June's Notable Cases and Events in E-Discovery

1. In King v. Catholic Health Initiatives, 2019 WL 6699705 (D. Neb. Dec. 9, 2019), Magistrate Judge Michael D. Nelson of the District of Nebraska held that the defendants had to review backup media for deleted emails but rejected the claim that defendants had to supplement their productions with instant messages, voicemails and texts that had not been saved automatically.

In this employment litigation, plaintiff stated that her former employer “failed to take proper remedial action to protect her from sexual harassment from another employee.” Id. at *1. Plaintiff claimed that over the course of her employment she had made repeated requests that this employee be disciplined or told to stay away from her but that those requests were ignored. Plaintiff alleged that she eventually resigned due to the harassment by this employee, and the alleged harasser was dismissed shortly thereafter.

In discovery, plaintiff requested the emails as well as the instant messages, voicemails and text messages of herself and the alleged harasser. Id. at *2. Defendants claimed that they had already produced all available documents while acknowledging that they might have backup media with the requested emails. Defendants opposed discovery of those backup media because even the process of finding out whether these media contained responsive material would be expensive and burdensome. Id. at *3. Defendants also argued they had no duty to preserve any documents because any preservation obligation arose after the defendants’ disposal of the plaintiff’s and alleged harasser’s emails in accordance with its normal retention practices. In defendants’ view, the lack of a preservation obligation weighed against forcing them to incur the expense of exploring whether the backups contained responsive material. Id. at *2.

Recognizing that the issue was a “close call,” the magistrate judge concluded that the circumstances surrounding plaintiff’s departure triggered defendant’s duty to preserve. Id. at *4. Plaintiff’s supervisor had engaged in email exchanges with the senior human resources directors in which directors noted that the situation with the harassing employee was “high risk” and that there was legal risk involved in deciding to fire the alleged harassing employee. This exchange was sufficient, Magistrate Judge Nelson found, to indicate that defendants should have reasonably anticipated litigation triggering the duty to preserve.

Magistrate Judge Nelson denied plaintiff’s request for severe sanctions, stating that additional discovery could replace the deleted documents. Defendants had sought to escape the retrieval effort, explaining that it cost approximately $18,000 to recover a year’s worth of data and that the success rate of retrieval was only 70 to 80 percent. Id. at *3. The magistrate judge, however, did order defendants to begin the retrieval process from the alleged harasser’s backup files but did not order the process for plaintiff’s backup documents pending review of the availability of the missing emails from plaintiff’s or the alleged harasser’s files or other sources. Id. at *4. Judge Nelson noted that if the alleged harasser’s files could not be restored or replaced, he would then consider an additional remedy “no greater than necessary to cure the prejudice.” Id. (quoting Fed. R. Civ. P. 37(e)(1)). The additional remedy, however, would likely not be severe, as Magistrate Judge Nelson explained that defendants “did not act in bad faith and [had] attempted to comply with [plaintiff’s] discovery requests to the extent it was able.”

Magistrate Judge Nelson also held that defendants had no duty to provide instant messages, voicemails and text messages requested by plaintiff. Id. at *5. He noted that defendant’s instant messaging system — Microsoft Lync — saved messages only “if the save feature was enabled on a user-by-user basis.” Similarly, defendants did not have in place any mechanism to save voicemails or forward voicemail to email. As such, the magistrate judge found that the defendants had no duty to supplement their production with voicemails. In response to plaintiff’s request for text messages, Magistrate Judge Nelson noted that the custodians from which the text messages were sought did not have company-issued phones and found, therefore, that text messages sent by nonparty custodians “using their personal devices [were] not reasonably available in the possession, custody or control of Defendants.”

2. In William v. Morrison & Foerster LLP, 2020 WL 1643977 (N.D. Cal. April 4, 2020), Magistrate Judge Jacqueline S. Corley quashed in part defendant’s subpoena for plaintiffs’ personnel files, finding that job performance and related subjects were relevant to discrimination claims but rejecting requests for production of the entire file.

In this pregnancy and gender employment discrimination case by two law firm associates against their law firm, the defendant issued a Fed. R. Civ. P. 45(d)(3) subpoena requesting all personnel records and communications related to the plaintiffs, with one subpoena served on one plaintiff’s former employer, Freshfields, LLP, and a second subpoena served on another plaintiff’s current employer, Linklaters LLP.

Magistrate Judge Corley stated that Rule 45(d) “requires a court to quash a non-party subpoena that requires the disclosure of privileged or other protected material.” Id. at *1. She noted that plaintiffs as objectors bore the burden of demonstrating that the subpoenaed information was protected but also observed that personnel files involve privacy interests and require a “specific showing of relevance.”

With that framework, she turned to the two subpoenas. The Freshfields subpoena sought 1) plaintiff’s personnel file and communications about her job performance and 2) communications about the decision to place her in the 2011 class year rather than the 2010 class year. Magistrate Judge Corley stated that documents on her job performance and classification year were clearly relevant and rejected plaintiff’s claim that her testimony about the classification year issue was sufficient. Plaintiff argued that the Freshfields information would be irrelevant at trial, but the magistrate judge responded that material need not be admissible at trial to be discoverable. But the magistrate judge rejected defendant’s effort to obtain the personnel file beyond the job performance and classification year materials, finding such other information not to be relevant to a claim or defense.

As to the Linklaters subpoena, it sought all

1) communications [plaintiff] had with Linklaters about her claims against Morrison; (2) her performance evaluations and disciplinary records from an approximately one-year period, and (3) documents relating to her current compensation and benefits, including representations she made to Linklaters in negotiations. Id. at *2.

As was the case with the Freshfields subpoena, the personnel file materials regarding plaintiff’s performance and disciplinary records were relevant and discoverable even though they might not be admissible at trial. As to plaintiff’s conversation with Linklaters about plaintiff’s claims against defendant and her compensation and benefits, the plaintiff did not dispute that such information was relevant but argued that her testimony and documents should be sufficient. The magistrate judge rejected this claim, stating that the defendant did not have to accept plaintiff’s version of matters and had a “right to discovery from others.” On the other hand, the magistrate judge quashed defendant’s request for the entire personnel file as overbroad. Thus, Magistrate Judge Corley ordered Linklater to produce documents relating to the allowed categories but rejected the request for the entire personnel file. Id. at *2.

Finally, the magistrate judge stated that any documents produced pursuant to these two subpoenas would be subject to the terms of a protective order.

3. In In Matter of Subpoena 2018R00776, 2020 WL 113984 (3rd Cir. Jan. 10, 2020), the U.S. Court of Appeals for the Third Circuit held that an order barring a service provider from disclosing that it had produced subscriber data to a grand jury did not violate the First Amendment because the government’s interest in maintaining grand jury secrecy was sufficiently strong for the nondisclosure orders to withstand strict scrutiny.

In this matter, ABC Corp., an electronic communications service provider, received a grand jury subpoena and a search warrant for data associated with one of its customer’s employees, who was the subject of a grand jury investigation. Both the subpoena and search warrant were accompanied by nondisclosure orders (NDOs), which prohibited ABC Corp. from disclosing the existence of the data requests for a period of one year. Id. at *2–*3.

When the customer filed for bankruptcy, ABC Corp. moved the district court to modify the NDO so that it could notify the bankruptcy trustee of the existence of the subpoena and warrant. ABC Corp. argued that the NDOs were content-based restrictions and prior restraints that infringed on its First Amendment rights. The district court denied ABC Corp.’s motion, finding that the Stored Communications Act of 1986 (SCA) implicates the First Amendment rights of service providers. Without determining which level of scrutiny applied, the district court held that the NDOs “serve the compelling governmental interest of ‘maintain[ing] the secrecy of the ongoing grand jury investigation and meet[ing] several of the requirements under § 2705(b)’ ” and thus pass strict scrutiny. Id. at *3 (quoting 18 U.S.C. § 2705(b)). The district court further held that the NDOs were narrowly tailored as they were limited to one year and were the least restrictive means for advancing the government’s interest.

The SCA is “designed to protect legitimate law enforcement needs while minimizing intrusions on the privacy of system users as well as the business needs of electronic communications system providers.” Id. at *1 (quoting 132 Cong. Rec. 27633 (1986) (statement of Sen. Leahy)). The SCA authorizes the government to compel an electronic service provider to produce a subscriber’s information stored on remote servers. As a general rule, a service provider turning information over to a grand jury is a grand jury witness not subject to the general secrecy obligation. However, the SCA allows courts to issue NDOs prohibiting the service provider from disclosing the demand for information if disclosure would (1) endanger the life or physical safety of an individual, (2) cause flight from prosecution, (3) result in destruction of or tampering with evidence, (4) result in the intimidation of potential witnesses or (5) jeopardize an investigation or unduly delay a trial. Id. at *1–*2.

The Third Circuit determined that NDOs implicate First Amendment rights by restricting the service provider’s speech. The NDOs at issue were content-based because they prohibited ABC Corp. from conveying information specifically about the grand jury investigation, thus drawing distinctions based on the message. Therefore, these NDOs were presumptively unconstitutional and subject to strict scrutiny. Furthermore, the Third Circuit determined that the NDOs constituted prior restraint, as they forbade ABC Corp. from speaking about its participation as a grand jury witness in advance of this participation. Prior restraints, the “most serious and the least tolerable infringement on First Amendment rights,” are also presumptively unconstitutional and subject to strict scrutiny. Id. at *4.

The Third Circuit thus applied strict scrutiny, requiring the government to demonstrate that the restriction on speech (1) served a compelling government interest, (2) was narrowly tailored to achieve that interest and (3) was the least restrictive means of advancing that interest. The Third Circuit found that the government had a compelling interest in issuing the NDO: grand jury secrecy. Id. at *5. The Supreme Court has previously identified several reasons for maintaining this secrecy:

(1) To prevent the escape of those whose indictment may be contemplated; (2) to insure the utmost freedom to the grand jury in its deliberations, and to prevent persons subject to indictment or their friends from importuning the grand jurors; (3) to prevent subornation of perjury or tampering with the witness who may testify before [the] grand jury and later appear at the trial of those indicted by it; (4) to encourage free and untrammeled disclosures by persons who have information with respect to the commission of crimes; (5) to protect innocent accused who is exonerated from disclosure of the fact that he has been under investigation, and from the expense of standing trial where there was no probability of guilt. Id. at *6 (quoting Douglas Oil Co. of Cal. v. Petrol Stops Nw., 441 U.S. 211, 219 n.10 (1979)).

The Third Circuit next determined that the NDOs at issue were narrowly tailored to achieve the compelling government interest in maintaining grand jury secrecy. “Courts consistently distinguish between disclosure of information that a witness has independent of his participation in grand jury proceedings and information the witness learns as a result of his participation,” thus striking a balance between First Amendment rights and the interest in maintaining grand jury confidentiality. The NDOs prohibited ABC Corp. only from speaking about the existence of the government’s requests, and ABC Corp. had knowledge of this information only as a result of its participation as a grand jury witness. Furthermore, the NDOs did not prohibit ABC Corp. from discussing the requests abstractly: “The NDOs only proscribe speech that would reveal the existence of this particular grand jury investigation to a non-participant, a measure narrowly tailored to preserve the secrecy of this grand jury proceeding.”

Finally, the Third Circuit found that the speech restrictions in the NDOs were the least restrictive means to maintain grand jury secrecy. ABC Corp. proposed alternative, less restrictive measures, such as allowing it to notify the bankruptcy trustee without identifying the target email account. The Third Circuit found the alternatives to be impractical and likely ineffective. “Disclosure by an electronic service provider to a third party undermines the government’s interest in maintaining the confidentiality of an ongoing investigation.” Id. at *7. The Third Circuit refused to assess the trustworthiness of a would-be confidant chosen by a service provider: “Strict scrutiny does not demand that sort of prognostication.”

Thus, the Third Circuit affirmed the district court decision denying ABC Corp.'s motion to amend the nondisclosure orders.

4. In Nuvasive, Inc. v. Kormanis, 2019 WL 1171486 (M.D. N.C. Mar. 13, 2019), Magistrate Judge L. Patrick Auld awarded attorney’s fees and expenses as a sanction for defendant’s failure to preserve relevant text messages but deferred a decision on further curative measures and left to the jury the issue whether defendant destroyed the relevant ESI with the intent to deprive plaintiff of its use.

The defendant, a North Carolina medical products distributor, left his job on March 3, 2018, with InoSpine, the exclusive distributor of plaintiff’s products, and joined Alphatech, a competitor. InoSpine, concerned that the defendant might sell competing Alphatech medical products in the same geographic region as he had for InoSpine, wrote defendant a letter on March 9, 2018, stating that it would bring legal action if it learned that defendant was engaging in such conduct in violation of his noncompete agreement. The plaintiff also instructed the defendant to “refrain from the destruction of relevant evidence … including ... text messages and to take steps to preserve all such information.” Id. at *3. Plaintiff subsequently filed suit.

During discovery, defendant signed an affidavit stating that he had taken steps to back up data on his phone to preserve messages. When the defendant thereafter provided data to the plaintiff, however, he was not able to produce text messages prior to August 2018. He subsequently stated that he had unknowingly enabled a setting on his phone that erased text messages older than 30 days, and defendant testified that he was not aware that this setting was enabled until his counsel asked for the text messages during the litigation. The defendant later claimed that the feature may have been enabled by a Verizon store employee working on the phone’s video functions, but he was unable to identify which store he visited or when the visit took place. Id. at *5. When asked during his deposition about the affidavit stating that he had taken steps to preserve the phone messages, the defendant acknowledged that he had not taken any steps other than to stop deleting emails and to back up his phone, but he did not know how to check whether the text messages had actually been uploaded.

As a threshold matter, the magistrate judge considered the plaintiff’s claim that the court could invoke its inherent authority in sanctioning defendant. Magistrate Judge Auld indicated that the plain text of Rule 37(e) and the advisory committee’s notes of Rule 37 precluded the court’s use of its inherent authority to order spoliation sanctions and concluded that its authority was limited by the requirements set forth in Rule 37. Id. at *3. The magistrate judge then determined that at a minimum, the defendant failed to implement even the most rudimentary litigation hold or confirm that his phone settings were configured in a manner that would ensure message preservation after he received the plaintiff’s preservation notice.

After holding that the defendant failed to take reasonable steps to preserve his texts, the magistrate judge turned to the sanctions to be imposed. He noted that “[f]rom its inception, this litigation has revolved around the question of whether [the defendant] marketed Alphatech’s products to doctors to whom he formerly marketed Plaintiff’s products, in violation of his [non-compete] contract.” Id. at *11. Magistrate Judge Auld held that attorney’s fees and expenses associated with litigating the loss of the messages were appropriate to cure some of the prejudice caused by the defendant’s failure to preserve them but deferred ruling on whether further sanctions were necessary to fully cure the prejudice caused by the defendant’s spoliation until the factual record was further developed during trial.

Finally, the magistrate judge ruled that the evidence supported but did not compel a finding that the defendant destroyed the relevant ESI with the intent to deprive plaintiff of its use, and he therefore left that issue for resolution by the jury. If the fact-finders determined that the spoliation was intentional, the court would instruct them to presume that the lost messages contained information that was unfavorable to the defendant. Id. at *12.