Archive for April 2016

Brown Jordan Int’l, Inc. v. Carmicle, Nos. 0:14-CV-60629, 0:14-CV-61415, 2016 WL 815827 (S.D. Fla. Mar. 2, 2016)

In this case, the court heard argument regarding Defendant’s alleged spoliation in October, 2015—before amendments to the Rules of Civil Procedure went into effect—and deferred ruling on the motion until the end of trial.  The amendments became effective “shortly after trial concluded.”  Upon determining that “applying the new version of Rule 37(e) would be neither unjust nor impractical,” the court found that Defendant failed to take reasonable steps to preserve the information at-issue, despite a duty to do so; that the lost information could not be restored or replaced through additional discovery; and that Defendant acted with the intent to deprive Plaintiffs of the information’s use in the litigation.  Accordingly, the court presumed that the lost information was unfavorable to the defendant.  The court also noted that the sanction would be appropriate under prior standards, specifically pursuant to the court’s inherent authority to sanction a party’s bad faith litigation conduct.

In the present case, Defendant was terminated from his position for accessing other employees’ email accounts using a company-wide generic email password (issued to allow employees to test their access to the company’s new email system) and for other issues related to his use of company funds. On the day of his termination, Defendant’s counsel communicated with Plaintiffs’ counsel regarding potential litigation and the need to preserve relevant evidence.  On the morning of his termination, Defendant remotely wiped his company-owned iPad and restored it to factory settings.  In the afternoon, after returning home, he remotely locked his company-owned laptop and, despite claiming he had done so inadvertently, never provided the means to unlock it.  Later, he claimed that his personal iPad—“which he used to access other Company employees’ email accounts and to take screenshots of individual emails”—was lost.  Additionally, a forensic examination of Defendant’s personal laptop revealed that nearly all files had been accessed in the 48 hours prior to the laptop’s surrender, thus affecting the metadata.  The court ultimately determined that Defendant failed to preserve ESI on “his personal iPad, his personal laptop computer, the Company-owned laptop, the Company-owned iPad, [Defendant’s] personal iPhone” and his wife’s personal computer.

Analyzing the question of spoliation, the court laid out the standards for imposing sanctions under the Eleventh Circuit’s common law spoliation framework and pursuant to the court’s inherent authority. Recognizing the recent amendments to Fed. R. Civ. P. 37(e), however, the court concluded that its application was neither unjust nor impractical and thus, was the proper source for analysis of Defendant’s spoliation.  Finding that the at-issue information should have been preserved, that reasonable steps were not taken to do so, that the information could not be restored or replaced, and that Defendant “acted with the intent to deprive the [Plaintiffs] of the information’s use in the litigation—the new standard for imposing an adverse inference—the court concluded that it would “presume that the lost information was unfavorable to [the defendant].”   In so doing, the court noted that the measure would also have been appropriate under the prior standards.

A copy of the court’s (lengthy) opinion is available here.

Noble Roman’s, Inc. v. Hattenhauer Distrib. Co., No. 1:14-cv-01734-WTL-DML, 2016 WL 1162553 (S.D. Ind. Mar. 24, 2016)

In this case, the court granted Plaintiff’s motion for a protective order and ordered that Defendant was prohibited from obtaining the discovery sought from Plaintiff’s shareholder by the at-issue subpoenas. In reaching its conclusion, the court undertook analysis of recently-amended Fed. R. Civ. P. 26(b)(1), highlighting the principle of proportionality, and ultimately concluded that Defendant’s subpoenas constituted “discovery run amok” and “fail[ed] the proportionality test under Rule 26(b).”

In this dispute over royalties between Plaintiff, the franchisor, and Defendant, the franchisee, Defendant filed a counterclaim alleging that Plaintiff was not permitted to conduct the audit that uncovered its alleged underpayment of royalties and that the true impetus for the audits and their “flawed methodology” was Plaintiff’s “poor financial condition.” In support of its counterclaim, Defendant served a subpoena upon a “major shareholder” of the plaintiff, seeking production of 23 “wide-ranging” categories of documents and Rule 30(b)(6) testimony, essentially amounting to “every document and every piece of information it has … about every aspect of [Plaintiff’s] business operations, finances, marketing plans, and management structure.”    In its motion for a protective order, Plaintiff argued that Defendant had been permitted to pursue discovery from the plaintiff regarding its counterclaims and that the information sought from the third party shareholder did not “materially advance those theories but [was] a fishing expedition that should not be permitted.”

In response to Plaintiff’s motion, Defendant “beat[] the drum of ‘relevancy’” but “never attempt[ed] to demonstrate that the discovery [wa]s in any way proportional to the needs of the case.” That, the court determined, was “not good enough.”

Following two examples illustrating the “abject disproportionality” of the requests, including Defendant’s failure to explain why the shareholder’s analysis of Plaintiff’s management practices and financial prospects was “reasonably necessary,” the court found that Defendant’s “documents and deposition subpoenas … constitute[d] discovery run amok.” Declaring, that the subpoenas “fail[ed] the proportionality test under 26(b),” the court granted the motion for a protective order.

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