2009-01-17 Preservation, Spoliation, Sanctions, and Emergency Relief

Another spoliation hearing in a major patent case, and two from Magistrate Judge Facciola, one of which involves (and orders) preservation of White House emails in advance of the Bush-to-Obama transition, and the other, a good example of bad lawyering.

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Case: Micron Technology, Inc. v Rambus, Inc.
Cite: --- F.Supp.2d ----, 2009 WL 54887, (D. Del. 2009)
Date: 2009-01-09
Topics: Spoliation, spoliation standard in patent cases, document retention policy, reasonable forseeability of litigation triggering document preservation, document retention policy reasonableness test, Third Circuit bad faith requirement for imposition of dispositive sanctions.

In this patent infringement decision, the plaintiff was found by the Court to have spoliated key documents that would have shown involvement in a standards setting organization (reminiscent of Qualcomm v Broadcom). The spoliation was serious enough to warrant a finding of inequitable conduct, which in turn operated to invalidate (and deem unenforceable) the 12 patents asserted as infringed.

Some what-not-to-do's:

1. Post litigation commencement shredding of 480 boxes of documents

2. Document retention policy designed in conjunction with formation of patent litigation strategy (destroy, then litigate).

3. Litigation was reasonably foreseeable (and document preservation triggered) when patent litigation strategy was developed (two years prior to filing suit).

4. Oral, rather than emailed or otherwise recorded discussion of document retention program was encouraged.

The District Court first relies on Federal Circuit precedent (this is a patent case) and states that:

"[T]he imposition of sanctions in, patent cases, is controlled by regional circuit law. Monsanto Co. v. Ralph, 382 F.3d 1374, 1380 (Fed.Cir.2004)."

For those wishing to join, or share my continuing spoliation migraine, I offer the following analysis. The Monsanto case cited by the Rambus court is a Federal Circuit decision which, to my reading, holds only that regional circuit law is to be applied "when reviewing sanctions orders" and does not appear to limit the application of circuit decisional authority to patent matters. In fact, the Federal Circuit precedent relied on by the Monsanto decision says just that:

"A decision to sanction a litigant pursuant to Fed.R.Civ.P. 37 is one that is not unique to patent law, DH Tech., Inc. v. Synergystex Int'l, Inc., 154 F.3d 1333, 1343, 47 USPQ2d 1865, 1873 (Fed.Cir.1998), and we therefore apply regional circuit law to that issue, Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359, 50 USPQ2d 1672, 1675 (Fed.Cir.1999) (en banc in relevant part). Transclean Corp. v. Bridgewood Services, Inc., 290 F.3d 1364, 1370 (Fed. Cir. 2002)"

I bring this up only to point out that if the Rambus court analysis means that a District Court should employ a non-regional circuit (state law rather than Federal common law) in non-patent cases, then woe betide the attorney who must determine the proper spoliation standard in a case where there is.a pendent state law claim asserted together with a patent claim.

Ok, back to the Rambus case. The District Court of Delaware generally follows the spoliation test set forth in the Mosaid case by the 3rd Circuit Court of Appeals, but sprinkles bits and pieces of other District Courts and U.S. Courts of Appeal authority into the decisional mix.

The District Court applies the “Pure” Federal Common Law Spoliation Approach (I use the term “pure” where a Federal District Court relies on Federal Common law only and makes no state spoliation law reliance or incorporation):

""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." Kounelis v. Sherrer, 529 F.Supp.2d 503, 519 (D.N.J.2008) (citing Mosaid Tech. Inc. v. Samsung Elec. Co., 348 F.Supp.2d 332, 335 (D.N.J.2004)). "Spoliation occurs when a party has intentionally or negligently breached its duty to preserve potentially discoverable evidence," and cannot occur in the absence of such a duty. Id., at 518-19."

Duty to preserve is drawn from 2nd Circuit as well as Federal District court decisions from California, Delaware and New Jersey:

"A duty to preserve evidence arises when there is knowledge of a potential claim. Winters v. Textron, Inc., 187 F.R.D. 518 (M.D.Pa.1999). A potential claim is generally deemed cognizable in this regard when litigation is pending or imminent, or when there is a reasonable belief that litigation is foreseeable. For instance, a duty to preserve evidence can arise many years before litigation commences; imminency is sufficient to create the duty, but it is not a requirement. See Kronish v. United States, 150 F.3d 112, 126 (2d Cir.1998); In re Napster, Inc. Copyright Litig., 462 F.Supp.2d 1060, 1068 (N.D.Cal.2006); In re Quintus Corp., 353 B.R. 77, 80-84 (Bankr.D.Del.2006), aff'd, 2007 WL 4233665 (D.Del.2007). As soon as a potential claim is thus identified, a party is under a duty to preserve evidence which it knows, or reasonably should know, is relevant to the future litigation. Nat'l Ass'n of Radiation Survivors v. Turnage, 115 F.R.D. 543, 556-57 (N.D.Cal.1987)."


Reasonableness Test for Document Retention Policies

Borrowing precedent from the U.S. Court of Appeals for the Eighth Circuit, the Court provides an interesting twist on document retention policy and document destruction, and appears to endorse an approach in which a court may determine if a document retention policy is prima facie reasonable

"If a party has a record retention policy, it is appropriate for the court to determine "whether the policy is reasonable considering the facts and circumstances surrounding the relevant documents," or whether it was instituted in bad faith. Lewy v. Remington Arms Co., 836 F.2d 1104, 1112 (8th Cir.1988)."

The Court then notes that once a Court has found a document retention policy reasonable under the circumstances, a Zubulake analysis may then be undertaken:

"Even if the court finds the policy to be reasonable given the nature of the documents subject to the policy, the court may find that under the particular circumstances certain documents should have been retained notwithstanding the policy. For example, if [a party] knew or should have known that the documents would become material at some point in the future then such documents should have been preserved. Thus a [party] cannot blindly destroy documents and expect to be shielded by a seemingly innocuous document retention policy. Gumbs v. Int'l Harvester, Inc., 718 F.2d 88, 96 (3d Cir.1983). Therefore, "[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a 'litigation hold' to ensure the preservation of relevant documents." Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y.2003)."


Imminence Not Required to Trigger Duty to Preserve

The Rambus court acknowledges that a duty to preserve may be triggered well in advance of litigation, as Rambus found out.

“A duty to preserve arises when there is knowledge of a potential claim. Winters v.Textron, Inc., 187 F.R.D. 518 (M.D.Pa.1999). A potential claim is generally deemed cognizable in this regard when litigation is pending or imminent, or when there is a reasonable belief that litigation is foreseeable. For instance, a duty to preserve evidence can arise many years before litigation commences; imminency is sufficient to create the duty, but it is not a requirement. See Kronish v. United States, 150 F.3d 112, 126 (2d Cir.1998); In re Napster, Inc. Copyright Litig., 462 F.Supp.2d 1060, 1068 (N.D.Cal.2006); In re Quintus Corp., 353 B.R. 77, 80-84 (Bankr.D.Del.2006), aff'd, 2007 WL 4233665 (D.Del.2007). As soon as a potential claim is thus identified, a party is under a duty to preserve evidence which it knows, or reasonably should know, is relevant to the future litigation. Nat'l Ass'n. of Radiation Survivors v. Turnage, 115 F.R.D. 543, 556-57 (N.D.Cal.1987).


Dispositive Sanctions

The Rambus court, following 3rd Circuit precedent, notes that:

"Consistent with the analytical framework identified in Schmid, such sanctions are not warranted in the absence of demonstrated bad faith (i.e., the intentional destruction of evidence) and prejudice. With respect to the latter, the imposition of a dispositive sanction should be confined to those cases where the failure to produce " 'materially affect[s] the substantial rights of the adverse party' and is 'prejudicial to the presentation of his case.' " Gates, 167 F.R.D. at 104 ( citing Wilson v. Volkswagen of America, Inc., 561 F.2d 494, 503 (4th Cir.1977))."


So, we have the adoption 8th Circuit standards to determine if a document retention policy is prima facie reasonable, 3rd Circuit spoliation standards require a showing of "bad faith" or "intentional" destruction of evidence, rather than the negligence applied by the 2d Circuit and others.


Burden of Proof to Establish Spoliation

The Rambus court acknowledges that the standard of proof required to prevail in a spoliation claim "is not a matter of settled law in the Third Circuit."
Citing a District Court of Colorado case, the Court decides that "clear and convincing" standard for spoliation mirrors the "clear and convincing"
standard for a finding of inequitable conduct in patent cases:

"Although the court recognizes that requiring clear and convincing evidence for the imposition of dispositive sanctions for spoliation places an onerous burden on the aggrieved party (where the very proof of intent and prejudice arguably has been destroyed), nevertheless, the court concludes that this higher burden can appropriately operate as the clear and convincing burden operates in the patent arena in proving inequitable conduct."

Now, for the Court's decision, and for Rambus, not a pretty result:

"In determining the degree of prejudice suffered by Micron as a result of this spoliation of evidence, Micron has carried its burden under Schmid to prove that the documents destroyed FN58 were discoverable and the type of documents that would be relevant to the instant litigation. More specifically, Micron asserts unenforceability due to patent misuse and violation of the antitrust and unfair competition laws (based in part on Rambus' conduct at JEDEC), as well as inequitable conduct. These are defenses that are illuminated by evidence of a non-public nature, e.g., by internal Rambus documents.FN59 Because the record demonstrates that there were documents relevant to these defenses,FN60 the court concludes that Micron has been prejudiced by Rambus' conduct. That prejudice has been compounded by Rambus' litigation conduct, which has been obstructive at best, misleading at worst."
"In determining which of the potential sanctions for spoliation should be imposed, the court is directed to find the least harsh sanction that serves both to avoid substantial unfairness to Micron but deter such conduct in the future. In reviewing the record, the court concludes that the showing of bad faith is so clear and convincing that the showing of prejudice can be proportionally less. The spoliation conduct was extensive, including within its scope the destruction of innumerable documents relating to all aspects of Rambus' business; when considered in light of Rambus' litigation conduct, the very integrity of the litigation process has been impugned. Sanctions such as adverse jury instructions and preclusion of evidence are impractical, bordering on meaningless, under these circumstances and in the context of a typical jury trial.FN61 Therefore, the court concludes that the appropriate sanction for the conduct of record is to declare the patents in suit unenforceable against Micron. An order will issue."

Link to the decision (from Rambus site): http://investor.rambus.com/downloads/2009-01-09%20Opinion%20on%20Unclean%20Hands.pdf

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Case: Jones v Hawley
Cite: --- F.R.D. ----, 2009 WL 63000 (D.D.C. 2009)
Date: 2009-01-12
Topics: Mutuality of duty to preserve, spoliation, failure to preserve, sanctions, adverse inference, D.C. Circuit Court of Appeals spoliation approach.

Plaintiffs (former TSA employees) alleged that the TSA's loss of a hard drive containing personal information (names, social security numbers, dates of birth, etc.). In an interesting twist, it was the plaintiff's failure to preserve emails and other documents that led the Court to render the following decision. This case shows just how blurry the line can be between spoliation and negligent document withholding or destruction. That blur was in large part caused by defendants' own actions, and, in this blogger's opinion, underscores the importance of mutuality of the duty to preserve:

"1. Failed to preserve and produce documents relevant to their claim, although they admitted that they had such documents in their possession.

"2. Indicated that they had no responsive documents in their response to the defendants' Request to Produce Documents, although their other responses to discovery indicated that they did.

"3. Never searched for documents that the defendants demanded, except for one plaintiff, who limited his search to what he described as information that was "reasonably accessible." Defs. Mot. at 5-6 ( quoting deposition of plaintiff Soulia at 105).

"4. Indicated that they would supplement their responses to the interrogatories but never did."
Plaintiff's position? The missing evidence was "barely relevant" and so no harm or prejudice could be found by plaintiff's failure to keep or produce.

Magistrate Judge Facciola notes plaintiff's:

"[m]isapprehension" that a fundamental purpose of discovery is to secure information that will impeach or contradict an opponent's case."


The Court then finds that:

"Since the plaintiffs have lost information that they were unquestionably required to preserve and produce, the question becomes what remedy is appropriate for the Court to impose."

The Court reminds us that Fed. R. Civ. P. provides no express remedy for spoliation, and then provides a good spoliation sanctions imposition analysis in the District of Columbia Circuit Court of Appeals.

Notably, the Court of Appeals draws on Federal, and not state common law, (in this case, District of Columbia, or Maryland law):

""[i]t is settled beyond all question that at common law the destruction, alteration, or failure to preserve evidence in pending or reasonably foreseeable litigation warrants the finder of fact inferring that the destroyed evidence would have been favorable to the opposing party." Ashford v. E. Coast Express Eviction, No. 06-CV-1561, 2008 WL 4517177, at *2 (D.D.C. Oct. 8, 2008) (citing United Med. Supply Co., Inc. v. United States, 77 Fed. Cl. 257, 263 (2007)). See also Shepherd v. Am. Broad. Cos., 62 F.3d 1469, 1481 (D.C.Cir.1995) (holding that each party has " 'an obligation to preserve and also not to alter documents it knew or reasonably should have known were relevant ... if it knew the destruction or alteration of those documents would prejudice [its opponent]." ') (internal quotations omitted). "[A] court may employ an adverse inference due to a party's 'failure to preserve evidence,' even if deliberate or reckless conduct is not present." More v. Snow, 480 F.Supp.2d 257, 275 (D.D.C.2007) (citations omitted); Miller v. Holzmann, No. 95-CV-1231, 2007 WL 172327, at *3 (D.D.C. Jan. 17, 2007) ("It is the law of this Circuit that a party has an obligation to preserve evidence it knew or reasonably should have known was relevant to the litigation and the destruction of which would prejudice the other party to that litigation."). Before allowing an adverse inference however, "the court should consider the 'degree of negligence or bad faith involved, the importance of the evidence involved, the importance of the evidence lost to the issues at hand, and the availability of other proof enabling the party deprived of the evidence to make the same point." ' Id."


Magistrate Judge Facciola then provides a chart (you can see the chart by clicking the link to the decision below) listing the plaintiff's claims, and quite adroitly explains how each of these claims operates as an admission that "while they once had the relevant documents, they no longer do and therefore never produced them during discovery."

Finding plaintiff's negligence "inexcusable," the Court then ordered the imposition of an adverse inference in connection with those documents not "kept and produced."

In case anyone is curious, plaintiffs were represented by counsel, apparently employed by the American Federation of Government Employees.

Link to the decision: https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2007cv0855-39

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Case: Citizens for Responsibility and Ethics in Washington v Exec. Office of the White House
Cite: 07-cv1707; 07-cv-1577 (D.C.D.C.)
Date: 2009-01-15
Topics: Duty to Preserve; emergency relief in connection with ESI preservation; Not your everyday search and document preservation case

In this latest chapter involving the White House emails, Magistrate Judge Facciola faced an issue in connection with which he had limited information, and a very short period of time in which to make a decision based on that limited information. The White House represented to the Court that, in accordance with standing orders of the District Court produce hard drives containing certain ESI (emails) generated by the Executive Office of the President (EOP) between 2003 and 2005. Despite the broad wording of the District Court's order, the EOP represented to Magistrate Judge Facciola on January 14 that it would:

"[p]rovide only upon those divisions whose records are subject to the Federal Records Act ("FRA")3 and not to those subject to the Presidential Records Act ("PRA").4 As a result, they have not and will not fulfill the obligations now imposed by Judge Kennedy's order as to the latter."

The Court notes that the missing emails (apparently retrievable from backup
tapes) to be "at the very heart of this lawsuit, and finds a "profound societal interest in their preservation. They are, after all, the most fundamental and useful contemporary records of the recent history of the President's office."

In what is his signature style, Magistrate Judge Facciola puts the need to preserve the truth in historical perspective:

"If Napoleon was right when he said that he did not care who wrote France's laws if he could write its history, then the importance of preserving the e-mails cannot be exaggerated."

The Court's rationale appears much earlier in the decision:

"To further complicate the matter, the records at issue are not paper records that can be stored but electronically stored information that can be deleted with a keystroke. Additionally, I have no way of knowing what happens to computers and to hard drives in them when one administration replaces another."

With time running out (two days before the Bush-Obama transition) the Court was left with only two choices:

"Moreover, at this point I am between a rock and a hard place. If, despite the defendants' representations, e-mails were transmitted from PRA to FRA agencies and back but I preclude a search for them in the PRA agencies, I will be honoring a representation without having any opportunity to test its correctness. I may therefore fail miserably to preserve the res of this lawsuit based on an untested assertion."

"If, on the other hand, I do not honor the representation and order all computers to be searched, I am at least doing all I can to preserve the res in the only way possible. The importance of doing so easily trumps the costs involved. "

It appears that the EOP attempted to run the clock. Time ran out --- for the
EOP:

"Therefore, defendants must appreciate that the Order I am issuing requires them to search for e-mails in the specified period in both PRA and FRA agencies."

Link to decision: https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2007cv1707-105