2009-04-11 Cooperation, Documentation Retention, Spoliation, ESI Authentication, Hearsay,and a Petard Hoist Self-Help

Cooperation and Competency: Leading off is a decision by U.S. Magistrate Judge John Facciola of The District Court for the District of Columbia addressing both the margins of eDiscovery as well as the limits to which the Courts will assist in providing counsel with the other half of the eDiscovery picnic sandwich. For those attorneys and parties who have neither heard nor heeded the clarion call for eDiscovery cooperation in matters brought before federal judges, Magistrate Judge Facciola provides insightful guidance, and some hints as to the future judicial treatment of poorly articulated discovery requests.

Document Retention Policies: In what appears to be a case of first impression, the District Court of Utah finds that the absence of a document retention policy may be considered a factor in duty to preserve violations, (For body of digest: the question whether or not to have a doc retention policy frequently arises. Better to have or have not? Imo, it’s always better to have something to lean on, rather than leave it to a court (or worse, a jury) to determine whether there was a federal common law preservation trigger. This decision may well put that question to rest. Better to have one, and follow it. This decision also addresses ESI authentication and hearsay issues as well as duties to preserve and timeline triggers.

Spoliation: These digests provide (admittedly anecdotal) evidence of a notable increase in the volume of ESI spoliation litigation. Analyzed are decisions from: the Eleventh Circuit Court of Appeal, two from the District of Arizona. More to come next week.

Catch 22 Award: This week’s hands-down winner is the Supreme Court of Ohio, which ruled that a criminal defendant alleging spoliation of ESI must first make a prima facie showing of spoliation --- without being permitted access to the evidence drive. Imo, the dissent offered the more rational approach.

Decisions:

Newman v. Borders, Inc., --- F.R.D. ----, 2009 WL 931545 (D.D.C. 2009)
Adams and Associates, L.L.C v Dell, Inc., 2009 WL 910801 (D. Utah 2009)
Tieco, Inc. v. USX Corp., 2009 WL 921266 (11th Cir. 2009)
Reed v. Honeywell Intern., Inc., 2009 WL 886844 (D. Ariz. 2009)
Marceau v. International Broth. of Elec. Workers, 2009 WL 891036 (D. Ariz. 2009)
State of Ohio v Rivas, --- N.E.2d ----, 2009 WL 875216 (Ohio 2009)

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Case: Newman v. Borders, Inc.
Cite: --- F.R.D. ----, 2009 WL 931545 (D.D.C. 2009)
Date: 2009-04-06
Topics: Call for Cooperation, ESI Document Retention Policy Discovery Fit Subject for Discovery, consequence of failure to identify Fed. R. Civ. P. 30(b) topics, no ask-no get.

In this decision from the District of Columbia District Court, Magistrate Judge John Facciola rules on a motion to amend a discovery order limiting the number of depositions, and a second motion to compel an additional Rule 30(b)6 deponent.

Plaintiff had apparently served what might best be described as a notice of deposition topics that was either poorly worded, or an overly broad. As a result, the Rule 30(b)6 deponent was ignorant of certain topics relating to defendant’s email and email retention policy:

“Plaintiff served a notice to take a deposition pursuant to Rule 30(b)(6).Motion to Compel, Exhibit 3. Attached to the notice and identified as “Exhibit A” was a detailed list of the nine topics that would be the subject of the deposition. See id. at 5-7.Borders designated Lisa Morrow to testify as to four of the nine topics. The first of those was “Borders' document, information, and record collection and retention policies and practices.”Id. at 5. This topic had in turn nine subdivisions that specified the “policies and practices” that would be the subject of the deposition. Id.”
“During the course of her deposition, Morrow was asked if she knew about Borders's policy regarding the retention or destruction of e-mails. She responded:

"The Witness: I don't know what the specific retention policy is. I know the e-mails are backed up in our I.T. department. I don't know how long they're kept for.”

“Given Morrows' ignorance, plaintiff wants Borders to designate another 30(b)(6) witness to testify as to Borders's “e-mail retention policies and any searched [sic] conducted of emails.””

Defendant’s opposition complained of “mousetrapping” by plaintiff. Defendant argued that plaintiff’s Rule 30(b)6 notice requested deposition of an individual with “general” information and document retention policy, but asked questions relating to email management and retention. Interestingly (and especially so in this time of ESI predominance) defendant pointed out that plaintiff made no “formal” document requests relating to defendant’s email retention policy.

In what is perhaps one of the first decisions in which counsel’s eDiscovery (poor) eDiscovery articulation does not result in a reflexive judicial second helping, the Court denies the motion requesting amendment of the District Court’s discovery to allow for an additional deposition.

The Court also notes quite plainly what argument might augured in favor of granting the additional deposition, and what plaintiff instead chose to assert:

“Plaintiff justifies its demand not by pointing to any claim of missing or deleted e-mails or because it has some specific reason to believe that e-mails pertaining to the incident were once in existence but have never been produced. Rather, he paints with a much broader brush, insisting that it is important that another 30(b)(6) designee be named to testify as to Borders's retention of e-mails and the searches for them in this case “because Defendants have repeatedly failed to produced [sic] responsive documents until Plaintiff learned of the existence of such documents and specifically requested them or the Court ordered Defendants to produce them.””

Discoverability of eMail Retention Policy and Production of Knowledgeable 30(b)6 Designee

Although the Court appeared to be less than utterly impressed with the quality of discovery undertaken by plaintiff’s counsel, it did recognize that an outright denial of the relief requested might result in prejudice to the requesting party. The Court first proceeds with an analysis of the discoverability of document retention policies, and the right of a party to notice for deposition a Fed.R. Civ. P. Rule 30(b)6 individual with sufficient knowledge to testify in connection therewith:

“That a party's document retention policies, including its policies as to electronically stored information, may be a fit subject of discovery cannot be gainsaid. Huthnance v. District of Columbia, 255 F.R.D. 285, 287 (D.D.C.2008) (quoting Doe v. District of Columbia, 230 F.R.D. 47, 56 (D.D.C.2005)). “

“It is equally clear that a party must produce as its 30(b)(6) designee a person who can speak knowingly as to the topic and, if necessary, educate that designee so that she can do so. Intervet, Inc. v. Merial Ltd., No. 06-CV-658, --- F.R.D. ----, 2009 WL 540392, at *4 n. 1 (D.D.C. Mar. 4, 2009)”

Obligation to Clearly Define Topics of Notice Deposition

The Court then qualifies this right of a requesting party by including with an obligation on the part of a requesting party to be clear about what it seeks, and the knowledge set of the individual sought to be deposed:
“There is, however, a concomitant responsibility upon the party who had noticed the 30(b)(6) deposition to define as clearly as possible the topics for the deposition.”

In this matter, no request for email, email retention policies, or even the term “electronically stored information” were included in plaintiff’s document production requests, which the Court points out were otherwise “remarkably detailed.”

No Ask (in RPD), No Get (Knowledgeable Deponent)

Ok, perhaps the caption should read “ask and ye shall receive,” but in this case, plaintiff did not ask for the specie of documents (defendant’s email, email retention policy, and other ESI) in its document requests, and accordingly, the Court found it reasonable for the defendant not to produce a Rule 30(b)6 deponent so knowledgeable:

“I cannot say that a reasonable lawyer reading that document would conclude that Borders's e-mail retention policy and the search for e-mails pertaining to this case were going to be topics of the deposition. Instead, in a world where the vast majority (to put it mildly) of all communications within businesses is electronic, I am hard pressed to understand why, if plaintiff thinks it so obvious that information about defendants' e-mail policy and the search for e-mails were called for by the topic description, plaintiff did not simply say so.

“While I appreciate that plaintiff's claim that defendants initially failed to produce a portion of a document that should have been produced is unrebutted, I have presided over the discovery in this case and have found absolutely no indication that the defendants have engaged in any behavior that would suggest that defendants have knowingly destroyed any pertinent e-mails or failed to search conscientiously for pertinent e-mails.

A Somewhat Solomonic Result

Teeing up to his decision, Magistrate Judge Facciola at once recognized the importance of discovery of a party’s document retention policy as well as the Court’s “unquestioned right (if not the duty) to bring discovery disputes to an end.” The Court’s take on the parties’ discovery activities:

“I am stunned by how much time and effort has been spent on discovery in a case that involves a confrontation between plaintiff and a store detective that could not have taken much time. I am also well past being convinced that the potential legal fees in this case, thanks to the many discovery disputes, will dwarf the potential recovery, if there is one.”

And so, with a terrible swift sword, the decision was split by the Court.

The half given to defendant: “The time has come (it may have come and gone) for me to bring this particular controversy about e-mail to a quick and merciful end without another costly deposition.”
The half given to plaintiff: Although it ultimately denying plaintiff’s request for leave to conduct additional depositions, the Court appeared unwilling to penalize the plaintiff for the shortcomings of counsel’s discovery activity. Instead, the Court sua sponte provided a set of 9 court-crafted questions to be answered in an affidavit from a knowledgeable representative of the defendant.

An interesting feature of this decision is that the parties represented to the Court that they had attempted (unsuccessfully) to resolve this discovery dispute by agreeing to the terms of an affidavit to be provided by defendant. The Court believed otherwise:

“I understand from their papers that the parties attempted to resolve the controversy by trying to agree to an affidavit from Borders that spoke to the issues that arose during Morrow's deposition. They did not try hard enough.”

The Court makes the point (as have so many others) that genuine counsel cooperation in eDiscovery matters is now a near-mandate:

“Counsel should become aware of the perceptible trend in the case law that insists that counsel genuinely attempt to resolve discovery disputes. See Covad Commc'ns Co. v. Revonet, Inc., 254 F.R.D. 147, 149 (D.D.C.2008); see also Sedona Conference Cooperation Proclamation (2008), available at http://www.thesedonaconferen ce.org/dltForm?did=Cooperation_ Proclamation.pdf.”
Takeaways: Failure to request ESI in document requests has two consequences: First, ESI will in all likelihood not be produced. The second is that a producing party may justifiably not produce a deponent with knowledge about ESI, and ESI retention, where production of the ESI itself either is not, or has been inarticulately requested; second, expect such helpfulness from the Court to be an exceptional (and a fading one at that) rather than a routine occurrence.


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Case: Phillip M. Adams & Associates, L.L.C. v. Dell, Inc., et al.
Cite: 2009 WL 910801 (D. Utah 2009)
Date: 2009-03-30
Topics: Spoliation, 10th Circuit standards for establishing spoliation, standards for determination of spoliation sanctions, bad faith finding required in 10th Circuit for imposition of adverse inference, duty to preserve, temporal trigger of duty to preserve, information management practices as basis for finding of culpability, absence of document retention policy factor in evaluation of spoliation sanctions, ESI authentication and hearsay challenges in sanctions motion

This decision by United States Magistrate Judge David Nuffer from the U.S. District Court for the District of Utah provides what appears to be a first-of-its-kind ruling that the absence of a document retention policy is a “pertinent factor” to consider in evaluation sanctions for spoliation.

First, a bit of context. This is a patent infringement matter, and involves a patentee who invented floppy disk related technology, and subsequently commenced an infringement action against many of the major computer and computer component manufacturers. This decision resulted from plaintiff’s motion for sanctions “Based Upon Asus’ Spoliation of Evidence of It’s Piracy.” Avast, mateys, and read on. Plaintiff alleged that defendant had destroyed ESI (source code) and test documents (unclear whether these documents were paper-based or ESI). Plaintiff claimed that the spoliated documents would have conclusively proved defendant’s piracy.

Absence of Evidence Does Not Mean Evidence of Absence

Yes, that’s what plaintiff asserted: that “Because ASUS has produced so little, Adams therefore draws the conclusion that ASUS has destroyed evidence.”

But wait, there’s a twist. Defendant actually produced numerous documents, but according to the Court, not what was requested:

“ASUS's only response is that it has produced a large volume of documents. That may be the case; but, it has not produced the most critical documents-those that relate to its misappropriation, its copying, and its willful behavior. The only conclusion after all this time is that ASUS has destroyed critical evidence that it simply cannot show did not exist”

Spoliation and Discovery Abuse Hearing Practice Is Trial Practice

I had taken the position that spoliation hearings are really trials-in-miniature. Perhaps, in light of the 2008 Qualcomm v Broadcom, Rambus, Keithley v Homestore, Gutman v Klein, and Nucor v Bell decisions, spoliation hearings may now be considered real, grown-up trials. A critical difference in a spoliation or discovery abuse hearing is that a party’s counsel may well turn out to be a fact witness. Spoliation and discovery abuse hearings typically take place before a judge, and involve the proffer of testimonial, documentary, and other evidence. As with a trial on the merits, evidentiary proceedings in such hearings will invoke (in Federal Courts) the Federal Rules of Evidence, and whatever jurisdictional decisional authority is followed by the presiding District Court.

Motion to Strike Evidence in Support of Sanctions Motion

With the understanding that spoliation and discovery abuse sanctions hearings are trials-with-a-twist (just add a dash of counsel witness for added flavor) it should come as no surprise that defendant filed a motion to strike evidence in an attempt to gut plaintiff’s spoliation motion.

Blognote: Some attorneys might prefer to wait until trial, and then file a motion in limine to exclude spoliated evidence. Imo, a more prudent course of action would be to file a spoliation motion as soon as evidence proving same is acquired by the non-spoliator. It might also be advisable to combine a motion for spoliation with a discovery abuse motion where appropriate.

In any event, defendant attempted, with very limited success, to have the evidence of spoliation excluded on the basis of both authentication and hearsay.

Authentication Challenges – Emails and Header Printouts

Defendant first sought to strike exhibits, including, inter alia, a co-defendant’s eMail, claiming that there was no testimony from the offering party as to the authenticity of the email, and that therefore the eMail should be stricken as not satisfying the requirements imposed by Fed. R. Evid. Rule 901. The emails had, however, been produced by one of the co-defendants in a related case, and since that co-defendant could authenticate those emails in the instant case, the Court wasn’t buying, and one might consider the court to have deemed this evidence “pre-authenticated:”

“As to the emails, ASUS says “Plaintiff has not submitted a sworn testimony that the emails attached as Exhibits A through D to its memorandum are authentic under Fed.R.Evid. 901, which requires a witness with “knowledge ... that a matter is what it is claimed to be.” FN70 These emails were first produced by Winbond in the Gateway case, not in this case. FN71 Winbond was not a party to the Gateway case, but is a party in this case. While it is not clear on this record whether Winbond also produced the emails in this case, it is clear that Winbond would readily authenticate them again by production, which would be an effective authentication against all parties to the case.FN72 Authentication for this motion is satisfied.”

Footnote 72 cites to a Ninth Circuit decision: Orr v. Bank of Am., 285 F.3d 764, 776 (9th Cir.2002)

Defendant also mounted an authentication to a “program header printout:”

“Plaintiff's explanation of the source of [the program header printouts] is ‘A copy of each programming header is attached hereto as Exhibit I’. Plaintiff's cursory account of Exhibit I's origin is insufficient under Rule 901, which requires “evidence sufficient to support a finding that the matter in question is what its proponent claims.” FN73””

Once again, a co-defendant had produced the program files as having come from defendant, and so the program printouts were deemed “sufficiently authenticated for this motion.”

The Court also notes that defendant claimed only “insufficient authentication” and did not repudiate the ESI evidence, and deemed plaintiff’s authentication sufficient in light of defendant’s “marginal” challenge.

Defendant’s “Internal Evidence Vacuum”

Magistrate Judge Nuffer provides an early assessment of defendant’s evidence management behavior, and a hint of what was to follow, in this excerpt rejecting defendant’s authentication challenges:

“ASUS claims a nearly total absence of evidence, disputing any evidence produced by other parties. The purpose of authentication is to buttress reliability and filter untrustworthy evidence. ASUS is using the requirement of authentication, in conjunction with its internal evidence vacuum, to eliminate the only evidence available because ASUS will not repudiate, authenticate or contradict it. That the evidence comes from other sources will be considered as to the weight the evidence may have, but ASUS should not be able to prevent consideration of the best evidence available, which has reasonable assurances of authenticity.”

Hearsay Challenges - eMail

Well, if authentication challenges won’t stick, the next best approach is to mount a hearsay challenge. Which is just what defendant did. One of defendant’s various hearsay challenges addressed the emails of a co-defendant. The Court accepts them as business records of that co-defendant:

“The Winbond emails are admissible business records of Winbond. They reflect the activities and knowledge of Winbond and only mention involvement of ASUS.”
“Because the records themselves are the actual communications, they are timely recorded, regular activities; they memorialize events and conditions; and they have no indicia of untrustworthiness. They do not purport to reflect statements of unidentified third parties.”

Blognote: It should be pointed out that this approach is emblematic of the low bar for a finding that ESI hearsay falls within the business records exception of Fed. R. Evid. Rule 803(6). The “indicia of untrustworthiness” is a condition subsequent, and absent some showing by a party challenging trustworthiness of ESI, the application of the business records exception to ESI hearsay remains to this day a virtual fait accompli. In his book, “The Foundations of Digital Evidence” author George Paul makes a cogent and supportable argument that computer generated information is not “born with integrity” or trustworthiness. Mr. Paul also argues that unless some testable integrity mechanism (not mere sworn testimony) is applied to computer generated information at the time relevance is asserted to attach, such computer generated information should not be considered trustworthy. Put this author in the same camp as Mr. Paul.

Attachments to Business Records Emails are Business Records

The defendant next challenged the “program header printouts” attached as exhibits to plaintiff’s motion for sanctions. The court provided this analysis: First, the emails were referenced and “enclosed” [I think this means attached] in an email produced a co-defendant as having come from the defendant. Second, “coupled with the emails, the program header printouts constitute admissible business records.”

The upshot: “The arguments ASUS makes about authenticity and chain of custody all go to weight.”

Now, onward to the Motion for Sanctions itself.

Motion for Sanctions – Threshold Issues to Establish Spoliation and Standards for Determination of Sanctions

Magistrate Judge Nuffer first notes that a spoliation hearing involves two separate determinations. First, threshold issues on a spoliation motion include establishing:

“(a) that evidence has been lost, destroyed or made unavailable and
(b) that the party against whom sanctions are sought had a duty to preserve the evidence.”

The second determination provides that if these elements are established, “the determination of sanctions is subject to other standards.”

Unavailable Evidence

Plaintiff produced a veritable laundry list of materials defendant would be “expected to have,” including test program source code, and documentation of their development, documentation of testing activities during the relevant time period, relevant communication with testing and design experts, documentation of defendant’s internal discussions relating to the licensing of plaintiff’s technology.

It certainly did not help defendant’s position that other co-defendants had copies of evidence that defendant should itself have possessed:

“Adams claims that “[t]he evidence that Winbond provided in the Gateway litigation does not leave any doubt that these documents existed and that ASUS had them.” FN107 Certainly, other parties have provided evidence that one would expect ASUS to have as well. And the volume and tenor of the Winbond communication and concurrent Yang emails would suggest ASUS should have far more evidence than it has produced in this case.”

Admissions that a party destroyed evidence is typically not helpful in challenging a spoliation assertion:

“ASUS' own statements and productions highlight data that is missing. “[N]o documents, programs or source code have been discarded since ASUSTeK received some information of Plaintiff's potential claims against ASUSTeK in early 2005.” FN108 ASUS therefore admits that materials prior to 2005 could have been destroyed because of its information management practices.”

The Court’s take:

“The universe of materials we are missing is very large. Indisputably, we have very little evidence compared to what would be expected.”

Ouch.

Duty to Preserve

The Court then turns to the issue of ESI preservation and first notes that the parties agreed that “a litigant's duty to preserve evidence arises when “he knows or should know [it] is relevant to imminent or ongoing litigation.” Jordan F. Miller Corp. v. Mid-Continent Aircraft Service, Inc., No. 97-5089, 1998 WL 68879, *5 (10th Cir. Feb. 20, 1998).” [Author’s note: the Court employs endnotes rather than in-text citations]

Temporal Trigger of Duty to Preserve

The Court first addresses the issue of timing: when was the duty to preserve triggered?

Constructive Notice May Trigger a Duty to Preserve

In this patent matter, the plaintiff sent a letter (relating to defendant’s possible infringement of plaintiff’s patents). The Court notes that the receipt of plaintiff’s counsel’s letter was not an “inviolable benchmark” and noted that Tenth Circuit decisional authority provided for a triggering event to occur based on constructive, rather than actual notice, or where “[t]he district court found that plaintiff had a duty to preserve the evidence because it knew or should have known that litigation was imminent....” 103 Investors I, L.P. v. Square D Co., 470 F.3d 985 (10th Cir.2006).”

First and Last Temporal Triggers of Duty to Preserve

The Court also provides a determination of the last date in which the discarded information should have been available:

“Separate and apart from the benchmark date to start preservation is the last date on which information related to the patent application, including the source code, should have been available. Adams says “ASUS would have to have kept the source code for the test programs because its application remained pending until June 2005.” FN130 ASUS does not explain how, why or when its source code was discarded.”

Seeking Shelter in the ESI Safe Harbor

Defendant claimed shelter in the safe harbor provision of Fed. R. Civ. P. Rule 37(e):

“ASUS claims it can find a safe harbor against sanctions because of the recently adopted rule that sanctions may not be generally imposed for “failing to provide electronically stored information lost” if a party can show the loss was “a result of the routine, good-faith operation of an electronic information system.”

Blognote: Some of the spoliated evidence was paper based and not ESI. Other than pointing out general principles applicable to both ESI and non-ESI, the discussion and analyses here addresses only ESI.

Expert [Consultant] Safe Harbor Testimony – Hoisted on One’s Own Petard

In its efforts to seek shelter under Fed. Rule Civ. P. Rule 37’s safe harbor, defendant in this matter provided “an extensive declaration from an experienced consultant in eDiscovery.” Unfortunately, the declaration served more to damage than bolster defendant’s argument. The testimony, unlovingly parsed by the author:

Helpful: Expert “stated the reasons for and history of ASUS' “distributed information architecture.”
Not Helpful: “[Expert] did not state any opinion as to the reasonableness or good-faith in the system's operation,”

Helpful: “ASUSTeK's data architecture relies predominantly on storage on individual user's workstations.”
Not Helpful: “[The expert’s] 31-page declaration does not show he is familiar with the precise practices pointed out in the declarations of employees.

Not Helpful: “Neither the expert nor ASUS speak of archiving “policies;” they speak of archiving ‘practices.’”
Not Helpful: Apart from archiving, neither the expert nor the employees describe any sort of backup system or data backup policy, past or present. Presumably ASUS' current data is at the mercy of individual employees' backup practices.
Not Helpful: “The expert does not evaluate risk of data loss from ASUS' reliance on employees though he does specifically mention the expected turnover of employees in this industry FN137 which would seem to heighten the risk.”

Expert Testimony: Ready, Fire, Aim

Where an expert’s testimony torpedoes his or her client:

“He does mention that certain financial-related data is stored in centrally accessible and presumably secure, backed-up servers.”

I believe the Court is being somewhat tongue-in-cheek when it concludes that defendant’s expert testimony shows that “ASUS does know how to protect data it regards as important.”

The upshot: Defendant is not entitled to Rule 37 safe harbor protection: “The information before the court does not demonstrate that ASUS' loss of electronic information is within the safe harbor provision.”

But wait, here’s the teaser for the next episode: “Further, there has been no explanation of the loss of other information”

Determination of Appropriate Sanction

Having determined that defendant violated its duty to preserve evidence, and after finding that under the circumstances, defendant’s ESI destruction was not afforded protection under Fed. R. Civ. P. Rule 37’s safe harbor provisions, the Court then turns to the type of sanction to be imposed.

The Court then provides an analysis under Tenth Circuit decisional authority for the determination of sanctions:

“’When deciding whether to sanction a party for the spoliation of evidence, courts have considered a variety of factors, two of which generally carry the most weight: (1) the degree of culpability of the party who lost or destroyed the evidence, and (2) the degree of actual prejudice to the other party.” FN139 [Jordan F. Miller Corp. v. Mid-Continent Aircraft Service, Inc., No. 97-5089, 1998 WL 68879 at *4 (10th Cir. 1998).]

“The most widely known sanction is the adverse inference instruction, but other sanctions range from admonitions to granting judgment or dismissal.’”

Tenth Circuit Culpability Analysis in Spoliation Proceedings

Bad Faith Required for Imposition of Adverse Inference

The Court first points out that the “general rule” in the Tenth Circuit 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)]

Degree of Control Influences Severity of Sanctions

The Court then discusses the Tenth Circuit’s approach to determination of severity of spoliation sanctions, indicating that a spoliator’s degree of control over destroyed evidence can influence the determination of sanctions severity:

“A sliding scale of sanctions may be imposed depending on the degree of control the alleged spoliator had over the evidence and the spoliator's subjective intentions.

Terminating Sanctions Not Appropriate

The Court then states that “Case law defines the factors to consider when terminating sanctions are sought,” and discusses factors it is to take into consideration:

“The district court should consider the following factors when considering whether dismissal is an appropriate sanction: (1) the degree of actual prejudice to the opposing party, (2) the degree of interference with the judicial process, (3) the litigant's culpability, (4) whether the litigant was warned in advance that dismissal was a likely sanction, and (5) whether a lesser sanction would be effective.FN142” [LaFleur v. Teen Help, 342 F.3d 1145, 1151 (10th Cir.2003).]

The Court finds that in this matter, terminating sanctions are not appropriate because defendant was not “warned of the possibility of a terminating sanction,” and because plaintiff had other sources for evidence spoliated by the defendant.

Questionable Information Management Practices as Basis for Finding of Culpability

The Court focuses its determination of culpability on defendant’s “questionable” information management practices:

“The culpability in this case appears at this time to be founded in ASUS' questionable information management practices. A court-and more importantly, a litigant-is not required to simply accept whatever information management practices a party may have. A practice may be unreasonable, given responsibilities to third parties. While a party may design its information management practices to suit its business purposes, one of those business purposes must be accountability to third parties.”

Information Management Practices that Lead to Denial of Access to Evidence

The Court also notes that defendant’s information management practices denied plaintiff of access to evidence, thereby thwarting the discovery rules:

“[U]tilizing a system of record-keeping which conceals rather than discloses relevant records, or makes it unduly difficult to identify or locate them, [renders] the production of the documents an excessively burdensome and costly expedition. To allow a defendant whose business generates massive records to frustrate discovery by creating an inadequate filing system, and then claiming undue burden, would defeat the purposes of the discovery rules.” Kozlowski v. Sears, Roebuck, 73 F.R.D. 73 (D.Mass.1976).

The Court’s finding:

“ASUS' system architecture of questionable reliability which has evolved rather than been planned, operates to deny Adams access to evidence. This should not be excused.”

The reasons provided by the Court:

“ASUS did not have a designed information management policy taking varying needs into account. ASUS offers no statements from management-level persons explaining its practices, or existence of any policies.”

Absence of Document Retention Policy is Pertinent Factor in Sanctions Decision

In what appears to be one of the first decisions to adopt verbatim Guideline 1 of the Sedona Principles, the Court states:

“An organization should have reasonable policies and procedures for managing its information and records.” FN145 [Guideline 1, The Sedona Guidelines: Best Practice Guidelines & Commentary for Managing Information & Records in the Electronic Age (November 2007).]

Magistrate Judge Nuffer adopts decisional authority from the Southern District of Florida in finding that the absence of a document retention policy can negatively influence a spoliation determination:

“The absence of a coherent document retention policy” is a pertinent factor to consider when evaluating sanctions. FN146 [Telectron, Inc. v. Overhead Door Corp. 116 F.R.D. 107, 123 (S.D.Fla.1987)]”

Moreover, the Court notes, “[I]nformation management policies are not a dark or novel art. Numerous authoritative organizations have long promulgated policy guidelines for document retention and destruction.”

After finding that that plaintiff was prejudiced by defendant’s spoliation, the Court found that the imposition of sanctions was appropriate, but deferred determination of any particular sanction until the close of discovery.

It would not be surprising to see the imposition of an adverse inference instruction to the jury in this matter.


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Case: Tieco, Inc. v. USX Corp.
Cite: 2009 WL 921266 (11th Cir. 2009)
Date: 2009-04-07
Topics: Independent tort of spoliation in Alabama - maybe.

The 11th Circuit appears to state in a somewhat qualified fashion that, in this case that there is no Alabama state law based independent tort of spoliation:

“FN1. To the extent that plaintiff's complaint alleges a new claim for the independent tort of spoliation, the district court correctly concluded that Alabama law does not recognize that claim as asserted here. “

Blognote: The Alabama Supreme Court apparently thinks otherwise, and is a bit more forthright about the existence of this tort, and negligence as the basis for such actions:

“Although there is no general duty to preserve evidence, “Alabama clearly recognizes the doctrine that one who volunteers to act, though under no duty to do so, is thereafter charged with the duty of acting with due care and is liable for negligence in connection therewith.” Dailey v. City of Birmingham, 378 So.2d 728, 729 (Ala.1979).FN3 When a third party has knowledge of a pending or potential lawsuit and accepts responsibility for evidence that would be used in that lawsuit, it should be held liable for damage resulting from the loss or destruction of that evidence.” Smith v. Atkinson, 771 So.2d 429, 432 (Ala. 2000)

The Supreme Court of Alabama reiterated its position in 2008 and announced a formal three part test for third party negligent spoliation:

"In Smith v. Atkinson, 771 So.2d 429, 432 (Ala.2000), this Court recognized that general principles of negligence law afford an Alabama plaintiff a remedy when evidence crucial to that plaintiff's case is lost or destroyed through the acts of a third party. [FN4] “

“We further explained how a claim of spoliation of evidence against a third party fit within the negligence framework: "As in all negligence actions, the plaintiff in a third-party spoliation case must show a duty to a foreseeable plaintiff, a breach of that duty, proximate causation, and damage. Crowne Invs., Inc. v. Bryant, 638 So.2d 873, 878 (Ala.1994).

“We announce today a three-part test for determining when a third party can be held liable for negligent spoliation of evidence. In addition to proving a duty, a breach, proximate cause, and damage, the plaintiff in a third-party spoliation case must also show:

(1) that the defendant spoliator had actual knowledge of pending or potential litigation;

(2) that a duty was imposed upon the defendant through a voluntary undertaking, an agreement, or a specific request; and

(3) that the missing evidence was vital to the plaintiff's pending or potential action. Once all three of these elements are established, there arises a rebuttable presumption that but for the fact of the spoliation of evidence the plaintiff would have recovered in the pending or potential litigation; the defendant must overcome that rebuttable presumption or else be liable for damages." Smith, 771 So.2d at 432-33." Killings v. Enterprise Leasing Co., Inc. 2008 WL 4967412, 4 (Ala.) (Ala.,2008)


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Case: Reed v. Honeywell Intern., Inc.
Cite: 2009 WL 886844 (D. Ariz. 2009)
Date: 2009-03-31
Topics: Duty to preserve handwritten notes spontaneously taken during meeting, Second Circuit’s “reasonable knowledge of potential relevance to anticipated litigation triggers duty to preserve approach acknowledged in 9th Circuit and Arizona federal courts, bad faith not required, and inadvertence may provide basis for spoliation, timing of sanctions imposition

In this wrongful termination matter from the United States District Court for the District of Arizona, plaintiff maintained that a defendant failed to preserve certain relevant handwritten meeting notes created by defendant’s former employment manager. Upon his departure from defendant’s employ, the former manager left the handwritten notes in his desk. The Court found that defendant recognized the potential for litigation in connection with plaintiff’s termination more than a year before the employment manager left defendant’s employ.

Here now, a response from one of defendant’s counsel explaining the possible fate of the handwritten notes:

“When an attorney for Honeywell was asked what happens to notes and records that are left in a departing employee's desk, she replied “’[H]opefully the next HR person would pick them up. But I can't tell you what happens in every case.’”

The Court then tees up its spoliation analysis by stating the relief sought by plaintiffs:

“Plaintiff requests that this Court exercise its discretion to impose the specific sanction of excluding evidence relating to the alleged investigation that Defendants claim to have conducted into the allegations against Ms. Reed and her subordinates because of Defendants' failure.”

Analysis

District Judge Murguia then sets out Ninth Circuit spoliation sanctions requirements, beginning with “inherent powers” as the basis for sanctions impositions. Following Second Circuit doctrine, the Court notes that spoliation need not be in “bad faith” and that adverse inference instructions may be appropriate even where the loss of evidence is inadvertent:

A district court has the inherent power to levy sanctions for spoliation of evidence. U.S. v. $40,955.00 in U.S. Currency, 554 F.3d 752, 758 (9th Cir.2009). As Defendants concede, a party's destruction of evidence need not be in “bad faith” to warrant a court's imposition of sanctions in the Ninth Circuit. Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir.1993). Defendants argue that the loss was inadvertent and that inadvertent losses do not warrant sanctions. Med. Lab. Mgmt. Consultants v. Am. Broad Cos., 306 F.3d 806, 824 (9th Cir.2002) (holding that trial court did not abuse its discretionary power in refusing to order an adverse inference for inadvertently lost slides that were either misplaced or stolen between a hotel room in Geneva and Defendants' expert's landing in New York City).

“However, in the Ninth Circuit, sanctions may be awarded even for inadvertent loss. Leon v. IDX System Corp. ., 464 F.3d 951, 959 (9th Cir.2006) (affirming $65,000 spoliation sanction where party had some notice of pending litigation but claimed that it overwrote computer files to protect privacy rather than to avoid litigation).”

Spoliation Leaves No Meaningful Alternative

The Court notes that defendant provided typewritten memoranda of the critical meeting(s), and that the Court’s review of these memoranda found them to be mere summaries, and ruled that summaries were wanting:

“However, a review of the typewritten memoranda reveal that they are summaries of what occurred in the meetings rather than “transcriptions” of the notes spontaneously taken during a meeting. Plaintiffs are therefore left without a meaningful alternative to Mr. Eden's handwritten notes. “

The Court then notes that defendant had a duty to preserve the handwritten now of the now-departed employee at least one year prior to the onset of litigation:

“Moreover, “[t]he duty to preserve material evidence arises not only during litigation but also extends to the period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.” World Courier v. Barone, 2007 WL 1119196 at *1 (N.D.Cal.2007) (quoting Kronisch v. United States, 150 F.3d 112, 126 (2d Cir.1998)). Defendants apparently anticipated litigation on this matter at least a year prior to Mr. Eden's departure and the disappearance of the notes.”

As a result of the destruction of the handwritten notes, the Court notes, plaintiffs were left with no opportunity to cross examine defendant’s former employee manager about the handwritten notes and his typewritten summaries.

Type and Timing of Spoliation Sanctions

The Court finds that spoliation has occurred and then concludes that “[T]he only remaining question is the appropriate sanction.” Plaintiff requested relief consisted of broad evidence exclusion. The Court disagreed, and ruled that:

“[A]ny sanctions for misbehavior on the part of [defendant] is more appropriately remedied at trial or at the conclusion of the case.”

But wait, that’s not all folks. Finding that striking any and all evidence as requested by plaintiff would result in a directed verdict, the Court imposed a (somewhat) less draconian sanction of an adverse inference:

“Based on the information presented, the Court is prepared to consider an adverse jury instruction at trial. Striking any and all evidence relating to the BRAVO investigation would essentially constitute a directed verdict as it would likely guarantee a verdict in Plaintiff's favor. A directed verdict appears too harsh a penalty for Defendants' alleged inadvertent conduct. Halaco Engineering Co. v. Costle, 843 F.2d 376, 380 (9th Cir.1988) (“In cases where the drastic sanctions of dismissal or default are ordered, the range of discretion for a district court is narrowed and the losing party's non-compliance must be due to willfulness, fault, or bad faith.”). Plaintiff's motion for sanctions for spoliation of evidence is therefore denied as premature without prejudice to Plaintiff's refiling of the motion as a Motion in Limine or Request for Adverse Jury Instruction prior to trial. “

Blognote: Compare this decision with IBEW case that follows. It appears that in the Arizona federal courts (and perhaps also in the Ninth Circuit) inadvertence may trigger the imposition of a spoliation sanction, whereas accident (or innocent loss) may not.


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Case: Marceau v. International Broth. of Elec. Workers
Cite: 2009 WL 891036 (D. Ariz. 2009)
Date: 2009-03-31
Topics: Spoliation, destruction of documents, document preservation obligations, court’s inherent powers to impose adverse inference sanction for spoliation, no sanction imposition for accidental or innocent loss

My spoliation migraine is returning, and it’s time to bring out the aspirin. In this RICO action, decided on the same day and by the same District Judge (Murguia) in Honeywell, the plaintiff accused defendant of violating both the latter’s internal document retention policy as well as other legal or regulatory document retention requirements and moved for an adverse inference.

Spoliation Analysis Redux

Noting that sanctions imposition for spoliation may arise from either the violation of a discovery order pursuant to Fed. R. Civ. P. 37 or from the court’s inherent powers, District Judge Murguia provides an analysis relying on Ninth Circuits adoption of the Second Circuit’s approach in West and Kronisch, as well as District Judge Scheindlin’s Zubulake decisions.

“ ‘A federal trial court has the inherent discretionary power to make appropriate evidentiary rulings in response to the destruction or spoliation FN18 of relevant evidence.’ “ Medical Laboratory Management Consultants v. American Broadcasting Companies, Inc., 306 F.3d 806, 824 (9th Cir.2002) (quoting Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir.1993)). A district court “has the broad discretionary power to permit a jury to draw an adverse inference from the destruction or spoliation against the party or witness responsible for that behavior.” Glover, 6 F.3d at 1329 (citing Akiona v. U.S., 938 F.2d 158, 161 (9th Cir.1991)); see Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y.2003) (“Zubulake IV”) (“The spoliation of evidence germane ‘to proof of an issue at trial can support an inference that the evidence would have been unfavorable to the party responsible for its destruction.’ ”) (quoting Kronisch v. United States, 150 F.3d 112, 126 (2d Cir.1998)).FN18. Spoliation is “the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.” West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir.1999).

Carve- Out One: Employer Spoliation

Drawing on Seventh Circuit precedent, however, Judge Murguia then appears to adopt a carve-out for document destruction by an employer:

““An employer's destruction of or inability to produce a document, standing alone, does not warrant an inference that the document, if produced, would have contained information adverse to the employer's case.” Park v. City of Chicago, 297 F.3d 606, 615 (7th Cir.2002).”

Carve-Out Two: Reasonably Should Know Means “Some” Notice

The Court first sets forth the Second Circuit’s position on duty to preserve for future litigation, adopted mostly in tact by the Ninth Circuit, except, of course that “should know” now means that some actual (rather than constructive) notice of potential future litigation relevance must take place:

“ ‘The duty to preserve material evidence arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.’ “ World Courier v. Barone, 2007 WL 1119196, at * 1 (N.D.Cal.2007) (quoting Kronisch v. United States, 150 F.3d 112, 126 (2d Cir.1998)); see Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423, 436 (2d Cir.2001) (“The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.”).

“In addition, “Defendants engage in spoliation of documents as a matter of law only if they had ‘some notice that the documents were potentially relevant’ to the litigation before they was destroyed.” U.S. v. Kitsap Physicians Service, 314 F.3d 995, 1001 (9th Cir.2002) (quoting Akiona v. United States, 938 F.2d 158, 161 (9th Cir.1991)). However, only a ‘minimum link of relevance’ is required to permit a jury to draw an adverse inference. Akiona, 938 F.2d at 161.“”

Spoliator Bad Faith Not Required

It is clear that in the Ninth Circuit, bad faith is not required in order for a court to impose the sanction of an adverse inference instruction to a jury:

“Moreover, despite Defendants' contention to the contrary, the party seeking to introduce evidence of spoliation need not establish bad faith on the part of the party who destroyed the evidence. Glover, 6 F.3d at 1329 (“[A] finding of ‘bad faith’ is not a prerequisite to [permit a jury to draw an adverse inference].”) (citing Akiona, 938 F.2d at 368-70 & n. 2). Nonetheless, “when relevant evidence is lost accidentally or for an innocent reason, an adverse evidentiary inference from the loss may be rejected.” Medical Laboratory, 306 F.3d 806, 824 (9th Cir.2002) (citing Blinzler v. Marriott Int'l, Inc., 81 F.3d 1148, 1159 (1st Cir.1996)).”

Awareness of Possibility of Future Litigation – An Issue of Fact

Accident and innocence notwithstanding, the Court also finds that the facts and circumstances of this case warranted a finding that the facts and circumstances of this case were:

“…[s]ufficient to establish a reasonable inference that Corporate Defendants were aware of the possibility of future litigation involving the instant claims.”

In essence, the court tells us, is whether the defendants “reasonably should have anticipated future litigation.”

Blognote: I don’t see how a party could “anticipate” anything other than a future event.

Totality of Circumstances and Relevance – An Issue of Fact

The Court also found that based on ample witness testimony, there existed sufficient evidence to “establish a genuine issue of fact as to whether the destroyed documents were relevant to Plaintiffs’ claims.”

“Thus, based on the totality of the circumstances, it is reasonable to infer that documents pertaining to sales accounts are at the very least potentially relevant to this litigation, which involves, among other things, allegations of account manipulation. See Medical Laboratory, 306 F.3d at 824 (a district court may base its conclusion regarding whether to issue an adverse inference instruction on the totality of the circumstances).”

Assertion of Innocent Destruction, and Protection Under Fed. R. Civ. P. Rule 37 Safe Harbor – A Question of Fact

In their opposition to plaintiffs’ spoliation motion, defendant’s defenses (supported by testimony) included assertions to the effect that the destroyed documents were copies disposed of in accordance with the routine operation of defendant’s document retention policy. It was also “unclear” said the Court, whether there was personal knowledge of the destruction of the subject documents.

Adverse Inference Sanction Imposition Improper at Summary Judgment Stage

The Court, employing the “totality of circumstances” approach, punted, and in denying the motion without prejudice, left the adverse inference determination for post-summary judgment proceedings:

“That evidence, in addition to the totality of the circumstances, establishes questions of fact concerning the nature of the destroyed documents, in addition to credibility determinations, that are inappropriate for resolution on summary judgment. Accordingly, the Court cannot draw an adverse inference at this time and must deny without prejudice Plaintiffs' Motion to the refiling of the Motion prior to trial as a Request for an Adverse Jury Instruction.”

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Case: State of Ohio v Rivas
Cite: --- N.E.2d ----, 2009 WL 875216 (Ohio 2009)
Date: 2009-03-31
Topics: Spoliation assertion must be made by prima facie showing, absent prima facie showing, forensic imaging of allegedly spoliated hard drive not permitted.

In this criminal case decision, the Ohio Supreme Court ruled that “[W]hen a prosecutor has provided a written transcript that purports to accurately reflect data stored on a computer hard drive, a court may not order an examination of the computer hard drive unless the defense makes a prima facie showing that the state has provided false, incomplete, adulterated, or spoliated evidence.”

Of course, making a prima facie showing of ESI contained on a hard drive without conducting a forensic examination of that hard drive is, well, impossible. It certainly is not ascertainable from any “written transcript”

The dissent has the more reasoned approach. Noting that appropriate limiting cautions could be taken,

“There is no requirement in the discovery provisions of the Criminal Rules that a defendant who wishes to verify the accuracy of the printed version of electronic data stored on a state's computer hard drive must first make a prima facie showing that the state provided false, incomplete, adulterated, or spoliated evidence.”

“Although defendant's basis for asserting a discrepancy between the printed version of the data and the version that resides on the computer hard drive may seem unusual, there is no justification for creating, as the majority opinion does, a permanent judicial gloss over the plain language of the discovery rules to short-circuit defendant's discovery request.”

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2009-04-03 Springing into Spoliation

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

Decisions:

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

SWT


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

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

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

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

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

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

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

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

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

Sampling of Privilege Log

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

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

Attorneys’ Eyes Only

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

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

“Unringing the Bell”

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

Spoliation Discovery Does Have an Endpoint

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

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

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

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

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

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

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

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

Limitation of Spoliation Related Discovery

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

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

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

Consultation between Plaintiff and Defendants’ Experts

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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


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

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

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

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

Control

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

Culpable State of Mind

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

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

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

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

Relevance

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

“‘…[s]poliation’ has been defined as ‘the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.’ “ Id. (and cases cited therein)’”

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

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

Tenth Circuit Standards for Determining Sanctions Severity

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

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

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

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

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

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

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

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

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

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

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

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

Spoliation Timeline

What's a good spoliation proceeding without one?

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

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

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

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

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

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

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

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

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

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

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

Presence of Anti-Forensics Tools

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

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

First Spoliation Trigger Date

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

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

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

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

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

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

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

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

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

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

Systemic Effort to Erase Permanent Data

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

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

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

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

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

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

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

Documents and Settings Folder

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

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

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

System Volume Folder

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

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

Windows Directory

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

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

Expert Report Practice Do’s and Don’ts

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

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

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

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

Analysis

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

Bad Faith Document Destruction Required for Adverse Inference in Tenth Circuit

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

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

Bad Faith Defined: “Antithesis of Good Faith”

No, I didn’t make that up:

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

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

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

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

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

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

Defense Counsel Gets A Pass

This time:

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

Adverse Inference Standard of Proof

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

“[T]he party seeking an adverse inference must adduce sufficient evidence from which a reasonable trier of fact could infer that the destroyed [or unavailable] evidence would have been of the nature alleged by the party affected by its destruction.... Courts must take care not to hold[ ] the prejudiced party to too strict a standard of proof regarding the likely contents of the destroyed [or unavailable] evidence, because doing so would subvert the purposes of the adverse inference, and would allow parties who have ... destroyed evidence to profit from that destruction.” Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 109 (2d Cir.2002) (internal quotations omitted). “Where a party destroys evidence in bad faith, that bad faith alone is sufficient circumstantial evidence from which a reasonable fact finder could conclude that the missing evidence was unfavorable to that party.” Id. See Aramburu v. Boeing Co., 112 F.3d at 1407…”

Result

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

Tenth Circuit Standards for Imposition of Terminating Sanctions

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

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

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

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

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

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

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

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