Archive for July 2014

Brown v. Tellermate Holdings, Ltd., No. 2:11-cv-1122, 2014 WL 2987051 (S.D. Ohio July 1, 2014)

While the preservation, review, and production of ESI often involves procedures and techniques which do not have direct parallels to discovery involving paper documents, the underlying principles governing discovery do not change just because ESI is involved. Counsel still have a duty (perhaps even a heightened duty) to cooperate in the discovery process; to be transparent about what information exists, how it is maintained, and whether and how it can be retrieved; and, above all, to exercise sufficient diligence (even when venturing into unfamiliar territory like ESI) to ensure that all representations made to opposing parties and to the Court are truthful and are based upon a reasonable investigation of the facts. As another Judge of this Court has observed, “trial counsel must exercise some degree of oversight to ensure that their client’s employees are acting competently, diligently and ethically in order to fulfill their responsibility to the Court,” Bratka v. Anheuser–Busch Co., 164 F.R.D. 448, 461 (S.D.Ohio 1995) (Graham, J.). That holds true whether the bulk of the information relevant to discovery is ESI or resides in paper documents.

In this age discrimination case, the court determined that both defendant and counsel failed to uphold their discovery obligations, including by failing to timely produce ESI and by failing to make timely efforts to preserve.  The court observed, however, that the “significant problems arose in this case for one overriding reason: counsel fell far short of their obligation to examine critically the information which Tellermate gave them about the existence and availability of documents requested by the Browns.”  “As a result, they did not produce documents in a timely fashion, made unfounded arguments about their ability and obligation to do so, caused the Browns to file discovery motions to address these issues, and, eventually, produced a key set of documents which were never subject to proper preservation.”  Accordingly, the court ordered that defendant was precluded from “using any evidence which would tend to show that the Browns were terminated for performance-related reasons” and also ordered monetary sanctions, to be paid jointly by defendant and counsel.

The opinion in this case is quite long and addresses several instances of discovery failures, described by the court as indicating “what appears to have been a pattern of Tellermate’s failure either to learn or communicate the truth about matters related to discovery, and its counsel’s failure to make the reasonable inquiries required by Rule 26(g).”  Most significant were defendant’s and counsel’s failures related to a web-based application utilized by defendant’s sales force, including plaintiffs (prior to their termination), which tracked sales activities, among other things.  When information from the application was requested, defendant and counsel asserted (repeatedly and emphatically) that defendant was not in control of the data and could not produce it which, as it turns out, was entirely untrue.  Moreover, no steps were taken to preserve the information based, at least in part, upon counsel’s unfounded (and mistaken) belief that the third party service provider would preserve the data.  By the time counsel checked this assumption, the integrity of the data (which was ultimately produced) was in question because it had been subject to possible changes by defendant’s sales force who still utilized the application, absent any effort to preserve. 

Other discovery violations included additional misrepresentations to the court regarding a different category of documents, counsel’s failure to sufficiently follow up regarding the existence of requested information, delayed assertions of privilege, a “document dump” of over 50,000 pages “largely consisting of irrelevant and unresponsive documents,” and the drastic over-marking of documents as “Attorney’s Eyes Only.”  Many of these issues are addressed in detail in the court’s opinion.

Ultimately, the court found that sanctions were warranted and ordered, among other things, that defendant was precluded from “using any evidence which would tend to show that the Browns were terminated for performance-related reasons” and monetary sanctions, to be paid jointly by defendant and counsel.

A full copy of the court’s opinion is available here.

Brookshire Bros., Ltd. v. Aldridge, –S.W.3d–, 2014 WL 2994435 (Tex. July 3, 2013)

In this case, the Supreme Court of Texas “enunciate[d] with greater clarity the standards governing whether an act of spoliation has occurred and the parameters of a trial court’s discretion to impose a remedy upon a finding of spoliation, including submission of a spoliation instruction to the jury” and held that such an instruction is only appropriate when the destruction of evidence was intentional or deprived the opposing party of “any meaningful ability to present a claim or defense.”  The court also concluded that “[s]poliation findings—and their related sanctions—are to be determined by the trial judge, outside the presence of the jury, in order to avoid unfairly prejudicing the jury by the presentation of evidence that is unrelated to the facts underlying the lawsuit” and that “[a]ccordingly, evidence bearing directly upon whether a party has spoliated evidence is not to be presented to the jury except insofar as it relates to the substance of the lawsuit.”  Applying the newly-articulated standards to the facts of the case before it, the court held that “imposition of the severe sanction of a spoliation instruction was an abuse of discretion” and that the trial court erred “in admitting evidence of the circumstances of the spoliating conduct.”  Accordingly, the judgment of the court of appeals was reversed, and the case was remanded for a new trial.

Plaintiff/Respondent (“Plaintiff”) slipped and fell at defendant/petitioner’s (“Defendant”) store and sued for damages.  The fall was captured on surveillance video and defendant preserved the video footage from the time plaintiff entered the store until a short time after he fell.  The remainder of the video was automatically erased after approximately 30 days.  At trial “significant emphasis” was placed on defendant’s failure to preserve the whole video and the jury was given a spoliation instruction and “permitted . . . to decide whether spoliation occurred during its deliberations on the merits of the lawsuit.”  The jury ultimately found in favor of the plaintiff and the court of appeals affirmed, holding that the trial court did not abuse its discretion by admitting evidence of spoliation or by charging the jury with a spoliation instruction.

The Supreme Court disagreed.  In short, following substantial analysis of the law surrounding spoliation, the court held that a spoliation instruction is only warranted “when the trial court finds that the spoliating party acted with the specific intent of concealing discoverable evidence, and that a less severe remedy would be insufficient to reduce the prejudice caused by the spoliation” or, absent intent, “in the rare situation in which a nonspoliating party has been irreparably deprived of any meaningful ability to present a claim or defense.”  The court clarified that “intentional spoliation” included the concept of “‘willful blindness,’ which encompasses the scenario in which a party does not directly destroy evidence known to be relevant and discoverable, but nonetheless ‘allows for its destruction.’” Regarding the question of “whether evidence bearing solely on whether a party spoliated evidence or the party’s degree of culpability in doing so relates to a ‘fact that is of consequence to the determination of the action’” (i.e. is relevant), the court held that “it does not” and further instructed that “there is no basis on which to allow the jury to hear evidence that is unrelated to the merits of the case, but serves only to highlight the spoliating party’s breach and culpability.”  Thus, the court instructed that “evidence bearing directly upon whether a party has spoliated evidence is not to be presented to the jury except insofar as it relates to the substance of the lawsuit.”  The court clarified, however, that “all references to missing evidence” could not and should not be foreclosed.  (Thus, for example, a party may present “indirect evidence to attempt to prove the contents of missing evidence that is otherwise relevant . . . such as a person’s testimony about the content of a missing document, photo, or recording.”)

In the present case, the court reasoned that there was no evidence of the requisite intent to conceal or destroy relevant evidence or that plaintiff was “irreparably deprived of any meaningful ability to present his claim” and held that the trial court therefore abused its discretion in submitting a spoliation instruction.  The court further held that the trial court erred in admitting “evidence of the circumstances surrounding the failure to preserve additional video footage, though only to the extent such evidence was unrelated to the merits and served principally to highlight Brookshire Brothers’ culpability.”  Because the court also held that the trial court’s error “probably cased the rendition of an improper judgment”, the judgment of the court of appeals was reversed and the case was remanded for a new trial.

A copy of the full opinion is available here.

Kyko Global Inc. v. Prithvi Info. Solutions Ltd., No. C13-1034 MJP, 2014 WL 2694236 (W.D. Wash. June 13, 2014)

In this case, the court addressed the question of whether privilege was waived by the sale of a seized computer at public auction.  Balancing the relevant factors under Washington law, the court determined that the prior owner’s steps to protect her information by reformatting the computer and installing a new operating system coupled with defendants’ prompt efforts to remedy the error and considerations of fairness weighed against waiver.

Following settlement and confession of judgment by a number of named defendants in this case, plaintiffs obtained a Writ of Execution resulting in the seizure of one such defendant’s personal property, including her computer.  An attorney for the plaintiffs then purchased that computer at public auction—outbidding a representative sent by defendants.  Plaintiffs sent the computer to a third party for analysis.  Defendants contend that this action violated ethical rules, that plaintiffs must return the computer, and that counsel should be disqualified from further representation of plaintiffs.  Seeking resolution of these issues, plaintiffs moved for a determination of the admissibility of the materials on the at-issue computer.  Defendants moved for plaintiffs’ counsel to be disqualified.

Summarizing broadly, the court determined that plaintiffs’ acquisition of the computer was not “inherently wrongful” and also noted plaintiffs’ claim that they had not reviewed the materials on the computer at the time of the motion (indeed, it is not clear that the presence of privileged materials on the computer had actually been confirmed).  The court also concluded that the use of forensic analysis did not violate Washington’s RPC 4.4(a) and was “not equivalent to metadata mining of documents produced through the normal discovery process . . . .”

Addressing the question of waiver, the court applied the balancing test used by Washington courts “that is similar to Rule 502(b)” and considers: “(1) the reasonableness of precautions taken to prevent disclosure, (2) the amount of time taken to remedy the error, (3) the scope of discovery, (4) the extent of the disclosure, and (5) the overriding issue of fairness.”  The court then analogized the facts of this case to instances in which one party discovers privileged documents in the other party’s trash, which “can lead to waiver if the opposing party can show that the person who discarded the material was unconcerned with maintaining its confidentiality.”  Thus, “the precautions taken by the discarding party are a paramount concern.” 

In the present case, the prior owner of the computer stated that “she had ‘someone at her office’ reformat the hard drive on the computer and install a new operating system” and that she “believed her documents had been erased and were not readily accessible.”  There was also some dispute regarding whether the hard drives were password protected at the time of the sale.  In any event, the court reasoned that it was “not inconceivable” that the prior owner believed that no one could access her documents and, returning to its trash analogy, further reasoned that the facts bore “closer resemblance to the memo torn into 16 pieces than a document simply placed in a trash can without alteration.”  Thus, the court concluded that “[a]long with Defendants’ prompt efforts to remedy the error by filing a motion with the Court and the general sense that parties should not be able to force waiver of attorneyclient [sic] privilege through investigative activities outside the discovery process and a superior understanding of the relevant technology, the Washington balancing test weighs against waiver.”  Plaintiffs’ Motion to Disqualify counsel was also denied. 

Accordingly, plaintiffs were ordered to provide defendants with a copy of the hard drive and defendants were ordered to review the hard drive for privileged documents and to provide plaintiffs with a privilege log. (Note: the court’s opinion appears (in several places) to have mistakenly referenced plaintiffs as defendants and vice versa, an oversight that was corrected in this summary.)

A copy of the court’s order is available here.