a determination. Cf. Residential Funding Corp., 306 F.3d at 109 (citing Reilly v. Natwest Markets Group, Inc., 181 F.3d 253, 267-68 (2d Cir.1999)); Cine Forty-Second St. Theatre Corp. v. Allied Artists Pictures Corp., 602 F.2d 1062, 1068 (2d Cir.1979)."

Nevertheless, in rides gross negligence to the rescue (of plaintiff's claims for sanctions) resulting in an imposition of attorneys fees and costs:

Given the court's finding regarding the County's grossly negligent conduct in failing to implement a litigation hold, some sanction against the County is warranted...An award of costs serves both a remedial and punitive purpose-it will compensate plaintiffs for having to make this motion, and it will discourage the County from repeating its cavalier decision to forego implementing a litigation hold while a motion to dismiss is pending."

Result: No spoliation, but award of attorneys fees and costs.

Manual ESI Search

In an odd twist of logic, the Court accepts the County's representations that it has no capability to (I guess electronically) search ESI (i.e., emails or MS Office Documents) and allows for the adequacy of a "manual" search of emails and other electronic documents.

"Plaintiffs have not provided any case law suggesting that a “manual” search of electronic files does not satisfy a party's discovery obligations."


Case: Hoover v Florida Hydro, Inc.
Citation: 2009 WL 586507 (E.D. La. 2009)
Date: 2009-03-06
Topics: Motion to compel ESI discovery from non-party

In this decision from the Eastern District of Louisiana, a non-party was served with two subpoenas, both of which directed her to produce her laptop and flash drive computer. The non-party made appropriate objections to that request in the first, but not in response to the second, subpoena. The first subpoena was held invalid. U.S. Magistrate Judge Roby found that while the non-party did indeed object to the first subpoena, that objection was predicated on her production of information in document form.

The Court wasn't in a buying frame of mind, and found the basis for the objection unavailing:

The Court further notes that, while Ms. Hoover contends that she objected to the first subpoena, the objection was based upon the fact that she produced the information in document form. The discovery rules, however, contemplate the production of edata, which she has refused to produce. Mary Catherine Hoover is therefore required to produce her computer for inspection at a mutually agreeable date and time, as determined by counsel for the parties."

Note the use of the term “edata.”

Case: McClendon et al., v. Challenge Financial Investors Corp., et al.
Citation: 2009 WL 589245
Date: 2009-03-09
Topics: Fed. R. Evid. Rule 803(6), database as business record, statistical run as business record, database reliability established by pattern of human activity associated with database operation.

In this class action matter from the U.S. District Court for the District of Ohio, U.S. District Judge O'Malley approves a Report and Recommendation of the Magistrate Judge. In so doing, Judge O'Malley notes that a "computer database is a record when the data was entered into the computer in the regular course of business. See United States v. Weinstock, 153 F. 3d 272, 276 (6th Cir. 1998).

Likewise, a "'statistical run' from a computer data base is a 'business record' pursuant to Rule 803(6)" [Internal citations omitted]

What is interesting about this decision is that the Court makes a finding of reliability (the third requirement of Fed. R. Evid. Rule 803(6) satisfying the third requirement of the business records exception to the hearsay rule because the database administrator stated in testimony that "[i]t was Challenge's regular practice to maintain and update the database."

The Court then goes on to say the "regularly prepared records are particularly reliable because the person creating the record has a strong incentive to be accurate. [Citation omitted]."
I think the Court's approach is somewhat simplistic. First, it is the computer, and not the person, who creates the record. The computer has no incentive to be accurate, because the computer doesn't know if it is accurate or not. (A computer with incentive would qualify as a Turing machine). In like fashion, a computer might regularly, routinely, and in perfectly operational fashion produce garbage data. It may be that plaintiff's counsel might have sought the benefit of an expert witness to explain why routine and regular activity by a computer might not necessarily impute reliability.

What appears to have swayed the judge was defendant's witness, who "consolidated defendant's financial statement" and who testified that:

Defendant's "accountants regularly updated the Challenge database in connection with mortgage loans and downloaded financial information directly from banks. As this information was clearly critical to Challenge's core business-loan servicing -the accountants had every reason to be accurate and regularly maintain and update the Challenge database."

An aside: The challenge to the database information as a business record was asserted by plaintiffs (in an unsuccessful attempt) to defeat a CAFA jurisdictional assertion resulting in the removal of the action from state to federal court.

Another aside: Challenge, according to the Court, is "now defunct." It would be somewhat ironic if Challenge's defunct status was somehow related to the reliability of the information contained in the database....


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