Thursday, March 05, 2009

2009-03-05 Discovery Abuse Findings and Sanctions Order in Bray & Gillespie v Lexington Insurance Company

This sanctions order, issued yesterday by Magistrate Judge Karla Spaulding of the Middle District of Florida, warrants an extended post. Purely imo, I think it’s significance compares with Magistrate Judge Major’s decision in Qualcomm v Broadcom. Of course, it ain't over till it's over, and that means we'll have to await (1) the District Judge's approval and adoption of Magistrate Judge Spaulding's Order (not a Report and Recommendation), and any appeal (whether to the District Judge or to the 11th Circuit).

Case: Bray & Gillespie Management, LLC., et al. v. Lexington Ins. Co., et al.
Citation: 2009 WL546429 (MD FL 2009)
Date: 2009-03-04
Topics: eDiscovery abuse, client and law firm sanction, attorney sanction, sanctions based on inherent powers and Fed.R. Civ. P. Rule 37, inherent power to sanction non-parties for bad faith conduct, non-compliance with form of production, failure to produce metadata, deletion, alteration
or manipulation of metadata, attorney misunderstanding technical terms (competency), attorneys as fact witnesses in ESI discovery proceedings, TIFF images are not native format ESI, TIFF images deemed not maintained in "ordinary course of business".

Imo, this 51 page decision ranks in significance with the 2008 Qualcomm v Broadcom sanctions order. In what appears to be turning into an epic discovery abuse decision from the U.S. District Court from the Middle District of Florida, U.S. Magistrate Judge Karla Spaulding sets context by recounting the numerous discovery conferences and two days of evidentiary hearings regarding "ongoing difficulties with the form of production of electronically stored information ("ESI") by Plaintiffs.

In the instant proceedings Defendant Lexington sought "an order compelling ESI production "in the form specified in its request for production of documents ("RFP")" awarding sanctions for continuing non-compliance with Fed.R.Civ.P. Rule 34, and M.J. Spaulding’s April 11, 2008 Order compelling discovery responses to certain of Defendant Lexington’s requests.

The short of it: Defendants requested ESI produced in native data format, or in the alternative, in "Extractiva" format. Plaintiff B&G failed to produce in the form specified by Defendants. Bad juju, and we’re only on page 2.

Then, the eDiscovery actions of Plaintiff’s counsel are placed under intense judicial scrutiny. Magistrate Judge Spaulding notes that although "[C]ounsel for Plaintiffs argued that the form of production was substantially justified," [B&G’s counsel’s] arguments were "premised on material misrepresentations and omission regarding facts underlying the form in which ESI was maintained by B&G and provided to its lawyers." (Bad juju, and we're still on page 2)

But wait, it gets worse:

"Accordingly, while Lexington seeks sanctions only against B&G, this Court has also put counsel of record for B&G on notice that certain lawyers at Reed Smith, LLP, who made the misrepresentations and withheld material information, Reed Smith, LLP, and B&G’s in-house counsel are also subject to sanctions."

This case involved a dispute about insurance coverage claims for hurricane damages sustained by Plaintiff B&G in 2004. Anderson, Kill & Olick ("AKO") represented B&G in connection with its claims submission. In connection with these activities, both electronic and paper records were gathered by B&G’s counsel AKO. Paper docs were scanned, other ESI (such as emails and email attachments) were "downloaded in native data format."

Magistrate Judge Spaulding is nothing if not definitionally precise: for purposes of the instant decision, she defines ESI as information that is first instantiated electronically, rather than scanned from paper to generate a digital image:

"FN3 Throughout this Order, I will use ESI to refer only to electronically stored information, not to information that was scanned from paper form to a digital image."

Both scans and ESI were copied to a hard drive ("Target Hard Drive") at B&G counsel AKO's office, where a program called "Extractiva" was "used to convert the scanned documents and ESI to TIFF images. (In footnote 4, the Court quoting from the Sedona Principles, notes that .tiff images ""lose searchable text and metadata that might enable better understanding and utility of the evidence.""). AKO failed to instruct anyone to exclude metadata thought would be automatically captured by Extractiva. After loading the .tiff images and associated metadata into an Introspect database, the "Target Hard Drive" was put into storage.

The complaint was filed in February 2007, and the Orlando office of Boies, Schiller and Flexner ("Boies Schiller") was substituted as AKO's local counsel. In January of 2008, John Ellison, one of AKO's partners handling the case thereafter joined Reed Smith as partner. Ellison did not withdraw and continued to co-counsel for plaintiff B&G.

In March 2008, B&G discharged AKO as counsel and John Ellison and Reed Smith "effectively became B&G's lead attorney." AKO subsequently moved to withdraw as counsel, and the Court permitted its withdrawal, conditioned upon AKO's delivery of all discovery materials and other litigation-centric documents to new counsel Reed Smith.

BlogNote: Stay with me. This timeline plays an important role in the Court's reasoning.

Sometime "after May 2, 2008" Reed Smith partner John Berringer became involved in the case, and asked Reed Smith associate Jeremy Heinnickel to assist with eDiscovery issues. Meanwhile, attorney W. Bruce DelValle, formerly outside counsel for plaintiff B&G, entered his appearance as in-house counsel for B&G, and substituted as local attorney for Boies Schiller. In September 2008, B&G filed for bankruptcy protection, and thereafter attorney Michael Beaudine and "other lawyers" at Latham, Shuker, Eden & Beaudine appeared as co-counsel for B&G. Defendant Lexington has been represented throughout by Daniel C. Brown at Carlton Fields (Carlton Fields).

Ok, now that the cast of main characters is set, on to the proceedings:

In their August 2007 Case Management report, the parties reported that they believed eDiscovery was necessary, but after meeting and conferring, could not reach an agreement on form of ESI production. That said, defendant Lexington's second RPD requested ESI, and specified form of ESI production pursuant to Fed. R. Civ. P/ Rule 34(b)(1)(C) as follows:

"Electronically stored information" includes all "electronically stored information" as that term is used in Federal Rules of Civil Procedure 26(a)(1)(B) and 34(a)(1). . . . As used in these Requests for Production a request for "electronically stored information" calls upon you to produce such information, without deletion or alteration of meta-data, in its native form, and to indicate the computer hardware and software program(s) needed to translate the information into usable form in the information’s native format. Lexington RFP 1 at 5 ¶ J (emphasis in original); Lexington RFP 2 at 3 ¶ G (same).

"Document" includes electronically stored information – including writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations–stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form."

Defendant Lexington's further instructions to B&G:

"Please state, for each item of electronically stored information, the hardware, medium (for example, "compact disk" or "compact disk reader") and software program required to inspect the information contained in the item in the native format in which the information is stored and the computer hardware and software required to copy the information in such native format."

Despite these requests, plaintiff B&G's counsel objected to the "requested form for producing electronically stored information (something the Court notes that the FRCP do not permit) but did not object to B&G's ESI definitions or to its native data format requests.

What B&G Produced - The Meaning of "Scanned"

In response to defendant's second RPD, B&G produced 27 discs containing .tiff images of paper documents produced previously to defendant Lexington. The B&G attorney at AKO signed the RFP responses for B&G understood "scanned" to mean converting paper documents to an electronically stored image. The Court "credited that attorneys testimony only to the extent that it referred to scanning of "documents that originally existed in paper form, and not production of ESI."
You can see where this is heading...

B&G, without objecting to Defendant Lexington ESI format request, served a supplemental response, and then an amended supplemental response, to Lexington's RPD. Although B&G asserted in a discovery conference that it had:

"produced about 100,000 e-mail documents categorized by sender's email in-box" and that "about 100,000 electronic non-email documents...are into the queue and will be produced in the next two weeks or so, perhaps even earlier."

The problem: the ESI had been produced as .tiff images without metadata. As you might surmise, Rule 37 motion practice ensued, and on April 11, 2008, Magistrate Judge Spaulding issued an order compelling plaintiff B&G to respond to the request as instructed in that request (and provide native format data, etc.).

B&G's ESI Representations

At a March 28, 2008 discovery conference, counsel for B&G (Reed Smith) represented that a March 14 CD contained email and attachments. Upon examination, defendant Lexington's counsel discovered that the disc "contained 108,845 documents in .tiff format. The Court then makes the
following point perfectly clear:

"TIFF images are not the native format of email or other ESI"

To steal a line from Bugs and company, that's not all, folks. The Court also notes that:

"Similarly, Lexington’s counsel discovered that the April 30 Discs contained at least 721,331 pages of documents, many of which were e-mails. See Doc. No. 202-9 ¶¶ 5-6. All of the documents were TIFF images with no metadata and no coding that would allow the documents to be searched by fields, such as creation date, last modification date, author, or subject. Doc. No. 202-10 ¶¶ 5-7; see also Doc. No. 222-2 ¶ 5. Thus, both the March 14 Disc and the April 30 Discs did not comply with Lexington’s specifications in its RFPs that ESI be produced in native format without alteration or deletion of metadata. The April 30 Discs also did not comply with the April 11 Order directing B&G to produce documents responsive to the specific requests identified in the Renewed Motion to Compel."

At minimum, the Court points out, TIFF format "eliminated" search capabilities, and OCR conversion would have been necessary to make the images searchable. "Accordingly," the Court states, "the March 14 Disc and the April 30 Disc contain ESI that was not in reasonably usable form."

BlogNote: Although I would have argued in addition that .TIFF's are not ESI (and that, as such these files never existed as original ESI), Judge Spaulding does cite Judge Scheindlin's new Digital Evidence book as source for her reason why a .tiff file is not generally "reasonably usable:

"FN9 When a person "scans" a document, the resulting electronic output is stored as a picture of the document, such as in the TIFF images produced by B&G in this case. See SHIRA A. SCHEINDLIN, DANIEL J. CAPRA, ELECTRONIC DISCOVERY AND DIGITAL EVIDENCE 708 (2009) [hereinafter "ELECTRONIC DISCOVERY"] (A scanner is "[a]n input device commonly used to convert paper documents into images."). OCR used to convert physical documents or
electronic images into text files has significant limitations. OCR generally does not recognize handwriting. If the image file is of poor quality, OCR often cannot produce usable text files. Id. at 696."

Section "D" to the Order: "Berringer's False Story About How B&G Collected ESI"

One could argue that no blanks need be filled in other than the caption to Section "D" to the Order.

That said, this is where this decision begins to resemble Magistrate Judge Major's 2008 eDiscovery abuse decision in Qualcomm v Broadcom. Some choice excerpts follow.

"During the course of the negotiations to resolve the dispute regarding the form of production of ESI, [Reed Smith attorney] Berringer concocted a story about the process that B&G and AKO used to gather the discoverable documents"

How Not to Produce ESI in Native Data Format: Claim that Client Printed Files and Scanned into .tiff Format

"Berringer explained that "B&G printed the documents from B&G’s electronic systems. B&G sent the printed documents to Anderson Kill. Anderson Kill scanned the documents to create TIFF images of them . . . , from which production was then made." Doc. No. 202 at 15 n.11 (emphasis in original) (Counsel for Lexington’s description of the explanation)."

The Court states that B&G's attorney Berringer was aware of quite the opposite:

""In creating this false tale, Berringer ignored numerous facts known or readily available to him about the actual process that was used to collect ESI and produce it to Lexington. On April 9, 2008, Berringer defended a deposition of Harold Lueken, formerly in-house counsel for B&G, who
testified that information was "electronically transferred" and given to AKO in 2006."

Willful Blindness of B&G's Retained Counsel

The Court was not sparing in its depiction of B&G's outside counsel's discovery behavior:

"Reed Smith attorneys had access to the Introspect database before and after AKO transferred it to Reed Smith. If he had reviewed the Introspect database, Berringer would have seen that it contained ESI metadata. Finally, Berringer could simply have contacted AKO to learn how the information was gathered. See id. at 344 (Berringer did not seek information from AKO about
the scope of the agreement to produce scanned copies of documents in lieu of hard copies); accord. Id. at 238, 259-61 (cooperation between AKO and Reed Smith).10"

"The false explanation Berringer gave regarding how ESI had been collected was based, at best, on willful blindness which unreasonably prolonged and multiplied the proceedings regarding the ESI discovery dispute."

On May 27, 2008, Defendant Lexington filed a Third Motion for Sanctions including a Third Motion to Compel Production of ESI (I believe that is how the pleading was captioned). The Court notes that "Lexington argued, in sum, that B&G violated Rule 34 by failing to produce ESI in the form specified in Lexington’s RFPs and violated the April 11 Order by producing the April 30 Discs, which did not comply with the specified form of production of ESI. Lexington sought an order compelling production of ESI in the form specified in Lexington’s RFPs, striking portions of B&G’s claims to which the requests for production at issue pertained, and awarding Lexington the reasonable costs, including attorney’s fees, it incurred in filing the motion."

Plaintiff B&G countered with arguments, inter alia, that

(1) Lexington had not specified form of request in initial case management cnference did in its RFP),
(2) the RPD contained definitions buried in boilerplate,
(3) the native format data requests were overly burdensome, and
(4) that the documents were "provided 'as kept in the usual course of business,'" citing to several out-of-circuit cases in which courts determined that failure to produce metadata did not violate Rule 34.

(BlogNote: Quick retreat to the timeline: On June 28, 2008 the Introspect data base was transferred to B&G new counsel, Reed Smith. As of June 28, 2008, therefore, Reed Smith had a copy of the Target Hard Drive, replete with all ESI and associated metadata.)

Counsel for the parties continued to confer in an attempt to resolve or narrow eDiscovery issues throughout June 2008. On June 23, Reed Smith attorneys disclosed defendants' counsel that B&G's ESI had not been "printed and scanned," but rather, that "native format emails were collected and then converted into TIFF images using a program that set to selectively exclude
certain types of metadata."

What Defines Non-Cooperation, or, How Not to Cooperate

"During these [June 2008] discussions, Reed Smith attorneys did not disclose what metadata the Introspect database actually contained; did not disclose how the ESI in native format was transferred to the Introspect database; and did not disclose the existence of the Target Hard Drive or that Reed Smith had a copy of it in its possession."

B&G's counsel at Reed Smith attorneys then offered to produce "load files" (of a type not discussed) containing "seven basic metadata fields for the TIFF images previously produced..."

Metadata Offered, Then Offer Withdrawn

Here's where it gets murky. Or messy. Or ugly, depending upon your pov. At one point, Reed Smith attorney Berringer offered to give defendant Lexington "all of the metadata in the Introspect database," but then and apparently without explanation, retracted that offer:

"When defense counsel asked that B&G disclose in writing the metadata contained in the Introspect database, among other things, Berringer withdrew the offer."

The June 25, 2008 Evidentiary Hearing - Semantics Gives Way to Facts

At an evidentiary hearing held in June 2008, defendant's technology expert opined that "the discs contained ESI that had been converted to TIFF images, not scanned copies of paper documents. The discs had metadata showing the beginning and ending of each page, but no other metadata and no text search capabilities.

As well, the Court noted, there was no ability to link email by conversation thread, link attachments to particular emails, no hash values (to determine if ESI is/are duplicates). The expert also testified that the conversion of spreadsheets into TIFF images made the spreadsheets essentially unreadable and "did not disclose the underlying formulas for financial calculations."

Perhaps not coincidentally, it was only after defendant's expert's testimony that attorney Berringer "revealed to the Court for the first time" that he had "learned that ESI had been copied to the Target Hard Drive and converted to TIFF images stored into the Introspect database."

BlogNote: Some disclosures are better not left for a closing argument in a sanctions hearing:

"Ellison and Berringer did not disclose until closing argument, that sometime before June 20, 2008, [the] Reed Smith analyst reviewed the Introspect database and the Target Hard Drive and told [Reed Smith associate] Heinnickel that metadata existed for the documents on the March 14 and April 30 Discs."

When Cornered, Blame Your Adversary

B&G's counsel, Reed Smith attorneys Ellison and Berringer "repeatedly argued that their failure to learn and disclose the correct information about the gathering and production of ESI was the result of AKO's (Plaintiff's predecessor counsel) refusal to provide them information."

That dog wouldn't hunt.

June 2008 Sanctions Imposed on Plaintiff B&G for ESI Manipulation

The failure to produce metadata, or strip it away by means of flattening ESI into an unsearchable .TIFF sans metadata is addressed by Magistrate Judge Spaulding assessing fault and imposing monetary penalties:

"At the conclusion of the hearing, I found that B&G "directly or through their agents deliberately manipulated the electronically stored information in such a way as to withhold from the defendants the information that had been requested, specifically metadata." Id. at 196.15

"I further found that the problems with the ESI production were caused by B&G and its agents, and therefore "they will be the ones to bear the burden of whatever cost it takes to get" the ESI produced in a usable format."

It is perhaps noteworthy to point out that Plaintiff B&G appealed the June 2008 Order to the District Judge, in essence asserting the Magistrate Judge Spaulding had (1) erred by failing to reduce her order to writing, and (2) that the Court abused its discretion by requiring expedited production of ESI "too quickly" and thereby placing an undue burden on Plaintiffs. Not surprisingly, the District Judge overruled Plaintiff B&G's and "affirmed the order in all aspects."

Thereafter, in attempted compliance, Plaintiff B&G provided Lexington with a hard drive ("B&G Hard Drive") that "was not complete, not in the original format, and not as maintained by B&G in the ordinary course of business."

Re-Opened Sanction Hearing December 8 2008

In October 2008, the Court issued a notice to B&G's in house counsel,to Reed Smith attorney Berringer, and the Reed Smith firm, affording them an opportunity to file a supplemental response addressing "why sanctions should not be imposed against any or all of them as the attorney(s) responsible for the sanctionable conduct." The Court also later re-opened the June 8, 2008
evidentiary hearing.

When Cornered A Second Time, Blame Predecessor Counsel

B&G outside counsel's supplemented response at the re-opened evidentiary and sanctions hearing:

"In their supplemental response to the motion for sanctions, Reed Smith and Ellison again asserted that "[b]ecause of the poor communication with prior counsel, and the termination of B&G’s prior chief legal officer, it has proven difficult for Reed Smith and John Ellison to get the facts about
Plaintiffs’ document production.""

The December 8, 2008 Hearing

Cast blame Plaintiff B&G's current counsel tried, but come the hearing, predecessor counsel AKO testified through its attorneys that AKO "always cooperated with Reed Smith...allowing [them] unrestricted remote access to the Introspect database."

Nevertheless, at this point, and with a torrent of impeachment testimony provided by Plaintiff's B&G's predecessor counsel AKO, B&G's current counsel began conceding points... and at the hearing, one of Reed Smith's attorneys conceded that the "asserted" communications problems between Reed Smith and AKO were "'overstated.'"

"[B&G co-lead counsel and Reed Smith Attorney]Berringer conceded that he had incorrectly advised defense counsel that ESI contained in the Introspect database had been printed and scanned."

Berringer also testified about, well, I think he testified about his misunderstanding of "how the hard drive c[a]me about." The following testimonial excerpt is included solely to point out a rather feeble (strictly imo) attempt at feigned technological ignorance:

"I asked Jeremy [Heinnickel] and I’m sure we asked the client, how did this target hard drive come about? Every time we raised the question, we were told that Maya Cater and Leuken were involved. "You’d have to talk to them." But every time we raised the question, somebody talked about the [student interns]. And I guess what happened was I just translated that, because the only thing I could ever take from most of these discussions was that [the student interns] stood in front of scanners, scanning documents for a full weekend; and I just – I guess I made an unconscious leap then and assumed that they had scanned everything."

The Money Shot: Withholding Disclosure of Hard Drive Containing ESI Metadata

Something more significant than Berringer's "we screwed up" defensive posture (actual testimony excerpt) was his "acknowledgement that he did not disclose the existence of the Target Hard Drive containing the ESI in native format during the negotiations with Lexington's counsel."

The Court wasn't into buying the "screw-up" argument:

"Berringer was evasive and dissembling when asked to explain why Reed Smith did not simply produce the metadata in the Introspect database associated with the TIFF images when it produced the March 14 and April 30 Discs."

It was also clear that there was an easy way to comply with Defendant's RPD's, and at minimum, that meant to produce the TIFF images in searchable fashion together with the associated metadata:

"Berringer also knew that the Introspect database was searchable by fields that contained metadata such as name, date, subject matter, to, from, and CC. Id. at 278-79, 305-06. Berringer testified, 'I know that the fields that we told them [the Introspect database] had were to, from, date, re line, if there was one, cc’s, bcc’s.'). Id. at 304-05 (emphasis added). Berringer identified a letter in which Reed Smith offered 'to produce load files containing certain metadata fields for the e-mails produced' that included, but were not limited to, those set forth in the letter. Id. at 313. Thus, there was no need to search the ESI in native format before determining the scope of the metadata in the Introspect database, and no need to conduct a privilege review of the ESI in native format. Rather, B&G and Reed Smith could easily have produced for each TIFF image on the March 14 and April 30 Discs a corresponding load file containing the metadata for each image as stored in the Introspect database."

The Court then determined that the evidence supported a finding that B&G has (at least as of March 4, 2009) still not disclosed all the metadata in the Introspect database.

Now, on to the Court's analysis:

eDiscovery Violations Analysis

Waiver of Objection to Form of ESI Production Results in Fed. R. Civ. P. Rule 34

Although the Court found that the parties complied with the Fed. R. Civ. P. Rule 26f) meet and confer, even though they did not reach an agreement. The Court then provides an analysis of Fed. R.Civ. P. Rule 34 requestor's option to designate format of production of ESI. In particular, the Court notes, defendant Lexington specified the form of production -- "in native form without deletion or alteration of metadata." Relying on Rule 37a)(3)(B)(iv), the Court found that plaintiff B&G waived its objections to defendant Lexington's RFP because it failed to support the objections in a response to the Renewed Motion to Compel.

Plaintiff B&G's Violation of April 11, 2008 Order

On April 11, 2008 Order, the Court ordered B&G to produce by April 30, 2008 "all responsive documents in its possession, custody or control to the extent requested in the Renewed Motion to Compel. The Court found that B&G could have produced responsive ESI by that deadline. That B&G (or its counsel) had in its possession, but chose not to produce, the Target Hard Drive that contained what would have been documents responsive to the request, the Court found that B&G violated the April 11, 2008 order by "failing to produce ESI in the specified form.

Available Sanctions Discover Violations Sanctions Under Fed. R. Civ. P. Rule 37

The Court then provides a short analysis of possible sanctions for violations of a discovery order pursuant to Fed. R. Civ. P. Rule 37(b):

"(i) directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims;
(ii) prohibiting the disobedient party from supporting or opposing
designated claims or defenses, or from introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the order is obeyed;
(v) dismissing the action or proceeding in whole or in part;
(vi) rendering a default judgment against the disobedient party; or
(vii) treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination."

Fed. R. Civ. P. Rule 37 Sanctions Applicable to Party, Its Counsel, or Both

The Court goes on to describe the "instead of" or "in addition to" language of Rule 37(b)(2)(C), where in essence, sanctions for discovery violations may be imposed against a party, the party's advising attorney, or both, and that sanctions may include attorneys fees caused by the failure.

The Court then states that under 11th Circuit decisional precedent, a motion for sanctions under Rule 37 may include both a party and his attorney, and that a court also has the double option of holding either the party, the attorney, or both responsible:

"'[A] motion for sanctions under Rule 37, even one which names only a party, places both that party and its attorney on notice that the court may assess sanctions against either or both unless they provide the court with a substantial justification for their conduct.' Devaney v. Continental Am. Ins. Co., 989 F.2d 1154, 1160 (11th Cir. 1993)."

No Bad Faith or Willfulness Required for Imposition of Discovery Violation Sanctions

The Court then notes that Rule 37 sanctions do not require a finding of either willfulness or bad faith by the party or its counsel, relying again on the 11th Circuit's decision in Devany v Continental Am. Ins. Co., supra.

Court's Inherent Power to Sanction

Magistrate Judge Spaulding also notes that the Court, pursuant to Supreme Court and 11th Circuit authority, has inherent power to sanction for discovery violations:

"Courts have the discretion to sanction conduct that abuses the judicial process even if procedural rules exist that govern the same conduct. Chambers v. NASCO, Inc., 501 U.S. 32, 44-45, 48-49 (1991). In fashioning appropriate sanctions, courts have the inherent power to impose sanctions on parties, lawyers, or both. In re Sunshine Jr. Stores, Inc., 456 F.3d 1291, 1304 (11th Cir. 2006). The court may tax attorney’s fees and costs "when either has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Byrne v. Nezhat, 261 F.3d 1075, 1106 (11th Cir. 2001)"

Court's Inherent Power to Sanction Non-Parties for Bad Faith Discovery Violations

In what appears to be a decision of first impression for the Middle District of Florida, the Court adopts the reasoning of a decision from the U.S. District Court of the Eastern District of Michigan in finding that non-parties may be subject to inherent power sanctions imposition for bad faith discovery violations:

"The court’s inherent power also includes sanctioning non-parties for bad faith conduct. See generally Chambers, 501 U.S. at 43; see also Helmac Prods. Corp. v. Roth (Plastics) Corp., 150 F.R.D. 563, 564-67 (E.D. Mich. 1993) (citing Chambers as authority to sanction non-parties). The
sanctioning of non-parties requires additional safeguards. I find persuasive the decision in Helmac Products that a non-party must "(1) have a substantial interest in the outcome of the litigation and (2) substantially participate in the proceedings in which he interfered." Helmac Prods. Corp.,
150 F.R.D. at 568."

No Substantial Justification Shown

The Court notes that the Supreme Court imposes a negative pre-condition (no substantial justification) prior to permitting the imposition of a sanction for discovery violations under a Court's inherent power:

""The Supreme Court has clarified that an individual’s discovery conduct should be found ‘substantially justified’ under Rule 37 if it is a response to a ‘genuine dispute, or if reasonable people could differ as to the appropriateness of the contested action.’" Devaney, 989 F.3d at 1163 (quoting Pierce v. Underwood, 487 U.S. 552, 565 (1988) (citations omitted))."

B&G's "Substantial Justification" Arguments

Three were asserted:

(1) B&G’s response to Lexington’s RFPs referred to an agreement to produce scanned copies of documents;
(2) Lexington delayed in objecting to the form of production of ESI; and,
(3) B&G was entitled to produce ESI as maintained in the usual course of its business and in reasonably usable form." [citations omitted]

Magistrate Judge Spaulding's analysis:

(1) The evidence established that the agreement among counsel related only to documents that were maintained in paper form. B&G did not produce all documents as scanned copies: "Rather, B&G's attorneys manipulated ESI to convert the searchable text to a TIFF image stripped of metadata." The Court found these facts to "undermine" B&G's assertions of justifiable reliance.

(2) Lexington's Delay in Objecting to B&G's failure "might carry some weight if B&G had produced ESI in a form permitted by Rule 34 at the outset. It didn't, and the Court again found no evidence of "justifiable reliance."

(3) Magistrate Judge Spaulding provides incisive comments about "maintained in the usual course of its business" --- Put succinctly, the Court found that it was not TIFF images that was maintained by B&G in usual course of its business." In fact, the argument was apparently made that the ESI, together with its associated metadata was what *was* maintained in B&G's ordinary course of business. Relying on the Federal Rules Advisory Committee notes to Rule 34, the Court also found that B&G's deletion of metadata from its discovery response "significantly degraded Lexington’s ability to search the ESI and, accordingly, that it was not in a reasonably usable form as required by Rule 34." Once again, B&G's "substantial justification" argument fell on deaf ears.

Out of Circuit Case Law Permitting Non-Production of ESI Metadata on Basis of Substantial Justification Rejected

B&G cited three cases in support of its assertion that it was "substantially justified in not producing ESI in native data format with associated metadata," and, notwithstanding the Court's finding them non-binding, rejects them each in turn as non-supportive of plaintiff's position:

Kentucky Speedway, LLC v. NASCAR, Inc., Civ. Action No. 05-138-WOB, 2006 WL 5097354 (E.D. Ky. Dec. 18, 2006) -- The Court notes that in this case, the movant did not specifically request the manner in which ESI should be produced, and that, on the facts of that case, that Court noted that the belated request was not warranted.

Michigan First Credit Union v. Cumis Ins. Soc’y, Inc., No. 05-74423, 2007 WL 4098213 (E.D. Mich. Nov. 16, 2007) --- In this case, the defendant objected to the format of production (native format data, with associated metadata). Judge Spaulding again notes that B&G never objected to the format of production specified by defendant Lexington.

In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig. ("In re Payment Card"), No. MD 05-1720(JG)(JO), 2007 WL 121426 (E.D.N.Y. Jan. 12, 2007). In this case, the requests were served (and responses produced) before the effective date of the amended Rule 34. In that case, even though defendant's had failed to object, the Court found it would "not be fair to impose the costs of reproduction of the ESI on the individual plaintiffs," but warned them that future production would likely require them to reproduce any ESI that was produced in a form that was reasonably usable. Rather than support plaintiff B&G's position, the Mag. Judge Spaulding finds here that "Accordingly, B&G’s knowledge of the decision in In re Payment Card provides additional support for the finding that the form in which it produced ESI to Lexington was not substantially justified"

The Impax Labs Decision Footnote

Footnotes are typically at least as instructive (if not more so) as opinion text in the main. Footnote 25 tells all:

"B&G cited Wyeth v. Impax Labs., Inc., 248 F.R.D. 169 (D. Del. 2006) for the proposition that when counsel do not agree on the form of production of ESI, a party is not required to produce ESI in native format." The Wyeth court’s decision was based on local discovery standards that directed parties to produce ESI as image files if they could not agree on a different form of \production. Id. at * 4-5. This Court does not have local discovery standards that establish the default form of production of ESI in the absence of agreement of the parties."

Author's Note: What is interesting is whether, in Delaware, a challenge to the local rules (as contradicting, or limiting, the Federal Rules) might be asserted.

Ok, back to Judge Spaulding's decision.

In a showng of impeccable logic, Magistrate Judge Spaulding also disposes of any remaining "substantial justification" arguments:

"Most telling, if B&G and its attorneys believed the form in which they produced ESI was substantially justified, there was no reason for them to conceal information and make material misrepresentations about the way ESI was collected and the form in which it was kept in the Introspect database."

" Instead, Reed Smith and its attorneys went to great length to fabricate explanations about why they could not produce ESI. In response to the April 11 Order, they asserted the costs and burden B&G would incur in producing ESI without disclosing to the Court and the parties that ESI with associated metadata was readily available in the Introspect database."

Deliberate or Reckless Disregard of Truth Does Not Provide Substantial Justification

This may not really require much explanation, but again, the Court was not sparing in its criticism of B&B's counsel's discovery conduct:

"During the December 8, 2008, hearing, counsel for Reed Smith still argued that production of ESI in native format would have been unduly burdensome because the privilege review had not been conducted of the ESI on the Target Hard Drive. In making this argument, counsel ignored the evidence that a privilege review had been done in the Introspect database, and that the metadata associated with the TIFF images on the March 14 and April 30 Discs could be produced from the Introspect database."

The Court's take: "Such deliberate or reckless disregard of the truth can never provide substantial justification under Rule 37."

Accordingly, B&G and its counsel have not established that their production of ESI and their response to the April 11 Order were substantially justified.

Sanctions for eDiscovery Violations Imposed

First, a finding of prejudice to defendant Lexington as requesting party:

"Lexington has been prejudiced by

(1) being unable to complete discovery after receiving ESI in a form that was not reasonably usable;

(2) incurring additional expense in using ESI that was produced in a form that limited its ability to search it; and,

(3) incurring attorney’s fees, costs, and litigation expenses in establishing that ESI had not been properly produced."

Perhaps most tellingly, B&G's discovery violations were ongoing:

"The interim relief that I granted resulted in production of the Logix Systems Hard Drive and B&G Hard Drive, but B&G still has not produced all specified ESI in reasonably usable form."


(1) Order directing Plaintiff B&G to produce (again): "Accordingly, B&G shall provide to Lexington the Introspect database, except for information already segregated as privileged or protected. B&G shall bear all costs related to this production, including purchasing software or paying license fees for Lexington’s use of the database software, and hiring professionals to copy the database, if necessary. Lexington may elect the form or forms in which it wishes the production of the Introspect database to be made – it may ask for a copy of the Introspect database, remote access to the database, or both."

(2) To ensure B&G's compliance, the Court also ordered it to provide a computer expert selected by Defendant with direct access to the Introspect database maintained by Reed Smith, so that "the expert can confirm that all information loaded into the Introspect database (except for privileged or
otherwise protected information) has been produced to Lexington.

(3) Discovery reopened as to Defendant for 60 days.

No Sanctions Against In House Counsel

The Court gave B&G's in house counsel (who was not an attorney advising B&G during the pertinent time period) a pass, and a strict warning:

"DelValle entered the case in May 2008 and became local counsel for B&G in June 2008. I credit his testimony that he did not participate in the production of ESI until after my June 25 Order requiring reproduction of ESI. Accordingly, I find that he was not an attorney advising B&G with respect to the production of ESI in March and April 2008. I remind DelValle, however, that blindly relying on outside counsel falls short of the duty he has as an officer of the court, as counsel of record, and as an advocate for his client."

Sanctions Against B&G's Outside Co-Lead Counsel

Sanctions Against Ellison: The Court first sets forth the discovery violation rules applicable to "advising attorneys" --

"Rule 37 provides that the party or the attorney advising the sanctionable conduct, or both, are subject to sanctions. Fed. R. Civ. P. 37(a)(5)(A), (b)(2)(C). The Eleventh Circuit has explained that "[t]he phrase ‘attorney advising such conduct’ does not . . . exclude . . . an attorney’s willful blindness . . . ; to the contrary, the phrase instructs that when an attorney advises a client in discovery matters, he assumes a responsibility for the professional disposition of that portion of a lawsuit and may be held accountable for positions taken or responses filed during that process." Devaney, 989 F.2d at 1161-62. In this respect, "[s]anctions exist, in part, to remind attorneys that service to their clients must coexist with their responsibilities toward the court, toward the law and toward their brethren at the bar.""

The Court then finds that Ellison to an "advising attorney" and finds him personally liable for sanctions:

"Ellison has been one of the lead counsel of record in this case since its inception. While he presented evidence that he was not involved in production of discovery before April 2008, the evidence shows that he began advising B&G regarding discovery before the April 30 Discs were produced."

"The improper production of ESI on the April 30 Discs and the discovery misconduct that followed was done under Ellison’s supervision, and necessitated the motion for sanctions and proceedings related thereto.

The Court's ruling: "As such, Ellison was "an attorney advising" B&G regarding the discovery misconduct, and he is personally liable for Rule 37 sanctions."

It bears mentioning that Ellison's argument that "his local counsel was in charge of the production of the April 30 Discs" fell on deaf ears: It did not relieve him from personal liability "because counsel of record may not avoid sanctions for his own conduct on the basis that another attorney was advising the client regarding the discovery matter at issue. Citing 11th Circuit precedent in Stuart I. Levin & Assocs., P.A. v. Rogers, 156 F.3d 1135 (11th Cir. 1998), Magistrate Judge Spaulding notes that in that case :

"The [11th Circuit] observed that while Levin "may have delegated some of these duties to his associate, such a delegation-while it may provide a ground for sanctioning [his associate]-did not relieve Levin of his own duties." Id. The Eleventh Circuit noted that "[a]s counsel of record, Levin
owed a duty to his client fully to represent his interests, and he owed a duty to the court to comply with the court’s orders." Id. Accordingly, the Eleventh Circuit found that the district court had not abused its discretion in imposing Rule 37 sanctions against Levin."

Magistrate Judge Spaulding's ruling:: "As in Levin, because Ellison’s own conduct was not substantially justified, he is subject to sanctions under Rule 37 and shall pay the reasonable attorney’s fees, costs, and expenses Lexington incurred in filing the motion for sanctions and in the matters arising therefrom. These costs include the fees and expenses of expert witness Teshima. In addition, Ellison shall pay the Court’s court reporter, Diane Peede, for the cost of transcribing the December 8, 2008, hearing on the motion for sanctions. "

Sanctions Against Plaintiff's Counsel and Plaintiff's Counsel's Firm

Magistrate Judge Spaulding also finds Plaintiff's counsel's law firm responsible for the discovery abuse of its attorneys:

"Reed Smith, through its partners and associate attorneys, was also responsible for the discovery misconduct."

The Court singled out Reed Smith, and Reed Smith attorney Berringer for his behavior:

"The evidence establishes that Reed Smith, particularly through its partners Ellison and Berringer, acted in bad faith with respect to the events that occurred after Lexington objected in May 2008 to the form of B&G’s production of ESI. Specifically, Berringer falsely told opposing counsel that B&G had caused all of its ESI to be printed and scanned to support the position that B&G could not produce metadata or text searchable documents. He made no reasonable effort to determine whether the story he told was true – such as looking at the information in the Introspect database or asking AKO."

"Counsel for Lexington and the Court were deceived by Berringer’s deliberate fabrication, and it resulted in a significant waste of resources for Lexington and the Court. Berringer finally disclosed to Lexington’s counsel on the eve of the June 25, 2008, hearing that B&G’s ESI had been obtained in electronic form and transferred to the Introspect database, but that disclosure remained deceptive and incomplete. He did not disclose what metadata the Introspect database contained or the extent to which the ESI therein had full text search capacity. He did not reveal, until after Teshima testified at the June 25 hearing, that B&G possessed the Target Hard Drive on which the ESI in native format was stored."

Berringer received additional excoriating attention from the Court:

"Berringer continued this pattern of deliberate misrepresentation through willful blindness in his testimony at the December 2008 hearing. He testified about the metadata on the Introspect
database, even though he never examined the database to determine what it contained. He was evasive about why B&G did not simply disclose the metadata on that database before the hearing.
Berringer and Ellison also made material misrepresentations to the Court about the reason they did not produce the metadata from the Introspect database to resolve the production problems. Both of them repeatedly told the Court that AKO had been asked to provide necessary information, but refused to do so. Instead, as the evidence established, throughout the relevant period, AKO made the Introspect database remotely accessible without restrictions to Reed Smith"

Order Imposing Sanctions Against B&G's Outside Counsel and Counsel's Firm, cont'd

"The totality of this conduct establishes that Reed Smith’s actions in this regard were deliberately designed to impede Lexington’s ability to discover and reasonably use ESI maintained by B&G. This bad faith conduct disrupted and delayed the discovery process and caused significant prejudice to Lexington. The bad faith conduct also unreasonably multiplied the proceedings in this case."

Magistrate Judge Spauldings' Ruling: "Accordingly, pursuant to Rule 37 and the Court’s inherent power, I find that Reed Smith is jointly and severally liable with Ellison to pay the reasonable attorney’s fees, costs, and expenses Lexington has incurred in filing the motion for sanctions and in the proceedings related thereto. These costs include the fees and expenses of expert witness Teshima, whose testimony was essential to uncovering the misrepresentations made regarding
ESI. Reed Smith is also jointly and severally liable with Ellison to reimburse the Court’s court reporter for the cost of transcribing the December 8, 2008, hearing on the motion for sanctions. "

"Finally, I will issue an order to show cause why John Berringer Esq., should not also be personally sanctioned for his conduct in this case."

I expect that this decision will be appealed first to the District Judge, and then, perhaps, to the 11th Circuit. That said, the standards for review (and reversal) are either abuse of discretion or clear error...

Stay tuned.


2009-03-05 8th and 10th Circuit Spoliation, Accessibility, Expedited Motion to Compel Imaging

Another week, and you guessed, it a spate of spoliation decisions: One from the 8th Circuit and a second from the District of Colorado (relying on 10th Circuit). Also, an "accessibility" decision (with a twist) from the Eastern District of Virginia, an expedited motion to compel imaging from the Southern District of Florida, and a Maryland Court of Appeals decision permitting the discovery of the identity of anonymous "internet communicants"


Case: Insignia Systems, Inc. v News America Marketing In-Store
Citation: 2009 WL 483850 (D. Minn. 2009)
Date: 2009-02-25
Topics: Eighth Circuit spoliation standards, non-party destruction, ESI destruction by non-party during pendency of litigation

In this spoliation decision from the U.S. Court of Appeals for the 8th Circuit, defendant claimed that plaintiff had instructed a consultant preparing an "Investment Thesis" equity report to destroy all information used to prepare the report that was received by that third party. The consultant testified that it has destroyed all computer files in accordance with instructions for payment from plaintiff. Defendant then claimed that the non-party consultant’s testimony in connection with the preparation of the Investment Thesis was substantially compromised by the non-party’s destruction of all collateral materials (including, apparently, even the contract of engagement with plaintiff).

Eighth Circuit Spoliation Standards

The Court first turns to the traditional definition from Black’s Law Dictionary: "Spoliation is defined as the "intentional destruction, mutilation, alteration, or concealment of evidence"

The Court next articulates standards to establish spoliation for the 8th Circuit --- which, imo, appears to be a "pure" Federal common law position, which in turn means (at least imo) a universal approach to spoliation by all District Courts within the Circuit (compare 11th Circuit’s "advised" by state law principles approach, yielding potentially conflicting intra-circuit decisions). In requiring a finding actual intent, the Eighth Circuit appears to eschew the ordinary negligence standards adopted by the 2nd and other circuits.

"There must be a finding of intentional destruction indicating a desire to suppress the truth before an adverse inference instruction is justified. Morris v. Union Pac. R.R., 373 F.3d 896, 901 (8th Cir.2004)(emphasis added). A spoliation sanction requires a finding of "intentional destruction of evidence indicating a desire to suppress the truth, not the prospect of litigation." Greyhound Lines, Inc. v. Wade, 485 F.3d 1032, 1035 (8th Cir.2007)(citing Morris, 373 F.3d at 901). A court may rely upon inferences to find requisite intent on behalf of the spoliator to destroy the evidence and suppress the truth. Morris, 373 F.3d at 902."

Intentionality, Purposefulness and Obscuring the Truth

The spoliation bar set by the Eighth Circuit is set fairly high: The court notes that the "intentionality must be purposeful" and that the "purpose of the destruction must serve is the obscuring of truth."


The Court then goes on to state that intent must be combined with a finding of prejudice:
"Intent is rarely proved by direct evidence, and a district court has substantial leeway to determine intent through consideration of circumstantial evidence, witness credibility, motives of the witnesses in a particular case, and other factors." Id. at 901.Second, there must be a finding of prejudice to the opposing party before imposing a sanction for destruction of evidence. Dillon v. Nissan Motor Co., Ltd., 986 F.2d 263, 267 (8th Cir.1993)."

ESI Destruction During Litigation

Defendant also claimed (and it was admitted by plaintiff) that the plaintiff had instructed the non-party to destroy its ESI after litigation with plaintiff had commenced. The Court found that although the ESI was destroyed during after litigation had commenced, the Court:

"…did not find that the record shows that documents were destroyed as a result of any ongoing or anticipated litigation. As Insignia points out, "There is no reference in the Diracles letter to the litigation with News America, or any other litigation.""

Indication or Reasonable Inference for Motive to Destroy

Well, they were admitted destroyed after litigation had commenced, so whither this finding? The Court found that the record supported no indication or reasonable inference suggesting the report was prepared and destroyed due to pending litigation.

"Additionally, the Court is not persuaded by NAM's argument that CIRG's services were connected to this litigation through the discussions Insignia's Board had on these topics. See Defs.' Mem. 13. Upon review of both the Board meeting minutes from March 17, 2005 (Ex. C), and May 18, 2005 (Ex. F), the Court would note that both the CIRG report and the case in front of this Court were discussed, however, the Court holds there is no indication or reasonable inference that can be drawn from these meeting minutes that suggests the report was prepared and thereafter ordered to be destroyed due to the pending litigation."

Of course, without reference to the destroyed information that would be a difficult call, but the Court was apparently satisfied that no circumstantial evidence satisfying the intent-suppression-obscuring 8th Circuit spoliation standards.

No Prejudice Where Other Sources of Destroyed Documents Exist

The Court noted that the ESI was available to the defendant, as plaintiff had instructed the non-party to destroy the "copies" of what it had received, implying of course, that other copies (or originals) still existed under plaintiff’s custody or control.

Result: Defendant’s motion for adverse inference was denied.

Smith v. Slifer Smith & Frampton/Vail Associates Real Estate, LLC
Citation: 2009 WL 482603 (D. Colo. 2009)
Date: 2009-02-25
Topics: 10th Circuit Spoliation standards require bad faith destruction of relevant evidence, standard of review in U.S. Magistrate Judge’s Report and Recommendation is clear error and abuse of discretion, counsel’s letter of "investigation" of transaction triggered duty to preserve, use of secure wiping programs

In this decision from the U.S. District Court for the District of Colorado, U.S. District Judge Kane reviewed and approved the U.S. Magistrate Judge’s report and recommendation on plaintiff’s "Motion for Sanctions for Destruction of Evidence." In this case plaintiff’s counsel sent defendant a letter of inquiry and investigation in connection with a real estate transaction on May 19th 2006, and that May 19th 2006 (a date nearly six months prior to onset of litigation) was deemed to have triggered defendant’s duty to preserve. What follows is the timeline of what transpired after the action was commenced:

April 9, 2007 – Plaintiffs serve request for document production("RPD"); definition of "document" 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.""

July 30, 2007 – Plaintiff serve second RPD, again asking for documents, including ESI, but also requesting inspection and sampling of a defendant’s Computers 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 respond to RPDs and provide, inter alia, a CD containing a Forensic Toolkit ("FTK") report provided by defendant’s technical expert.

November 1, 2007 - "…included in a letter from defense counsel on November 1, 2007, was a description of the sources searched for ESI, which included four media drives residing on three of [defendant] Seibert's computers: SSF 1-2 and SSF 1-5 were two drives from Seiberts "Old Office PC," SSF 1-4 was from Seibert's "Home Computer," and another came from Seibert's laptop computer, SSF 1-1."

Defendants then disclosed that there were additional sources of potentially relevant information on one or more of one defendant principal’s other computers:

"included in a letter from defense counsel on November 1, 2007, was a description of the sources searched for ESI, which included four media drives residing on three of Seibert's computers: SSF 1-2 and SSF 1-5 were two drives from Seiberts "Old Office PC," SSF 1-4 was from Seibert's "Home Computer," and another came from Seibert's laptop computer, SSF 1-1"

Use of Wiping Utility During Pendency of Litigation

The facts then become a bit more intriguing: defendant had installed a wiping utility on his computers. There is almost always an "oops" in spoliation challenges --- this "oops" is a whopper. First, the tee-up: A wiping utility was admittedly installed on defendant’s computer

"[T]he parties do not dispute that Anti Tracks software was found on Seibert's home computer (SSF 1-4) and that the drive labeled SSF 1-2, Seibert's Old Office PCDisk 1, was not functional (See Docket No. 92 at 60)"

'Th[e] defendants' expert, Raphael Gorgal, stated in his report dated July 7, 2008, that the four systems were analyzed "to determine if secure deletion (wiping) software had been installed." (Docket No. 74-25 at 6). Gorgal found that "the executable files of a wiping program called Anti tracks" was on SSF-1-4, the home computer. He stated that the program's "advertised capabilities include 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." (Docket No. 74-25 at 6). In addition, he reported that "[f]iles associated with the application were discovered on the drive image and have last accessed dates of 9/6/2007..." (Docket No. 74-25 at 6) (emphasis added)."

Why this turns out to be a whopper:

"[Defendant’s expert] 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...."
(Docket No. 74-25 at 10)"

It gets worse (for defendants):

"[A]n Anti-Tracks folder was created on August 17, 2006, which was after the May 19, 2006, letter from attorney Wendell Porterfield to defendant Seibert (Docket No. 74-2; Pls.' Ex. 1);"
"That the last-accessed date of September 6, 2007, was also after the May 19, 2006, letter from attorney Porterfield to Seibert; after the commencement of this action on November 2, 2006 (Docket No. 1); after the entry of the original Scheduling Order in this matter (Docket No. 12); after service of the plaintiffs' first RFP to Seibert and SSF on April 9, 2007 (Docket Nos. 74-4 and 74-5); after service of the plaintiffs' second set of RFP to defendants on July 30, 2007, which included RFPs for production of ESI (Docket No. 74-8), and just two days after responses were

served by defendants to that second set of RFP (Docket No. 74-9);"

"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"

"[F]ollowing the production of the defendants' expert report, which was produced after a motion to compel production of certain ESI (Docket No. 66) was filed by plaintiffs, the parties filed a Joint Motion to Amend the Scheduling and Discovery Order (Docket No. 72). In that motion, the parties, through counsel, stated, inter alia, "Material Facts. Subsequent to the filing of the Motion to Compel, Defendants endorsed and disclosed a report from their computer forensic expert, Raphael Gorgal, showing the presence of wiping or secure deletion software called ‘Anti Tracks' on and the deletion of a significant number of files from a computer drive owned by Defendant Seibert which had been subject to discovery in this case." (Docket No. 72 at 2, ¶ 3) (emphasis added)"

Wiping Utility Usage During Pendency of Litigation, Cont'd

Defendant's situation keeps worsening – keep in mind that all these activities occurred during the discovery period:

"[P]ursuant to that Order, 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." (Docket No. 74-28 at 5, ¶ 12)"

"[P]enrod further states, inter alia, in his affidavit with regard to Seibert's home PC (SSF 1-4) that Penrod recovered evidence of secure data deletion (file wiping) on SSF 1-4, EnCase includes a utility that searches a drive image for successive, uninterrupted sectors containing well known file wiping patterns. Consecutive sectors containing such patterns were recovered during this search..."

"The EnCase forensic program automatically recovered a total of 67,714 folders, files and individual system data streams as Lost Files. 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..."

Good Wipe, Bad Timing

The Court notes (by way of the Magistrate Judge’s findings) that the wiping utility did serious impaired any forensic efforts:

"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...."

A What-Never-to-Do (but was done) During Pendency of Litigation

Think things could get any worse for defendant? Think again. When a forensic examiner states "These files are no longer present" things aren’t looking up:

"The Affiant's analysis of EnCase's Lost Files bin revealed that two (2) Microsoft Outlook PST files had been deleted and corrupted. The Outlook PST files were both created on June 27, 2005. The principal file (Outlook.PST) was deleted on August 3, 2007. The secondary file
(OutlookHotmail-00000002.PST) was deleted on July 20, 2007...."

"The Affiant's analysis of EnCase's Lost Files bin revealed that approximately 9,500 files and folders, including critical system files, had been deleted between September 6 and 14, 2007. These files included the contents of the principal Windows operating system directories, containing critical files necessary for booting and running Windows. The contents of the following folders were deleted: Documents and Settings, Program Files, System Volume Information and Windows.... Documents and Settings contains 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. It is completely empty.... "

"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. This folder is completely empty.... 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. Both the Registry and event logs are critical to effective forensic analysis."

The forensics piece de resistance:

"These files are no longer present."

Rebuttal Expert Testimony, Wiping Patterns, and the Battle of Experts

Defendant then called in a rebuttal expert to refute the findings of plaintiff’s expert.
"[P]ursuant to Judge Kane's Order of July 18, 2008 (Docket No. 73), defendants' rebuttal expert, David Cowan (Mr. Gorgal's coworker), submitted a rebuttal report dated August 21, 2008. (Docket No. 92-15, Defs.' Ex. N). Cowan does not agree with certain conclusions stated in Penrod's report."

"Cowan opines that EnCase script does not do what Penrod claims and that "[i]n fact, nowhere in the script source code does it reference, identify or test any ‘well known wiping patterns'." (Docket No. 92-15 at 4-5). Cowan further states that "CFL [Penrod's firm] is basing their technical argument that wiping occurred [sic] on SSF-1-4 and SSF1-2 on the consecutive sector script which does not operate as has been described in Mr. Penrod's report and does not in my opinion show that this or any drive has been wiped.""

And Make Sure that We Provide Another Explanation For What Appears to Be Reformatting

A second rebuttal expert’s report was provided by defendant, who apparently marched as ordered. What’s interesting is that the new expert’s rebuttal report did not rebut plaintiff’s expert report; rather it stated only that it could not be determined that the wiping patterns were the result of reformatting:

"[A]ttached to defendants' response to the instant motion is a new expert report from L. Aaron Phillipp of Navigent Consulting, Inc., responding to Penrod's opinion that the defendants intentionally reformatted the data drive labeled SSF 1-2 (Seibert's old office PC-disk 2) in an effort to prevent the plaintiffs from acquiring evidence against the defendants. (Docket No. 92-16, Defs.' Ex. O)."

"Phillipp concludes that he did not identify any evidence to support Mr. Penrod's assertion that Mr. Slifer's [sic] work computer was reformatted. As detailed in this report, in all cases on the SSF 1-2 hard drive, the markers which are a direct and inevitable result of formatting were either missing or damaged. In short, none of the artifacts which would indicate a proper or attempted reformatting had occurred could be identified. Rather, the state of the drive would indicate some kind of catastrophic failure, either caused by older hardware which was nearing the end of its life or some type of malware."

The Court wasn’t buying for two reasons:

The new expert’s rebuttal report was first not considered on procedural grounds. Nonetheless, and I am seeing more often in such decisions, the Magistrate Judge considers the report anyway, and considers it as having been rebutted nonetheless (to be clear, a rebuttal of a rebuttal of an expert report):

"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;

"[E]ven if Phillipp's report should be considered, the conclusion stated therein is rebutted by Penrod's subsequent declaration submitted by plaintiffs with their reply. (Docket No. 106-2). Furthermore, as correctly noted by plaintiffs in their reply, Penrod and Phillipps agree that all of the data on the old office PC was destroyed after May 10, 2007. Such loss of data could have been avoided if the data had been timely preserved by defendants. In addition, in his declaration, Penrod also methodically rebuts Cowan's August 21, 2008, report and conclusions and identifies purported misstatements in defendants' response concerning Penrod's conclusions"

"Seibert's August 22, 2008, deposition testimony (Docket No. 74-34) includes the following. His old office PC came from his brother in 2003 (Seibert Transcript at 17:4-7, 18:1) and remained at Seibert's office until October 2007 (20:4-10, 36:15-18). He was out of town for about 17 days in September 2007, and while he was gone, copies were made of the computer drives. (21:14-25-22:4). It was the primary computer he used for his work from 2003 through the summer of 2005 at which time he started using his lap top computer. (43:23-25; 44:1). After the summer of 2005, he still had that desktop PC in his office and turned it on from time to time if he was looking for a file that he could not find in his lap top computer. (44:8-13). There was no other place he kept electronic information relating to his work from the summer of 2003 through the summer of 2005. The information from his work related to this case was contained on that computer. (54:4-12)."

Of course, when other options run out, and one is backed into a corner, the next logical course of action is abject denial, or a plea of ingorance:

"Seibert does not know how the destruction of data on the computer occurred.(49:20-22, 50:12-15)." "He denies deleting or destroying any information from a computer since May 2006 that might related to this case. (17:18-22). He further denies installing, downloading, or using any wiping software on any computer. (59:18-20; 60:8-13). With regard to his home PC, from the time until it came into the house until September 2007, he had a habit of using it to check his SSF email. (71:4-9, 23-25; 72:1-8). He had access to that computer from September 6 to 8, 2007, at which time he went to Arizona. At that time his wife and two daughters were in the house, but they told him they have no knowledge about the Anti-Tracks software on the computer. (73:8-11; 75:15-18). He returned to Colorado on September 26 or 27, 2007.
(73:12-15). He does not know who installed the software, and he never used it. (75:18-23)"

10th Circuit Spoliation Standards

The U.S. Court of Appeals for the 10th Circuit is a "pure" Federal common law jurisdiction, and a successful spoliation requires a showing of intent and bad faith:

"[T]he 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."

"‘[B]ad 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"

Suspect Timing Creates Supports Conclusion that Defendant (or agent) Wiped Drive

While there was no direct identifying who destroyed the ESI, the Court found that sufficient circumstantial evidence to conclude that it was either the defendant, or someone acting on his behalf:

"[T]here is no smoking gun establishing who caused the loss of data on the two computers, but the evidence strongly supports the conclusion that that person was defendant Seibert or someone acting on his behalf."

The Court also found sufficient evidence to support a finding of bad faith, intent, and prejudice to the non-spoliating party:

"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".

ESI Destruction Occurred Post Action Commencement, Triggering Violation Duty to Preserve

"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 "

Strict Standard of Proof Rejected

Interestingly enough, the Court relies on the 2d Circuit’s decision in Residential Funding v DeGeorge, 306 F. 3d 99, (2d Cir. 2002) (a negligence standard case) in articulating a flexible standard of proof in spoliation proceedings.

"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.""

Egregious as defendant’s acts appear, the Court declined to impose terminating sanctions, and determined that under 8th Circuit standards, the imposition of an adverse inference instruction to the jury was a appropriate penalty:

"[W]hile 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. "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…"

Tenth Circuit Standards For Terminating Sanctions

"FN3. '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 omitted)."

The Court then found that defendant’s acts prejudiced plaintiff’s case, and further cause plaintiffs to incur "considerable additional discovery expenses," and imposed an adverse inference, together with attorneys fees and costs.

District Judge Kane appears to have exerted some restraint, and no small amount of tact, in connection with this matter;

"Finally, I note Defendants and their counsel have employed ad hominem comments and sarcasm regarding Plaintiffs' counsel and impertinent descriptions of the Magistrate Judge's conduct and rulings in this matter.

Such are counterproductive to the objective of persuasion."

Case: Cappetta v. GC Services Ltd. Partnership
Citation: 2009 WL 482439 (E.D.Va.2009)
Date: 2009-02-24
Topics: Producing party bears burden of showing "not reasonably accessible" in ESI dispute,
In this decision from the Eastern District of Virginia, U.S. Judge Luck noted that the Court had declined to order the production of defendant employee’s entire hard drive, pointing out that "such production would necessarily include information not relevant to the case…" The Court instead ordered defendant to generate and preserve a "mirror image" of the hard drive in order to prevent spoliation.

Takeaway: "Absent evidence of spoliation, the Court continues to deny Plaintiff's request for wholesale production of the hard drive."

But wait, wait. Defendant "bypassed two deadlines" to image the hard drive (or, to confirm that it had complied with the Court’s order to so image the drive.) Instead, it claimed that, more than six weeks after the last deadline, it was still "reviewing" the contents of the hard drive. (Query: Court order requires imaging and confirmation to court. How is a statement that contents of a drive are being reviewed in any way responsive to that Order?)

"The Plaintiff propounded the discovery to which the documents respond on August 27, 2008, meaning that the initial deadline to respond with any information from any employee lapsed in September 2008. Despite Defendant's contention otherwise during the February 23 hearing, the Court ordered Defendant to supplement its discovery responses to include responsive information from the hard drive no later than January 12, 2009. (Dec. 24, 2008 Mem. Op. Ex. A at 9, 14, 24, 31, 34, 36, 44.) Defendant now suggests that it believes it has produced all responsive documents otherwise, but that it intends to supplement its responses as its review of the hard drive continues. No documents from the hard drive had been produced as of the February 23 hearing."

The Court was not amused and required a bit more:

"Defendant will be ordered to produce a complete inventory of the contents of the hard drive at issue, including e-mails, to Plaintiff no later than February 27, 2009. During oral hearing, Defendant represented to the Court it believed it could meet this deadline. Defendant will also be ordered to produce all responsive documents located on the hard drive, updated discovery responses, and a concomitant privilege log, no later than March 6, 2009.FN3 Defendant is advised that to the extent it intends to withhold responsive information, including e-mails, on the basis of the attorney-client privilege and work-product doctrine, it must provide a detailed privilege log."

This matter is obviously a TBD…

Case: Continental Group, Inc. v. KW Property Management, LLC
Citation: 2009 WL 425945 (S.D. FL 2009)
Date: 2009-02-20
Topics: Expedited motion to compel imaging of computers and electronic devices, orders to meet and confer, possession by plaintiff’s counsel of defendants’’ imaged drives pursuant to court order deemed not waiver of attorney client privilege.

Reading this case brings to mind the term "flay" (as in flaying the skin of the parties’ counsel) \. A statement like this appearing at the beginning of a discovery decision does not bode well for either party:

"The parties have been unable to cooperate to effect the imaging of the portable devices by today's deadline."

U.S. District Judge Cohn of the Southern District of Florida appears (and, I admit, appearances can be deceiving) to cut the parties some slack:

"The Court's Orders perhaps were unclear whether the filtering out of attorney client privileges documents applied to just the forensic word searching of the KW servers (to be done next week), or also to the portable computers to be imaged by today. Defendants believed such filtering was to apply to the portable devices and that the imaging should be escrowed until the filter process was agreed upon. Plaintiff believes the imaging of the portable devices was to be done by today.

The parties were unable to agree to a filtering protocol by today's deadline for imaging of the portable devices."

In ordering the imaging of defendant’s portable ESI storage drives, the Court also ruled that the possession by plaintiff’s counsel of these drives were to be considered "attorneys-eyes only," not a waiver of any attorney client privilege, although the Court did require the submission of a privilege log by defendants:

"The fact that Plaintiff has possession of the images taken off the portable devices, which are subject to Confidential-Attorney's Eyes Only classification, shall not be deemed to waive any attorney-client privilege should Defendants discover privileged material. Defendant shall serve a privilege log, if any, with respect to these two portable devices, upon Plaintiff's counsel by 4:00pm on Friday, February 27, 2009."

Compressed Time To Review Images No Prejudice to Requesting Party Under Circumstances

The Court noted that it considered the "few days" in which plaintiff could review potentially privileged material not to be prejudicial, and placed any blame for time compression on defendant. The Court noted that it was defendant’s failure to propose a specific filtering protocol rather than simple "escrow" the images prior to a sufficient time to review:

"The fact that this procedure means that Plaintiff's counsel will have a few days to view the images which may contain privileged material is not prejudicial to Defendants. Had Defendants proposed a specific filtering protocol before today's deadline, rather than a procedure to simply "escrow" the images prior to filtering, this situation would have been avoided."

Parties Directed to Cooperate to Include Filtering of Privileged Material

The Court however, also directed defendant to take initial steps in proposing such protocol with plaintiff’s counsel:

"Turning next to the issue of the forensic word search for the KW servers, for this issue the parties must cooperate to include a filtering of privileged material. In this regard, Plaintiff is correct that Defendants must propose a specific filtering protocol with the identity of any counsel who might have engaged in communications with these Defendants, and other terms which might indicate a potentially privileged communication, because this information is uniquely in the possession of the KW Defendants."

"Defendants shall propose such a specific protocol by 12 noon on Tuesday, February 24, 2009. The parties shall cooperate to finalize the word search and filtering protocol by close of business on Wednesday, February 25, 2007, in order for the searching and filtering to be completed by February 27, 2009."


I am going to start counting the occurrences of the term "cooperate" in these digests. This decision is one-plus page in length, and yet the word "cooperate appears --- 4 times, and so, I am pleased to introduce, the one and only "cooperation rating" system. The higher the number of occurrences in an eDiscovery decision, the less likely it is that the parties will have cooperated.

In other words (no pun intended) more is bad, fewer is good.

We’ll see how this proposed inverse proportion works out…

Cooperation Meter Rating: 4

Case: Independent Newspapers, Inc. v. Brodie
Citation: --- A.2d ----, 2009 WL 484956 (Md. 2009)
Date: 2009-02-27
Topics: Maryland state court standard for review of discovery order, Motion for protective order prohibiting disclosure of "anonymous internet communicant."

Although not strictly an eDiscovery case, the decision of the Maryland Court of Appeals provides some insight as to the circumstances by which the identity of anonymous internet "communicants" may be the proper object of a discovery request:

"…this Court holds that, when a subpoena is challenged under a rule akin to Virginia Supreme Court Rule 4:9(c), a court should only order a non-party, Internet service provider to provide information concerning the identity of a subscriber (1) when the court is satisfied by the pleadings or evidence supplied to that court (2) that the party requesting the subpoena has a legitimate, good faith basis to contend that it may be the victim of conduct actionable in the jurisdiction where suit was filed and (3) the subpoenaed identity information is centrally needed to advance that claim. A review of the Indiana pleadings and the subject Internet postings satisfies this Court that all three prongs of the above-stated test have been satisfied as to the identities of the subscribers utilizing the four e-mail addresses in question."