Archive for January 2016

Magistrate Judge Applies Newly Amended Rule 37(e), Addresses Threshold Question of Whether At-Issue Emails were “Lost”

CAT3, LLC v. Black Lineage, Inc., No. 14 Civ. 5511 (AT) (JCF), 2016 WL 154116 (S.D.N.Y. Jan. 12, 2016)

In this case, which raised “significant issues concerning the reach of newly amended Rule 37(e) of the Federal Rules of Civil Procedure, the standard of proof governing spoliation, and the relief appropriate for the destruction of electronically stored information,” Magistrate Judge James C. Francis IV addressed Plaintiffs’ intentional alteration of relevant emails, as evidenced by the discovery of the original emails “which had been deleted, albeit not without leaving a digital imprint.” Finding that newly amended Rule 37 applied and that remedies were available pursuant to both subsections (e)(1) and (e)(2), the Magistrate Judge noted that “drastic sanctions are not mandatory” and ordered that Plaintiffs were precluded from relying on “their version” of the emails to demonstrate notice to Defendants of the use of the at-issue mark and that Plaintiffs would bear the “costs, including reasonable attorney’s fees, incurred by the defendants in establishing the plaintiffs’ misconduct and in securing relief.”

Plaintiffs alleged trademark infringement and related claims. One of the “key issues” in the case therefore became “whether the defendants developed their FLASHXHYPE mark independently or, instead, sought to trade on the plaintiffs’ reputation after learning of their use of the SLAMXHYPE mark.”  In a deposition of Defendant Black Lineage, Inc.’s president, Plaintiffs’ counsel showed the witness an email from a Black Lineage, Inc. employee to the deponent and an employee of Plaintiffs, which showed Plaintiffs’ employee’s address as having the email domain “”  On cross examination, however, “It became apparent that there was more than one version of the document.”  Specifically, the deponent testified that the email he received (and which was produced in discovery) was identical, except that it showed Plaintiffs’ employee’s address as having the email domain “”

Following court ordered production of the at issue emails, Defendants’ forensic analyst discovered that there were two versions of each email message: the “top” level version and, “behind each email message,” a “near-duplicate copy of the message containing the identical message,” but with different email domains appearing for a number of the senders and recipients.

Summarizing broadly, Defendants’ expert concluded that the “presence of the deleted emails [was] the result of intentional human action, and not of an automatic or inadvertent computer process.” Conversely, Plaintiffs denied any intentional manipulation, supported by their expert’s “two possible explanations” for the discrepancies, both related to technical issues, including the migration of Plaintiffs’ emails from one system to another.  The Magistrate Judge was persuaded by Defendants and concluded that “[t]here [was] clear and convincing evidence . . . that the plaintiffs manipulated the emails here to gain an advantage in the litigation.”

Regarding a proper remedy, the Magistrate Judge turned his analysis to newly amended Fed. R. Civ. P. 37(e). Notably, Plaintiffs argued that the rule was not applicable where there had been no loss of evidence and where “there certainly ha[d] not been both (i) loss of evidence AND (ii) ‘such evidence [could not] be restored or replaced’ as required by Rule 37.”  “Put simply,” Plaintiffs contended:

[T]hough there may be an evidentiary dispute as to which email address versions are more accurate, Defendants’ [sic] have not been deprived of any information or potential evidence. Since there is no missing or destroyed evidence, sanctions cannot be properly imposed under Rule 37 or under a theory of spoilation [sic].”

The Magistrate Judge disagreed. First, he reasoned, “it cannot be said that the information lost has been ‘restored or replaced.’”  Acknowledging that relief would not be available where ESI  lost from one source could be found in another, the Magistrate Judge noted that in this case, “the fact that there are near-duplicate emails showing different addresses casts doubt on the authenticity of both.”  “In other words,” he went on “as long as the plaintiffs are permitted to rely on the emails to argue that the defendant had notice of their use of the SLAMXHYPE mark as of the date of those emails, a different version of the same email is not an adequate substitute.”  Moreover, he reasoned that even if Rule 37(e) did not apply, he could exercise his inherent authority, which allows for the imposition of sanctions “for the bad faith spoliation of evidence.”  As the Magistrate Judge explained, “[w]here exercise of inherent power is necessary to remedy abuse of the judicial process, it matters not whether there might be another source of authority that could address the same issue.”

Addressing the threshold requirements to apply Rule 37(e), the Magistrate Judge reasoned:

The emails are plainly “electronically stored information.” There is no dispute that the plaintiffs were obligated to preserve them in connection with this litigation. As discussed above, information was “lost” and cannot adequately be “restored or replaced.” And the plaintiffs’ manipulation of the email addresses is not consistent with taking “reasonable steps” to preserve the evidence.

He next determined that because of the prejudice resulting from the existence of “multiple versions of the same document” and the intentionality of the act, which he inferred was done “specifically for purposes of this litigation,” remedies were available under both subsections (e)(1) and (e)(2). The Magistrate Judge also reiterated that even if Rule 37(e) did not apply, “relief would nonetheless be warranted under the court’s inherent power.”

When choosing a remedy, the Magistrate Judge noted that in light of his findings, an adverse inference or dismissal were available options, but also noted that “such drastic sanctions [were] not mandatory.” Ultimately, the Magistrate Judge  ordered that Plaintiffs would be precluded from relying on “their version” of the emails to demonstrate notice to Defendants of the use of the at-issue mark and that Plaintiffs would bear the “costs, including reasonable attorney’s fees, incurred by the defendants in establishing the plaintiffs’ misconduct and in securing relief.”

A copy of the Magistrate Judge’s order is available here.

Upcoming Event: The New FRCPs & Your eDiscovery Practice (Webinar)

Join K&L Gates Partner, Daniel R. Miller and other distinguished panelists for an informative discussion of recent amendments to the Federal Rules of Civil Procedure.

Date: January 26, 2016
Time: 10:00 – 11:30 PST (1:00 – 2:30 EST)
Sponsored by: Law Seminars International

Why You Should Call In

Attorneys involved in federal court practice, in-house counsel, eDiscovery attorneys, document retention & review specialists, others seeking to gain literacy in ESI preservation and disclosure.

Why You Should Call In

The U.S. Supreme Court released the 2015 amendments to the Federal Rules of Civil Procedure in April, which took effect last month. The amendments affect several aspects of discovery, by placing a duty of timeliness on the parties, restoring proportionality factors as to the scope of discovery, allowing scheduling orders to address clawback agreements and ESI preservation, and requiring a party to state whether it is withholding material on the basis of a discovery objection.

Perhaps the most debated change affects eDiscovery in particular. The revision of FRCP 37(e) addresses a contentious circuit split, and unifies the sanctions standard for ESI spoliation. The available sanctions are divided into two parts: when the court has made a finding of prejudice, and when the court has made a finding of intent to deprive. But the rule seeks to aid parties who have taken “reasonable steps” to preserve ESI.

In light of the changes to the FRCPs, this panel will review “reasonable steps” an attorney should take to preserve evidence, considerations in drafting litigation holds, options for managed document review, and the scope of preservation.

What You Will Learn

  • How the adjustments to the FRCPs impact eDiscovery
  • Scope of preservation: platforms, devices, email & social accounts
  • Practical effects of the rule changes on data management & costs
  • The effect of the rules’ proportionality emphasis on eDiscovery
  • Developing ethical & defensible legal hold notices
  • ESI preservation & review insight from the perspectives of in-house discovery counsel, an experienced large-firm partner, and an eDiscovery specialist

Click here to learn more and to register.

Court Concludes Defendant’s Request was “precisely the kind of disproportionate discovery that Rule 26—old or new—was intended to preclude.”

Gilead Sciences, Inc. v. Merck & Co., Inc., No. 5:13-cv-04057-BLF, 2016 WL 146574 (N.D. Cal. Jan. 13, 2016)

In this case, the court addressed Defendant’s motion to compel production of additional discovery and, applying newly amended Fed. R. Civ. P. 26(b)(1), determined that Defendant’s request was “precisely the kind of disproportionate discovery that Rule 26—old or new—was intended to preclude.” Accordingly, the motion was denied.

In this patent infringement case, Defendant sought additional discovery regarding the contents of certain “tubes of compounds” pictured in a photograph produced by Plaintiff’s expert in related Canadian litigation, claiming it “should not have to take [Plaintiff’s] word as to what exactly [was] in those tubes.” Plaintiff claimed that the contents of the tubes were not the compound at issue in the case.

Taking up Defendant’s motion to compel, the court began with a discussion of proportionality:

Proportionality in discovery under the Federal Rules is nothing new. Old Rule 26(b)(2)(C)(iii) was clear that a court could limit discovery when burden outweighed benefit, and old Rule 26(g)(1)(B)(iii) was clear that a lawyer was obligated to certify that discovery served was not unduly burdensome. New Rule 26(b)(1), implemented by the December 1, 2015 amendments, simply takes the factors explicit or implicit in these old requirements to fix the scope of all discovery demands in the first instance.

What will change—hopefully—is mindset. No longer is it good enough to hope that the information sought might lead to the discovery of admissible evidence. In fact, the old language to that effect is gone. Instead, a party seeking discovery of relevant, non-privileged information must show, before anything else, that the discovery sought is proportional to the needs of the case. The present dispute offers a good example of the wisdom of the Advisory Committee on Civil Rules in elevating proportionality in defining the scope of permissible discovery.

Turning to the specific facts of the case, the court noted that Defendant “ha[d] long had information from [Plaintiff]” that confirmed the contents of the pictured tubes, including a laboratory notebook and a letter from the source of the photograph, and that Defendant offered “no real evidence” to contradict Plaintiff’s representations. Accordingly, the court concluded, “[Defendant’s] demands are exactly the type of disproportionate demands that Rule 26(b)(1) proscribes.”  The court went on to note that Defendant’s request would put Plaintiff “[i]n the position of having to produce discovery on all sorts of compounds that bear no indication of any nexus to the disputes in this case,” and analogized the request to “requiring GM to produce discovery on Buicks and Chevys in a patent case about Cadillacs simply because all three happen to be cars.”

Ultimately, the court concluded that “[i]n the absence of any reason to doubt the proof [Plaintiff] has tendered about the identity of the disputed compounds, and given the cost and potential delay introduced by the requested production, [Defendant’s] request is precisely the kind of disproportionate discovery that Rule 26—old or new—was intended to preclude.”  Defendant’s motion was therefore denied.

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

“The amendments may not look like a big deal at first glance, but they are.” – Chief Justice Roberts, 2015 Year-End Report on the Federal Judiciary

Chief Justice John Roberts has issued his annual report on the federal judiciary, focused primarily on the 2015 amendments to the Federal Rules of Civil Procedure, including a brief history of their development and discussion of their intended effects. Among other things, the report makes clear that the amendments “mark significant change, for both lawyers and judges, in the future conduct of civil trials.”  The report further counsels that:

The 2015 civil rules amendments are a major stride toward a better federal court system. But they will achieve the goal of Rule 1—“the just, speedy, and inexpensive determination of every action and proceeding”—only if the entire legal community, including the bench, bar, and legal academy, step up to the challenge of making real change.

A full copy of the report is available for download, here.