Legal Holds and Trigger Events

Eighth Circuit Passes On Opportunity To Require Litigation Holds

In Gallagher v. Magner, 2010 U.S. App. LEXIS 18245 (8th Cir. Sep. 1, 2010) a group of owners and former owners of rental properties sued the City of St. Paul, Minnesota challenging enforcement of the City's housing code. A special enforcement agency was created in 2002, targeting problem properties, including neighborhood "sweeps" looking for code violations. The agency's tactics were very aggressive by most standards. As a result of the City's housing code enforcement, plaintiffs suffered increased maintenance costs, fees, condemnations, and were forced to sell properties in some instances.

During the course of the action several matters, including plaintiffs’ initial motion for sanctions and renewed motion for sanctions were referred to a magistrate judge. Plaintiffs requested various sanctions, including an adverse inference instruction due to the City's failure to implement a litigation hold. The magistrate judge denied both motions, and the district court judge affirmed. The City ultimately moved for summary judgment, which was granted by the district court judge.

Plaintiffs appealed the summary judgment decision and the denial of their spoliation motions, including their request for an advere inference instruction.

On appeal, the Eighth Circuit reversed summary judgment on one claim regarding disparate impact on racial minorities, but affirmed dismissal of all other claims in the lawsuit. The court went on to analyze the spoliation claims, which is our focus.

In short, the district court (first the magistrate judge and as affirmed by the district court judge) held that spoliation sanctions for the failure to implement a litigation hold were not warranted. The Eighth Circuit affirmed using an abuse of discretion standard of review. In other words, did the lower court's opinion deviate from applicable law in an arbitrary or unreasonable way. The Eighth Circuit held that the record failed to establish prejudice to the plaintiffs or an intentional destruction of evidence or withholding of evidence in an attempt to suppress the truth. For anyone keeping score on litigation hold decisions, this is very helpful to an organization that accidentally loses or destroys electronically stored evidence - with or without a legal hold in place. But the court quickly reminds us that discretion can go both ways, holding that a district court can sanction a party that destroys specific evidence, "even absent an explicit bad faith finding...."

Notice of Claim to Regional Government Equals Trigger Event Despite High Volume

In Field Day v. Suffolk Co., 2010 U.S. Dist. LEXIS 28476 (EDNY Mar. 25, 2010), a concert promoter entered into a $150,000 agreement with the County of Suffolk to hold a two day music festival featuring rap, hip-hop and rock artists in 2003.  The agreement required Field Day to secure a "Mass Gatherings Permit".  The County denied the permit and even initiated an injunction proceeding to prevent the festival from taking place.  In response, Field Day filed a "Notice of Claim" In August of 2003.  Such a notice is a common prerequisite to suing a government entity.  The lawsuit was commenced on May 26, 2004.  In short, the court held that the Notice of Claim was the trigger event for the duty to preserve (even thought the County argued it receives thousands of notices of claim each year).  Following a detailed analsysis the court granted monetary sanctions, refusing to award an adverse inference jury instruction.  The court held that the litigation hold failures were merely negligent and plaintiffs were unable to demonstrate prejudice. 

Judge Rosenthal Issues Sanction's For Failure To Preserve E-Mail

Judge Lee H. Rosenthal, current Chair of the Federal Rules Advisory Committee's Committee on Rules of Practice and Procedure has just issued a sanctions opinion that provides an important counterpoint to Judge Scheidilin's Pension Committee opinion.  Judge Rosenthal was at the helm of the Federal Rules Advisory Committee when the e-discovery amendments were developed and enacted in 2006.  Her words on legal hold and e-discovery duties, therefore, carry weight.  Because she certainly knows a thing or two about e-discovery, her opinion in Rimkus v. Cammarata, 07-cv-00405 (SDTX Feb. 19, 2010) is as important as Judge Scheindlin's Pension Committee opinon, although not as heavily footnooted.  To download a copy of the opinion click here: Download Rimkus v Cammarata SDTX Feb 19 2010.

Lack of Evidence Draws Suspicion, Backup Tape Preservation Question and Third Party Expert's Involvement

Maggette v. BL Development Corp., 2:07-cv-182, 2009 U.S. Dist. LEXIS 116789 (ND Miss. Nov. 24, 2009) is a straightforward caution to corporations to make sure that litigation hold procedures are transparent and communicated to the court as early as possible.  Here, a U.S. Magistrate Judge for the Northern District of Mississippi, openly suspicious of defendants' lack of evidence, orders defendant to pay for the services of a third-party e-discovery expert to answer some very basic questions posed by the court.    Procedurally, the court was entertaining plaintiffs' motions to strike and for sanctions.  The court declined to order sanctions, but nevertheless takes defendant to task for failing to come forward with what exactly was done to preserve ESI and search ESI in response to plaintiffs' discovery demands. The lack of specificity before the court on the exact efforts used to search ESI lead the court to write:

In this case, the defendants have produced information and affidavits and have stated at the hearing on these motions that they have searched for documents and information responsive to the plaintiffs' discovery requests and produced all information responsive to those requests. Nevertheless, despite the court's direct order that "all defendants . . . search any available databases for responsive information and produce it to the plaintiffs. . . , " the defendants are un-able to describe the databases searched, the search terms, methods or parameters used to search the databases or provide any expert information confirming that there are no documents, electronically stored information or other information responsive to plaintiffs' discovery requests. Docket 177, p. 13. Further, the defendants have not provided any concrete reason or rationale for the numerous discrepancies within their discovery responses and the deposition testimony of their own employees. Nor has defendant articulated a satisfactory response to the court's doubts expressed at the hearing that corporations as large and sophisticated as the defendants, which operate numerous gaming facilities across the country with various operations centers, do not have either paper files, electronic files or information or -- even in light of Hurricane Katrina -- backup measures and files for at least some of the information requested by plaintiffs.

This begins defendants slide down a slippery slope. 

Negligent Litigation Hold Does Not Result In Sanctions

In Scalera v. Electrograph Systems, Inc. et al, (EDNY Sept. 29, 2009) the Magistrate Judge denied plaintiff’s motion for an adverse inference instruction.  This is in contrast to Shukla v. Sharma (EDNY Aug. 21, 2009) (holding failure to implement a litigation hold constituted gross negligence leading to sanctions).

In Scalera, the court held that the haphazard litigation hold implemented by defendants’ counsel constituted negligence.   A formal written litigation hold was not issued.  Although, defendants' counsel did verbally tell some potential key players to preserve documents, counsel did not sufficiently communicate the need to preserve with defendants’ IT department.  Despite some other recent holdings in the EDNY, the court did not believe that the failure to implement a written legal hold was grossly negligent or “bad faith”.  In short, in the absence of gross negligence plaintiff needed to establish the necessary “relevancy” of the unpreserved ESI to obtain spoliation sanctions, including proving that the unpreserved ESI would have been favorable to plaintiff’s case.  Plaintiff provided no evidence in support of its motion on this issue, so plaintiff’s motion for sanctions was denied.

Enslaved Priest’s Negligent Loss of Laptop Results in Spoliation Sanctions Recommendation

In Shukla v. Sharma (EDNY Aug. 21, 2009), a Hindu Priest, claimed that the Ashram he lived and worked for in New York illegally trafficked him into the US in 2000 and enslaved him.  Defendants denied the allegations pointing to plaintiff's ability to come and go as he pleased, access to the internet, cell phones, phone cards, e-mail, duties that took him away from the Ashram, as well as television appearances promoting the Indian community.  Defendants claimed that despite plaintiff's admitted ability to call 911, plaintiff never reported his alleged enslavement for years. Plaintiff countered that he was psychologically coerced.

The opinion in this case is a Report and Recommendation ("Report") from a magistrate judge.  The primary discussion of the Report is a summary judgment motion by defendants, but a spoliation motion also considered by the magistrate brings the Report to our attention.  The magistrate recommended denial of the summary judgment motion, because credibility determinations were needed to make sense of the two competing sides of the story.

Given the he-said-she-said nature of the litigation, information on a laptop computer used by plaintiff was deemed highly relevant by the magistrate.  Although plaintiff made no complaints to authorities about his enslavement for seven years, the court theorized that correspondence, such as e-mail to friends and family, may hold some insight into plaintiff's state of mind.  The laptop apparently existed at the time the complaint was filed.  Yet, despite repeated requests and a court order, the laptop or its contents were never produced.  This was a problem because plaintiff testified that he owned the laptop during his deposition.  He told the court, however, that it belonged to an unidentified member of the congregation in response to the motion.  Making matters worse the mystery owner vanished without a trace, taking the laptop with him. 

Because there was no evidence that the laptop was willfully destroyed to keep it out of the hands of defendants, the court reminded us that mere negligent destruction of highly relevant evidence can lead to spoliation sanctions.  Here the sanctions recommended consist of an adverse inference jury instruction and costs associated with repeated attempts to compel discovery of the laptop. 

Failure to Preserve Security Camera Video Results in Adverse Inference Charge

 

When working on the scope of materials to preserve for a slip and fall case, be sure to add one more item to your checklist: security camera video. 

In Minaya v. Duane Reade a New York State appellate court upheld sanctions resulting from the failure of defendant to preserve video recordings of a stairway that may have shown the condition of the stairs prior to plaintiff's fall and may have even recorded plaintiff's fall.

The trial court actually precluded defendant from offering any evidence about the condition of the stairs and awarded an adverse inference charge.  The appellate court held that precluding all evidence of the condition of the stairs was too harsh.  The adverse inference charge was deemed sufficient to restore balance to the case.

This a very short opinion.  To read the opinion click here.  Quote worthy:

Defendant failed to preserve a video recording that may have shown the stairway before and during plaintiff's accident. The unavailability to plaintiff of the video recording may have impaired his ability to establish that defendant possessed the requisite notice of a defective condition on the stairs. Under these circumstances, however, the extreme sanction of preclusion is not warranted "to restore balance to the matter". Rather, an adverse inference is sufficient to prevent defendant from using the absence of the videotape to its own advantage

Exhaustion of Administrative Procedures Did Not End Legal Hold Obligations

To see the original blog post from E-Discovery Bytes click here.

"In a recent Louisiana case, Pipes v. UPS (W.D. La. 7/22/09), UPS was hit with a motion for sanctions due to alleged spoliation of evidence.  One of its drivers was involved in an accident.  After the accident, UPS fired the driver and he filed a grievance protesting his termination.  He argued that the accident was not his fault, but rather was caused by a faulty tire on his delivery van.  His grievance was denied at all stages, and his firing was upheld.  Following the end of the grievance process, van maintenance records were destroyed, and the allegedly faulty tire was released to a vendor."

"However, the fired driver then sued both UPS (for firing him) and his union (for inadequate representation) in federal court.  When he discovered that the maintenance records and tire were gone, he brought a motion for sanctions.  UPS's managers testified that they thought they could put the matter behind them when the grievance was decided, and so had gotten rid of the evidence.  The court ultimately declined to sanction UPS because the driver's claim lacked merit, and the tire and maintenance records were ultimately only slightly relevant to his claims."

Suspicious Lack of Data on Blackberries Leads to Adverse Inference Sanction

When employees defect from one company to another and litigation is initiated, nothing good ever comes of it.  The case of Southeastern Mechanical Services, Inc. v. Brody, 2009 WL 2883057 (M.D. Fla. Aug. 31, 2009) is just such a case.  The short answer here is that a group of employees left the plaintiff''s company, Southeastern Mechanical Services ("SMS") to join Thermal Engineering Construction Services, Inc. (“TEI”).   When some of the employees turned in their SMS laptops upon their departure, they were wiped (meaning a software program was used to erase data from the hard drives of the laptops.)  This raised suspicion and SMS initiated a lawsuit alleging theft of trade secrets and confidential information.  

During a preliminary injunction hearing, the court did not believe the explanation that some of the individual defendants wiped their laptops to protect personal information.  As a result the court issued a temporary restraining order ("TRO") preventing the group of employees from deleting their TEI issued blackberries and laptops.  The blackberries were turned in for forensic examination by plaintiff and defendants and found to have a suspicious absence of data.  The blackberries contained no phone, e-mail or text messages, even though individual defendants (former SMS employees) testified that they used their TEI issued blackberries (and a personal blackberry of one former employee) every day for e-mail, phone and texting since starting with TEI.