RECENT SPOLIATION CASES A CASE LAW REVIEW

Transcription

1 RECENT SPOLIATION CASES A CASE LAW REVIEW

2 WELCOME Thank you for joining Numerous diverse attendees Please feel free to submit questions Slides, recording and survey coming tomorrow

3 SPEAKERS Matthew Verga Director, Content Marketing and ediscovery Strategy

4 AGENDA Introduction Triggering Events In Re: Actos In Re: Ethicon Slep-Tone v. Granito Holds and Duties Brown v. Tellermate Procaps v. Patheon Knickerbocker v. Corinthian Colleges Vincente v. City of Prescott Mobile Devices Hosch v. BAE Systems Information Solutions In Re: Pradaxa Social Media Painter v. Atwood FRCP Amendments Key Takeaways Engage with Modus

5 INTRODUCTION

6 INTRODUCTION Spoliation sanctions are the boogeymen of ediscovery Big, scary, lying in wait Quick Spoliation Review Essential Spoliation: o Loss, destruction or substantive alteration of evidentiary materials o In violation of a duty to preserve those materials for litigation Other Factors: o Prejudice to the requesting party: curable and incurable o Intentionality: negligence, recklessness and willfulness

7 INTRODUCTION Oft-cited Duke Law Journal study: Comprehensive survey of ediscovery sanctions cases prior to 1/1/2010 Out of 230 total sanctions awards: o 90 were based solely on the spoliation of ESI o 46 listed ESI spoliation as one of several bases Steady, year-over-year increase in the number of such cases More than a decade has passed since Zubulake Now accepted that ESI is central to discovery in many/most cases But continuing technological change presents challenges o Cloud services, mobile devices, social media platforms, etc.

8 TRIGGERING EVENTS

9 IN RE: ACTOS

10 IN RE: ACTOS In Re: Actos (Pioglitazone) Products Liability Litigation (No. 6:11-md-2299) Amended Final Memorandum Opinion and Ruling (Takeda Only) issued 7/23/2014 Company implemented a very broad hold in response to initial litigation Should have covered everything at all to do with the drug Was refreshed 5 times over 9 years Despite the hold, relevant materials were destroyed including 46 custodial files belonging to senior employees privy to critical information regarding the development and marketing of Actos Destroyed prior to the issuance of the multidistrict litigation hold in 2011, but All should have been subject to the 2002 litigation hold that was already in place

11 IN RE: ACTOS The Court found that the broad language of the still-active 2002 litigation hold created an obligation to retain the materials that had been destroyed, plus:... acted in bad faith and, also, a willful abuse of the judicial process in a deliberate attempt to destroy and, eliminate information concerning Actos and to obfuscate and hide its conduct and its knowledge of potential health risks of Actos that might be relevant to future lawsuits and set about eliminating all files which might contain relevant evidence contained in [the Defendants ] corporate files electronic and otherwise and thereafter acted before this Court to obfuscate and conceal that conduct. Having found both spoliation and culpable intent: A permissive adverse inference instruction Costs of restoring whichever of the destroyed files can be restored Plaintiffs discovery costs for proving the spoliation Attorneys fees to be determined later in the process

12 IN RE: ETHICON

13 IN RE: ETHICON In Re: Ethicon, Inc. Pelvic Repair Systems Product Liability Litigation (No. 2:12-md-2327) Pretrial Order # 100 issued 2/4/2014 As in Actos, the Defendant in Ethicon was involved in a variety of prior, individual suits in the years leading up to the current multidistrict litigation and had issued a variety of prior litigation holds in response to those earlier suits The Plaintiffs, relying heavily on Actos, argued that these prior litigation holds never technically released created a duty to preserve certain custodial files that had been destroyed As in Actos, the Court gave a lot of weight to the terms of the Defendant s litigation holds, but unlike in Actos, that was not all bad for the Defendant In Ethicon, the earliest holds (starting in 2003) were narrower in scope than the extremely broad hold issued in Actos, and they were not expanded internally to that breadth until after more individual suits had been filed Later hold notices made clear reference to ongoing, company-wide holds for the relevant product lines beginning as of certain dates in 2007 and 2008, and the Court accepted these dates as the dates from which the duty to preserve for the current multi-district litigation began That acceptance rendered the earlier destruction of some materials moot

14 IN RE: ETHICON In Re: Ethicon also differs from In Re: Actos in another important respect: culpable intent The Court finds that the record does not support a finding that [the Defendant], or any employee of [the Defendant], acted willfully or intentionally to delete, discard, or hide evidence, and certainly... no proof that [the Defendant] destroyed evidence specifically for the purpose of preventing its disclosure in this litigation Rather, the Defendant s failure to better implement and monitor its litigation holds was negligent, and perhaps grossly negligent in some cases Having found this lesser level of culpable intent (and also finding no evidence of significant prejudice from the spoliation), the Court finds that lesser sanctions are appropriate than were appropriate in Actos: No blanket authorization for the use of adverse inference instructions Allows the Plaintiffs the opportunity to make showings for it on a case-by-case basis Allows for the application of monetary sanctions and reasonable costs

15 SLEP-TONE v. GRANITO

16 SLEP-TONE v. GRANITO Slep-Tone Entertainment Corporation and Piracy Recovery LLC, et al. v. Gary Anthony Granito, et al. (CV TUC DCB) Order issued 1/7/14 Concerned the makers of karaoke accompaniment tracks suing the Defendant for using and selling counterfeit copies of their tracks The Defendant destroyed all available evidence of the tracks he had been using by erasing hard drives using special software, replacing hard drives, etc. Claimed he wiped the drives clean when he was told by an acquittance [sic] about [the Plaintiffs ] lawsuits against [others like him] and prior to being served in this action to avoid potential infringement Finding that a duty to preserve had been triggered by the reasonable anticipation of litigation, the Court finds both a high degree of culpable intent and a high degree of prejudice to the Plaintiffs: Grants summary judgment as sanction for the deliberate destruction of all evidence

17 TRIGGERING EVENTS WRAP-UP

18 TRIGGERING EVENTS WRAP-UP The thread that connects them is the importance of the defendants own, internal conduct as evidence of whether or not a preservation duty had been triggered: Actos: the company acted internally like a broad, ongoing hold was necessary from the first round of litigation Ethicon: the company acted internally like the first few cases were isolated incidents requiring limited holds, but that the growing number of cases eventually justified the implementation of broad, ongoing holds Slep-Tone: the Defendant took actions to destroy evidence based on his belief that he was at risk for a lawsuit from the Plaintiffs In each of these cases, the defendant was held to a preservation duty, the existence of which was largely evidenced by the defendant having acted like there was a duty

19 HOLDS AND DUTIES

20 BROWN v. TELLERMATE

21 BROWN v. TELLERMATE Brown v. Tellermate Holdings, Ltd. (No. 2:11-cv-1122) Opinion and Order issued 7/1/2014 Suit by terminated sales representatives alleging they had been terminated due to age discrimination The Defendant utilized Salesforce.com (a cloud-based CRM platform) Organizes and tracks sales representatives sales activity Reports and records from it were sought in the Plaintiffs discovery requests Despite the predictable importance of the Salesforce.com records and the Plaintiffs request for them, the Defendant failed to preserve the records, reassigning the Plaintiffs user accounts to other representatives and allowing the records to become irreversibly altered or lost

22 BROWN v. TELLERMATE As the Magistrate Judge writes:... there is no evidence that counsel asked who the new users were, made any attempt to speak to them about accessing or retrieving the information in the [the Plaintiffs ] accounts, told anyone about the need not to alter that information [emphasis added] or, indeed, any information in the salesforce.com accounts even though [the Defendant] received a preservation letter prior to suit, and not even after the [the Plaintiffs ] served their document request. Merely issuing a generalized litigation hold by itself still would not have been enough: Like any litigation counsel, [the Defendant s] counsel had an obligation to do more than issue a general directive to their client to preserve documents which may be relevant to the case. Rather, counsel had an affirmative obligation to speak to the key players at [the Defendant] so that counsel and client together could identify, preserve, and search the sources of discoverable information. [emphasis added] Four core steps that should be taken: 1. Identifying everyone responsible for the relevant subject matter and everyone likely to have been the authors, recipients or custodians of relevant materials 2. Contacting and interviewing those individuals about what materials exist and where they exist 3. Collecting or otherwise preserving all of the materials so identified 4. Reviewing those materials to look for evidence of other materials not yet preserved or other individuals not yet contacted Sanctions, including evidence preclusion and cost and fee shifting

23 PROCAPS v. PATHEON

24 PROCAPS v. PATHEON Procaps S.A. v. Patheon Inc. (No CIV) Order Granting Defendant s Motion for a Forensic Analysis of Plaintiff s Electronic Media issued 2/28/2014 Participants in the supplements and pharmaceuticals industries; suit related to breach of collaboration agreement and antitrust issues Dispute over Plaintiff Procaps preservation and collection failures, which were uncovered during Defendant Patheon s depositions of the Plaintiff s employees: Failure of the Plaintiff to institute a formal litigation hold The Plaintiff s attorneys never traveled to the corporate headquarters in Colombia to meet with [the Plaintiff s] information technology ( IT ) team (or other executives) to discuss how relevant or responsive electronically stored information ( ESI ) would be located... Neither the Plaintiff nor its attorneys hired an ediscovery services provider or consultant Key executives and employees were permitted to self-search and self-collect from their materials without ever seeing [the Defendant s] document request or without receiving a list of search terms from its counsel

25 PROCAPS v. PATHEON The Plaintiff s attorneys maintained that there was no evidence that any ESI or other documents [had] been deleted or purged with no chance of being recovered The Magistrate Judge was not persuaded that this rendered the failures harmless: Even if true, this argument does not address the indisputable conclusion that the ESI and document searches were inadequate a scenario which strongly suggests that some (and perhaps even a significant amount of) responsive discovery from [the Plaintiff] has not yet been located and mandates a comprehensive forensic search of [the Plaintiff s] ESI and other sources of relevant documents. The Magistrate Judge (1) ordered the Plaintiff to implement a litigation hold, (2) ordered the Plaintiff s attorneys to interview key custodians and take other discovery do-over steps, and (3) ordered the retention of an ediscovery vendor at the Plaintiff s expense for the completion of specified collection and ESI search tasks The Magistrate Judge also awarded the Defendant nearly $25,000 of its attorneys fees for the motions practice and other work associated with the discovery dispute Split evenly between the Plaintiff and its law firm Suggested that the firm pass the bill on to the specific attorneys directly responsible for the failures

26 KNICKERBOCKER v. CORINTHIAN COLLEGES

27 KNICKERBOCKER v. CORINTHIAN COLLEGES Knickerbocker, et al. v. Corinthian Colleges, et al. (No. C JLR) Order Awarding Sanctions issued 4/4/2014 Suit by former employees claiming racial discrimination, harassment, and retaliation Despite receiving legal notices from the EEOC and the Plaintiffs in May 2012 and retaining counsel for the matter in June 2012, the former employees accounts were subsequently deleted: The Defendant claimed that the information could not be extracted without shutting down the servers; in other words, it was not extractable an assertion that would later prove to be false The Defendant eventually agreed to conduct a full and complete search for all documents responsive to Plaintiffs Requests for Production including documents on backup servers Eventually, the Plaintiffs learned, through depositions of Defendant employees: That they had not searched, did not recall searching, and had not been asked to search for documents relevant to the litigation That no litigation hold had been issued related to the matter That the employee designated for the 30(b)(6) deposition was not familiar with the backup systems or how information could be retrieved from them

28 KNICKERBOCKER v. CORINTHIAN COLLEGES The Plaintiffs moved for sanctions, and the Judge found that at the latest the duty to preserve had been triggered (for two of the three plaintiffs materials) when the EEOC notices were received The Defendant s attorney eventually conceded that the deletion of Plaintiffs s occurred after [the Defendant] received Plaintiffs EEOC notices As the Judge wrote:... this situation, without more, would qualify as willful spoliation of evidence that merits sanctions In sum, the court finds, by clear and convincing evidence, that [Defendant] s and [Defendant] s counsel s lackluster search for documents, failure to implement a litigation hold, deletion of evidence, refusal to cooperate with Plaintiffs in the discovery process (particularly as evidenced by its withholding of information regarding both the backup tapes and its interpretation of the parties Stipulated Order), reliance on a recklessly false declaration, shifting litigation positions, and inaccurate representations to the court constitute bad faith or conduct tantamount to bad faith [emphasis added]. However, minimal prejudice, so no adverse inference sanction The Judge awarded the Plaintiffs their costs and fees associated with the sanctions motions and the duplicative discovery efforts reasonably attributable to [the Defendant] s sanctioned conduct Additionally, the Judge assessed a $25,000 fine against the Defendant and a $10,000 fine against the Defendant s law firm as sanction for their conduct and its effects on the Plaintiffs, the Court, and case

29 VINCENTE v. CITY OF PRESCOTT

30 VINCENTE v. CITY OF PRESCOTT Vincente v. City of Prescott (No. CV PCT-DGC) Order issued 8/8/2014 A variety of employment related conflicts between firefighter and city Numerous cross-motions for sanctions alleging a variety of spoliation Of primary concern to the Judge were the Defendant s failure to notify its IT department of the litigation hold and the need to suspend its automatic deletion processes and its failure to involve the IT department in the collection and preservation of materials from employee custodians The Judge writes that [t]hese preservation efforts were plainly deficient Offsetting failures with (potentially) offsetting fees and costs

31 HOLDS AND DUTIES WRAP-UP

32 HOLDS AND DUTIES WRAP-UP The thread that connects Brown, Procaps, Knickerbocker, and Vincente is the failure of parties and their attorneys to take basic steps to ensure that preservation and production obligations are satisfied: Brown: the attorneys failed to issue a hold, failed to interview and collect from key custodians, and failed to provide accurate information about electronic sources and materials Procaps: the attorneys failed to issue a hold, failed to interview key custodians, and failed to direct or validate the identification and collection processes used Knickerbocker: the attorneys failed to issue a hold, failed to suspend automatic deletion processes, and failed to provide accurate information about electronic sources and materials Vincente: the attorneys failed to issue a hold, failed to suspend automatic deletion processes, and failed to adequately involve IT personnel in the preservation and collection effort These are not extraordinary efforts to undertake: issuing litigation holds, addressing relevant IT processes, involving key custodians, and attempting to understand client sources and systems Better characterized as extraordinary failures and as valuable reminders of the potential consequences of not fulfilling basic preservation duties related to ESI, including: evidence preclusion; mandatory vendor retention; cost and fee shifting; and, fines against parties and their lawyers/law firms

33 MOBILE DEVICES

34 HOSCH V. BAE SYSTEMS INFORMATION SOLUTIONS

35 HOSCH V. BAE SYSTEMS INFORMATION SOLUTIONS Hosch v. BAE Systems Information Solutions, Inc. (No. 1:13-cv-00825) Report and Recommendation issued 1/22/2014 Whistleblower retaliation lawsuit, False Claims Act During the course of discovery, it was revealed that the Plaintiff had forwarded many work s and documents to his personal accounts using his various mobile devices When expected materials did not appear in the Plaintiff s produced discovery, the Defendant sought and received an order compelling the production of those mobile devices for forensic examination When the Plaintiff s iphone and Blackberry were forensically examined, it was determined that: He had wiped his iphone before turning it over o Permanently deleting all text messages, call logs, data, voic s, internet history and bookmarks, pictures, network activity history, contacts, calendars, notes, applications, social media, and video stored on the device He had also deleted two-years worth of similar materials from his Blackberry before turning it over Moreover, the examination revealed that the iphone had been wiped just two days before it was handed over, on the same day that the Court warned plaintiff that failure to comply with the Court's Order may result in sanctions [emphasis added]

36 HOSCH V. BAE SYSTEMS INFORMATION SOLUTIONS Deliberate spoliation + direct contravention of the Magistrate Judge s orders + other discovery failures = culpable intent: Plaintiff's actions clearly meet the bad faith standard justifying the imposition of sanctions. Given the egregiousness of the Plaintiff s discovery misconduct and the degree to which that misconduct had prejudiced the Defendant, the Magistrate Judge concluded that the most severe sanction was warranted: dismissal with prejudice Plus fees and costs Upon review de novo, the District Judge agreed After a review of the fee requests and relevant standards, the Judge awarded $55,755 in fees and $53, in costs for a total award of $108, The Judge also concluded that, based on the specifics of the misconduct giving rise to the sanctions, the award should only be recoverable from the Plaintiff.

37 IN RE: PRADAXA

38 IN RE: PRADAXA In Re: Pradaxa (No. 3:12 md 02385) «Case Management Order Number 50» issued 12/9/13 Large-scale, multi-district products liability litigation Context: The discovery process in Pradaxa was fraught with conflicts and issues. Previously, the Judge had awarded sanctions from the bench, describing the Defendants litany of discovery issues this way: I ve never seen a litigation where the problems are just ongoing and continual, and every month or every week there s an issue of this failure and that failure and the other failure. It just is astounding. The reason, that it s because of the volume or because of the scope or because of the breadth or because of the this or that, the vendor or this other or that other, that s fine in the early going perhaps but as the litigation matures the reasons just don t make sense and just simply can t be tolerated by the Court. [emphasis added] The Judge fined the Defendants $20 per case then consolidated, for a total fine of $29,500, as well as some fees and costs, and he directed them to undertake an audit to close the remaining gaps in their discovery.

39 IN RE: PRADAXA Of the many issues identified in the new sanctions motion, one of the most significant was the failure to preserve and/or untimely production of business related text messages on certain employees cell phones [emphasis added] Failed to include in hold, despite requests Failed to intervene in automated deletion The basis for their argument seems to be that text messages are a less prominent form of communication and that the production of text messages is too burdensome. As to the former, text messages are electronically stored information, it does not matter that text messaging is a less prominent form of communication.... There is no question the defendants owed a duty to preserve this material. As to the latter... The defendants cannot simply make a unilateral decision regarding the burden of a particular discovery request and then allow the information that is the subject of the discovery request to be destroyed. [emphasis added; citations omitted] In addition to relevant fees and costs, the Defendants were ordered to pay a fine of $500 per case a 2500% increase from the $20 per case assessed a few months prior, for a total fine of $931,500 These financial sanctions were approved on appeal

40 SOCIAL MEDIA

41 PAINTER v. ATWOOD

42 PAINTER v. ATWOOD Painter v. Atwood (No. 2:12-cv-01215) Order issued 3/18/2014 Suit by former employee alleging sexual harassment, constructive termination, etc. This case did not include a litany of discovery issues or abuses by either party There had been two prior discovery disputes The Magistrate Judge wrote, those two discovery disputes were minor and do not warrant characterizing this case as rife with discovery abuses [emphasis added] The third dispute that arose concerned social media materials Posts the Plaintiff was alleged to have made on Facebook commenting on her experience of working for the Defendants The posts were not produced, allegedly, because they were deleted by the Plaintiff Evidence offered was declaration of Mrs. Atwood who had been Facebook friends The Defendants moved for sanctions for this alleged spoliation, including dismissal or an adverse inference instruction

43 PAINTER v. ATWOOD At the hearing, Plaintiff s counsel conceded that Plaintiff deleted Facebook comments... after she retained counsel for this litigation [emphasis added] Plaintiff s counsel argued that the posts were not relevant and that Plaintiff is a 22-year old girl who would not have known better than to delete her Facebook comments The Magistrate Judge rejected both arguments: o Both of Plaintiff s arguments fail. First, Plaintiff s Facebook comments discussing her opinion on working and interacting with Defendant Dr. Atwood are directly relevant to this litigation.... Second, as the Court stated at the hearing, it is of no consequence that Plaintiff is young or that she is female and, therefore, according to her counsel, would not have known better than to delete her Facebook comments. Once Plaintiff retained counsel, her counsel should have informed her of her duty to preserve evidence and, further, explained to Plaintiff the full extent of that obligation. [emphasis added] The Magistrate Judge concludes that the Plaintiff knew or should have known that the at-issue Facebook comments were relevant to Defendants case at the time she deleted them and, therefore, there was some degree of culpability in the destruction [emphasis added] Having found both spoliation and some level of culpable intent, sanctions She determined that the terminating sanction requested would be too severe Awarded an adverse inference instruction regarding the deleted posts

44 FRCP AMENDMENTS

45 FRCP AMENDMENTS Pending amendments to the Federal Rules of Civil Procedure (FRCP) Supreme Court approved on 4/19/2015; expected to take effect on 12/15/2015 Rule 37 of the FRCP concerns Failure to Make Disclosures or to Cooperate in Discovery; Sanctions So-called safe harbor in subpart (e): o (e) Failure to Provide Electronically Stored Information. Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system Committee Notes: o Many steps essential to computer operation may alter or destroy information, for reasons that have nothing to do with how that information might relate to litigation. As a result, the ordinary operation of computer systems creates a risk that a party may lose potentially discoverable information without culpable conduct on its part. The notes also make clear, however, that preservation duties may obligate parties to alter or suspend normal computer system operations to effectuate necessary litigation holds Narrow and inconsistent interpretations of what steps parties must take and when the safe harbor applies have left the provision s promise unfulfilled Compounded by a circuit split regarding the culpability required for severe sanctions

46 FRCP AMENDMENTS As of 12/15/2015, the revised Rule 37(e) will read 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. Key changes: It attempts to reduce ambiguity by removing the language regarding the good-faith operation of a computer system and instead focusing on the question of whether ESI has been lost because a party failed to take reasonable steps to preserve it No sanctions unless the ESI that has been lost cannot be restored or replaced through additional discovery No sanctions greater than what is necessary to cure an identified prejudice caused by the spoliation It attempts to reduce uncertainty regarding the application of severe sanctions by adopting the higher of the standards from the circuit split, requiring a finding of intentional misconduct

47 KEY TAKEAWAYS

48 KEY TAKEAWAYS The boogeymen of ediscovery Fines of thousands, tens of thousands, or hundreds of thousands levied against parties and counsel Adverse inferences and terminating sanctions granted Sanctions levied for spoliation involving newer sources like mobile devices and social media Spoliation sanctions remain largely avoidable with the exercise of reasonable caution Actos, Ethicon, and Slep-Tone show organizations recognizing a duty but failing to fulfill it Brown, Knickerbocker, etc. reveal basic failures to issue holds, speak with key custodians, learn about source systems, and provide accurate information to the court The Magistrate Judge in Brown identified four key steps that must be taken: Identifying those responsible for the matter and likely to have been authors, recipients, or custodians Contacting and interviewing those individuals about what materials exist and where they exist Collecting or otherwise preserving all of the materials so identified Reviewing those materials to look for evidence of other materials or other individuals To those we can add the issuance of a hold at the beginning of the list and the ongoing confirmation of compliance with the hold at the end of the list Modern computer and communication systems can add some technical complications, but they do not fundamentally alter the duty or the exercise required to fulfill it

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