Electronic Discovery & Computer Forensics : RenewData : Austin, Texas

APC Filtration (“APC”) moved the U.S. District Court for Northern District of Illinois to issue sanctions against a former employee, William Becker and his new employer SourceOne in APC Filtration Inc. v. Becker, 2007 U.S. Dist. LEXIS 76221 (N.D.Ill. Oct. 12, 2007).

APC had initially brought suit against Becker for alleged misappropriation of confidential information and diversion of corporate opportunities. In discovery, APC requested Becker’s personal computer because of admitted communications between Becker and one of APC’s major customers and a major supplier. Becker and SourceOne claimed any communications using that computer were irretrievably lost because Becker’s personal computer had “crashed.” The court required further explanation from Becker. In an affidavit, Becker stated that he had experienced computer problems on March 21, 2007, and that he had brought his computer to a repair shop where he was told that “the mother board and hard drive were shot, and that the computer was not worth fixing.” Therefore, Becker threw it away with “other junk.” However, in his July 24, 2007 deposition, Becker testified that he took the computer to a construction site in McHenry, Illinois, and disposed of it in a dumpster. He admitted this dumpster was approximately 20 miles away from his home.

The court held that the computer was discoverable and Becker and SourceOne had reasonable notice that the computer could become the subject of discovery requests when Becker threw the computer away, some time after March 21, 2007. APC's complaint was filed on March 15, 2007, and counsel for Defendants made his initial appearance on March 19, 2007. Therefore Becker had “reasonable notice” when he disposed of his computer that the computer “could become part of the discovery process” and “had the duty to preserve the computer as evidence prior to the date on which he discarded it.”

The court further held that by disposing of the computer within days of receiving notice of the lawsuit, Becker had acted in bad faith to prevent APC from discovering potentially damaging evidence.

Furthermore, the destruction of the computer impaired APC’s ability to present proof in its diversion claims that Becker had communicated with its customer and supplier. However, because APC had other means of proving its misappropriation of information claims, prejudice from destruction of the computer was less significant. Nevertheless, the conduct warranted sanctions and the court held that certain communications between Becker and the employer’s customer and its supplier were deemed “conclusively proven,” and Becker and SourceOne were required to pay APC’s costs and attorney’s fees in connection with “a) filing and arguing this motion for sanctions; b) third-party discovery that was made necessary by Becker’s destruction of the computer; and c) retaining [a] computer expert.”

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Magistrate Judge Facciola rules for preservation and limited inspection of cell phone images in response to a motion to compel in Smith v. Café Asia, 2007 WL 2849579 (D.D.C.) As background, plaintiff, Andrei Smith, was formerly employed as a host and waiter at Cafe Asia, a restaurant located in Washington, D.C. The restaurant owned by defendant is located at 1720 Eye Street DC Hospitality, LLC ("Cafe Asia"). Plaintiff claimed he was the victim of discrimination based on his sexual orientation, in violation of the District of Columbia Human Rights Act and that he was the subject of assault and battery in the form of unwanted touching. Specifically, plaintiff alleged that:

(1) the kitchen staff routinely verbally taunted him based on his sexual orientation;

(2) the kitchen staff repeatedly subjected him to humiliating physical harassment;

(3) the management tolerated and encouraged this verbal and physical harassment; and

(4) Ms. Joey Yim, one of the managers, sent him an email containing six pornographic images portraying homosexual sex acts (the "Yim e-mail").

This discovery dispute focuses on defendant's request that it be permitted to inspect and make copies of images stored on plaintiff's cell phone. Defendant alleged that these images portray:

(1) plaintiff's genitalia at various states of arousal; and

(2) graphic images of other men purported to be plaintiff's sexual partners

Plaintiff concedes that his cell phone contains "intimate, highly personal" and "unclothed images," but denies having willingly shared the images with his co-workers. 

Defendant asserted that even if the images where not admissible at trial, they were discoverable. The court, however, observed that this is true only if the images led to other discoverable evidence. Here, since the defendant sought to use the graphic content of the images to establish plaintiff's own standards of behavior, the images themselves are the “end game” of the discovery request. Therefore, the ultimate issue was whether the images would be admissible at trial. Specifically, the court stated that a determination of whether the probative value of the images outweighed their prejudice was required under F.R.E. 403 and 412(b)(2).  Because this determination was best made by the trial judge, the court ordered the images to be preserved.

Judge Facciola also noted that the “analysis differs where the discovery is sought by defendant to corroborate the testimony of its witnesses that plaintiff willingly shared the images,” as plaintiff had denied sharing the images with co-workers. Although F.R.C.P. 26(b)(1) usually allows production of any matter relevant to the subject matter of the litigation, plaintiff argued that F.R.E. 412 required that defendant must establish that the probative value outweighed prejudice to plaintiff. The court found that it had “the discretion under Rule 26 to balance defendant’s need for the images against plaintiff’s valid privacy concerns.” Thus, in addition to ordering the preservation of the images, the court also ordered that one defense attorney be allowed to inspect the images, “only so far as necessary to fully inform its discovery and trial preparation.”

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On September 27, 2007, The Financial Industry Regulatory Authority (FINRA) announced a settlement with Morgan Stanley & Co. to resolve charges that the firm's former affiliate, Morgan Stanley DW, Inc. (MSDW), failed on numerous occasions to provide emails to claimants in arbitration proceedings as well as to regulators - while representing that the destruction of the firm's email servers in the Sept. 11, 2001 terrorist attacks on New York's World Trade Center resulted in the loss of all pre-9/11 email. In fact, the firm had millions of pre-9/11 emails that had been restored to the firm's active email system using back-up tapes that had been stored in another location.

The settlement provides for distribution of $9.5 million to two groups of customers who had arbitration claims against the firm. FINRA also imposed a $3 million fine on the firm for its failure to provide pre-9/11 emails and updates to a supervisory manual.

“The integrity of our process demands that brokerage firms comply with their obligations to search diligently for, and provide in a timely way, information and documents required in arbitration proceedings and regulatory investigations," said Susan Merrill, FINRA Executive Vice President and Chief of Enforcement." The action announced today underscores FINRA's commitment to ensuring that firms live up to those obligations. We are particularly pleased that this unique settlement directs the bulk of the monetary sanction to the customers in arbitrations, to remedy MSDW's discovery failures."

FINRA found that MSDW failed to provide pre-9/11 emails to claimants in numerous arbitration proceedings and in response to three regulatory inquiries during the period from October 2001 through March 2005. MSDW made statements in numerous arbitration proceedings and to the former NASD, New York Stock Exchange Regulation and the Massachusetts Securities Division that those emails had been destroyed. Those statements were found not to be true. In fact, MSDW possessed millions of pre-9/11 emails that had been restored to the firm's system shortly after Sept.11, 2001 using backup tapes. Many other emails were maintained on individual users' computers and had not been affected by the events of 9/11. Among the matters where MSDW failed to produce e-mail was an NASD investigation that resulted in an August 2005 settlement with the firm.

FINRA also found that MSDW later destroyed many of the pre-9/11 emails it did possess. The firm did so in two ways - by overwriting backup tapes that had been used to restore the emails from 11 of its 12 servers to the firm's system, and by allowing users of the firm's email system to permanently delete the emails over an extended period of time. As a result, between September 2001 and March 2005, MSDW deleted millions of pre-9/11 emails from the firm's systems.

In settling this matter, Morgan Stanley neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

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In PSEG Power New York, Inc. v. Alberici Constructors, Inc. 2007 WL 2687670 (N.D.N.Y. Sept 07,2007) large-stakes construction litigation, plaintiff PSEG Power Inc. (“PSEG”) originally turned over more than 3,000 emails and 211,000 pages of documents, along with a disk containing e-mails. However, Magistrate Judge Randolph F. Treece directed PSEG to produce the emails in the form requested by defendant Alberici Constructors Inc. (“Alberici”) and do so at its own expense.

Alberici was a contractor in construction of a $25 million, PSEG power plant outside of Albany. In 2005, PSEG sued Alberici for $ 4.4 M improperly performed work and failure to complete jobs at the Bethlehem Energy Center project. Alberici filed a mechanic's lien against PSEG for $6.8 M and countersued PSEG for $11.4 M.   Both companies made complex discovery requests for documents and communications concerning the Bethlehem project.

In January 2007, Alberici started to notice that the discovery materials PSEG delivered through an information materials vendor were incomplete. Although the 3,000-plus e-mails were present, many of the attachments that accompanied the messages were not. In some instances, there were up to 12 attachments per e-mail that became separated from their original messages. It appeared that the “vendor’s software was not compatible with the HTML format in which PSEG had provided its documents and that this incompatibility had resulted in the parent child link between the emails and attachments being broken.”

For nearly six months, PSEG, its vendor and Alberici tried to figure out methods to reattach the materials to the e-mail messages. Although the 750 GB of underlying data still existed, the metadata necessary to join the e-mails and attachments “was destroyed during [PSEG]s collection and formatting of the emails. PSEG tried to solve the problem by supplying a spreadsheet to Alberici that would match attachments with e-mails. But it did not work. An effort to reach a compromise failed when PSEG claimed it would cost an "unconscionable" $206,000 for it to redo the e-mail and attachment retrieval process. Alberici’s vendor estimated the cost at $37,500. The court proposed a protective order to allow Alberici’s vendor to recover the emails but PSEG rejected that proposal.

Once the court agreed that Alberici should get the discovery documents in a usable form, it had to determine who would pay for the production. PSEG alleged that the data was not reasonably accessible because of undue burden or cost. However, because Alberici had established good cause for the production of the data, a cost-benefit analysis was done according to the factors set forth in the Advisory Committee Notes to Rule 26:

1. the specificity of the discovery request;
2. the quantity of information available from other and more easily accessed sources;
3. the failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources;
4. the likelihood of finding relevant, responsive information that cannot be obtained from other, more easily accessed sources;
5. predictions as to the importance and usefulness of the further information;
6. the importance of the issues at stake in the litigation; and
7. the parties’ resources.

The court found the factors in Alberici’s favor and ordered PSEG to bear its own costs. Further, the court acknowledged "the cost of retrieval in this matter is by no means cheap," but it may not be as high as the $206,000 estimated by PSEG and lower-cost alternatives were available. It stated "considering the monumental production issue that confronts us, $37,500 is a significant discount when compared to PSEG's vendor's proposal and may be a bargain," and "although no one wants to spend any significant amount of money on discovery, whether it be thousands of dollars or hundreds of thousands of dollars, but if they have to, PSEG's access to resources rivals, if not exceeds, Alberici's claim to resources."

Finally the court stated:

“But for [PSEG]s vendor creating this email attachment fiasco, we would not be having this discussion. Without question, attachments should have been produced with their corresponding emails as such are kept in the usual course of business. [PSEG] chose to provide the emails and attachments in this disassembled manner albeit unbeknowst to it at the time of production. Whether created by a software incompatibility or malfunction, such deficiency does not provide a sufficient excuse from presenting an important aspect of discovery in a convoluted fashion. And, [Aberici] should not be resigned to accept a flawed discovery process.”

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Lack of a meaningful meet and confer and purposeful sluggishness leads to failure to comply with numerous discovery obligations and potential sanctions in In re Seroquel Products Liability Litigation (2007 U.S. Dist. LEXIS 61287 (M.D. Fl. Aug. 21, 2007).

Magistrate Judge David Baker in this multidistrict litigation (MDL) products liability proceeding has sanctioned defendant AstraZeneca (“AZ”) for its failure to timely and systematically produce e-discovery. 

In January 2007, the court had entered a comprehensive Case Management Order regarding the timing and method of discovery, including detailed requirements for e-discovery. The court set forth the party’s document collection and production obligations and held that each party shall bear its own costs for the production of accessible data. The order allowed plaintiffs to conduct information interviews of AZ employed IT persons about approximately 14 categories of databases and the methods by which information could be produced or extracted. Additionally, the court commented that the defendant’s failure to “investigate and understand its own records and documents and to prepare them for production has not met expectations of the Court as discussed in the September 2006 Conference.”

In April 2007, the plaintiff’s motion to compel was denied to allow parties to confer “in good faith” but an evidentiary hearing on the motion was scheduled for a later date. That hearing was later canceled when AZ asserted that it would correct the deficiencies. Ultimately, plaintiff’s counsel did not believe the deficiencies were addressed and filed the motion for sanctions which was granted in part.

The sanctions were granted based on a number of AZ’s discovery failures. Despite requests by plaintiffs’ expert to meet with an equivalent IT counterpart to discuss various technical problems with production of over ten million pages and an explicit order to allow plaintiffs to interview AZ’s IT employees, no one was provided and no discussion took place. AZ’s unilateral decision to conduct key word searches on a number of its databases to locate relevant documents without coming to an agreement with the plaintiffs about the words to be used was a concern. The court found the key word search was “plainly inadequate,” attachments to emails were not provided, relevant emails were omitted, AZ’s de-duplication method “remains mysterious,” production was tardy, AZ’s efforts in preventing and solving its technical problems were “woefully deficient,” and there was no quality control. The documents were “unsearchable, and unusable.”

Ultimately, the court reached the conclusion that AZ was “purposely sluggish” in its production to plaintiffs. The court noted that the sluggishness had benefited AZ and prejudiced the plaintiffs by limiting the time available to for review and follow up investigation. Therefore, prejudice was presumed. The court had little sympathy for AZ’s attempt to blame its vendor by responding with citations to appellate decisions holding that continued reliance on an ineffective vendor is itself subject to sanctions.

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District Judge Cooper of the U.S. District Court of California has affirmed Magistrate Judge Chooljian’s finding that contents of a web server’s random access memory (“RAM”) are discoverable. Columbia Pictures Indus. v. Bunnell, C. D. Calif., No. CV 06-1093, discovery order 8/24/07. Defendants had challenged the magistrate’s prior ruling that required a BitTorrent site sued for copyright infringement to turn on the site's logging function and begin capturing and retaining user requests for dot-torrent files. See Columbia Pictures Industries v. Bunnell, 2007 WL 2080419 (C.D.Cal., May 29, 2007).

In this motion, Judge Cooper was asked not to interpret “electronically stored information” (”ESI”) to include data stored in RAM and to exclude RAM from discovery because it is too “ephemeral”.  Defendants and amici argued that information held in a computer’s RAM was not ESI under Federal Rule of Civil Procedure 34 because even though it was “stored”, it was not stored for later retrieval because of its very temporary period of storage.  The court found this interpretation of “stored” unsupported by the Rule, the Rule’s commentary, or any Ninth Circuit precedent involving RAM.  Following the magistrate’s reasoning, the Judge Cooper cited MAI Systems Corp. v. Peak Computer Inc., 991 F.2d 511 (9th Cir. 1993).  In that copyright infringement case, the court concluded that software copied into RAM was “fixed” in a tangible medium and was sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.  Therefore, Judge Cooper rejected the position that ESI requires a degree of permanency not found in RAM.

Additionally, the court dismissed concerns that this approach would have a devastating impact on the record-keeping obligations of businesses and individuals. The court clarified that the decision's effect is limited to the defendants in the instant case only.

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In Peskoff v. Faber, 2007 2416119 (D.D.C. August 27, 2007), U.S. Magistrate Judge John M. Facciola attempts to resolve ongoing discovery issues in Plaintiff Peskoff’s suit to recover damages for financial injury resulting from Defendant Faber's operation of a venture capital fund, NextPoint GP, LLC ("NextPoint").

As indicated in earlier opinions, the main point of dispute was the sufficiency of the search done by Faber for documents in response to Peskoff’s discovery requests. Specifically, Peskoff sought emails from his tenure with NextPoint that "are highly likely to contain information relating to the ownership issues in this case, the suspect transactions identified in the Complaint and other relevant matters." Faber had produced computer disks containing electronic documents, obtained from Peskoff's computer, but these disks did not include any of Peskoff’s emails between mid-2001 and mid-2003, and Faber had no explanation why the emails were not produced. He also had no explanation regarding the current location(s) of email from that time period or what was done to locate them. Faber insisted that all of Peskoff's emails from his computer had been produced and that they no longer existed on the system. Judge Facciola ruled that Faber’s search for responsive emails had been inadequate, ordered him to do a more thorough search, and to describe his efforts in a sworn statement and testimony at a subsequent evidentiary hearing.

In this opinion, Judge Facciola considered whether a forensic examination should be done to look for additional material, and if so, who should pay for such an examination. He determined that the importance of this type of discovery in resolving the issues in the litigation was challenging because "the importance of the results of the forensic examination to be had can only be accurately assessed after it is done." However, he concluded that the information produced thus far seemed to indicate the possible existence of additional similar information.

The parties were directed to collaborate on an RFP process to seek bids from forensic computer technicians to determine the likely cost of searching for, restoring, and converting email from the computers in question. Judge Facciola also addressed the arguments presented by Faber’s attorney who was also representing NextPoint. He argued that since Peskoff had only sued Faber and not NextPoint, then NextPoint was simply a third party to the suit and not under any obligation to preserve documents. This argument was ruled to be untimely and was therefore waived.

Finally, Judge Facciola expressed concern over apparent inaccuracies or inconsistencies in the testimony provided by both Peskoff’s and Faber’s counsel, ordering both to submit written explanations to the court for previous erroneous and/or contradictory statements they made regarding discovery issues in the case.

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In Columbia Pictures Industries v. Bunnell, 2007 WL 2080419 (C.D.Cal.) an order by the U.S. Magistrate Judge Chooljian directs the defendants in an ongoing copyright infringement lawsuit to collect and produce information stored in RAM of their servers.

This case involves a number of motion picture studios who sued the operators of a web site named "TorrentSpy". The website offers users "dot-torrent" files to download which in turn are used by a "BitTorrent" application running on the user's computer. The BitTorrent application locates and downloads content. The plaintiffs contend that the downloads include copyrighted motion picture content. Because the dot-torrent files were not themselves infringing, and due to the fact that the allegedly infringing content was not hosted by TorrentSpy, the claims were contributory actions of vicarious infringement, contributory infringement and inducement.  

The motion picture plaintiffs served discovery requests on the defendants asking for IP addresses of users of the TorrentSpy site who requested dot-torrent files, and records, dates and times of such requests.

TorrentSpy servers were capable of creating a log of the requests made for dot-torrent files, but TorrentSpy had disabled the logging function. This meant dot-torrent requests were being stored only in the servers' RAM and most information in the RAM was overwritten within a few hours. The court found that the temporarily stored information was extremely relevant to the litigation and that the server log information that resided on the servers' RAM constituted "electronically stored information" under the Federal Rules of Civil Procedure and must be produced.

Additionally, the court ordered IP addresses associated with any dot-torrent request to the website to be produced with masks. The masks were to be done in a manner where the plaintiffs could identify multiple dot-torrent file requests. 

This order will give new ammunition to requesting parties when demanding the preservation, collection and production of temporarily stored information.

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After following resolution of issues concerning covered insureds in insurance coverage litigation involving September 11, 2001 attacks on the World Trade Center (“WTC”), insured parties moved for sanctions against liability insurer. In re Sept. 11th Liab. Ins. Coverage Cases, 2007 WL 1739666 (S.D.N.Y. June 18, 2007)

On June 18, 2007, United States District Judge Alvin K. Hellerstein, for the Southern District of New York, slapped Zurich American Insurance Company (“Zurich”) and its counsel, the law firms of Wiley Rein LLP and Coughlin Duffy LLP, with a $1.25 million sanction for making statements without evidence to back them up and discovery violations including deleted electronic evidence, and delayed production of relevant documents.

This insurance coverage suit revolved around whether Zurich covered Westfield Corporation, Inc. which leased retail space in the WTC, and the Port Authority of New York and New Jersey (“Port Authority”) which owned the WTC. Zurich alleged that it did not.  Zurich ultimately changed its position, however, when Zurich’s chief underwriter revealed in a deposition that she believed the Port Authority was covered. During discovery, opposing counsel, Latham & Watkins became suspicious that among other documents, a 62-page policy that would prove Zurich’ policy applied had been deleted from Zurich’s computer system and that defense counsel had a copy that had not been produced. Critical documents were in Zurich’s counsel’s possession for almost three years before they were produced. 

Federal Rule of Civil Procedure 37 authorizes sanctions for an attorney’s failure to comply with Rule 26 disclosure requirements, even without a discovery request, including:

1) failure to produce a copy of all relevant documents in the party’s control; and

2) failure to amend any prior discovery responses if the party learns that the response is incomplete or incorrect and the additional or corrective information has not been made known to the other parties during the discovery process.

The Court dismissed counsel’s explanation at the sanctions hearing that Zurich’s failure to produce was due to inadvertence.  The court found the actions to be negligent or worse. The Court was particularly troubled by Zurich’s deletion of the electronic version of the 62-page policy which occurred even after counsel had instructed that all underwriting communications were to be preserved.  The Court also took umbrage at Zurich’s “slow and inadequate responses” to repeated document requests and related court orders. and found that “Counsel’s failure to recognize the importance of the document, and to produce it timely, especially when alerted to its possible existence by opposing counsel,” was sanctionable. 

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Disability Rights Council of Greater Wash. v. Wash. Metro. Area Transit Auth., 2007 WL 1585452 (D.D.C. June 1, 2007)

Disabled individuals and the Equal Rights Center filed a lawsuit based on the Americans with Disabilities Act (ADA) against Washington Metro Area Transit Authority (WMATA).  The case was referred to Magistrate Judge John M. Facciola to resolve several discovery disputes, one of which was regarding the production of email from backup tapes.

Although the complaint in this case was filed on March 25, 2004, WMATA did nothing to stop its email system from obliterating all emails after sixty days until, at the earliest, June of 2006. WMATA presented testimony that its email system was programmed with an automatic deletion feature that deleted any email after it had been in existence for sixty days.  Although, a user could override the feature by archiving the email, most of the WMATA employees did not do this.  Therefore, plaintiffs argued that WMATA had failed to properly instruct employees to retain potentially responsive electronic documents and therefore should pay to create the backup tapes. 

WMATA did not deny that there should have been a litigation hold on the emails.  The court agreed and called the lack of preservation “indefensible.”  The court determined that Rule 37 of the Federal Rules of Civil Procedure did not apply since plaintiffs were not seeking sanctions but seemed to imply that had the plaintiffs asked, Rule 37 would not have shielded WMATA.  This is because, the rule requires good faith in the routine operation of an information system, which “may involve a party’s intervention to modify or suspend certain features of that routine operation to prevent the loss of information, if that information is subject to a preservation obligation.”

Plaintiffs moved the Court to order WMATA to search the backup tapes for discoverable information which WMATA deleted.  WMATA objected on the grounds of burden and expense because backup tapes were “not reasonably accessible” and that there was little reason to believe they contained relevant information.  The court likened the argument to Leo Kosten’s definition of chutzpah: "that quality enshrined in a man who, having killed his mother and his father, throws himself on the mercy of the court because he is an orphan."

A decision on whether to require a responding party to search for and produce information that is not reasonably accessible depends not only on the burdens and costs of doing so, but also on whether those burdens and costs can be justified in the circumstances of the case.  The court found that application of these factors made for an “overwhelming” case for production of the backup tapes and granted the plaintiffs’ motion.  

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AAB Joint Venture v. United States, 2007 WL 646157 (Fed. Cl. Feb. 28, 2007)

Contractor brought suit against the United States requesting compensation for the increased costs incurred as a result of the alleged differing site conditions encountered at the work site. Plaintiff moved for order compelling discovery.  AAB noted that defendant had identified in its discovery responses numerous individuals who were active in the review of the project design, and who were known to have generated email related to the subject matter of the litigation.  However, defendant had produced few, if any, emails from these individuals, and for the six individuals for whom emails were produced, there were gaps in the production.  Defendant admitted that, although thousands of electronic documents were produced, it was unable to locate emails of some individuals.  Defendant argued that to restore backup tapes that may contain such emails would cost between $85,000 and $150,000 and take 30 days.  Defendant further argued that many of the emails produced, contained communications to/from numerous individuals, including those whose own emails were not produced.  Therefore, defendant contended that defendant had in fact produced emails for almost all the individuals, and that production of additional email would likely only duplicate those already produced.   

The Court ruled that Defendant was under a duty to preserve emails from July 2002 to the present, and that Defendant's decision to transfer the emails to backup tapes does not exempt Defendant from its responsibility to produce relevant emails. To permit a party to reap the business benefits of such technology and simultaneously use that technology as a shield in litigation would lead to incongruous and unfair results.  Under the circumstances, the Court found that a reasonable solution is for Defendant to restore a portion of the backup tapes from time periods specified by AAB.   After Defendant restores a portion of the backup tapes and identifies responsive documents contained therein, AAB will then have the opportunity to review responsive material to determine if it contains relevant evidence and if additional restoration of backup tapes is warranted. 

The Court ruled that restoration of one-fourth of the total backup tapes should be adequate to determine whether the tapes are likely to possess relevant evidence.  Defendant shall bear the costs of restoration of the initial sample of backup tapes and screening the sample to identify responsive documents.  The parties will then have an opportunity to argue before the Court whether or not additional restoration of backup tapes is likely to lead to production of relevant evidence and consequently who should bear the cost for additional restoration.

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Floeter v. City of Orlando, 2007 WL 486633 (M.D.Fla. Feb 09, 2007)

The following summary refers to a Sexual Harassment case filed by a male undercover agent against his female supervisor.

On April 20, 2004, Floeter filed an Internal Affairs complaint against Jones for sexual harassment. On February 14, 2005, Floeter filed a three-count complaint against the City in Florida State court. In Floeter's complaint, he alleged that he and other male detectives had to “endure a sexually charged work environment, which included the dissemination of sexually provocative and pornographic materials to their computers (emails) from supervisors and around the work place....” The case was removed to U.S. District Court M.D. Florida on March 16, 2005. There is no evidence that in-house or outside counsel for the City ever issued a directive requiring that information which might be relevant to the issues in the case be preserved.

Floeter was deposed on December 15, 2005 and described the pornographic emails and alleged harassment.  The next day he served his first request to produce documents, including copies of all “sexually explicit or pornographic materials” emailed by one of his supervisors on police department computers.  Four months later the Court ordered the City to produce these materials. The City of Orlando’s Internet Security Administrator then completed a search of the Electronically Stored Information (ESI) of the key players to the litigation in the Orlando police department. His search included the officer’s computers, the email server, and the backup tapes.  The type or accessibility of the backup tapes involved is not described, but they were not identified as disaster recovery type backup tapes, and it is inferred that they were readily searchable.

The search by the Administrator even included a “remote search” of the computers of some of the key players.  The Administrator reported, however, that key hard drives could not be searched for various reasons, one of which was that on July 19, 2005, the City computer that had been issued to one of Floeter’s superiors, Uvalle, in 2000 was replaced. As was the City's general policy, data from the hard drive in Uvalle's original computer was copied to the hard drive of the replacement computer. The Administrator testified that only data existing as of the copy date would have been transferred and anything that had been deleted before the data was copied, would not have been transferred and would not be retrievable by forensic examination from the replacement computer.

The original computer was maintained for approximately two weeks after the data was moved to the replacement computer to ensure that Uvalle was not missing any information needed from the original computer. Thereafter, the hard drive was removed from the original computer and re-imaged, effectively erasing all of the data. The Magistrate who heard the testimony concerning these facts found the timing of the request for a new computer, resulting as it did in the complete destruction of all deleted data on the old computer, to be “certainly suspicious.”  The backup tapes the Administrator searched were also porn-free as to the target users.  However, by the time of the search these tapes only went back to October 2005, which was 7 months after the Federal Suit and 9 months after the State Suit was filed.  This was because the City recycled its backup tapes every four months.

Next, mediation took place on August 15, 2006, and Floeter said at mediation that he told the City he had possession of more emails that were clearly sent from the police computers.  The City then made its own request for emails within Floeter’s custody supporting his claim of a hostile work environment.  Floater objected arguing that since the emails requested were disclosed at mediation they were confidential and privileged as work product. 

The City then moved to compel, and Floeter responded that the emails were already in the City’s possession.  The City replied that it had looked and had not been able to find them.  Based on this representation, the Court on October 6, 2006, ordered Floeter to produce the emails and the sexually explicit materials attached thereto, and even, taxed Floeter with part of the City’s costs to make the motion.  Next, the parties filed cross motions for summary judgment, and motions in limine related to the pornographic materials, and motions to seal these x-rated documents and other final pretrial related motions then due under the scheduling order.  After these motions were completed, the plaintiff filed the mentioned “emergency motion” related to spoliation, which led to an evidentiary hearing on January 11^th and 18^th, 2007.

The Magistrate agreed the pornographic emails were relevant but not “crucial” and that there was no bad faith because the erasure of the post-litigation backup tapes was done according to policy.  The court denied Floeters request for sanctions and even denied a refund of his payment for the City’s costs to bring its previous motion to compel.  The court did say that Floeter may be able to argue spoliation and an adverse inference to the jury at trial. 

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Best Buy Stores, L.P. v. Developers Diversified Realty Corp. 2007 WL 333987 (D. Minn. Feb. 1, 2007).

Best Buy was involved in a lease dispute for alleged overcharges for insurance and maintenance. When Best Buy filed a motion seeking to compel the production of responsive archived emails and electronic documents, the defendants offered no proof, by affidavit or otherwise, to support their argument that the information was contained on backup tapes that weren't reasonably accessible. They argued that the cost of processing the tapes would be over $125,000. They also argued that the issue of whether the backup tapes should be restored was not ripe for determination because the parties had not yet sorted through all the issues.

Magistrate Judge Jeanne J. Graham held that the defendants failed to show that the electronic data on the backup tapes was “not reasonably accessible”. Graham cited amended Rule 26(b)(2) and stated, "the Defendants offer no proof, aside from conclusory statements, about the cost to obtain documents from electronic archives. So this concern cannot shield the defendants from discovery here."  The defendants were ordered to produce the responsive electronic documents in 28 days.

The defendants then filed an objection with U.S. District Court Judge David S. Doty, seeking an extension of the deadline because it was technologically impossible to comply. The defendants wanted permission to produce data on a rolling basis. To support this assertion they submitted an un-sworn email from Kroll Ontrack saying it would take 102-122 days to restore all the backup tapes, cull and process the data.  They also submitted an affidavit from their director of IT stating the backup tapes were only for disaster recovery and that an outside vendor was needed to restore and cull data.  Additionally, they submitted letters, exchanged between counsel, one of which included cost estimates from Kroll for the restoration, filtering and processing of the data from the backup tapes. The estimates in that letter doubled the prior cost estimates in the motion paper and now indicated that it would cost between $288,300 and $468,100 to restore the backup tapes, cull and process the data.   

Judge Doty was not persuaded by the untimely evidence. He did acknowledge that a modification of the deadline might be warranted if compliance with the deadline was in fact technologically impossible.  However, he upheld Judge Graham's order requiring production within 28 days.

The defendants then filed a motion for reconsideration of the order requiring production within 28 days. Judge Graham denied the motion. Judge Graham rejected the defendants' arguments that they did not know of costs or delays earlier and thus could not have presented evidence in support of their objections to electronic discovery until they filed their objection with Judge Doty. Six days later, the defendants filed another motion seeking to extend the time to produce data from backup tapes. This motion has not yet been ruled upon.

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E*Trade Securities LLC v.Deutsche Bank AG, et al., Civil No. 02-3711 RHK/AJB and Civil No. 02-3682 RHK/AJB (D. Minn. Feb. 17, 2005)

This is a Report and Recommendation by Magistrate Boylan on e-discovery disputes in a fraudulent securities lending scheme. Two of the Plaintiffs moved for sanctions for certain Defendant’s spoliation of evidence and failure to conduct a reasonable inquiry in response to discovery requests.  The Defendants opposed the sanctions motion and requested attorneys' fees & costs. Judge Boylan recommended that the Plaintiffs’ motions for sanctions be granted and that the Defendants’ motion be denied. He concluded that the Defendants had wrongfully destroyed three categories of evidence:

Hard Drives: One of the Defendants, Nomura Canada, permanently erased all the company's hard drives in Mid-2002, approximately 6 months after its duty to preserve was triggered. Nomura Canada argued this was done for a valid business purpose.  Nomura Canada’s President ordered the wiping clean of the hard drives because the company was shutting down business, and because the computers were being given to the employees, he did not want confidential business information on the computers. Also, Nomura Canada argued that before cleaning the hard drives, all relevant information had been removed from the employee's hard drives and therefore, no relevant information was lost and the Plaintiffs suffered no prejudice. Judge Boylan concluded that Nomura Canada's acts with respect to its destruction of the hard drives were sanctionable.

Telephone Recordings: Nomura Canada recorded and preserved its trader’s calls on DVDs. As soon as one DVD was full, it switched to the second. When the second DVD filled, the system would automatically switch back to the first DVD and record over the previously saved telephone calls. Nomura Canada made no changes in the taping system until about 9 months after the duty to preserve arose. Judge Boylan found that the communications of Nomura Canada's traders regarding the alleged lending scheme would have been highly relevant, and the Defendant’s failure to retain the audio recordings was spoliation, and thus, sanctionable.

Email: A 30(b)(6) witness designated by Nomura Securities International ("NSI") stated in a deposition that a litigation hold was put into effect in 2001. No litigation hold had been put into place for retention of email messages because all email would be preserved on backup tapes, which she thought would not be destroyed. According to NSI's retention policy, however, backup tapes for email messages were only retained for 3 years. Due to the fact that NSI relied on its backup tapes to preserve evidence that was not preserved through a litigation hold, Judge Boylan determined that NSI should have retained a copy of relevant backup tapes because it was the only source of “relevant evidence”. He also found that, because NSI had not placed an adequate litigation hold on email, and made no changes to its retention policy, unique information relevant to the time period of the stock transactions was destroyed. He found that "[t]he substantial and complete nature of the destruction of the evidence contained in the recorded telephone conversations and hard drives destroyed by Nomura Canada, justifies a finding of prejudice." Additionally, Judge Boylan held that the failure to preserve email "has prejudiced the plaintiffs”. Accordingly, the judge recommended that the district court instruct the jury that it may infer that the information that Nomura Canada and NSI failed to preserve, would have been favorable to Plaintiffs and disadvantageous to the Defendants.

He recommended that NSI be sanctioned $5,000 for failing to conduct a reasonable inquiry into Plaintiffs' discovery requests prior to responding. Plaintiffs presented evidence that, on several occasions, the Defendants denied the existence of certain documents and which was later found to be untrue through depositions of witnesses who could locate said document.  The judge also recommended that Nomura Canada be sanctioned $5,000 for failing to conduct a reasonable inquiry into requested audio recordings and for certifying that all calls during a particular time period were inaudible.  The calls were found to be audible.  Interestingly, even though Judge Boylan found Defendants’ actions to constitute bad faith, he did not find enough evidence to indicate that the Defendants deliberately misrepresented facts to this court or opposing counsel or engaged in 'deliberate fabrications.'

Magistrate Boylan’s recommendation was adopted by U.S. District Judge Kyle. See E*Trade Securities LLC v. Deutsche Bank AG, 230 F.R.D. 582 (D.Minn. Apr 18, 2005) (NO. 02-3711(RHK/AJB), 02-3682(RHK/AJB)).

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Williams v. Mass. Mutual Life Insurance Company, 226 F.R.D. 144 (D. Mass. 2005)

MassMutual employee filed employment discrimination suit against employer. Employee moved to compel discovery and appointment of neutral expert in computer forensics.

Employee plaintiff was seeking a particular email that he claimed to have seen and possessed at one point, but now claimed was not in his possession. Plaintiff, who is African-American, was referring to a hard copy of an October 24, 2002 email message sent by either the Senior Vice President, Nancy Roberts, or Stephanie Allsup to Robert O'Connell, MassMutual's Chief Executive Officer. That email message, "spelled out" a policy or practice by MassMutual of using disciplinary actions as a pretext for terminating minority employees. Plaintiff sought an order appointing a neutral computer forensics expert to search for the email, and once the email was discovered, to further investigate the location of all electronic communications related to his employment and termination that have not as yet been produced by defendants. He also sought an order requiring defendants to "'preserve all documents and information, whether in electronic or paper form, to suspend all recycling of any backup tapes, any automated deletion of email, the reformatting of hard drives, and/or that an appropriate medium for retention of this type of data be disclosed and utilized.'" Defendants claimed the plaintiff’s motion was based on "'flimsy and implausible assertions'" and that their own forensic analysis did not identify any email message resembling the one the plaintiff alleged he had once seen and possessed.

The court noted that plaintiff sought "significant relief -- the search of Defendants' information systems -- based not only on uncorroborated evidence but, curiously, on a document which Plaintiff himself claims to have had in his possession but which he can no longer locate."  The court refused the plaintiff’s request to appoint a neutral expert in computer forensics so that he can “confirm what is highly speculative conjecture that the October 24, 2002 email message, which he claims exists, is something other than the October 24, 2002 memorandum which Defendants have produced." The court concluded that the plaintiff had no credible evidence that defendants had withheld relevant information.  The court also did not allow plaintiff to conduct a forensic search at his own expense because he did not “present at least some reliable information that the opposing party's representations are misleading or substantively inaccurate."

However, the court ordered defendants "to preserve all documents, hard drives and email boxes which were searched by their forensic expert in response to Plaintiff's motion." In the court's estimation, this order was not unduly burdensome and was necessary to preserve plaintiff's appellate rights.

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