- A U.S. Supreme Court decision ruling that the Sarbanes-Oxley Act’s criminal prohibition on the alteration, destruction or falsification of a “tangible object” is limited to objects associated with the recording or preservation of information;
- A Nebraska federal court order rejecting plaintiffs’ motion to show cause regarding defendants’ failure to produce documents, stating that discovery requires only reasonableness, not perfection;
- An Eastern District of Virginia decision finding that plaintiffs had failed to produce relevant electronic social media in a timely manner but concluding that the amount plaintiffs spent on an e-discovery expert to collect and produce the media was proportional to the harm to defendants and thus a sufficient sanction under the circumstances; and
- A New Jersey federal court decision granting plaintiffs’ motions to compel the production of metadata for certain of defendant’s documents despite the existence of a discovery agreement not to require the production of metadata.
1. In Yates v. United States, 135 S. Ct. 1074 (U.S. Feb. 25, 2015), the U.S. Supreme Court ruled that the Sarbanes-Oxley Act’s criminal prohibition on the alteration, destruction or falsification of a “tangible object” is limited to objects associated with the recording or preservation of information.
Captain John Yates operated a fishing boat off the coast of Florida. National Marine Fisheries Service agents boarded the boat and spotted undersized fish onboard. At Captain Yates’ direction, crew members threw overboard the undersized fish and replaced them with slightly larger (though still undersized) fish. Id. at 1079. Yates was charged with and convicted of violating Section 1519 of Title 18, which provides:
“Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.” 18 U.S.C. § 1519.
During his trial, Yates moved for judgment of acquittal, arguing that Section 1519 is a “documents offense” and that its reference to “tangible object” subsumed “‘computer hard drives, logbooks, [and] things of that nature,’ not fish.” Id. at 1080 (citation omitted). The Government countered that a “tangible object” is “‘simply something other than a document or record.’” Id. (quoting Appendix). The trial court agreed with the Government and sentenced Yates to 30 days’ imprisonment. The Eleventh Circuit affirmed the conviction because the ordinary meaning of “tangible object” is “[h]aving or possessing physical form.” Id. at 1080-81 (quoting U.S. v. Yates, 733 F.3d 1059 (11th Cir. 2013)).
The Supreme Court reversed the Eleventh Circuit decision. Writing a plurality opinion joined by three other Justices, Justice Ginsburg stated that Section 1519 “is better read to cover only objects one can use to record or preserve information, not all objects in the physical world.” Id. at 1081. Though the plain and ordinary meaning of “tangible object” is broad, Justice Ginsburg looked to the surrounding context to derive its meaning. She noted that, as part of Sarbanes-Oxley, Section 1519 “was intended to prohibit, in particular, corporate document-shredding to hide evidence of financial wrongdoing.” Id. Justice Ginsburg cited Section 1519’s caption (“Destruction, alteration, or falsification of records in Federal investigations and bankruptcy”), the Sarbanes-Oxley section in which Section 1519 appears (“Criminal penalties for altering documents”), and Section 1519’s placement with other provisions relating to specific obstructive acts as support that Congress did not intend “tangible evidence” to refer to physical objects of every kind. Similarly, Justice Ginsburg noted that the inclusion of Section 1512(c)(1) and its prohibition on any act to destroy or conceal a record, document, or “other object” would be superfluous if Section 1519 applied to all tangible objects broadly defined. Id. at 1084.
Justice Ginsburg also cited the principles of statutory construction noscitur a sociis (“a word is known by the company it keeps”) and ejusdem generis (“[w]here general words follow specific words in a statutory enumeration, the general words are [usually] construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words”) to conclude that the term “tangible object” is limited to the recording or preservation of information. Id. at 1085-86 (citations omitted).
The plurality opinion also rejected the Government’s claim that a 1962 version of the Model Penal Code with an early reference to “record, document, or tangible object” supported its position, noting that the cited Model Penal Code was a minor misdemeanor provision in which liability was limited to those with knowledge of a government investigation, limits that contrasted sharply with Section 1519’s provisions as a felony punishable by 20 years for impeding an investigation, including one that had not yet started. Id. at 1087-88.
Justice Ginsburg concluded by stating that ambiguous provisions in criminal statutes should be “resolved in favor of lenity” in a situation in which Section 1519 “exposes individuals to 20-year prison sentences for tampering with any physical object that might have evidentiary value in any federal investigation into any offense, no matter whether the investigation is pending or merely contemplated, or whether the offense subject to investigation is criminal or civil. Id. at 1088-89 (emphasis in original).
Justice Alito, in a separate opinion concurring in the judgment, noted that the surrounding terms indicated that the offense was directed at documentary offenses, and verbs like “alters, destroys, mutilates, conceals, covers up, falsifies or makes a false entry in” simply “make no sense outside of filekeeping.” Id. at 1090 (Alito, J. concurring). In Justice Alito’s view, the law was intended to target hard drives, computers and other devices that contain documentary evidence. Id.
In a dissenting opinion joined by three Justices, Justice Kagan relied on the plain meaning of the statute to conclude that the statute swept more broadly. “In my view, conventional tools of statutory construction all lead to a more conventional result: A ‘tangible object’ is an object that’s tangible.” Id. at 1091 (Kagan, J., dissenting). The law, according to Justice Kagan, was intended to target the destruction of evidence. “A fisherman, like John Yates, who dumps undersized fish to avoid a fine is no less blameworthy than one who shreds his vessel’s catch log for the same reason. Congress thus treated both offenders in the same way.” Id. at 1094.
2. In Malone v. Kantner Ingredients, Inc., 2015 WL 1470334 (D. Neb. Mar. 31, 2015), Magistrate Judge Cheryl R. Zwart rejected plaintiffs’ motion to show cause regarding defendants’ failure to produce documents, stating that discovery requires only reasonableness, not perfection.
In a case with a litigious e-discovery process involving five separate plaintiffs’ motions to compel, plaintiffs had previously claimed that defendants failed to produce all responsive documents to plaintiffs’ requests, particularly sent emails and invoices of transactions between one of the plaintiffs and a defendant. Responding to these claims, the Magistrate Judge had ordered defendants to locate their servers and determine if the server imaging performed at the outset of the case, before defendants’ initial review and production, was a full and complete imaging. Id. at *1. The Magistrate Judge had further ordered defendants to produce any invoices located on that server and responsive sent mail as well. Id.
In response, defendants reviewed the servers and determined that the forensic image matched the data set used to conduct their manual review. Id. at *2. Defendants did not repeat their earlier search of the server data for documents responsive to plaintiffs’ original requests or provide the invoices and sent mail as set forth in the court order but instead had their forensic expert send a full copy of the imaged server to the plaintiffs. Id.
Plaintiffs’ expert subsequently found that some documents on the imaged server that should have been produced previously had not been provided to plaintiffs. Plaintiffs then moved to show cause, arguing that defendants violated the court’s order by not repeating their search of the server data and by failing to produce responsive documents on a timely basis. Plaintiffs also sought an order requiring defendants to reimburse plaintiffs for the cost of their forensic expert. Id. at *1.
Magistrate Judge Zwart denied plaintiffs’ motion to show cause, first noting that plaintiffs had misconstrued her prior order, which did not require defendants to repeat their Electronically Stored Information (ESI) search of the server image, but rather required defendants to confirm that the earlier imaging was full and complete, which they had done. Id. at *2. Additionally, Magistrate Judge Zwart found that defendants’ production of the full server image exceeded their obligations under the order, which required only production from that image of invoices and responsive sent emails. Id. & n.4.
Plaintiffs’ request that defendants reimburse their costs for their forensic expert’s work was also rejected. Magistrate Judge Zwart noted that the parties could have avoided the undue costs of two experts if they had agreed at the case’s outset on a process for the collection and production of ESI. Id. & n.5. As no such agreement was reached, the Magistrate Judge found it reasonable to require plaintiffs to pay their own expert’s fees. Id.
As to defendants’ earlier failure to produce responsive documents, Magistrate Judge Zwart found that defendants’ counsel and its paralegal “did not provide misleading or untruthful information to the court” and that errors in a manual review would occur where a server contained more than one million documents and emails, of which over 200,000 electronic files and emails were produced:
“At most, the plaintiffs offered evidence of mistakes made during defense counsel’s 2012 manual review of the electronic files. Manual review is still considered by many as the ‘gold standard’ for electronic document review. But human error is common when attorneys are tasked with personally reviewing voluminous electronically stored information. The fact that defense counsel may have made mistakes does not warrant imposing sanctions—particularly where the plaintiffs now have full access to the server imaging. The discovery standard is, after all, reasonableness, not perfection.” Id. at *3 & n.6. (footnotes, internal quotation marks and citations omitted).
The Magistrate Judge denied the motion to show cause, finding that “the plaintiffs have presented no evidence, including through the testimony of their computer forensic expert, that Defendants, their counsel or their counsel’s paralegal destroyed, hid or purposefully (or even recklessly) failed to produce responsive ESI.” Id. at *3.
3. In Federico v. Lincoln Military Housing, LLC, 2014 WL 7447937 (E.D. Va. Dec. 31, 2014), Magistrate Judge Douglas Miller of the U.S. District Court for the Eastern District of Virginia held that plaintiffs had failed to produce relevant electronic social media on a timely basis but concluded that the amount plaintiffs spent on an e-discovery expert to collect and produce the media was proportional to the harm to defendants and thus a sufficient sanction under the circumstances.
This case consolidated eight military families’ claims for personal injury and property damage allegedly arising from mold in military housing. Id. at *1. The discovery proceedings were contentious, “produc[ing] 28 contested motions, including several motions for sanctions and reciprocal requests for costs and fees related to the parties’ alleged non-compliance.” Id. But the “most contentious” disagreements involved defendants’ requests for plaintiffs’ “electronic media, including text messages, email and social media posts.” Id.
The Magistrate Judge noted that “some of the Plaintiffs were very active users of email and social media.” Id. at *1. In January 2012, defense counsel sent a preservation letter to the first identified plaintiff, Shelley Federico, directing Ms. Federico to “preserve and eventually produce electronic media.” Id. Specifically, defense counsel’s letter requested the preservation and production of (i) “Internet and web browser history files,” (ii) [p]otentially relevant texts and email messages,” (iii) “[s]ocial media postings concerning their claims in the lawsuit and claimed damages,” and (iv) “[a]ny photo or video images of the subject properties.” Id. However, Federico and the other plaintiffs produced “almost no . . . electronic records” in response to defense counsel’s letter, and “few additional emails” thereafter. Id. at *1-*2. In a subsequent emergency hearing, the Magistrate Judge warned plaintiffs that if they did not conduct a sufficient review and production of their files, he would consider imposing various sanctions, including “the cost of having a professional engaged to produce” the electronic media. Id. at *2-*3 (citation omitted). Nevertheless, plaintiffs still did not produce all of the requested electronic media. Id. at *3.
Defendants moved for dismissal of plaintiffs’ claims and other “appropriate” sanctions for their failure to produce the electronic media. Id. Plaintiffs subsequently retained an e-discovery expert to collect and produce plaintiffs’ Facebook posts, spending $29,000 in the process. Id. at *4. Defendants were convinced, however, that discoverable material had been omitted and thus renewed their motion, asserting that sanctions were appropriate under Federal Rule of Civil Procedure 37 and the court’s inherent authority. Id.
The Magistrate Judge explained that dismissal is “the harshest sanction” available in litigation, and thus is “reserved for either severe misconduct or the loss of evidence central to their defense.” Id. at *6. “Indeed, where dismissal is ordered, it usually follows the intentional bad faith destruction of evidence which is central to the issues in dispute.” Id. (citations omitted). In this case, however, Magistrate Judge Miller explained that “no category” of the electronic media sought was “so central to the defense that its loss would deprive the Defendants of their ability to defend.” Id. (citation omitted). In addition, defendants “failed to establish that any Plaintiff deliberately destroyed evidence known to be relevant, or otherwise acted in bad faith.” Id. Accordingly, the Magistrate Judge found that while plaintiffs’ “delayed production” showed that they were either “poorly instructed or deliberately dilatory,” and that some sanction was appropriate, “the ultimate sanction of dismissal” was not warranted. Id. at *6-*7.
The Magistrate Judge ultimately concluded that defendants’ $29,000 in costs incurred in retaining the e-discovery expert was a sufficient sanction under the circumstances. Id. at *7. In so concluding, the court analyzed defendants’ conduct under the “proportionality mandate” in Federal Rule of Civil Procedure 26(b)(2)(C), id. at *17, which provides that the burden of proposed discovery should reflect the likely benefit to the requesting party in obtaining it. Fed. R. Civ. P. 26(b)(2)(C)(iii). After considering that issue, the court determined that the plaintiffs had violated their discovery obligations, but the materials sought ended up being “cumulative” of other discovery and of “marginal relevance,” Federico, 2014 WL 7447937, at *7, and thus “the $29,000 Plaintiffs already incurred to generate the additional material [was] a sufficient sanction.” Id. at *19.
4. In Younes v. 7-Eleven, Inc., 2015 WL 1268313 (D.N.J. Mar. 18, 2015), Magistrate Judge Joel Schneider granted plaintiffs’ motions to compel the production of metadata for certain of defendant’s documents despite the existence of a discovery agreement not to require production of metadata.
Plaintiffs were groups of defendant’s franchisees who alleged that their franchises were targeted for termination due to their national origin, defendant’s desire for additional franchise fees, and as retaliation for their criticism of defendant. Id. at *1-*2. Plaintiffs identified documents in defendant’s productions involving the “Project,” “Project P,” “Project Philadelphia,” or the “Operation” that appeared to be related to their termination claims. These documents, however, lacked identifying metadata, including the dates created, authors and recipients, and the plaintiffs moved to compel the production of such metadata for specified documents.
Magistrate Judge Schneider found that “plaintiffs have had a difficult time obtaining 7-Eleven’s documents”: “After first denying that Operation Philadelphia existed, 7-Eleven has slowly come around and has produced some documents related to Project P. Nevertheless, 7-Eleven has produced documents in dribs and drabs and even after months of discovery and numerous court conferences addressing discovery disputes, 7-Eleven acknowledges that not all relevant, requested and non-privileged Project P documents have been produced.” Id. at *3.
He also determined that, “[t]o the extent it is necessary, plaintiffs have shown a particularized need for the requested data,” concluding that the metadata was plainly relevant to their claims and necessary for authentication of defendant’s documents. Id. at *4. The Magistrate Judge also found that plaintiffs’ efforts to obtain information about the requested documents through depositions and other discovery had been unsuccessful and noted that it was “not insignificant” that plaintiffs had requested the metadata for a relatively small number of documents—87 unique documents sought by two sets of plaintiffs. Id. at *3-*4.
Because plaintiffs had shown a particularized need for the metadata, the burden shifted to defendant to show “undue hardship or expense.” Id. at *4 (quotation omitted). The defendant argued that the parties had agreed that metadata would not be produced, the documents had only minimal metadata, and production of such metadata would be unreasonably burdensome and expensive. Id. at *5.
Magistrate Judge Schneider rejected defendant’s arguments. Although the parties had agreed at the beginning of discovery that documents would be produced in .pdf format without metadata, the Magistrate Judge found “good cause exists to modify the agreement. . . . Had plaintiffs known at the outset of the case the difficulties they would face in obtaining relevant information regarding 7-Eleven’s documents, it is unlikely they would have agreed to forego requesting metadata.” Id. at *5. Magistrate Judge Schneider emphasized that plaintiffs had undertaken “substantial efforts to obtain key information about some of 7-Eleven’s documents without success. [Plaintiffs] should not have to use their limited deposition time to question witnesses about basic issues such as when scores of documents were prepared, who prepared them, who received them, etc.” Id. at *6. Finding that the requested metadata is “unquestionably relevant to important issues in the case,” the Magistrate Judge ordered that the defendant produce the available metadata relating to the documents in question. Id. at *6-*7.
If you have any questions regarding this Sidley Update, please contact the Sidley lawyer with whom you usually work.
Sidley E-Discovery Task Force
The legal framework in litigation for addressing the explosion in electronic communications has been in flux for a number of years. Sidley Austin LLP has established an “E-Discovery Task Force” to stay abreast of and advise clients on this shifting legal landscape. An inter-disciplinary group of more than 25 lawyers across all our domestic offices, the Task Force monitors and examines issues and developments in the law regarding electronic discovery. The Task Force works seamlessly with our firm’s Litigators who regularly defend and prosecute all types of litigation matters in trial and appellate courts, federal and state agencies, arbitrations and mediations throughout the country. The co-chairs of the E-Discovery Task Force are: Alan C. Geolot (+1.202.736.8250, firstname.lastname@example.org), Robert D. Keeling (+1.202.736.8396, email@example.com) and Colleen M. Kenney (+1.312.853.4166, firstname.lastname@example.org).
To receive Sidley Updates, please subscribe at www.sidley.com/subscribe.
Sidley Austin provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.