Archive for May 2016

Plaintiff’s “Lackadaisical attitude towards document preservation” Results in Prejudice to Defendant, Sanctions

Mathew Enter., Inc. v. Chrysler Grp. LLC, No. 13-cv-04236-BLF, 2016 WL 2957133 (N.D. Cal. May 23, 2016)

The rules governing parties’ duties to preserve data do not demand perfection. Only when a party should have preserved electronically stored information “in the anticipation or conduct of litigation” and when that party “failed to take reasonable steps to preserve it” may a court order corrective measures. The standard is an attainable one.

Applying newly-amended Rule 37(e) (which “now provides a genuine safe harbor for those parties that take ‘reasonable steps’ to preserve their [ESI]”) the court concluded that Defendant was prejudiced by Plaintiff’s failure to preserve customer communications and imposed curative measures.

Plaintiff—“a car dealership … [that] buys and resells vehicles from [Defendant]”—claimed that it was unable to earn “volume growth incentives” from Defendant because of a new, nearby dealership in town that Defendant knew would “cannibalize” Plaintiff’s sales and Defendant’s failure to adjust Plaintiff’s sales objectives accordingly. As a result, Plaintiff alleged, “the prices that [Plaintiff] could offer during negotiations with customers were higher than its competitors’, diverting sales to the latter.”  Conversely, Defendant alleged that Plaintiff raised its prices intentionally or failed to offer lower prices during negotiations “to set a lower baseline sales objective for the following year’s volume growth incentives.”

The parties agreed (or at least did not dispute) that the duty to preserve arose in August, 2012, when Plaintiff sent a “litigation threat letter” to Defendant. Despite that, for nearly a year after sending the letter, Plaintiff “made no effort to preserve communications from customers or internal emails.” Instead, an outside vendor storing customer communications “deleted them automatically without complaint” from the Plaintiff and Plaintiff discarded all of its “old messages” when it switched email providers.  Despite this loss, Plaintiff “did manage to produce certain data in other forms” that provided some, limited information regarding Plaintiff’s communications with customers.  In light of Plaintiff’s failure to preserve, Defendant sought sanctions under Rule 37(e)(1). [The court ultimately determined no sanctions were warranted for the loss of “internal emails” and they are not addressed in this summary.]

Pursuant to Rule 37(e), the court turned to the question of whether Defendant was prejudiced by the loss of the customer communications. Plaintiff argued it was not, asserting that the customer communications could not “overcome” Plaintiff’s statistical evidence, that Defendant could not show the communications contained evidence of why customers chose other dealerships, and that the alternative discovery produced was an adequate substitute.

Rejecting Plaintiff’s arguments, the court noted that “neither party can say with any certainty what the deleted communications would have shown” but reasoned that the emails could have “shed some light” on the negotiating process with customers and “could have helped to explain why customers chose other dealerships.” Moreover, the court reasoned that the information produced by Plaintiff was “no replacement” for what the customers actually said.  Accordingly, the court found that Defendant was prejudiced and turned to the question of remedy.

Initially, the court found Defendant’s suggested “preclusive sanctions” “too stringent.” Instead the court ordered that Defendant would be allowed to introduce communications post-dating the alleged price discrimination period “as if they came from that period itself,” that Defendant would be allowed to present evidence and argument regarding the spoliation upon Plaintiff’s elicitation of certain testimony, that the presiding judge would be allowed to “giv[e] the jury instructions to assist in its evaluation of such evidence or argument,” and that Defendant would be awarded its reasonable fees incurred in bringing this motion.

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

Once Again, UK Court Approves Use of Predictive Coding

It seems that predictive coding may be catching on in the UK. Not long ago, the English High Court approved the use of predictive coding for the first time in Pyrrho Investments Ltd v MWB Property Ltd [2016] EWHC 256 (Ch). In that case, the parties agreed to the use of predictive coding software and merely sought approval from the court.  Now, The Lawyer (registration required) reports that the High Court has once again weighed in on the issue, this time to approve the use of predictive coding despite the apparent objection of at least one party. This is the first time such an order has been granted.  While the details of the order and underlying disagreement have yet to be revealed, the result bodes well for parties seeking to rely on such technology in future.

Stay tuned to this space for more information as it becomes available.

Citing Restoration and Production of Deleted Emails, Court Denies Sanctions

FiTeq Inc. v. Venture Corp., No. 13-cv-01946-BLF, 2016 WL 1701794 (N.D. Cal. Apr. 28, 2016)

In this case, the court denied Plaintiff’s motion to “instruct jurors that they may presume Venture carried out or allowed the destruction of relevant evidence favorable to FiTeq” despite an executive’s deletion of potentially relevant emails where the messages were eventually recovered and produced and where Plaintiff failed to prove that other responsive documents existed or to establish that the ESI was not restored or replaced.

Plaintiff asked the court for an adverse jury instruction because an Executive Vice President for Defendant deleted potentially relevant emails shortly after termination of the at-issue Operating Agreement.

In its defense, Defendant claimed to have restored and produced the deleted emails upon locating the Vice President’s old computer and also argued that Plaintiff never sought alternative discovery regarding the missing emails, such as a deposition of the Vice President; that Plaintiff could not establish prejudice “because the recovered files were duplicates of documents already produced by both parties as emails sent to other individuals whose ESI was produced”; and that Plaintiff could not establish that the emails were deleted with any intent to deprive Plaintiff of the information’s use in the litigation because the emails were deleted “as part of routine housekeeping.” Defendant also challenged the proposition that sanctions could be imposed under the court’s inherent authority and argued that the Advisory Committee Notes to recently-amended Fed. R. Civ. P. 37(e) “foreclose this route.”

“The court agree[d] with [Defendant]” and denied the motion, reasoning that Plaintiff “failed to prove that other responsive documents ever existed” and that Plaintiff “failed to offer persuasive evidence to show that the ESI was not ‘restored or replaced through additional discovery’—namely, [Defendant’s] production of the emails . . . .”

A copy of the court’s Order Regarding Motions in Limine is available here.

Court Orders Production of “Download Your Info” Report from Facebook

Rhone v. Schneider Nat’l Carriers, Inc., No. 4:15-cv-01096-NCC, 2016 WL 1594453 (E.D. Mo. Apr. 21, 2016)

In this personal injury case, the court ordered Plaintiff to produce a “Download Your Info” report from Facebook, spanning from the date of the at-issue incident (June 2, 2014) through the present.   Per Facebook’s Help Center (last accessed May 10, 2016) a report contains 70 categories of information, including: About Me, Chat (history), Friends, Followers, Logins, Logouts, Messages, Photos, Photos Metadata, Posts by You, Posts by Others, Post to Others, Removed Friends, Searches, Shares, Status Updates, and Videos.

Plaintiff claimed that she sustained “severe physical injuries” in the at-issue vehicle accident. In the course of discovery, Defendant requested production of any social media postings, photographs and/or videos posted by Plaintiff to any social media accounts since the date of the accident.  Plaintiff objected and did not acknowledge the existence of any social media accounts.  However, an “independent investigation” by Defendant uncovered the existence of a Facebook account containing relevant information (e.g., “comments and photos regarding physical activity such as dancing”), and possibly a LinkedIn account.  Following communication between counsel, “including an option for Plaintiff’s counsel to disclose only that information related to Plaintiff’s ability to work and to enjoy the ordinary pursuits of life,” Plaintiff indicated there was no social media content related to the at-issue incident.  Defendant therefore moved to compel Plaintiff’s production of a “Download Your Info” report from Facebook or, if content had been deleted, for sanctions.  In response, Plaintiff argued the motion was moot because Defendant had already accessed and printed 264 pages of her Facebook postings and also claimed that her account may have been hacked.

The court found that Plaintiff had not “fully and completely” responded to Defendant’s requests and ordered her to identify all of her social media accounts from the at-issue time period. The court also found that production of a “Download Your Info” report from Facebook was “warranted.”  In so finding, the court acknowledged consideration of Plaintiff’s privacy, but reasoned that Defendant had already uncovered relevant information and that Plaintiff failed to explain how the request was unduly broad or overly burdensome, particularly in light of the relative ease of providing the requested report.

Accordingly, Plaintiff was ordered to provide the requested report, from the date of the accident through the present, and Defendant, in turn, was ordered to produce to Plaintiff any information upon which it intended to rely in its case. Sanctions were denied where it was unclear whether any social media information had been deleted, or whether it could be recovered.

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

Deflategate Reinflated: Second Circuit Reinstates Brady Suspension for Participating in Deflation Scheme and Obstructing Investigation

Nat’l Football League Mgmt. Council v. Nat’l Football League Players Assoc., — F.3d —, 2016 WL 1619883 (2d Cir. Apr. 25, 2016)

On April 25, 2016, the Second Circuit reinstated (reinflated?) the four-game suspension previously imposed upon New England Patriots quarterback, Tom Brady, for his participation in what has come to be known as “Deflategate,” including the destruction of his cellular phone and its contents.


On January 18, 2015, it was discovered that the footballs used by the New England Patriots in the AFC Championship Game against the Indianapolis Colts were underinflated, i.e., “inflated below the allowed minimum pressure of 12.5 pounds per square inch.” The initial investigation into the incident conducted by Theodore V. Wells, Jr., Esq.—an attorney retained by the NFL—concluded it was “more probable than not” that Brady was “at least generally aware” of the scheme to deflate footballs and indicated that “the investigation had been impaired” by Brady’s refusal to produce requested information, including text messages and emails.  This “awareness and knowledge of the scheme” and Brady’s “failure to cooperate” were cited by the NFL Executive Vice President in his letter notifying Brady of the suspension.  Brady, through the National Football League Players Association (“the Players Association”), appealed.

The suspension was affirmed by League Commissioner, Roger Goodell, following arbitration.  Notably, “[s]hortly before the hearing,” Goodell learned that on the day Brady was to be interviewed by the investigation team, he instructed his assistant to destroy the cell phone he used during the relevant time period, “despite knowing that the investigators had requested information from the phone several weeks before.”  Despite Brady’s claim that it was his “ordinary practice” to destroy old cell phones to protect his personal privacy (although he had “nonetheless retained phones that he had used before and after the relevant time frame”), Goodell found that Brady had “not only failed to cooperate with the investigation, but ‘made a deliberate effort to ensure that investigators would never have access to information that he had been asked to produce.’” Accordingly, Goodell drew an adverse inference that the contents of the phone would have been inculpatory and concluded that Brady both participated in the scheme to deflate footballs and “willfully obstructed” the investigation.  The suspension was therefore affirmed.

On appeal to the District Court, the suspensions were vacated.  Specifically, the District Court reasoned that Brady “lacked notice” that he could be suspended (as opposed to merely fined) for his conduct and also held that Brady was deprived of “fundamental fairness” arising from the denial of the Players Association’s motions to compel production of certain evidence at arbitration.

The League appealed to the Second Circuit.

Second Circuit

Sticking to the facts surrounding the cellular phone (and leaving the rest of the opinion to those whose love of football extends beyond its rare—but not unprecedented[1]—intersection with electronic discovery), the Second Circuit spent the bulk of its discussion addressing the Players Association’s argument that “Brady had no notice that destruction of the cell phone would even be an issue in the arbitration proceeding.”  Rejecting that argument, the Court noted that the original notice of suspension specifically cited Brady’s “failure to cooperate fully and candidly with the investigation, including by refusing to produce any relevant electronic evidence (emails, texts, etc.).” The Court further reasoned that claims of being blindsided were substantially belied by Counsel’s opening statements at arbitration, which specifically addressed the request for electronic communications in the course of the investigation, and the Players Association’s retention of a forensic expert in advance of the arbitration. Also rejecting the claim that a separate disciplinary action was necessary to address the cell phone’s destruction, the Court reasoned that it merely “provided further support for the Commissioner’s determination that Brady had failed to cooperate, and served as the basis for an adverse inference as to his participation in the scheme to deflate footballs.”  Finally, the Court reasoned that:

[A]ny reasonable litigant would understand that the destruction of evidence, revealed just days before the start of arbitration proceedings, would be an important issue. It is well established that the law permits a trier of fact to infer that a party who deliberately destroys relevant evidence the party had an obligation to produce did so in order to conceal damaging information from the adjudicator. See, e.g., Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 106–07 (2d Cir.2002); Byrnie v. Town of Cromwell, 243 F.3d 93, 107–12 (2d Cir.2001); Kronisch v. United States, 150 F.3d 112, 126 (2d Cir.1998). These principles are sufficiently settled that there is no need for any specific mention of them in a collective agreement, and we are confident that their application came as no surprise to Brady or the Association.


Putting aside our collective interest in the cell phone, the fundamental question before the Court was “whether the arbitration proceedings and award met the minimum legal standards established by the Labor Management Relations Act.”  Accordingly, the judgment of the District Court was reversed and remanded with instructions to confirm the four-game suspension upon the Court’s holding that “the Commissioner properly exercised his broad discretion under the collective bargaining agreement and that his procedural rulings were properly grounded in that agreement and did not deprive Brady of fundamental fairness.”

A copy of the Second Circuit’s opinion is available here.