2009-04-03 Springing into Spoliation

Four decisions this week --- all addressing spoliation in one form or another. The first decision is from Magistrate Judge Facciola, who addresses new Fed. R. Evid. Rule 502, privilege log statistical sampling, and the limits to discovery in a spoliation proceeding. The second decision finds the Sixth Circuit in an en banc reversal of its prior state-law centric spoliation standards stance. The third decision is from the Second Circuit, reminding us of the high bar for reversal of lower court (or magistrate judge) spoliation sanctions rulings. The fourth decision comes from the U.S. District Court for the District of Colorado. In this spoliation decision, the Court finds the record supports the imposition of an adverse inference sanction, together with attorneys fees and costs in connection with what appears to be ESI spoliation arising from (1) outright data destruction as well as from (2) post-duty-to-preserve use of digital anti-forensics tools.

Decisions:

D'Onofrio v. SFX Sports Group, Inc., --- F.R.D. ----, 2009 WL 859293 (D.D.C. 2009)
Smith v. Slifer Smith & Frampton/Vail Associates Real Estate, LLC, 2009 WL 482603 (D.Colo. 2009)
Farella v. City of New York, 2009 WL 833351 (2d Cir.2009)
Bolger v. District of Columbia, --- F.Supp.2d ----, 2009 WL 841137 (D.D.C. 2009)

SWT


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Case: D'Onofrio v. SFX Sports Group, Inc.
Citation: --- F.R.D. ----, 2009 WL 859293 (D.D.C. 2009)
Date: 2009-04-01
Topics: Fed.R. Evid. Rule 502, privilege logs, statistical sampling of privilege log

This is the latest installment of a discovery matter pending before Magistrate Judge Facciola of the District Court of the District of Columbia, and follows the abject failure of court-ordered inter-party cooperation in crafting an ESI search protocol (the Court describes these efforts as “fruitless”) in which the Court (and, imo, probably not without some small amount of exasperation) outlined its own search protocol

The defendants provided what must set a recent record for privilege log size and number of documents to which was asserted some claim of attorney client privilege, work product privilege, proprietary or private information:

“On March 5, 2009, defendants filed their privilege log, which is 568 pages long and contains 9,413 entries that variously assert attorney-client or work-product privileges, or seek to withhold documents on the grounds that they contain proprietary or private information. The parties have informed me that the searches yielded hundreds of thousands of documents.”

Now facing the Court were issues relating to new Federal Rule of Evidence 502 waiver provisions:

"I convened a hearing on March 10, 2009 to discuss how to proceed efficiently and whether the parties might be aided by the new Federal Rule of Evidence 502(d)-(e).FN1 See Whitaker Chalk Swindle & Sawyer, LLP v. Dart Oil & Gas Corp., No. 08-CV-468, 2009 WL 464898, at *4-5 (N.D.Tex. Feb. 23, 2009) (recognizing that amended Fed.R.Evid. 502 permits court or parties to fashion a protective order that will permit the parties to go forward with discovery without waiving privilege)."
The pertinent provisions of Fed. R. Evid. Rule 502:

“The following provisions apply, in the circumstances set out, to disclosure of a communication or information covered by the attorney-client privilege or work-product protection.

“(d) Controlling effect of a court order.--A Federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court--in which event the disclosure is also not a waiver in any other Federal or State proceeding.

(e) Controlling effect of a party agreement.--An agreement on the effect of disclosure in a Federal proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.”

Sampling of Privilege Log

Defendants in this case also offered to conduct a sampling of the privilege log (I think one of the first mentioned):

“Defendants also agreed at the hearing to permit plaintiff to test the validity of the privilege log using statistical sampling. Defendants offered to allow plaintiff's expert to select a representative sample, that would be made available to plaintiff's counsel for his review to determine whether the privileges asserted were in fact appropriate. Defendants' offer is conditioned on three criteria with which plaintiff takes issue: (1) the documents be designated “attorneys' eyes only,” (2) the sample exclude documents that were created on or after March 17, 2006, and (3) plaintiff's expert tell defendants what method he uses to generate the statistical sample prior to doing so.”

Attorneys’ Eyes Only

Magistrate Judge Facciola first notes agrees with defendants’ argument that only plaintiff’s counsel should be permitted “to see the attorney notes or the documents that [were] turned over to counsel as part of the statistical sample.” In essence, the Court agrees that the assistance of a client is not necessary to make that legal determination.

From a practical perspective, permitting a plaintiff (rather than counsel only) access to such documents could not undo any prejudice that might be cause by having access to documents to which some privilege or other assertion might properly be asserted:

“Unringing the Bell”

“Further, while I believe that plaintiff, were she given access to these documents, would take all appropriate steps to put anything she learns out of her mind, it is a simple fact that it is difficult to unlearn something once it is learned. See United States v. Lowis, 174 F.3d 881, 885 (7th Cir.1999) (noting the difficulties of “unringing the bell.”). If she is not already in a position to compete with the defendants, she likely will be in the future, and thus there is a risk that she might inadvertently use information that she gained through this lawsuit. The same risk cannot be said to be posed by permitting her counsel to review these items because he will never compete with the defendants and is also bound by the protective order I am issuing not to disclose what he sees except to certain people and under certain circumstances. For these reasons, I would find that good cause exists to make these items available on an “attorneys' eyes only” basis.”

Spoliation Discovery Does Have an Endpoint

Defendants also requested that documents created beginning with six months after the instant suit was filed, (and also approximately six months following the alleged wrongful termination of plaintiff by defendants) not be included in the representative sample. Defendants’ argument was that sufficient time had passed such that the documents in question would have no relevance to plaintiff’s cause of action, and that in any event, “many of these documents” were asserted to be attorney client privileged communications.

Plaintiff countered by maintaining that such a cutoff was “arbitrary.”

The Court acknowledges some degree of imprecision, and notes that such imprecision comes with the discovery territory:

“There is always some degree of imprecision in determining the appropriate temporal scope of discovery in wrongful termination cases. See Waters v. U.S. Cap. Police Bd., 216 F.R.D. 153, 158-59 (D.D.C.2003) (“[T]he proper scope of discovery in any case is a function of the nature of that case.”); Pleasants v. Allbaugh, 208 F.R.D. 7, 9-10 (D.D.C.2002) (“The problem of setting a time period for the discovery ordered is a perplexing one because it does not admit of a lapidary solution; life is messy and cannot be divided into neat chronological segments.”). A judge must simply draw a reasonable line between the likely and the unlikely, the discoverable and the prohibited, the wheat and the chaff.”

It’s not often that we see references from decisions decided (or dissented to by) Justice Holmes:

“As the Supreme Court stated in another context: “If in its theory the distinction is justifiable, as for all that we know it is, the fact that some cases, including the plaintiff's are very near to the line makes it none the worse. That is the inevitable result of drawing a line where the distinctions are distinctions of degree; and the constant business of the law is to draw such lines.” Dominion Hotel, Inc. v. Arizona, 249 U.S. 265, 268-69 (1919) (Holmes, J.). Accord Schlesinger v. Wisconsin, 270 U.S. 230, 241 (Holmes, J., dissenting) (“While I should not dream of asking where the line can be drawn, since the great body of the law consists in drawing such lines, yet when you realize that you are dealing with a matter of degree you must realize that reasonable men may differ widely as to the place where the line should fall.”).”

Magistrate Judge Facciola also weighs in on this line of reasoning:

“All one can do is weigh probabilities against probabilities, barring discovery whose likely benefit is outweighed by its cost considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the controversy and the importance of the discovery in resolving the issues. Fed.R.Civ.P. 26(b)(C)(iii).”

Limitation of Spoliation Related Discovery

In response to plaintiff’s request for additional discovery time, Magistrate Judge Facciola finds that more than adequate time (and presumably enough of the court’s own resources) have been expended on the spoliation issue , and accepts defendants’ proposal to limit document sampling to those dated before March 17, 2006:

“Finally, plaintiff has had ample opportunity to create a record before this Court and there is no need for further discovery on the issue of spoliation. All that remains on the issue of spoliation is to determine what information, if any, could not be recovered by forensic investigations and, if information is missing, to determine whether defendants should be sanctioned”

“I also think it is appropriate to remind plaintiff that the point of this exercise is not to look for relevant documents-in fact, it appears that defendants have not sought to withhold information on the basis of relevance at this juncture-but to ascertain whether the documents are what the defendants say they are. For these reasons I accept defendants' proposal to limit the documents that could be included in the sample to documents created before March 17, 2006.”

Consultation between Plaintiff and Defendants’ Experts

Plaintiff requested that the Court require plaintiff’s expert to consult with defendants’ expert on what methodology he intends to use prior to conducting the statistical sample. The Court found no need to interpose this extra burden on defendants, but did require that an explanation of the methodology be provided “as soon as practicable” after the sampling was conducted.

This raises an interesting issue. One might expect that in well conducted eDiscovery, any sampling method used by a producing party might well have been included in the Fed. R. Civ. P. Rule 26 counsel meet-and-confer discussion, and then included in any Fed. R. Civ. P. Rule 16 (or applicable local rule) case management or initial scheduling order.

Takeaway: If sampling protocol or methodology might have been foreseen as an issue early in this matter, and had the parties apparently been able to cooperate to a greater degree than “not-at-all,” it is entirely possible that methodology disclosure request might have been viewed more favorably by the court. Now, it pays for counsel to be mindful that if a large volume of ESI is expected to be requested and produced, and where the possibility of sampling for privilege, or even relevancy, is likely to be requested or ordered, counsel is well advised to raise the issue early, and position the issue as part of the early ESI discovery phase, rather than at the tail end of a spoliation proceeding.

It will be interesting to read the next chapter in this epic discovery saga: “Spoliation; The Hearing”

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Case: Adkins v. Wolever
Citation: 554 F.3d 650 (6th Cir. 2009)
Date: 2009-02-04
Topics: 6th Circuit Spoliation sanctions imposition now relies on Federal, not state law, District Court has broad discretion to craft proper sanction for spoliation.

In this decision from the U.S. Court of Appeals for the Sixrth Circuit, the Court reverses its prior stance of application of state law to spoliation sanctions, and adopts the approach of other circuits in applying federal law for spoliation sanctions. After an en banc rehearing (procedurally necessary for the reversal of a prior circuit court decision) the Court of Appeals held that federal (and not state) law of spoliation applies to a case litigated in a federal court. In so ruling the Court overruled Beck v. Haik, 377 F.3d 624, Welsh v. United States, 844 F.2d 1239, Shields v. Gov't Employees Hosp. Ass'n, Inc., 450 F.3d 643, and Nationwide Mut. Fire Ins. Co. v. Ford Motor Co., 174 F.3d 801. The Court also remanded for additional proceedings and spoliation findings consistent with this decision:

“The original [appellate] panel, constrained by our earlier opinions that applied state law to determine whether spoliation sanctions were available, (see, e.g., Beck v. Haik, 377 F.3d 624, 641 (6th Cir.2004); Nationwide Mut. Fire Ins. Co. v. Ford Motor Co., 174 F.3d 801, 804 (6th Cir.1999); Welsh v. United States, 844 F.2d 1239, 1245 (6th Cir.1988)), affirmed the district court's denial of sanctions because applicable state law did not provide for sanctions based on third-party spoliation. Adkins v. Wolever, 520 F.3d 585, 587 (6th Cir.2008) (citing Salmi v. Sec'y of Health & Human Servs., 774 F.2d 685, 689 (6th Cir.1985)). We granted rehearing en banc to bring our case law in line with other courts of appeals. We now recognize-as does every other federal court of appeals to have addressed the question-that a federal court's inherent powers include broad discretion to craft proper sanctions for spoliated evidence.”

“To the extent that our earlier opinions held otherwise, we overrule them. Accordingly, we VACATE the judgment of the district court and REMAND for consideration of what, if any, spoliation sanctions are appropriate in this case.”

The Sixth Circuit Court of appeals now joins the Fourth, Second, Ninth and (arguably) the Fifth Circuits (but not the 11th) in applying Federal “common law” to sanctions imposition:

“In contrast to our persistent application of state law in this area, other circuits apply federal law for spoliation sanctions. See, e.g., Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir.2001); Reilly v. Natwest Mkts. Group Inc., 181 F.3d 253, 267 (2d Cir.1999); Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir.1993). We believe that this is the correct view for two reasons. First, the authority to impose sanctions for spoliated evidence arises not from substantive law but, rather, “from a court's inherent power to control the judicial process.” Silvestri, 271 F.3d at 590 (citing Chambers v. NASCO, Inc., 501 U.S. 32, 45-46, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991)). Second, a spoliation ruling is evidentiary in nature and federal courts generally apply their own evidentiary rules in both federal question and diversity matters. King v. Ill. Cent. R.R., 337 F.3d 550, 556 (5th Cir.2003). These reasons persuade us now to acknowledge the district court's broad discretion in crafting a proper sanction for spoliation.”

“As our sister circuits have recognized, a proper spoliation sanction should serve both fairness and punitive functions. See Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir.1995) (observing that a proper sanction will serve the “purpose[s] of leveling the evidentiary playing field and ... sanctioning the improper conduct”). Because failures to produce relevant evidence fall “along a continuum of fault-ranging from innocence through the degrees of negligence to intentionality,” Welsh, 844 F.2d at 1246, the severity of a sanction may, depending on the circumstances*653 of the case, correspond to the party's fault. Thus, a district court could impose many different kinds of sanctions for spoliated evidence, including dismissing a case, granting summary judgment, or instructing a jury that it may infer a fact based on lost or destroyed evidence. Vodusek, 71 F.3d at 156.”

District Courts in the Circuit now have “broad discretion” (meaning they are not bound by state law principles) in “crafting a proper sanction for spoliation.”

Blognote: The 11th Circuit stands out as a hybrid. While embracing a federal law approach, the 11th Circuit allows for a district court to be guided by the laws of the state in which it sits.


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Case: Farella v. City of New York
Citation: 2009 WL 833351 (2d Cir. 2009)
Date: 2009-04-02
Topics: Spoliation is Evidentiary and Province of Federal Courts

In this decision from the Second Circuit Court of Appeals, the Court reminds us that spoliation sanctions decisions of a district court are reversible only upon a finding of an abuse of discretion. An abuse of discretion is found where:

“‘A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence.’ [Residential Funding Corp. v. Degeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir.2002)]. (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990)). We identify no such error in this case.”

Finding no abuse of discretion (“In denying the spoliation motion, the district court found that plaintiffs failed to establish that additional documents ever existed”) the decision of the district court denying plaintiff’s motion for sanctions was affirmed.


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Case: Bolger v District of Columbia
Citation: --- F.Supp.2d ----, 2009 WL 841137
Date: 2009-03-31
Topics: District of Columbia federal court adverse inference requirements, recognition of Second Circuit's Residential Funding negligence standard

In this decision from the District Court for the District of Columbia, plaintiff demonstrators claimed that “recorded police radio communications” sought in discovery had been destroyed, and sought an adverse inference as a sanction for spoliation. Plaintiffs asserted that the destruction was “especially troubling” because it occurred long after service of the first discovery requests. Defendant District of Columbia, seeking shelter under the safe harbor provided by Fed.R. Civ. P. Rule 37, claimed that the records were unintentionally destroyed as a result of a routine data purge. The District also claimed that such purges were necessary to “free” up memory for future calls, and that the sought after recordings were at best only minimally relevant.

District Judge Bates provides the requirements in the District of Columbia federal court for the imposition of an adverse inference:

(1) the party having control over the evidence had an obligation to preserve it when it was destroyed or altered;
(2) the destruction or loss was accompanied by a “culpable state of mind”; and
(3) the evidence that was destroyed or altered was “relevant” to the claims or defenses of the party that sought the discovery of the spoliated evidence, to the extent that a reasonable factfinder could conclude that the lost evidence would have supported the claims or defense of the party that sought it.*19 Mazloum v. District of Columbia Metro. Police Dep't, 530 F.Supp.2d 282, 291 (D.D.C.2008) (quoting Thompson v. HUD, 219 F.R .D. 93, 101 (D.Md.2003) (internal citations omitted)).”

Control

As to the element of control, there was no dispute that defendant District of Columbia had control over the recordings.

Culpable State of Mind

The District of Columbia also maintained that it had not acted with the “gross negligence” it asserted was a necessary element for the imposition of an adverse inference finding. Not so, said District Judge Bates:

“This Court has recognized that “the adverse inference doctrine embraces negligent (in addition to deliberate) destruction of evidence.” Mazloum, 530 F.Supp.2d at 292; see also More v. Snow, 480 F.Supp.2d 257, 275 (D.D.C.2007). Consequently, the District's stance that it did not act with “gross negligence or bad faith” is of no moment.”

Judge Bates was sufficiently unimpressed with the District compliance with its discovery obligations to find that it destroyed the records with culpable state of mind:

“Moreover, given the District's poor track record in satisfying its discovery obligations in this case, the Court cannot help but view the District's proffered explanation for its destruction of evidence with a jaundiced eye. Based on the facts recited above, the Court concludes that at a minimum the District was negligent in allowing the police radio communications to be destroyed. Therefore, plaintiffs have established the requisite “culpable state of mind” for an adverse inference instruction.”

Relevance

Again placing reliance on Second Circuit decisional authority, Judge Bates first sets out the standards for a finding that destroyed evidence was relevant:

“”The final element of “relevance” requires a determination whether “a reasonable trier of fact could infer that ‘the destroyed ... evidence would have been of the nature alleged by the party affected by its destruction.’ “Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 109 (2d Cir.2002) (internal citations omitted); see Mazloum, 530 F.Supp.2d at 293 (citing Residential Funding, 306 F.3d at 109). It is at this final step of the adverse inference inquiry that the limited record currently before the Court presents some difficulties.

The Court, while noting that plaintiff had not established relevance, permitted them to renew their request for sanctions at the “appropriate” time:

“Although the Court sympathizes with plaintiffs here, it cannot grant plaintiffs' request at this time. Put simply, plaintiffs have asked too much. In the Court's view, on the record currently before it, a reasonable trier of fact could not infer that the destroyed recordings would have contained evidence of retaliatory intent or animus beyond the identifying statements (i.e., persons dressed in black, anarchists) already acknowledged by the District.”

“Nor could a reasonable jury infer that there would have been evidence tending to disprove the existence of the building management company's mystery complainant. Plaintiffs' proffer with respect to this evidence is too speculative at this time. However, because plaintiffs have made the necessary showing on the first two elements-and the Court believes that a record developed fully during the course of trial could potentially provide plaintiffs with the support necessary to warrant an adverse inference instruction-the Court will deny plaintiffs' request without prejudice and will allow them to renew their request at an appropriate time after sufficient proof has been adduced at trial. The adverse inference they seek, after all, would be part of the jury instructions finalized at the close of the trial.”


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Case: Smith v. Slifer Smith & Frampton/Vail Associates Real Estate, LLC.
Citation: 2009 WL 482603(D.Colo. 2009
Date: 2009-02-25
Topics: Spoliation, recognition of Zubulake duty to preserve triggered by pre-litigation inquiry request for information, 10th Circuit bad faith (not mere negligence)spoliation standard, post-duty to preserve anti-forensic activity, deletion of anti-forensics activity evidence, manual vs. automatic erasures , timing of anti-forensics events supports finding of bad faith, imposition of adverse inference, standards for review by District Judge of Magistrate Judge’s Report and Recommendation.

In this decision from the U.S. District Court for the District of Colorado, District Judge Kane adopted U.S. Magistrate Judge Watenabe’s fifty-three paragraphs of findings and three recommendations in toto.

For those interested in pre-circuit appellate minutiae, District Judge Kane first points out that his review of the Magistrate Judge’s Report and Recommendation is not “de novo,” and that he had “done more than review for clear error or abuse of discretion.” While the posture of this proceedings is that of an adoption of a Magistrate Judge’s report and recommendation, District Judge Kane’s approach states that his analysis has exceeded the minimum required by him to reverse an Magistrate Judge’s order, as Judge Kane indicates in his references to clear error (“without legal error”) and abuse of discretion (“based on substantial evidence”).

Ok. Let’s start by pointing out that it’s never a good preservation practice to run a wiping utility after a preservation duty is triggered. Layer on to that a warning and threat of default judgment for future evidentiary misdeeds, and you get a flavor of what’s to come

“The Defendants are hereby advised that any further sanctions which may be imposed will be more severe and may include entry of default judgment against them and each of them.”

Couldn’t happen in this day and age? Think again, and read on…

Plaintiff asserted a digital evidence spoliation motion against defendant, and plaintiff’s expert dug up a treasure trove of indicia of post duty-to-preserve spoliation activities. In a somewhat novel argument in opposition, defendants counsel asserted that plaintiff’s expert exceeded the boundaries of “proper exert opinion” and continued on to assert that the expert’s report:

“… fails to apply sound scientific and technical analysis, and is premised on a myriad of misrepresentations; that defendants' experts wholly refute plaintiffs' expert's conclusions and establish that plaintiffs' expert is wrong in concluding that evidence was destroyed in this case; that plaintiffs' position is groundless from a technical standpoint and also fails factually; that spoliation of evidence cannot occur unless relevant evidence exists in the first place; that no electronic mail or other electronic communications occurred between the defendants and VRDC during the relevant time period; and that plaintiffs are not entitled to sanctions absent a showing that there is a reasonable possibility, based on actual evidence, not wild speculation, that evidence would have helped the plaintiffs' case existed and was lost”

Magistrate Judge Watenabe performs the necessary pre-decision recitations, noting that while discovery is a non-dispositive matter, a court may nonetheless order dispositive relief in certain circumstances. The analysis begins with a reliance on the Zubulake duty to preserve standard adopted by a prior Colorado District Court decision:

“’… “[d]iscovery is a nondispositive matter, and magistrate judges have the authority to order discovery sanctions.’ Hutchinson v. Pfeil, 105 F.3d 562, 566 (10th Cirl.1997). Here, however, plaintiffs seek dispositive relief as a sanction;”

“...That ‘[t]o ensure that the expansive discovery permitted by Rule 26(b)(1) does not become a futile exercise, putative litigants have a duty to preserve documents that may be relevant to pending or imminent litigation.’ Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. 614, 620 (D.Colo.2007) (citing Zubulake v. UBS Warburg, LLC, 200 F.R.D. 212, 216 (S.D.N.Y.2003) (“the obligation 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”));’”

Spoliation Defined, Imposition Based on Inherent Powers – Colorado Federal Courts

Magistrate Judge Watenabe then set out the definition of spoliation adopted by the Colorado federal courts:

“‘…[s]poliation’ has been defined as ‘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.’ “ Id. (and cases cited therein)’”

The Court also acknowledges that relevant decisional authority finds the basis for imposition of sanctions for spoliation to arise from a court’s inherent powers, even though a discovery proceeding is typically considered “non-dispositive:”

“….“The court has inherent power to impose sanctions for the destruction or loss of evidence.” Id. (and cases cited therein). “Federal courts have authority to impose a variety of sanctions for spoliation including dismissal of the action.” Kokins v. Teleflex Inc., 2007 WL 4322322, *2 (D.Colo. Dec. 6, 2007)

Tenth Circuit Standards for Determining Sanctions Severity

The Court then sets out the 10th Circuit’s approach to determining spoliation sanctions. Note that while the language cited appears to mean “whether to impose” (i.e., should we consider imposing sanction or not), a better reading might interpret the following language to mean “upon having decided that a sanction is appropriate…” (quote mine). Note, however, the language to the effect that destruction need not be in bad faith in order to support the imposition of spoliation sanctions is not part of the numbered factors, but appears to be some kind of condition subsequent:

““When deciding whether to sanction a party for the spoliation of evidence, courts have considered a variety of factors, two of which generally carry the most weight:

“(1) the degree of culpability of the party who lost or destroyed the evidence; and
(2) the degree of actual prejudice to the other party.” Id. (quoting Jordan F. Miller Corp. v. Mid-Continent Aircraft Serv., Inc., 1998 WL 68879, *13 (10th Cir. Feb. 20, 1998) (unpublished)).

“[T]he destruction need not be in bad faith to warrant spoliation sanctions.” Id.”

The burden of proof in a spoliation proceeding in Colorado federal courts is by a preponderance of the evidence:

“That “[t]he movant has the burden of proving, by a preponderance of the evidence, that the opposing party failed to preserve evidence or destroyed it.” Ernest v. Lockheed Martin Corp., 2008 WL 2945608, *1 (D.Colo. July 28, 2008);”

Zubulake Duty to Preserve Triggered by Attorney’s Letter of Inquiry and Informal Information Request

The Court first finds that an introductory letter from plaintiff’s attorney to one defendant containing inquiry into the “shocking” facts of a real estate transfer), and a pre-litigation request for information triggered the defendant’s duty to preserve:

“That under the specific facts of this case, defendant Seibert had an obligation as of May 19, 2006, to preserve non-privileged materials concerning the transaction at issue based upon attorney Wendell Porterfield's letter to Seibert on that date in which Porterfield stated that he was investigating the transaction and requested any information Seibert had regarding this transaction.”

The Court also acknowledges that an indisputable second trigger date occurred upon the filing of the instant action approximately five and one-half months after this letter was sent:

“That this action was commenced only five and one half months later on November 2, 2006. (Docket No. 1). As of the commencement of this action on November 2, 2006, defendants unquestionably had an obligation to preserve and produce non-privileged materials that may be relevant to this litigation. Plaintiffs are willing to concede a preservation date as late as November 2006.”

So, we have a May 2006 informal request for information, and a lawsuit commenced in November 2006.

Spoliation Timeline

What's a good spoliation proceeding without one?

April 9, 2007: Plaintiffs served their first Request for Production of Documents to defendants and included the following definitions:

“’…[T]he definition of [d]ocument” contained in both of these RFPs provided that it included “computer data, including floppy disks, hard drives, tapes and other electronic media ... e-mails and any and all forms of communication communicating, preserving, recording and transmitting human thoughts whether written, printed, typeset or reproduced by any other means, which is now or formerly was in your possession’”

The RFP included a decently-worded ESI request to defendants:

““[p]roduce all documents in your possession or control, whether generated by you or provided to you by other people, that in any way references or relate to the Property including, without limitation, all E-mails ... or documents in electronic form.””

May 9, 2007 – Defendants response to first RFP served.

July 30, 2007 – Second RFP. This second request for production included the following ESI request:

“Included in that RFP were requests for production of ESI from, to, or relating to Robert Danial, companies controlled or operated by him, or persons employed by or working on his behalf or of such companies; for production of ESI from, to, or relating to any actual or potential purchase of property by Vail Resorts or any subsidiary or company controlled or owned in whole or in part by Vail Resorts (including VRDC); and for inspection and sampling computers used by Seibert from January 2004 through the present and those databases identified in discovery in this case, including any email databases, any information or personal information management or similar program databases, and any backup tapes or databases.”

“inspection and sampling computers used by Seibert from January 2004 through the present and those databases identified in discovery in this case, including any email databases, any information or personal information management or similar program databases, and any backup tapes or databases.”

October 15, 2007 – Defendants response to plaintiff’s second RFP was served, and included the results of an electronic search using FTK (Forensic Tool Kit, a product of Access Data) together with the report of defendants’ expert.

November 1, 2007 – Defendants’ counsel sends letter to plaintiff’s counsel describing the ESI search undertaken, including location and sources searched.

The Court found that there were three relevant ESI storage locations; defendant’s old office computer, one home computer, and one laptop.

Presence of Anti-Forensics Tools

The Court notes that the parties agreed that a wiping program called “Anti-Tracks” was installed on the home computer. “Anti Tracks” is described by defendant’s expert as having:

“advertised capabilities includ[ing] the ability to automatically ‘erase recent document history, erase Windows temp, erase run history, erase search files history, erase search computers history, erase last logon history, erase network cache, erase telnet history, erase recycle bin, erase registry streams, and clear the Windows page file. It also offers the ability to securely delete information.”

First Spoliation Trigger Date

The Court then notes that the expert found that the time the anti-forensics program was last accessed was November 9, 2007, more than two months after the action had commenced.

Orphaned Files and Folders; Corruption, Missing Registry Components, Empty Recycle Bin

A first result of the forensics report was not favorable to the defendant. Note also that the spoliation period appears to span approximately eight days:

“He further stated regarding orphaned files and folders: “9383 files and folders from the period 9/6/07 through 9/14/07, as identified by Last Accessed Date were found. These include default Windows folders including Program Files, Documents and Settings, registry entries, downloaded music from iTunes, and content from the Temporary Internet Files Folder. Two of the orphaned files are Outlook. .pst files. Both .PSTs were included in the original data set of searched active files. Both are corrupt, and neither contains any whole recoverable mail data, even after being repaired using industry standard repair tools, however, can be searched via keyword.” (Docket No. 74-25 at 9) (emphasis added). He also stated, “SSF-1-4 is missing key components of the registry; and of those intact, some key areas are missing. Thus, a specific/comprehensive analysis of user activity was therefore not possible. In its current state, the imaged computer (SSF-1-4) could not boot into Windows, and the Documents and Settings folder, the Program Files folder, and Recycler are empty....”

You can guess where this is headed. That said, it’s helpful to provide a survey of some pre-decision findings of interest. Note the number of times the word “after” is used:

1) Anti-Tracks software installed on August 17, 2006, after the letter of inquiry and formal request of May 19, 2006.
2) The last accessed date (for Anti-Tracks program) of September 6, 2007 occurred after the May 2006 letter, after the commencement of the action, after entry of the Original Scheduling Order, after service of plaintiff’s first RFP, and after the service of plaintiff’s second RFP.

Also not helping defendants is that the last accessed date for the anti-forensics program took place just prior to the time defendant’s created a forensic image of the pertinent drives:

“That moreover the last-accessed date of September 6, 2007, was just eight days before defendants created a forensic bit-stream image from the computer on September 14, 2007, from which defendants' expert found 9383 orphaned files and folders from the period 9/6/07 through 9/14/07, which was days before and on the date the forensic image was created”

But wait, it gets better. In an apparent attempt to cover tracks, the anti-forensics program was deleted prior to the creation of the forensic image. Oh, and there were some visits to the anti-forensics program download web-site post-preservation trigger date:

“…plaintiff's expert, David Penrod, submitted a report in which he states that the Anti-Tracks folder “was created on August 17, 2006 at 11:11 AM. It was deleted on September 13, 2007 at 12:13 AM, just days before Mr. Gorgal [defendants' expert] created a forensic bit-stream image from it.” (Docket No. 74-28 at 4, ¶ 8). Penrod recovered three “Internet shortcut files that link to Internet websites from which Anti-Tracks can be downloaded and information about its function obtained.” (Docket No. 74-28 at 4, ¶ 12). All three “were created on August 17, 2006 at 11:11 AM.... They were deleted on September 6, 2007 at 7:44 AM. They were modified on August 4, 2007. The exact cause of this modification is unknown, but may have been caused by a visit to the Anti Tracks website on the Internet.””

Systemic Effort to Erase Permanent Data

The forensic examiner used EnCase to recover 67,714 folders, files, and individual system data streams as lost files, analyzed the time and date stamps, and made the following findings:

The Affiant analyzed the date and time stamps of these objects and determined that they had been deleted as part of a systemic effort to erase pertinent data. The erasures started on May 4, 2007 at 1:16 AM and continued every day until 11:02 AM on September 14, 2007, just before the entire operating system and its component parts was erased. Most of the erasures have the appearance of automated processes; many of those in August and September 2007, however, appear to be manual in nature.... " (Bold in the original)

Egregious Nature of Chronology Impairment to Forensic Analysis (Time Does Matter)

The Court noted that these deletion events impaired forensic examination, the most egregious deletions made were in connection with the data required to establish a chronology of events that took place on the subject computer during the relevant time period:

“Files and objects deleted include but are not limited to hives and individual keys of the Windows Registry stored within System Restore Points, files and folders from the Documents and Settings directory, including Outlook PST files, and operating system data from the Windows directory. While all these deletions seriously damage forensic recovery of evidence, no deletions are more damaging than those of the Windows Registry stored within the System Restore Points. Deletion of Restore Point files obliterates historical records that can be used by the forensic analyst to construct a chronology of system and user activity....”

Other expert findings accepted by the Court include the deletion (and corruption) of two Outlook PST files, deletion of 9.500 files and folders, deletion of critical system files, Documents and Settings, Program Files, System Volume Information, and others.

The Court then focuses on the deletions of three ESI sources of importance both to forensic analysis as well as to a spoliation analysis: Documents and Setting, System Volume, and Windows directories.

Documents and Settings Folder

The Court also focuses on the deletion of importance of the deletion of the “Documents and Settings” folder, which contains (or should contain) a veritable treasure trove of both relevant documents and metadata:

“Documents and Settings contain User Profiles for each user with a registered logon to the computer. It also contains user created files, such as Word documents, digital photographs and email messages as well as other files such as the user's Internet History, Cache and Cookie files. This is a critical folder for forensics.”

The Court notes and comments on the expert’s finding: “ It is completely empty....

System Volume Folder

“The System Volume Information directory contains several onboard services necessary for the efficient performance and restoration of the Windows operating system. This directory is part of System restore, a tool that allows the user to set points in time to which he or she can roll back the computer. The System Volume Information folder contains these points and associated information that makes them accessible. This is a critical folder for forensics as it contains a history of the computer that can be recovered by forensic tools.

The Court notes and comments on the expert’s finding: “This folder is completely empty....”

Windows Directory

“The Windows directory contains the Windows operating system files. Most importantly, it contains the Windows Directory, which is a central repository for all information about the operating system and its installed software and hardware components. The Windows Directory also contains event logs, which provide a chronological record of application, system, security and user events.”

Again, the Court notes and comments on the expert’s findings: Both the Registry and event logs are critical to effective forensic analysis. These files are no longer present.”

Expert Report Practice Do’s and Don’ts

The defendant, seeing the “Spoliation Express” rapidly approaching at full steam attempts to avoid intimate knowledge of skewer-by- cow-catcher syndrome and attached a second expert report to the opposition to plaintiff’s motion for spoliation sanctions. Plaintiff’s expert rebutted this updated report in its reply, and the Court, while noting that it could permit a late-filed expert report at its discretion, still wasn’t in a buying mood:

"That Federal Rule of Civil Procedure 37(c)(1) provides in pertinent part that “[i]f a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” “The determination of whether a Rule 26(a) violation is justified or harmless is entrusted to the broad discretion of the district court.” Jacobsen v. Deseret Book Co., 287 F.3d 936, 953 (10th Cir.2002) (internal quotations omitted);'

"...Defendants have not provided any explanation for why a new expert report was suddenly submitted with their response. There has been no showing that the failure to submit Phillip's report in a timely manner was substantially justified or is harmless. Therefore, such report should not be considered in conjunction with the motion now at issue;'

"...That even if Phillipp's report should be considered, the conclusion stated therein is rebutted by Penrod's subsequent declaration submitted by plaintiffs with their reply.'

Analysis

With this information on the record, the Magistrate Judge Watenabe then undertakes a sanctions imposition analysis as used in the 10th Circuit:

Bad Faith Document Destruction Required for Adverse Inference in Tenth Circuit

Chalk up the Tenth Circuit as being a bad faith jurisdiction, which means that:

““the general rule is that bad faith destruction of a document relevant to proof of an issue at trial gives rise to an inference that production of the document would have been unfavorable to the party responsible for its destruction.” Aramburu v. Boeing Co., 112 F.3d 1398, 1407 (10th Cir.1997). “Mere negligence in losing or destroying records is not enough because it does not support an inference of consciousness of a weak case.” Id.”

Bad Faith Defined: “Antithesis of Good Faith”

No, I didn’t make that up:

“.. ‘[Ba]d faith’ is the antithesis of good faith and has been defined in the cases to be when a thing is done dishonestly and not merely negligently. It is also defined as that which imports a dishonest purpose and implies wrongdoing or some motive of self-interest.” Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. at 635”

Highly Suspect Timing of Anti-Forensics Activity Supports Finding of Bad Faith

The Court finds that although there was no “smoking gun” evidence showing who destroyed ESI on the subject computers, the Court did find that plaintiff had shown by a preponderance of evidence that defendants had failed to preserve evidence.

What is notable is that the Court then also found bad faith based on the timing of the anti-forensics activity on the subject computers:

“Nevertheless, the court finds that the plaintiffs have shown by a preponderance of the evidence that after the duty to preserve the ESI on Seibert's computers arose, the defendants failed to preserve evidence and, in fact, destroyed it in bad faith and intended to prevent disclosure of relevant evidence on Seibert's computers. This finding is primarily based upon the highly-suspect timing of the usage of Anti-Tracks on Seibert's home PC and the timing of the destruction of the hard drive on Seibert's old office PC. The reformatting of that hard drive (SSF 1-2-the old office PC) occurred after May 10, 2007, which coincides with the date of Seibert's first deposition on May 11, 2007, and the day after he provided responses to the plaintiffs' first set of RFP. Moreover, the last access date of the Anti-Tracks on the home PC was in early September 2007 right before the drive was to be imaged by defendants' expert for purposes of producing ESI. “

“The inference can, and has been drawn by this court, that the timing of the destruction indicates that whoever was responsible knew that the evidence discovered would very well reveal information defendants did not want revealed. Furthermore, the timing of such destruction was after the commencement of this action, at which time the parties had an obligation to preserve such evidence”

Defense Counsel Gets A Pass

This time:

“That there is no evidence upon which the court can conclude that defense counsel had knowledge of the destruction of evidence prior to review of Gorgal's July 7, 2008.”

Adverse Inference Standard of Proof

While the Tenth Circuit does not follow a negligence standard for spoliation, it does adopt the Second Circuit’s standard of proof for a finding of bad faith, and borrows from the Residential Funding decision:

“[T]he 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 Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 109 (2d Cir.2002) (internal quotations omitted). “Where a party destroys evidence in bad faith, that bad faith alone is sufficient circumstantial evidence from which a reasonable fact finder could conclude that the missing evidence was unfavorable to that party.” Id. See Aramburu v. Boeing Co., 112 F.3d at 1407…”

Result

The Court finds that sufficient proof of bad faith to warrant the imposition of an adverse inference instruction to the jury. The inference: That some of the missing data was harmful to defendants (the Court uses the term “plaintiffs” but I *believe* this is a typo).

Tenth Circuit Standards for Imposition of Terminating Sanctions

The Court provides an explanation why, under 10th Circuit decisional authority, terminating sanctions were not appropriate, even in light of defendants’ bad faith and willfulness, finding “[T]hat while the court finds that the destruction of evidence here was the result of willfulness and bad faith, upon consideration of the circumstances presented in the instant motion and the so-called “ Ehrenhaus factors,” FN3 the extreme, severe sanction of a dispositive sanction, namely, entry of default judgment (albeit tempting under the circumstances presented here) is not recommended.”

The rationale appears to favor a predisposition to litigate on the merits:

“Because dismissal with prejudice defeats altogether a litigant's right to access to the courts, it should be used as a weapon of last, rather than first, resort.” Ehrenhaus v. Reynolds, 965 F.2d 916, 920 (10th Cir.1992) (internal quotation marks omitted). “Only when the aggravating factors outweigh the judicial system's strong predisposition to resolve cases on their merits is dismissal an appropriate sanction.” Id. at 921 “

The Court then describes the Tenth Circuit standards to be met for imposition of terminating sanctions, and” recommends” that these standards have not been met:

“Before choosing dismissal as a just sanction, a court should ordinarily consider a number of factors, including (1) the degree of actual prejudice to the defendant; (2) the amount of interference with the judicial process; ... (3) the culpability of the litigant, ... (4) whether the court warned the party in advance that dismissal of the action would be a likely sanction for noncompliance, ... and (5) the efficacy of lesser sanctions.” Ehrenhaus v. Reynolds, 965 F.2d 916, 921 (10th Cir.1992) (internal quotation marks and citations omit”

The Court also recommended the imposition of attorneys fees and costs award to plaintiffs in addition to the adverse inference instruction.

Blognote: Magistrate Judge Watenabe obviously credited plaintiff’s expert (who used EnCase) rather than defendants’ expert (who used FTK, another forensics examination tool). I don’t think that this reflects on the relative advantages of one forensics tool over another so much as it reflects on the use of the tool as well as the instruction set provided by the client to the forensics examiner in carrying out his or her analysis.

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