In Surowiec v. Capital Title Agency, Inc., 2011 WL 1671925 (D. Ariz. May 4, 2011), Judge David G. Campbell (Chair of the Federal Rules Committee) held that failure to issue a timely litigation hold was grossly negligent because e-mails of key custodians were clearly relevant and justified the award of an adverse inference instruction. The defendant title agency initially received a letter from the developer that sold a condominium unit to the plaintiff that indicated that several homeowners had “sought independent legal advice” and that the developer believed these individuals would claim damages of $2 million due to the defendant’s failure to record releases, which is exactly what happened.

In addition to his substantive claims, the plaintiff also sought sanctions against the title company for failing to implement a litigation hold and suspend its automatic deletion of e-mails.

In addressing the plaintiff’s spoliation claims, Judge Campbell found that the defendant’s duty to preserve attached when the defendant received the letter from the developer, noting that “[w]here a letter openly threatens litigation, then the recipient is on notice that litigation is reasonably foreseeable and the duty to preserve evidence relevant to that dispute is triggered.” Judge Campbell also held that that e-mails of key personnel were within the scope of a preservation obligation, noting that whatever the “outer contours of the duty [is] in this case … they clearly encompassed ongoing e-mails to and from [key players] and information on [key player’s] computer[s].”

Importantly, Judge Campbell expressly rejected Judge Scheindlin’s holding in Pension Comm. of Univ. of Montreal Pension Plan v. Banc of America Sec., 685 F. Supp. 2d 456 (S.D.N.Y. 2010), that failure to issue a litigation hold “constitutes gross negligence per se.” He stated that “[p]er se rules are too inflexible for this factually complex area of the law where a wide variety of circumstances may lead to spoliation accusations.” The fact that the defendant was grossly negligent in failing to implement a litigation hold was an “important factor in determining culpability.”

After finding that the defendant had deleted e-mails for an eight-month period in 2007, a highly relevant period for the instant dispute, Judge Campbell noted that the Ninth Circuit employs a five-part test to determine whether a terminating sanction is warranted. Based on the facts of the case, Judge Campbell found that the plaintiff was not entitled to a default judgment, as the award of the lesser sanction of an adverse inference instruction was sufficient.

In Gaalla v. Citizens Med. Ctr., 2011 WL 2115670 (S.D. Tex. May 27, 2011), Judge Janis Graham Jack examined whether a litigation hold covered backup tapes used for disaster recovery. The plaintiffs moved for sanctions against the defendant hospital center, claiming the defendant failed to preserve e-mail stored on its “backup” tapes or “disaster recovery system,” which continued to overwrite data every 7 or 14 days, and that the defendant failed to take timely “snapshots” of relevant e-mail accounts. The defendant denied any breach of duty, noting that it issued a litigation hold notice to its employees in March 2010, shortly after the filing of this action, and that snapshots were taken of relevant e-mail accounts in April and July 2010.

Judge Jack noted that “a litigation hold does not apply to inaccessible backup tapes (e.g., those typically maintained solely for the purpose of disaster recovery), which may continue to be recycled on the schedule set forth in the company’s policy.” Citing to the Rimkus decision, Judge Jack noted that the question of “[w]hether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done– or not done–was proportional to that case and consistent with clearly established applicable standards.” Using this standard, Judge Jack found that there was no need for the defendant to have searched its backup tapes, especially as the issue arose for the first time on the sanctions motion. Moreover, the court found no evidence of bad faith by the defendant, which is a requirement for the imposition of sanctions in the Fifth Circuit.

In another federal case addressing a motion for sanctions stemming from a defendant’s failure to suspend the automatic deletion of e-mails, Siani v. State Univ. of N.Y. at Farmington, 2011 WL 2580361 (E.D.N.Y. June 28, 2011), Judge Joseph F. Bianco denied the plaintiff’s motion to modify the magistrate judge’s order denying sanctions. The magistrate had found that although the defendant had a duty to preserve and had been negligent in not halting the automatic deletion protocol, the plaintiff failed to prove that any deleted documents were relevant to his claims and thus sanctions were not warranted. Judge Bianco cited to the magistrate’s decision that the defendant did not act in bad faith but rather was negligent in failing to suspend routine document clean-up procedures, especially as the defendant had issued litigation hold directives, backed up its systems, and reminded relevant parties to preserve documents.

Judge Bianco noted that in the Second Circuit, a spoliation inference is available if: (1) relevant evidence is destroyed; (2) with culpability; (3) when the defendant was under a duty to preserve the evidence. In order to be entitled to an adverse inference instruction, the moving party must “adduce sufficient evidence from which a reasonable trier of fact could infer that the destroyed or unavailable evidence would have been of the nature alleged by the party affected by its destruction.” As the plaintiff presented no evidence of bad faith, gross negligence or extrinsic evidence that the deleted documents were relevant, the court upheld the magistrate’s decision.

In Haraburda v. Arcelor Mittal USA, Inc., 2011 WL 2600756 (N.D. Ind. June 28, 2011), the plaintiff, prior to the Rule 26(f) conference, moved for a preservation order. The defendant opposed such an order on the ground that it was premature under Rule 26(d)(1), which states that the parties may not “seek discovery from any source before the parties have conferred as required by Rule 26(f).”

Judge Andrew P. Rodovich rejected this argument, finding Rule 26(d)(1) inapplicable. “A motion to preserve evidence is an injunctive remedy and should [be] issue[d] only upon an adequate showing that equitable relief is warranted.” Thus, the court must consider: “(1) whether Plaintiffs can demonstrate that Defendants will destroy necessary documentation without a preservation order; (2) whether Plaintiffs will suffer irreparable harm if a preservation order is not entered; and (3) the burden imposed upon the parties by granting a preservation order.’” Judge Rodovich concluded that the plaintiff had shown that at a minimum the defendant was not aware of the extent of its preservation obligation. Moreover, as the plaintiff’s claim is based primarily on e-mail communications, the plaintiff would be prejudiced if those e-mails were not preserved and it was not burdensome for the defendant to comply with the preservation order.

In a case involving the intentional and bad-faith deletion of files and e-mails by key employees of the defendant, Senior Judge Robert E. Payne declined to impose the severe sanction of default judgment, but did award the lesser sanctions of an adverse inference instruction and attorneys’ fees, expenses, and costs. E.I. Du Pont de Nemours & Co. v. Kolon Indus., Inc., 2011 WL 2966862 (E.D. Va. July 21, 2011).

Judge Payne noted that in order to impose a sanction of default judgment against the spoliating party, it is necessary to find that the defendant’s actions “were so egregious as to amount to forfeiture of its defense, or the spoliation’s effect was to inflict such prejudice on DuPont that it denied DuPont the ability to prosecute its case.” Based on the circumstances of the case, Judge Payne found that certain of the defendant’s employees had intentionally and in bad faith deleted electronically stored information relating to DuPont’s claims, including e-mail communications with a former DuPont employee and records relating to the defendant’s investigation of DuPont’s technologies. The court noted that defendant had implemented two litigation hold orders, undertook widespread document preservation efforts, and recovered many deleted items from its backup tapes. As these actions mitigated the harm to DuPont to some extent, Judge Payne held that a default judgment sanction was not warranted. However, he did conclude that because DuPont had “lost the ability to present some relevant evidence as a result of the actions taken by Kolon employees,” the lesser sanctions of an adverse inference instruction and the award of attorney fees, expenses, and costs were appropriate in order to alleviate the prejudice to DuPont and to deter similar conduct in the future.