This update addresses the following recent developments and court decisions involving e-discovery issues:
- A New Mexico district court decision ruling that a producing party need only produce electronically stored information (“ESI”) in the form specified by the requesting party or in a reasonably usable form and need not label the documents pursuant to Fed. R. Civ. P. 34(b)(2)(E)(i) to correspond to categories in the request;
- A Northern District of Minnesota opinion rejecting plaintiff’s sanctions motion for deletion of cellphone ESI, citing lack of prejudice, plaintiff’s failure to pursue several opportunities to otherwise obtain the information, and the ineffectiveness of monetary sanctions in a $100,000 case in which each party had spent over $1 million;
- A Northern District of Texas order imposing an adverse inference instruction and monetary sanctions against a defendant who had used a bulk file changer to alter metadata on a produced computer to conceal the existence of an unproduced computer; and
- A District of Kansas decision ordering defendants to conduct a forensic review of potentially lost or deleted ESI after defendants failed to implement a litigation hold to preserve such evidence.
1. In The Anderson Living Trust v. WPX Energy Production, LLC, 2014 WL 930869 (D. N.M. Mar. 6, 2014), District Court Judge James Browning held that a producing party need only produce ESI in the form specified by the requesting party or in a reasonably usable form and need not label the documents pursuant to Fed. R. Civ. P. 34(b)(2)(E)(i) to correspond to categories in the request.
Defendants produced thousands of documents in response to plaintiffs’ requests, including 20,000 pages of hard-copy documents that defendants scanned and produced as fully searchable PDF files. Id. at *1. The parties subsequently disagreed over the form of production, and defendants argued that, in accordance with Fed. R. Civ. P. 34(b)(2)(E)(ii), they would produce the documents in a reasonably usable format but were under no obligation to designate which documents were responsive to plaintiff’s specific requests. Plaintiff responded that it could not evaluate the accuracy and completeness of the production unless defendants made such designations.
The court initially determined that Rule 34(b)(2)(E)(i) applied and that defendants were required to label responsive documents to correspond with plaintiff’s requests. Id. at *2-*3. Rule 34(b)(2)(E)(i) requires parties to produce documents “as they are kept in the usual course of business” or organized and labeled “to correspond to the categories in the request.” Id. at *3 (quoting Fed. R. Civ. P. 34(b)(2)(E)(i)). As the documents had been reviewed for privilege, the court determined that the documents could not be produced as they were kept and had to be labeled to correspond to the categories of the request.
After this ruling, the defendants filed a motion for reconsideration, and upon further reflection, the court reversed its prior decision. Based on a close reading of the Rule’s history and commentary, id. at *7-*12, the court held that Rule 34(b)(2)(E)(i) was limited to the production of hard copy documents and did not control production of ESI. “Because [R]ule 34(b)(2)(E)(i) is not controlling, the Defendants are under no obligation to produce their discovery in the usual course of business, nor to label it to correspond to the categories in the Plaintiffs’ request.” Id. at *13.
Plaintiffs argued that, because many of the documents existed in hard copy before they were transformed into ESI, Rule 34(b)(2)(E)(i) should apply. In its reconsideration, the court disagreed and found that, when plaintiffs requested an electronic production, they “avail[ed] themselves of the guarantee in (E)(ii).” Id. The protections in (E)(i) were not applicable because “[t]he nimbleness of current search functionality with ESI software is the very reason the Advisory Committee found it unnecessary to make (E)(i)’s organization guarantees applicable to ESI.” Id. Thus, the court ruled that plaintiffs were not entitled to receive the benefit of both subparts (E)(i) and (E)(ii).
2. In Ewald v. Royal Norwegian Embassy, 2014 WL 1309095 (D. Minn. Apr. 1, 2014), Judge Susan Nelson upheld a Magistrate Judge’s decision rejecting plaintiff’s sanctions motion relating to deletion of cellphone ESI, agreeing with the Magistrate Judge’s findings of lack of prejudice, plaintiff’s failure to pursue several opportunities to otherwise obtain the information, and the ineffectiveness of monetary sanctions in a $100,000 case in which each party had spent over $1 million.
In this employment discrimination action, the plaintiff – formerly an employee at the Honorary Norwegian Consulate in Minneapolis, Minnesota – alleged that she received $40,000 a year less in pay than a similarly situated male employee, and was also the subject of retaliation after complaining about the pay disparity. Id. at *3. In the course of discovery, Judge Nelson granted the plaintiff’s motion to compel the production of a cellular phone used by the Honorary Consul for Norway, which the plaintiff alleged contained text messages relevant to her claims. Id. at *1 & n.1. The defendant informed the plaintiff, however, that the law firm where the Honorary Consul was a partner actually issued the phone, and that all ESI had been erased when the Honorary Consul retired from the law firm. Id. at *1.
The plaintiff then moved for spoliation sanctions, and Judge Nelson referred the dispute to Magistrate Judge Steven Rau for an initial Report and Recommendation. Id. After Magistrate Judge Rau recommended against sanctions, the plaintiff filed objections to the findings that she had offered “insufficient evidence” of prejudice – in this case, a single email suggesting the existence of a “potentially relevant” text message – and “failed to pursue other avenues of discovery to obtain [the] information.” Id. at *1-*2.
In the Report and Recommendation, Magistrate Judge Rau had stated that a court may order spoliation sanctions when a party destroys discoverable material that “the party knew or should have known . . . was relevant to pending, imminent, or reasonably foreseeable litigation.” Id. at *15 (quotations and citation omitted). Upon making such findings, a court has “broad discretion in choosing the appropriate sanction.” Id. at *16. In this case, the Magistrate Judge determined that the defendant had “spoliated [the] mobile phone because it failed to preserve” the mobile phone after the Embassy had become aware of the litigation.
Turning to the issue of prejudice, Magistrate Judge Rau determined that plaintiff had failed to carry her burden, finding that one email hinting at the existence of relevant text messages did not demonstrate prejudice. Id. at *18. Further, he concluded that the plaintiff had “passed up several opportunities” to otherwise obtain the information, even failing to ask the Honorary Consul about the text messages during his deposition. Id. at *19.
As a final matter, Magistrate Judge Rau observed that monetary sanctions were unlikely to deter future spoliation given that the parties had each spent nearly $1 million litigating a $100,000 dispute. Id. at *23. For these reasons, he ruled that sanctions were not appropriate despite the spoliation finding. Id. at *19.
Judge Nelson agreed with Magistrate Judge Rau’s reasoning. Id. at *2. Noting that “[t]he determination of an appropriate sanction for spoliation” is within “the sound discretion of the trial judge,” Judge Nelson concluded that, even if a showing of prejudice had been made, entry of monetary sanctions would have been inappropriate because such sanctions were “unlikely to deter either party.” Id. As such, Judge Nelson overruled the plaintiff’s objections and adopted the Report and Recommendation in its entirety. Id.
3. In T&E Investment Group LLC v. Faulkner, 2014 WL 550596 (N.D. Tex. Feb. 12, 2014), Judge Jorge Solis affirmed a Magistrate Judge’s adverse inference and monetary sanctions rulings where a defendant had used a bulk file changer to alter metadata on a produced computer to conceal the existence of an unproduced computer.
The district court had ordered defendants to allow an independent computer forensic expert (“Fogarty”) to have access to all computers used by defendants during the year 2011. Id. at *2. Citing Fogarty’s report, Plaintiffs moved for sanctions, claiming that defendants had spoliated evidence on three computers, and withheld additional computers from production, including one belonging to defendant Faulkner, identified as the Alienware computer (“Alienware”). Id. The district court limited plaintiffs’ motion to three computers—not including Alienware—and referred the motion to the Magistrate Judge for further proceedings. Id.
During an evidentiary hearing before the Magistrate Judge, Fogarty testified that Faulkner had used a bulk file changer to alter data on one of the three computers at issue to make it appear as though Faulkner had used that computer throughout the period at issue, and thus to “hide a computer [Alienware] that likely does contain information relevant to this case.” Id. at *3. Over defendants’ objections that Alienware was outside the scope of plaintiffs’ motion, the Magistrate Judge found that Faulkner’s conduct “is a related circumstance that cannot be disentangled from Defendants’ spoliation of [one of the three computers within the scope of plaintiffs’ motion].” Id. at *4. The Magistrate Judge recommended an adverse inference instruction and a monetary sanction.
The district court agreed that Faulkner had a duty to preserve the files on the produced computer and that his spoliation of these files was within the scope of the motion, was carried out in bad faith, and had prejudiced the plaintiffs. The court cited Faulkner’s falsification of file dates in support of the finding that he acted in bad faith. Id. at *5-*6. On prejudice, Judge Solis affirmed the Magistrate Judge’s finding that in light of “the totality of the circumstantial evidence surrounding Defendant Faulkner’s actions, . . . a reasonable fact finder could conclude that the Alienware computer contained information that was relevant and would have aided Plaintiffs in proving their claims.” Id. at *6, *18 (internal quotation marks omitted).
The district court also agreed that the Magistrate Judge’s recommended monetary sanction of $27,500 was reasonable. Id. at *7. As the Magistrate Judge did not find any individual defendant culpable for the spoliation other than Faulkner, the district court construed the Magistrate Judge’s recommendation to recommend monetary sanctions against only defendant Faulkner and his employer. Id. at *9.
Defendants made only a “non-specific, general objection” to the Magistrate Judge’s recommendation of an adverse inference instruction. The district court overruled the objection, finding no clear error in this recommendation, and stating that “[e]ven under a de novo review, . . . such a sanction is warranted for the conduct found sanctionable.” Id.
4. In Helget v. City of Hays, 2014 WL 1308893 (D. Kan. Mar. 31, 2014), Magistrate Judge Kenneth G. Gale ordered defendants to conduct a forensic review of potentially lost or deleted ESI after defendants failed to implement a litigation hold to preserve such evidence.
Plaintiff Firma Helget brought several claims against her former employer City of Hays and two individual defendants alleging wrongful termination. Defendants claimed plaintiff was rightfully terminated, in part, because she misused the city’s computers. Plaintiff argued that, despite her counsel’s June 26, 2012 letter to defendants informing them of a potential action involving plaintiff’s and her co-workers’ ESI, defendants failed to implement a litigation hold and failed to preserve relevant ESI. Plaintiff requested that the court compel defendants to implement a litigation hold, produce forensic evidence relating to five key players, and attempt to recover deleted or destroyed documents.
The Magistrate Judge set forth the governing standard for spoliation, stating that a party must demonstrate:
“‘(1) that the party had an obligation to preserve the electronic evidence at the time it was destroyed; (2) that the electronic evidence was destroyed with a culpable state of mind (may include ordinary negligence, gross negligence, recklessness, willful, or intentional); and (3) the destroyed evidence was relevant and favorable to the party’s claim such that a reasonable trier of fact could find it would support that claim.’” Id. at *3 (quoting Benton v. Dlorha, Inc., 2007 WL 3231431, at *4 (D. Kan. Oct. 30, 2007)).
The Magistrate Judge determined that defendants had a duty to preserve certain ESI that they had put at issue by stating that the plaintiff was fired for misuse of a city computer. He noted that “ESI relating to computer usage by Plaintiff – as well as her coworkers in her department – is relevant to a determination of whether this aspect [of] Defendants’ stated reasons for her termination is valid or pretextual.” Helget, 2014 WL 1308893, at *4.
The Magistrate Judge ruled that the duty to preserve documents was triggered by the June 26, 2012 letter to defense counsel. Though defendants were not required to preserve the scope of documents indicated by the letter, Magistrate Judge Gale stated that “[d]efendants were not . . . entitled to simply ignore the letter, which apparently was their response.” Id. at *3. The Magistrate Judge determined that a litigation hold should have been implemented after receipt of the June 26, 2012 letter and ordered defendants to institute a hold notice relating to the key players in the litigation to the extent they had not done so already. Id. at *4.
The Magistrate Judge then turned to the specific ESI alleged to have been destroyed: a server used to store Internet user history; ESI on plaintiff’s computer; certain emails relating to plaintiff; and ESI relating to plaintiff’s Internet use and the Internet use of her coworkers.
The Magistrate Judge found plaintiff had failed to provide sufficient evidence that the server stored relevant information, “providing nothing more than assumptions and conclusory statements in an effort to establish that Defendants had a duty to preserve the information that would have been compiled in this server.” Id. With respect to plaintiff’s computer, the Magistrate Judge found that the defendants had given the plaintiff’s computer to another worker who used it through November 2012, well after the lawsuit had been filed. Id. As the defendant conceded it “could not guarantee the current status” of plaintiff’s computer, the Magistrate Judge ordered that defendants conduct a forensic review to preserve plaintiff’s ESI on the computer. As to this effort, the Magistrate Judge ruled that “Defendant made arguably reasonable efforts to maintain the computer’s contents, and because it is not yet apparent that data from this computer has been lost, the parties shall split the cost of imaging the hard drive.” Id. at *5.
As to plaintiff’s claims that more than 200 emails produced to plaintiffs had been previously deleted or only partially recovered, the defendants argued that they had produced approximately 10,000 emails in this case and that there was no evidence of intentional destruction. The Magistrate Judge agreed that plaintiff had not shown that any of the emails were intentionally destroyed prior to their recovery and production to plaintiff and therefore denied this spoliation claim.
As the defendants had put at issue internet usage by plaintiff and her coworkers, this information was relevant, and the Magistrate Judge instructed the defendants to propose a method to compile and reconstruct ESI relating to internet usage by plaintiff and key players in the litigation during the relevant time period, with the defendant to bear this cost. Id. at *5-*6.