International Litigation Services, Inc.

The Federal Rules of Civil Procedure are getting a facelift. FRCP 1, 4, 16, 26, 30, 31, 33, 34, 37 and 55 were approved by SCOTUS on 4/9/15 and then were sent for approval by Congress.  Congress, if it chooses to take no action (none is expected) the updated rules will become law on December 1, 2015.

These new rules will affect the discovery process, particularly eDiscovery and spoliation of electronic data. As ILS has previously blogged about, Rule 37(e) has been particularly controversial. The new rule enforces a great burden on the litigant seeking spoliation sanctions for failure to preserve electronically stored information (ESI).  The amended rule was revised a number of times, and the final text is as follows:

(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;

(B) instruct the jury that it may or must presume the information was unfavorable to the party; or

(C) dismiss the action or enter a default judgment.

At issue in Hall v. Flannery, Case No. 3:13-cv-914-SMY-DGW(S.D.Ill. May 1, 2015), a medical malpractice case, is whether the metadata and audit trail of an electronic medical file must be produced by Defendants. Plaintiff sought the information after receiving two “different” medical charts relating to the patient’s care. She alleged a theory that the medical records have been improperly altered, and believes the metadata and audit trail may shed some light on the subject. The audit trail would show the date, time, name of person who accessed the record, the user ID, action taken and items viewed in the record.

Defendants objected on the grounds of peer review privilege. This protects from disclosure information related to the process by medical professionals in revising and commenting on medical records. Defendants asserted this privilege to protect the audit trail as to actions taken by its risk management personnel and representatives in anticipation of litigation.

Plaintiff responded that the audit trail is particularly relevant to her theory that the medical records were edited or altered. Further, the peer review privilege would not protect from disclosure of the medical record, of which the audit trail is a part. Finally, because the audit trail was not created in anticipation of litigation (it is automatically generated), work product privilege would not apply either.

The court looked to state law to see if the peer review privilege would shield the audit trail from disclosure. Illinois’ Medical Studies Act provided a list of information and data that is protected by this privilege. However, the types of information Plaintiff sought was not listed. The court found that the entire medical record is discoverable, and the audit trail is a part of that record. Neither the peer review privilege nor the work product privilege would apply. The court ordered Defendants to produce all portions of the audit trail responsive the Plaintiffs’ discovery requests.

Defendant’s sought full and complete access to Plaintiff’s Facebook account in the putative class action case In re Milo’s Kitchen Dog Treats Consolidated Cases, Civil Action No. 12-1011 (W.D. Penn. April 14, 2015). The case alleges that Defendant’s dog treats harmed Plaintiff’s dog, but Plaintiff had a Facebook entry where she blamed another dog treat company of being responsible. As Plaintiff subsequently denied she purchased any other dog treats, Defendants sought full access to the account on that basis.

Plaintiff provided 648 pages of Facebook data, but objected to the full account. The Facebook data contained the conversations and statements that Plaintiff purchased dog treats other than Defendant’s brand.

The court denied the Defendants’ request for full access to the Facebook profile.

In the beginning of a copyright infringement case filed in May 2013, the court entered a scheduling order on February 20, 2014, whereby Defendant was to preserve all electronically stored information (ESI) including metadata. Defendant was also to ascertain what devices he had and what he has done to preserve ESI in Grady v. Brodersen, Civil Action No. 13-cv-00752-REB-NYW (D.Colo. March 23, 2015).

Plaintiff alleged that for seven months after this order was entered, Defendant failed to disclose or communicate regarding what devices he had or what steps had been taken to preserve ESI. On February 27, 2014, Defendant admitted computer equipment was relevant and identified himself as the custodian. He claimed to be searching his computers for relevant ESI. In August 2014, Defendant amended his initial disclosure and noted his computer owned during the relevant time period died and was discarded.

In response to Plaintiff’s Motion to Compel, the court ordered on September 16, 2014 Defendant to produce his new computer hard drive for inspection and copying. In his deposition a month later, Defendant testified his computer was inoperable but he did nothing in attempt to have it repaired. Plaintiff moved for sanctions, alleging the following:

1.      The computer that was discarded and lost the ESI was a significant prejudice to Plaintiff. The computer was an important source of evidence regarding the copywritten works.

2.      Deferent was not truthful on his initial 26(a)(1) disclosures.

3.      Defendant destroyed the computer after litigation arose and there was a duty to preserve all relevant evidence.

4.      The court was not required to issue a warning of dismissal where the spoliation violation is severe to dismiss the case as sanction.

The court agreed with allegations 1-3 and found Defendant engaged in bad faith spoliation by discarding the computer. However, the court felt dismissal was too severe a sanction with the 10th Circuit’s direction in mind to consider the efficacy of lesser sanctions. The court ordered an adverse inference instruction and awarded Plaintiff attorney fees and costs.

Plaintiffs are 7-11 franchise owners who allege business torts and discrimination against 7-11 corporate company in Younes, et al. v. 7-Eleven, Inc., Civil Nos. 13-3500 (RMB/JS), 13-3715(MAS/JS), 13-4578(RMB/JS)(D.N.J. March 18, 2015). One of the most scathing allegations concerned “Project P” which Plaintiffs allege was an internal targeting of certain franchise to push out the owners based on national origin to “churn” the franchises and make more fees for the corporate entity. In the original discovery order, the parties agreed to not request metadata.

After receiving certain electronic data and holding oral depositions, Plaintiffs collectively sought metadata for 85 identified documents and 2 Excel spreadsheets. They sought “the date or origination, author, custodian date of each modification and author of each modification” as well as the date which established to whom the document had been electronically distributed. Defendant filed a motion for protective order to bar the discovery of metadata.

The court noted, “To put it mildly, plaintiffs have had a difficult time obtaining 7-Eleven’s documents regarding Project P.” Noting the documents had been produced in “dribs and drabs,” and that 7-11 acknowledged that not all relevant documents have been produced. This was important, as the court noted had Plaintiffs known the difficulties they would face in obtaining the discovery, they likely would have not agreed to forgo metadata.

The court noted FRCP 34(b)(2)(E) addresses the production of ESI, including metadata and cited that some courts hold that one must have a “particularized need” for metadata. The court found that Plaintiffs here have demonstrated such need: “The missing information is plainly relevant and discoverable.” Further, the court noted that Plaintiffs requested metadata for a relatively small and targeted group of documents; it was not a blanket request. 7-11 had failed to show that it would suffer undue hardship to provide this information. Although the court recognized the parties originally agreed to not produce metadata, the court held there was changed circumstances that justified modifying this order.

In Selectica v. Novatus, Inc., Case No. 6:13-cv-1708-Orl-40TBS(M.D. Fla. March 12, 2015), Plaintiff was the former employer of four non-parties to the lawsuit, who left the company to work for Defendant. At issue is the deleted electronically stored evidence by one of these parties, an employee named Holt.

Plaintiff had a contract with Holt to hold in confidence and not disclose proprietary information and that all must be returned to Plaintiff upon leaving the company. Holt had a laptop computer at Plaintiff’s office that automatically uploaded files onto cloud storage. Once he left to work for Defendant, Plaintiff had possession of the laptop but Holt admitted he emailed links to files on the cloud storage.

The lawsuit was filed November 29, 2013 and a litigation hold letter was sent December 17, 2013. Beginning in November but mainly on December 29, 2013, Holt purged the Plaintiff’s files form the cloud storage. In deposition, he admitted he was prompted to do this after “finding out about the litigation…” Later, Holt was able to produce a list of the 68 files deleted from the cloud storage.

Plaitniff filed a motion seeking spoliation and the imposition of sanctions agasint Defendant for Holt’s actions. Plaintiff was concerned that the metadata from the cloud storage was irrevocably gone, which may have shown whether the files were copied, viewed, forwarded or downloaded. The court considered the motion under FRCP 37 and the 11th Circuit’s case law regarding spoliation:

·         Did the party in control of relevant evidence that was destroyed have a duty to preserve it? Yes, the files on cloud storage had relevant information when the lawsuit was filed and there was a duty to preserve it. Defendant had access to the files and was obligated to instruct Holt to maintain and preserve the data.

·         Was the evidence crucial to the case? The court found it was not, because Plaintiff still had the files deleted from the cloud from Holt’s laptop. Although the metadata was gone, the court noted metadata was not necessary to show Holt misappropriated the files—he admitted he did. Although the metadata could have shown whether someone copied, viewed, forwarded or downloaded the files, it might not have shown who did it or what was done with the information. Although the metadata might be used to impeach Hold’s testimony if he claimed no one viewed or downloaded the data, the court believed Plaintiff had plenty of other evidence that could impeach Holt’s testimony.

·         Was the data destroyed with a culpable state of mind? The court had no problem finding that Holt deleted the evidence in bad faith. However, there was no evidence Defendant acted in bad faith, a requirement for spoliation under the 11th Circuit. Defendant acted with negligence, or gross negligence.

Therefore, the court denied plaintiff’s motion for spoliation.

Electronically stored information, including but not limited to email communications, is a main form of electronic discovery in nearly every civil litigation. So it’s not too surprising that defendants who refused to produce email messages and disobeyed the court’s orders were harshly fined as a sanction and then found in contempt of court for failing to pay the sanction. 

In Reed v. Cassidy, No. 49A05-1405-PL-220 (Ct. App. Ind. March 9, 2015) is a case that was filed in 2012. RFPs were sent to Appellant-Defendants (comprised of three companies, the main one “DTS”, whose chief officers were the individuals as defendants), which included requests for email threads. Defendants responded with 1,900 pages of paper documents, but no email. Motions to compel were filed, and the court eventually ordered Defendants to pay Plaintiffs $10,000 as a discovery sanction. The court also ordered Defendants to produce certain email messages, but Defendants did not follow the order. More motions to compel were granted and the court ordered $30,000 now payable to Plaintiff for Defendant’s “ongoing failure to cooperate with discovery.”

There were multiple motions to reconsider and interlocutory appeals, but in the end, Defendants lost all appeals and motions but still refused to pay the sanctions. Plaintiff filed a motion for rule to show cause, and the court found the Defendant DTS in contempt and ordered the $10,000 to be paid within 30 days or its primary officer, also a named Defendant, would have a bench warrant issued for his arrest until the fine was paid. The court also stated it would grant the motion to enforce the $30,000 fine and that Defendants were jointly and severally liable for that fine. 

Defendants appealed the contempt charge and issuing a warrant for arrest as well as the $30,000 sanction as jointly and severally liable against all defendants. The court cited the following Indiana statutes and rules:

·         Indiana Trial Rule 37(B)(2)(c) that courts may provide for sanctions for failure to comply with discovery

·         Code § 23-1-35-1 that officers can be held liable for a willful or reckless breach of duties, even in the context of a discovery violation

The appeals court affirmed the order of the trial court.

We recently published a newsletter regarding the duties to preserve and produce text messages in electronic discovery. Just like any other request for evidence in discovery, the requests must be specifically tailored to avoid being overbroad in scope or relevance. For a case where Defendants sought text messages from Plaintiff that were deemed overbroad and irrelevant by the trial court, see the Order Granting Motion to Quash Subpoena in Burdette v. Panola County, Civil Action No. 3:13CV286-MPM-SAA (N.D. Miss. February 4, 2015).

Plaintiff filed an employment lawsuit alleging unpaid wages and retaliation. Defendant sent a subpoena to AT&T seeking production of all calls and text messages, which included 20 days after Plaintiff was terminated from his employment. Defendant contended the subpoena was necessary as Plaintiff had “avoided producing ESI that was relevant to the claims.” Defendant noted that during Plaintiff’s oral deposition, Plaintiff admitted he had recorded a conversation on the date of his termination on his cell phone.

Plaintiff objected and moved to quash the subpoena as overbroad, harassing, irrelevant to the unpaid wage claims and retaliation, and possibly violating attorney-client privilege. The court agreed, noting that phone calls and texts would likely include data about Plaintiff’s family and possibly information protected by attorney-client privilege. Defendants offered to explanation how text messages or phone calls were in any way relevant to the claims, or how texts and phone calls were relevant to the Plaintiff admitting he had taped a conversation on his cell phone. Further, the scope of the subpoena was overbroad as it sought information 20 days after termination and the date of that recording. “The court will not permit irrelevant discovery that appears to be more harassing than productive.”

The court considered the standards set by the Fifth Circuit to quash a subpoena, and found the lack of relevance weighed in favor of granting Plaintiff’s motion to quash. 

When can lost or deleted video footage be deemed spoliated? The court considered this issue in Harrell v. Pathmark et al., Civil Action No. 14-5260 (E.D.Penn. February 26, 2015). Plaintiff sued Defendant, alleging its negligence caused her slip and fall accident in Defendant’s store. At the hearing on Defendant’s motion for summary judgment, the court considered sua sponte whether lost video surveillance would be considered spoliation and necessitate an adverse inference as sanction.

The District Court, Eastern Division of Pennsylvania is under the jurisdiction of the Third Circuit, whereby a plaintiff must prove bad faith for a finding of spoliation. Ordinary negligence would not be sufficient to establish spoliation.

In this case, the store’s manager as a witness testified in deposition that there were security cameras operating at the time of the fall in the store in the general vicinity of the accident. The manager did email the loss prevention manager after the accident to preserve the video footage, but the loss prevention manager failed to do so and was no longer working for the company at the time of the lawsuit. The video footage was recorded over in the usual course of business for the store.

The court found that sanctions in this case were not appropriate. Although the court noted that Defendant was in possession and control of the video, there was no evidence the footage was relevant. There was no testimony that the cameras even captured the fall in the store or that the camera was even pointed at the location where the fall occurred. The court also found that litigation was not necessarily reasonably foreseeable when the video was re-recorded, meaning it was not even established that Defendant had a duty to preserve the video.

Finally, Plaintiff could not establish her burden of bad faith in the loss of the video. The lawsuit was filed over a year after the accident, much longer than the 90 days after when the video was over recorded. Plaintiff had walked out of the store of her own accord, so the store did not have notice that a lawsuit was forthcoming. Finally, there was no evidence in the record that Plaintiff asked that the video evidence be preserved.

The court concluded that at most, Defendant was merely inadvertently negligent in failing to preserve the video footage. This is not sufficient to support a finding of spoliation or a sanction. The court also granted Defendant’s motion for summary judgment on other grounds.

The duty to preserve evidence begins when a party reasonably anticipates litigation. However, disputes over which date exactly does this duty arise are not uncommon. In the case The Lunkenheimer Company et al. v. Tyco Flow Control Pacific Party, Ltd. et al. the parties are disputing when the duty arose, but differ in their opinions by 10 years.

This is an intellectual property and licensing dispute, and Intervener/Counter –Defendant Klur alleged a Rule 30(b)(6) deposition revealed a massive failure by one of the defendants, PFCP, to preserve, search and produce evidence. It sought sanctions for the discovery failures. Klur asserted that the duty to preserve began in 2002, a month after the license was acquired. Klur points to an email from PFCP stating that the license ownership was at issue and that PFCP gave the matter to Tyco’s legal team pending resolution of the disagreement. Klur claimed from that date on, the license was in constant dispute.

PFCP, an Austrailian company, asserted the duty to preserve arose only 10 years later in 2012 when they answered the Complaint and consented to US jurisdiction. At the earliest, PFCP alleged in the alternative it was 9 years prior, in 2011, when the Complaint was first filed. PFCP noted that Klux accepted payments regarding its use of the license that entire time and never took any action or sent a dispute notice regarding the license until 9 years later after 2002. The court agreed the duty to preserve evidence arose with the Complaint being filed in 2011.

Klur also alleged that the email searches were insufficient and that PFCP never searched any email prior to 2009. The court noted that since it concluded the duty to preserve only arose in 2011, it was not required to preserve email from 2009 or earlier. The court ordered PFCP to investigate the burden and/or costs to search and recover the archived emails.

Klur also alleged PFCP failed to contact a number of former employees to find relevant docuents. Again, since the duty to preserve only began in 2011, the court ordered PFCP to discuss with custodians who were employed in 2011 to locate any relevant evidence not yet produced. Klur could subpoena any custodian that was not employed by PFCP in 2011 if it chose. The court also ordered PFCP to produce a number of specific documents that Klur sought.

Due to the duty to preserve only beginning in 2011, the court declined to order sanctions against PFCP but did decide Klur was entitled to additional discovery in accordance with the order.

What type of eDiscovery costs are taxable to the losing party under 28 U.S.C. § 1920(4)? For a  broad interpretation of taxation of electronic discovery costs, see Comprehensive Addition Treatment Center, Inc. v. Leslea, et al., Civil Action No. 11-cv-03417-CMA-MJW(D. Colo. February 13, 2015). After undertaking substantial electronic discovery production with a third-party vendor, Defendants sought taxable costs to Plaintiff under 28 U.S.C. § 1920(4). The trial court ordered costs amounting to approximately $57,000 to Plaintiff, who filed a motion to review the costs.

Plaintiff argued that the award of costs was inappropriate as the expenses for the third-party eDiscovery vendor were not copying costs allowable under the statute. Defendants disagreed and alleged the "production costs in collecting, scanning, reviewing, and preparing documents are necessary expenditures that are made for the purpose of advancing the discovery phase of the case and as such, are taxable."

The court noted that Defendants had hired a third-party vendor to retrieve and restore electronically stored information (ESI). Defendants had informed Plaintiff of the difficulties in responding to the ESI requests and that much of the responsive data would involve restoring 83 back-up tapes to a usable format. The court noted how Defendant kept Plaintiff apprised of needing to hire a third-party vendor and all the difficulties and complexities it was encountering for the ESI production. Despite these difficulties, Plaintiff would not agree to narrow the scope of its requests and instead, filed an Amended Complaint with additional allegations gleaned from the first ESI production requesting more ESI. Defendant produced more eDiscovery but ultimately prevailed on Summary Judgment.

The court found Defendant’s third-party ESI costs were enumerated in the statute and were not incurred merely for the convenience of the parties. Plaintiff was well aware of the high costs of this production and the costs of converting the data into usable formatting from the back-up tapes. The court found that the high costs were directly related to Plaintiffs’ “litigation choices and the aggressive course of discovery.” Plaintiff also failed to demonstrate how the costs were improper, and the court denied their motion and entered the awarded of eDiscovery costs against them.

We recently published a newsletter about text messages and plaintiff eDiscovery, just before the following case came down about forensic examination of cell phones for electronic data and metadata. In the Pennsylvania state court case Paint Township v. Clark, No. 2113 C.D. 2013 (Pa. Commw. Ct. February 5, 2015), the Township appealed the trial court’s order regarding the cell phone records from the chairman of the Township’s Board of Supervisors under the state’s Right to Know Law (RTKL).

The Requestor sought information about the cell phone contract, cell phone bills, the content of all text, picture or video messages and well as the content of application-related data on the phone. The trial court entered an order directing the Township to fulfill the request. The Township filed a notarized Affidavit claiming application-related data could not be retrieved from the provider and was not in its custody or control. At a hearing, the representative from the Township testified the Supervisor deleted all data on the phone and reset it to its original factory settings—all under the directive of the Board and before the present RTKL request was made. The Township asserted the phone was in its possession, but there was no data to be retrieved. After resetting the phone, the Supervisor had a private cell phone contract for work that the Township reimbursed him for monthly.

The trial court noted that simply because data was deleted did not mean a forensic examination could not retrieve useable metadata, and that the private cell phone records could be produced to the extent they contained Township business. The trial court ordered the Township to have the phone undergo an expert forensic examination.

The Township appealed the directive to undergo a forensic examination for metadata, claiming metadata was not in the original request. It also appealed the requirement it to retrieve records from the new, privately-held phone.

The appeals court noted that metadata is inseparable from ESI, and metadata must accompany any request for ESI. However, court found the record demonstrated all ESI was deleted from the phone. Therefore, the appeals court did not believe the Township should be compelled to hire a forensics expert to examine and produce something that did not exist in any ascertainable format. It ordered the Township to again review the phone itself for any discernable ESI and file an affidavit regarding what, if any, data remained. The appeals court affirmed the trial court’s order about producing the records of the private phone as to the Township’s business. 

UnderFRCP 25(f), parties in civil litigation must attempt to work out issues of discovery and electronically stored information before any scheduling conference, and before filing a Motion to Compel before the court. A common theme of our blog and the case law we write about is that the meet and confers must not just be for show, but parties must make a good faith attempt to work out their differences. If not, they face annoyed judges who pen sarcastic court options chastising both parties.

Case in point: District Judge Rosemary M Collyer obviously had enough when she ruled on discovery disputes in an opinion titled, “Order on One Millionth Discovery Dispute” in the case Herron v. Fannie Mae, Civil Action No. 10-943(RMC)(D.D.C. February 2, 2105). Noting that this is “yet another discovery dispute,” the Judge noted she resolved the following issues via her preferred method: a telephone conference.

The disputes centered on the Rule 30(b)(6) depositions and witnesses. Plaintiff was a contactor alleging wrongful termination, and she sought responses about bonuses given to executives. The court agreed this was highly overbroad: “the topics could have, and should have, been laser focused.”

The other main disagreement centered on Defendant’s refusal to designate two witnesses already deposed as 30(b)(6) deponents, and additional refusal to provide any 30(b)(6) witness for deposition. Defendant’s position was that Plaintiff failed to cover the full gamut of topics when the two witnesses were deposed, so it should not have to provide additional witnesses. The court decided that Defendant should simply designate the original witnesses as the 30(b)(6) witnesses to the extent of their prior testimonies.

Plaintiff sought sanctions after Defendants’ continued failure to timely and completely respond to Plaintiff’s document requests in Logtale, Ltd. v. Ikor, Inc. et al., No. C-11-5452 EDL(DMR) (N.D. Cal. Feb. 11, 2015). The first motion to compel was filed after Defendant produced an admittedly late and incomplete production, awarding $1,400 in attorney fees.

However, Defendant responded late to the new deadline with an incomplete production once again. The court awarded an additional $5, 200 in attorney fees after Plaintiff’s second motion to compel. After extending the discovery deadline once again, the judge had concerns regarding the adequacy of the search for responsive documents in the defense production. Defendant made several additional piecemeal productions, once again after the new discovery deadline passed.

Plaintiff then filed a motion for sanctions based on the untimely and still incomplete production.

Plaintiff also sought noted Defendants produced documents in PDF format without metadata instead of than native format. Defendants countered that they had no obligation to produce in any particular format, as Plaintiff did not make this specification on first pass. The court sided with Defendant on the issue of PDF files and metadata, but the court did order additional monetary sanctions of $44,145 for the multiple failures to follow court orders by Defendants.