December's Notable Cases and Events in E-Discovery

1. In Small v. University Medical Center, 2018 WL 3795238 (D. Nev. Aug. 9, 2018), Judge Peggy Leen imposed an adverse jury instruction and monetary sanctions against defendants for failing to identify and preserve relevant ESI where defendants, among other things, waited eight months after the litigation commenced to issue a litigation hold and did not conduct timely custodial interviews.

In this wage-and-hour litigation, plaintiffs (hospital employees) alleged that defendants (the hospital and key hospital executives) regularly interrupted employee meal breaks without compensating plaintiffs for the interruptions. Id. at *3. Defendants’ timekeeping software automatically deducted 30 minutes for the meal breaks with no mechanism to account for the interruptions in breaks.

After defendants’ motion to dismiss was denied, plaintiffs served defendants with their first set of discovery requests, including interrogatories and requests for production of documents and electronically stored information (ESI). Id. at *5. These discovery requests, later narrowed by plaintiffs, called for the production of personnel files, timekeeping records and payroll records related to several hundred named plaintiffs and opt-in plaintiffs. Id. at *9. Plaintiffs also requested ESI related to key custodians, including emails, text messages and their personal files. Id. at *13.

Five months after serving the initial requests, plaintiffs moved to compel on the grounds that defendants had failed to respond to the requested discovery. The motion to compel resulted in nine months of court hearings and protracted discovery disputes between the parties, which are cataloged in painstaking detail in Judge Leen’s 63-page opinion. Id. at *5-18. Early in the case, defendants had switched counsel and represented that the new counsel could not understand the prior counsel’s data collection and had to start from scratch. Id. at *6. Defendants also repeatedly produced ESI that was not in a usable or readable format or did not otherwise comply with the agreed-on ESI protocol. Id. at *9, *14-*15. During the course of the hearings on plaintiffs’ motion to compel, defendants repeatedly failed to meet agreed-on discovery deadlines.

The discovery issues came to a head when Judge Leen appointed a special master at defendants’ expense to oversee discovery and “solve the ongoing ESI problems to get ESI in [a] usable format to move the litigation forward.” Id. at *17. After five months of work and numerous hearings, the special master issued a report and recommendation concluding that defendants had “destroyed evidence by failing to identify, preserve, collect, process, and search multiple repositories.” Id. at *18. The special master recommended that Judge Leen enter a default judgment against defendants as to plaintiffs who had opted-in to the class action. Id. at *19. In addition, the special master recommended that Judge Leen certify a broader class of hospital employees and, for such a class, establish in effect a rebuttable presumption that defendants were liable for the wage-and-hour claims.

Defendants objected to the report and recommendation. Critically, defendants did not dispute that sanctions were warranted but requested that Judge Leen impose an adverse jury instruction as opposed to the case-dispositive default judgment the special master had recommended. Id. at *55.

In reviewing the report and recommendation, Judge Leen first made the following factual findings regarding defendants’ conduct:

• Defendants failed to comply with court orders and preserve ESI. After Judge Leen granted the motion to compel, defendants produced “virtually no useable ESI to plaintiffs before the court appointed a special master more than a year after [defendants’] responses” to the discovery requests were due. Id. at *39 (original in italics). Judge Leen also found that defendants had repeatedly failed to comply with deadlines they requested for the production of ESI. Counsel for defendants “blamed former counsel and their ESI consultants for the delay,” but Judge Leen concluded that counsel failed to “ask the right questions” in order to understand the prior collection efforts.
• Defendants failed to timely implement a litigation hold. Plaintiffs sent defendants a preservation letter at the beginning of the litigation, but there was no evidence that defendants took steps to act on the letter. The special master determined that defendants, including the chief of human resources, had received notice of the lawsuit and the preservation letter at the time it was sent. Id. at *40. Despite this, eight months after plaintiffs sent the preservation letter, defendants’ chief of human resources testified at a deposition that he was unaware of the letter and, to his knowledge, there had been no directive to preserve documents in this matter. Id. at *38. Judge Leen noted that defendants had no formal policy for issuing litigation holds and preservation notices in response to lawsuits. Id. at *43.
• Defendants failed to notify key custodians and IT staff to preserve relevant ESI. It was not until after the special master’s appointment that defendants instructed custodians or IT to retain responsive ESI and suspend regular business document retention procedures. Id. at *45.
• Defendants failed to identify and disclose to plaintiffs the existence of relevant ESI repositories. Defendants did not conduct custodial interviews to identify repositories of discoverable ESI until after the special master’s appointment. Defendants objected that they “did not know what to preserve,” but Judge Leen found that defendants and their counsel “had a legal duty to figure this out.” Id. at *60. The special master was able to promptly identify several sources of ESI that defendants had not identified to plaintiffs, including relevant shared drives and databases with timekeeping information. Id. at *46.
• Defendants destroyed relevant ESI. Defendants’ failure to timely identify relevant ESI resulted in the destruction of several sources of relevant ESI. First, Judge Leen accepted the estimate of the special master that 37,731 files on a shared drive were lost, modified or migrated in the four months that elapsed between plaintiffs’ filing the litigation and defendants’ collection of ESI. Id. at *53. Second, Judge Leen found that defendants deleted or destroyed several thousand text messages on BlackBerry devices after Judge Leen had ordered the production of the text messages. Id. at *53-*54. Although the production of text messages was discussed at several court hearings, defendants failed to take prompt steps to preserve or download the data. Third, defendants waited almost two years after the litigation began to collect data from work computers used by the custodians, despite the fact that these custodians later admitted to saving documents on personal folders on these computers. Id. at *54. There was no backup of the data saved on these computers, and Judge Leen concluded that this likely resulted in the destruction of ESI. Id. at *55.

Turning to the appropriate sanctions, Judge Leen concluded that case-dispositive sanctions were not appropriate because defendants’ actions did not “threaten[] to interfere with the rightful decision of this case on the merits.” Id. at *65. Judge Leen noted that through the extraordinary efforts of the special master, most of the discovery issues were remediated because the bulk of the responsive ESI was identified, restored where applicable and produced. Accordingly, Judge Leen elected to impose an adverse jury instruction and monetary sanctions in the form of the attorney’s fees unnecessarily incurred by plaintiffs as a result of defendants’ discovery failures. Id. at *71.

2. In Walker v. Coffey, 2018 WL 4496344 (3d Cir. Sept. 20, 2018), the U.S. Court of Appeals for the Third Circuit granted qualified immunity to federal agents upon finding that individuals do not have a clearly established right under the Fourth Amendment to have the content of their work emails remain free from a law enforcement search, especially when the employer produces the emails to law enforcement.

In 2015, the Pennsylvania Office of the Attorney General (OAG) filed criminal charges for forgery and various computer crimes against Carol Lee Walker. As part of the investigation into Walker’s conduct, Brian Coffey, a senior deputy attorney general, and Paul Zimmerer, an OAG special agent, requested Walker’s work emails from her employer, Pennsylvania State University (Penn State). Penn State officials responded that they needed a subpoena to produce the emails. Coffey and Zimmerer obtained a blank subpoena form, partially filled it out and presented it to Penn State. Penn State produced Walker’s emails. Id. at *1.

Walker then filed this action, pursuant to 42 U.S.C. § 1983, alleging that Coffey and Zimmerer violated her Fourth Amendment right to be free from an unreasonable search by using an invalid subpoena to induce Walker’s employer to produce the emails. All parties agreed that the subpoena, on its face, was incomplete and unenforceable. However, the defendants moved to dismiss the action, arguing that they were entitled to qualified immunity because Walker did not have a reasonable expectation of privacy in her work emails, or, if she did, the right was not clearly established at the time it was violated. The district court agreed with defendants, dismissed the case and denied Walker’s motion for reconsideration and leave to amend her complaint. Walker appealed to the Third Circuit. Id. at *1-*2.

On appeal, the Third Circuit reviewed the issue of qualified immunity de novo, as it involved a pure question of law: “To resolve a claim of qualified immunity, courts engage in a two-pronged inquiry: (1) whether the plaintiff sufficiently alleged the violation of a constitutional right, and (2) whether the right was ‘clearly established’ at the time of the official’s conduct.” Id. at *2 (citation omitted). The Third Circuit looked to the second prong of the test first, stating that a right is clearly established if “[t]he contours of [a] right [are] sufficiently clear that every reasonable official would have understood that what he is doing violates that right.” Id. at *3 (internal quotations and citations omitted). The Third Circuit defined the right at issue as “whether it is clearly established that the Fourth Amendment affords an employee, such as Walker, the right to have the contents of her work emails remain free from a law enforcement search, absent a warrant or valid exception to the warrant requirement.”

The answer to this question required inquiries into Walker’s subjective expectations and the objective reasonableness of those expectations. Because Walker’s subjective expectations were not contested, the Third Circuit focused on the objective reasonableness of Walker’s expectations. The Third Circuit then reviewed the relevant case law, bearing in mind (1) that the Supreme Court historically expressed sensitivity to advances in technology but recently had exercised caution in this area and (2) the difference in expectations of privacy in the workplace as opposed to other contexts.

The Third Circuit first looked to the Supreme Court’s decisions in Katz v. United States, 389 U.S. 347 (1967) (recognizing a reasonable expectation of privacy in the context of telephone calls made from a public phone booth), and Smith v. Maryland, 442 U.S. 735 (1979) (concluding that telephone users do not have a legitimate expectation of privacy in the phone numbers they dial). The court attributed the distinction in these cases to the well-established third-party doctrine — “a person has no legitimate expectation of privacy in information he voluntarily turns over to third parties,” such as the phone number he dials. Walker, 2018 WL 4496344, at *4 (quoting Smith, 442 U.S. at 743-44). With regard to communications, the third-party doctrine creates a distinction between the contents of communications and the surface-level identifying information or metadata. The court clarified, however, that there is not a categorical protection on the content of communications.

The Third Circuit noted that privacy expectations have been difficult to define in the context of electronic communications, especially in the workplace, citing City of Ontario v. Quon, 560 U.S. 746 (2010), in which the court declined to resolve the issue of whether a police officer enjoyed a reasonable expectation of privacy in the content of text messages sent to his city-issued pager, instead finding that the situation met the legitimate work-related purpose exception to the Fourth Amendment.

The Third Circuit also looked to circuit court case law on the expectation of privacy. In Rehberg v. Paulk, 611 F.3d 828 (11th Cir. 2010), the Eleventh Circuit was confronted with a question of whether an individual had a right to privacy in emails that were obtained by an invalid subpoena from the individual’s internet service provider. “Rather than attempting to resolve those issues, the Eleventh Circuit simply concluded that a right to privacy in the content of email communications was not clearly established.” Id. at *5. The Eleventh Circuit reasoned that the principles regarding telephone calls, as established in Katz and Smith, did not necessarily apply to internet email.

In United States v. Warshak, 631 F.3d 266 (6th Cir. 2010), the Sixth Circuit took a different approach, finding that “[g]iven the fundamental similarities between email and traditional forms of communication, it would defy common sense to afford emails lesser Fourth Amendment protection.” Id. (quoting Warshak, 631 F.3d at 285-86). The Sixth Circuit reasoned that the “mere ability” of an ISP to access the content of emails does not extinguish a reasonable expectation of privacy. Id. (quoting Warshak, 631 F.3d at 286-87) (emphasis in original). Still, the court differentiated the instant case, noting that it was decided on a motion to suppress.

After reviewing these precedents, the Third Circuit determined that there was no “robust consensus of cases of persuasive authority” finding that the right at issue was clearly established. Id. (citation omitted). And, “[a]s Quon and Rehberg recognized, electronic communications present new considerations, and perhaps distinguishing features, that may counsel caution rather than a rote application of older precedents addressing other forms of communication.”

Because the surveyed case law dealt primarily with personal communications, and this case dealt with work emails produced by an employer, the Third Circuit did not end the analysis there. The court noted that an employee’s Fourth Amendment rights in the workplace are subject to additional exceptions and limitations. While the Supreme Court has recognized that employees may be entitled to a reasonable expectation of privacy in the contents of documents stored in the workplace, public employers have the right to conduct a warrantless search of an employee’s files or communications “for a ‘noninvestigatory, work-related purpos[e]’ or for the ‘investigatio[n] of work-related misconduct.’ ” Id. at *6 (quoting Quon, 560 U.S. at 761).

The Third Circuit further noted that courts have recognized that employers, as third parties who possess common authority over the workplace, may independently consent to a search of an employee’s workplace documents or communications: “This rule is a logical application, in the workplace context, of general principles governing third-party consent.” The individual or entity exercising common authority over the thing to be searched may independently consent to the search.

Thus, the Third Circuit found that for purposes of the Fourth Amendment, the emails were subject to the common authority of Walker’s employer. Walker did not enjoy any reasonable expectation of privacy vis-à-vis Penn State, and Penn State could independently consent to a search of Walker’s work emails. Id. at *7.

Furthermore, the Third Circuit declined to find that the consent was invalid because it was procured by fraud or coercion. The court noted that Penn State was not merely a private party but a third party with the independent ability to consent to a search. Penn State did not contest the validity of the subpoena — instead, it voluntarily produced the emails.

The Third Circuit noted that such a finding was not meant to condone law enforcement’s actions. The Third Circuit cautioned that different circumstances might have resulted in a different conclusion. Under the current facts and the issues presented, however, the Third Circuit found that because the defendants’ conduct did not violate Walker’s clearly established constitutional rights, the federal officers were entitled to qualified immunity. Therefore, as to the defendants’ motion to dismiss, the Third Circuit affirmed the decision of the district court.

As to Walker’s motion for reconsideration, the Third Circuit ruled that the district court did not err in denying it. However, the Third Circuit found that the district court abused its discretion in denying out of hand Walker’s motion for leave to amend her complaint to add a cause of action under the Stored Communications Act and remanded the case to the district court for consideration of that issue. Id. at *8.

3. In Garrett v. Univ. of S. Fla. Bd. of Trs., 2018 WL 4383054 (M.D. Fla. Sept. 14, 2018), Magistrate Judge Amanda Arnold Sansone ruled that the defendant’s requests for forensic examinations of the plaintiff’s personal computer and cellphone were disproportional to the needs of the case but required plaintiff to produce text messages, allowed defendant to reopen plaintiff’s deposition to ask about the text messages and a recording produced at the discovery deadline and awarded partial attorney’s fees to defendants.

This litigation arose in a case claiming violations of Title IX of the Education Amendments of 1972, 20 U.S.C. § 1681 (Title IX) after the plaintiff accused a fellow student of sexual battery and rape. The plaintiff alleged that the defendant’s response to her claims violated Title IX, created a hostile educational environment and constituted retaliation when the defendant charged her with violating the Student Code of Conduct by surreptitiously recording on a cellphone a conversation with two of defendant’s employees during the investigation of the incident.

Defendant filed a motion to compel centered on the plaintiff’s recording of the conversation with the defendant’s employees and text messages between the plaintiff and the alleged perpetrator. Id. at *2. With respect to the recording, the plaintiff had previously provided to one of the recorded employees a transcription of the recording, and, during her deposition, she testified that she had deleted the recording shortly after creating it. At her continued deposition, however, the plaintiff testified that she had not destroyed the recording and that it was “still in her computer.” Id. (brackets omitted). In the motion to compel papers, the plaintiff clarified that after initially deleting the recording, “she later discovered she could recover the deleted recording from her iTunes account on her computer and then provided it to her attorney.” Id. at *3. Plaintiff’s counsel had received the recording prior to the filing of the lawsuit but had not produced the recording because plaintiff had not relied upon it. Defendant’s counsel raised at the plaintiff’s continued deposition the existence of the recording, and plaintiff’s counsel filed an amended discovery response the next day — the discovery deadline — in which the recording was provided to defendant.

The defendant then moved to compel forensic examinations of the plaintiff’s computer and cellphone, claiming that the transcription the plaintiff had provided did not match the produced recording and that plaintiff had not produced requested text messages. The defendant argued that forensic examinations were necessary to determine the authenticity of the recording, when it was created, when it was opened, whether it was modified and when it was saved or accessed. The defendant also asked to reopen plaintiff’s deposition and sought attorney’s fees in connection with the filing of the motion.

Magistrate Judge Sansone began her analysis by noting that “[d]iscovery into electronically stored information, including forensic examinations, is subject to the scope of discovery under Rule 26(b).” Id. at *2. She pointed out that when determining whether to permit forensic examinations of electronic devices, including computers and cellphones, courts consider the privacy interest of the party whose devices are to be examined, as well as whether the party whose devices are to be examined complied with discovery requests, withheld discovery and whether that party refused to or was unable to search for requested discovery. The magistrate judge also cited the Middle District of Florida Discovery Handbook’s statement that “[i]nspection of an opponent’s computer system is the exception, not the rule and the creation of forensic image backups of computers should only be sought in exceptional circumstances which warrant the burden and cost.” The court stated that “[m]ere speculation that electronic discovery must exist is insufficient to permit forensic examination of a party’s personal computer or cellphone.”

Based on these principles, the court found that the defendant’s request for forensic examinations of the plaintiff’s personal computer and cellphone was disproportional to both the needs of the case and the resolution of the parties’ specific discovery disputes. Id. at *3. The magistrate judge stated that counsel’s failure to produce the recording was “inexcusable” given its relevance, but the recording was nonetheless produced before the discovery deadline had passed. Moreover, in Magistrate Judge Sansone’s view, the defendant failed to show the requisite exceptional circumstances necessary to warrant forensic examination of the plaintiff’s personal computer or cellphone. Id. at *4.

The magistrate judge then addressed the defendant’s request for a forensic examination of the plaintiff’s cellphone to obtain all text messages between the plaintiff and the alleged perpetrator. The defendant argued that plaintiff had not produced all text messages with the alleged perpetrator, who had provided over 1,400 such text messages to the defendant, when plaintiff produced only 337. The plaintiff argued that she had produced those text messages that she deemed responsive to the defendant’s discovery requests and stated at her deposition that she disputed the accuracy of some of the alleged perpetrator’s text messages. Id. at *5. The magistrate judge agreed with the defendant that the plaintiff should produce all her text messages with the alleged perpetrator and indicated that the combined productions should resolve the text message production and discrepancy issues. Given that finding, Magistrate Judge Sansone concluded that the defendant had failed to establish that a forensic examination was necessary, as the discovery benefits of forensic examination of the plaintiff’s cellphone did not outweigh plaintiff’s privacy interest in the content of that device.

On the reopening of the deposition, plaintiff agreed to additional testimony on the recently produced recording. The magistrate judge also allowed defendant to ask about issues relating to the text messages to be produced by plaintiff and discrepancies between the text messages she is producing and the text messages provided by the alleged perpetrator, with plaintiff to bear the reasonable costs of the reopened deposition.

As to the request for attorney’s fees, the magistrate judge stated that the defendant had prevailed on two issues (request for text messages; reopening of deposition) and lost on two issues (the two requests for forensic examinations) and concluded that the defendant was entitled to 50 percent of its reasonable attorney’s fees incurred in submitting the motion to compel. Id. at *6.

4. In ComLab, Corp. v. Kal Tire, 2018 WL 4333987 (S.D.N.Y. Sept. 11, 2018), U.S. District Judge Katherine B. Forrest granted terminating sanctions against plaintiff after finding by clear and convincing evidence that its president had willfully fabricated emails in the course of discovery and then deleted the native versions to conceal his fraud.

This case began as “a relatively uncomplicated breach of contract action between ComLab, a New York information technology corporation, and Kal Tire, a Canadian tire partnership.” Id. at *1. ComLab claimed that it executed a contract with Kal Tire to provide an intranet service, had provided those services and had been denied payment. It was undisputed that ComLab sent four invoices to Kal Tire pursuant to that alleged agreement. A Kal Tire employee paid three of those invoices, but the company argued that there was in fact no agreement, that it had not received the claimed services from ComLab, that it had never approved the payments and that even if an agreement existed, it had not breached it.

At issue in the opinion were 16 additional invoices that ComLab produced in discovery, which “would constitute highly relevant evidence of the existence of a contract.” Kal Tire disputed the authenticity of these invoices, noting that it had no record of receiving them. In discovery, Kal Tire had requested documentation about these invoices “sufficient to identify the date(s) when ComLab sent” the contested invoices and had sought production of the native files. ComLab instead provided 13 hard-copy versions of the relevant transmittal emails.

Kal Tire’s director of platform and productivity technology information services, Allan Heel, then submitted a declaration stating that Kal Tire had enabled a litigation hold feature on the relevant Kal Tire email accounts, which preserved all emails sent to or from those accounts, and that a search of those accounts failed to turn up the emails that ComLab claimed it had sent.

Kal Tire then made multiple requests for the native versions of these emails, arguing that the “metadata contained in the native versions would allow it to analyze the authenticity of the Subject E-mails by verifying the dates they were created and sent.” Id. at *2. ComLab initially agreed — but informed Kal Tire two days before the deposition of its president, Matteo Deninno, that it could not produce the native files because Deninno’s computer had been infected with a virus, and he had deleted a significant number of emails from his computer to combat the virus, including the purported transmittal emails.

Kal Tire then moved for spoliation sanctions against ComLab, arguing that Deninno had fabricated the emails and then deleted the native versions to hide that fact. Given the severity of the spoliation, Kal Tire requested that the case be dismissed with prejudice and that ComLab be ordered to pay its attorney’s fees and costs. ComLab responded that there was an “innocent explanation” for the unavailability of the invoice emails and that Kal Tire had provided no concrete evidence that the emails were fabricated.

The parties submitted numerous briefs and exhibits, and the court held an evidentiary hearing on the matter. At the evidentiary hearing, the court heard testimony from Heel, as well as Joseph Caruso, an IT forensic expert hired by Kal Tire to investigate the matter. Plaintiffs offered only one witness: Deninno.

Judge Forrest began her analysis with a discussion of the legal standards, citing the Second Circuit’s definition of spoliation: “the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Id. (quoting West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)). Judge Forrest noted that spoliation sanctions could be issued both under Federal Rule of Civil Procedure 37(b) and pursuant to the court’s inherent power to control litigation. She further stated that any sanction should be designed to deter parties from spoliation, to place the risk of erroneous judgment on the party who wrongfully created the risk and to restore the prejudiced party to the same position it would have been in had the evidence been preserved. Judge Forrest noted that dismissal was appropriate in cases of bad faith, willfulness or fault, but that it was a drastic remedy that should be “imposed only in extreme circumstances, usually after consideration of alternative, less drastic sanctions.” Id. at *7. “The party seeking discovery sanctions based on spoliation bears the burden of proving that spoliation in fact occurred by a preponderance of the evidence. The burden of proof for a claim of fabrication, which effectively amounts to a fraud on the court, is clear and convincing evidence.” Id. (citation and internal quotation marks omitted).

Judge Forrest found Heel’s testimony on behalf of Kal Tire to be very credible, including that Kal Tire had never received the emails in question and that deletion of the emails was not possible due to the litigation hold function on the email program. Judge Forrest found that Deninno, by contrast, was not credible and was unable “to produce a shred of corroborative, objective evidence.” Id. at *8 (emphasis in original). This left “no question in the Court’s mind that the contested documents were fabricated.” “[I]f Deninno’s story [about the computer virus is] to be believed, he displayed a shocking amount of incompetence in attempting to mitigate that virus.” Judge Forrest stated that the evidence before the court “clearly shows that, after delaying production of this critical evidence for months, Deninno willfully deleted the native emails in a deliberate attempt to hide the fact that they were fabricated.”

Judge Forrest credited Caruso’s expert testimony that the metadata in the invoices purportedly attached to the emails at issue “was likely manipulated” at several points. “Combined with Heel’s credible testimony that the Subject E-mails were not received and no services were provided and Deninno’s implausible story, evidence of contemporaneous fabrications is damning.” Judge Forrest therefore concluded that “[t]his is ultimately not a hard decision.”

After considering all the options available, Judge Forrest concluded that for such “a serious transgression” — perpetrating “a fraud on the Court,” followed by “spolitat[ion] of evidence that was critical to Kal Tire[’]s defense” — dismissal with prejudice was the appropriate sanction. “ComLab’s actions not only prejudiced Kal Tire, which has no doubt expended significant resources in defending this litigation, but also the Court, which has now been forced to spend significant time presiding over this absurd series of events.” Id. at *9. Judge Forrest therefore ordered that the case be dismissed with prejudice and that ComLab pay Kal Tire’s reasonable attorney’s fees and costs incurred in defending this action.