John W. Ferron v. Echostar Satellite, LLC, 2:06–CV–453 (S.D. Ohio, July 30, 2009)

Take Away: A motion for sanctions premised on failure to preserve metadata requires proof that the metadata is relevant. A failure to institute a defensible litigation hold invites motions to compel and motions for sanctions, resulting in higher client legal fees regardless of the outcome.  

“What are my duties to preserve electronic evidence?” A party’s evaluation of this question at the start of every case includes factors such as the relevancy of the information, the cost and/or burden to preserve it, whether or not the same information can be found in a less burdensome place, the amount at stake, the zealousness and credibility of your adversary, and controlling case law within the jurisdiction. This question is larger than whether you think you can withstand a motion to compel or a motion for sanctions. It necessarily includes consideration of how much does an ounce of prevention cost and what is the probability and magnitude of a pound of cure.

Attorney John W. Ferron, Plaintiff in John W. Ferron v. Echostar Satellite, is a “known quantity” in the Southern District of Ohio. He is listed as Plaintiff in 25 federal cases since 2004, the bulk of which are in the Southern District of Ohio. Blogger Ken Magill wrote of Mr. Ferron in 2008, that he “has apparently made a practice out of signing up for commercial e-mail programs and suing marketers over what he deems as deceptive advertising.”

In the present case, Ferron’s firm filed a 1300-page Third Amended Complaint against Echostar, E-Mail Management, and two other parties, claiming a violation of Ohio’s Consumer Sales Practices Act for engaging in what appears to be SPAM-style advertising. Ferron served Defendants with a CD containing 703 offending emails and asked them to produce their own electronic copies of these emails, including the graphic images that were linked to the email and were separately hosted on the server. Defendant E-Mail Management printed the emails stored on its system and preserved these paper copies but apparently did not preserve all of the emails in their native electronic format, including the separately hosted graphics. Ferron brought not one but two motions for sanctions against Defendants. Only Defendant E-Mail Management bothered to respond.

Magistrate Judge King of the Southern District of Ohio wrote another pragmatic and well reasoned opinion in this case, consistent with her opinion in Scotts v. Liberty Mutual (discussed here), in which she refused to compel forensic examination of hard drives upon the mere suspicion of lost evidence.

In the present case, the Court begins with the standard for employing its inherent authority to sanction a party for discovery misconduct. Following U.S. Supreme Court and Sixth Circuit precedent, the Court finds that restraint must be exercised. “Bad faith” is required, not a “mere mistake.” The court’s reticence to rely upon its inherent authority naturally increases with the severity of the sanctions requested. Even where “all the elements entitling a party to an adverse inference have been met,” the Court notes, “other district courts within this circuit have stated that a court has discretion to deny such request for sanctions.” Citing Smith v. USF Holland, No.: 3:07-CV-150, Inc. (E.D.Tenn. July 20, 2009).

Plaintiff’s argument boils down to a claim that a failure on the part of the Defendants to preserve the native electronic form of the email and linked graphics resulted in lost metadata for these files. However, Plaintiff fails to draw the crucial link between the data lost and harm done.

The Court makes crystal clear in its opinion that it will not find bad faith without a predicate showing that the lost evidence is “necessary to or even relevant to” the claims:

Because many, if not all, paper copies of the disputed e-mails have been preserved, and plaintiff has not established E-Management's duty to maintain certain websites, plaintiff has submitted no real evidence that E-Management or its counsel engaged in bad faith. Based on the present record, the Court cannot conclude that plaintiff has met his burden of establishing that E-Management acted in bad faith or exhibited conduct that was “tantamount to bad faith.”

Plaintiff’s failure to establish relevancy even allowed Echostar and the other non-responding Defendants to avoid sanctions.

One might be tempted to draw the conclusion that the “do nothing” approach panned out well for Echostar in the present case. Perhaps, but the risks need to be weighed under the facts of each and every case. Echostar hasn’t always been so lucky with laissez-faire data preservation.

In Broccoli v. Echostar Communications, the District Court of Maryland reviewed Plaintiff’s post-trial motion for sanctions, ultimately granting Plaintiff $37,000 for costs and attorney’s fees in addition to the award it won at trial. The Court described Echostar’s email retention policy as follows:

Under Echostar's extraordinary email/document retention policy, the email system automatically sends all items in a user's "sent items" folder over seven days old to the user's "deleted items" folder, and all items in a user's "deleted items" folder over 14 days old are then automatically purged from the user's "deleted items" folder. The user's purged emails are not recorded or stored in any back up files. Thus, when 21-day-old emails are purged, they are forever unretrievable. The electronic files, including the contents of all folders, sub-folders, and all email folders, of former employees are also completely deleted 30 days after the employee leaves Echostar. Again, under normal circumstances, such a policy may be a risky but arguably defensible business practice undeserving of sanctions.

Because Echostar was on notice of potential litigation, and the email was very likely to be relevant – the gravamen of the complaint involved claims of employment discrimination ¬– Echostar had a duty to suspend its “normal” though “exceptional” retention policy in order to preserve evidence. Their failure to do so resulted in a finding of bad faith, the Court stating that: “the evidence of a regular policy at Echostar of ‘deep-sixing’ nettlesome documents and records (and of management's efforts to avoid their creation in the first instance) is overwhelming.”

In sum, there is no one-size fits all strategy for data preservation. A well documented and carefully reasoned plan, based upon the facts and circumstances of the particular case, is a good insurance policy and should begin as soon as possible in each and every case. Early dialogue with opposing counsel and, if necessary, the intervention of the Court can further help avoid or defeat a well timed “gotcha” motion later in the case.

Read John W. Ferron v. Echostar Satellite, LLC, 2:06–CV–453 (S.D. Ohio, July 30, 2009)

Read Broccoli v. Echostar Communs. Corp., 229 F.R.D. 506 (D. Md. 2005)