July’s Notable Cases and Events in E-Discovery

1. A ruling from the U.S. District Court for the Southern District of New York denying spoliation sanctions based on the fact that Plaintiff had reset his employer-provided mobile phone before returning it to his employer.

In Goldman v. Sol Goldman Investments LLC, 20-CV-06727 (MKV)(SN), 2022 WL 2118199 (S.D.N.Y. June 13, 2022), U.S. Magistrate Judge Sarah Netburn denied a motion for terminating and other sanctions based on the fact that Plaintiff had reset his employer-provided mobile phone before returning it to his employer, as well on as the non-production of certain emails.

In this case alleging wrongful termination of Plaintiff by Defendants, a dispute arose in discovery regarding certain electronically stored information (ESI): (1) the records from Plaintiff’s work cell phone and (2) an email Plaintiff sent to his doctor on May 28, 2020. Id. at *1. After Plaintiff was fired in June 2020, he returned his work phone and laptop to Defendants. Before returning the phone, Plaintiff reset the phone to the factory setting, deleting the phone’s contents. Plaintiff claimed that he reset the phone because he “received this work phone on the factory setting and believed [he] was supposed to return the phone in the same condition in which [he] received it” and because he thought “it would be easier for the next employee to use the phone if it had been re-set to the factory setting.” Plaintiff further claimed that he did not believe resetting the phone would lead to any loss of information because Defendants maintained the phone records, and all of his emails were saved on their server. The evidence included a July 3, 2020, email in which Plaintiff wrote to a friend: “I erased the Solil phone .... Long story short, they would not send me my stuff and they didn’t send me FedEx labels for their computers.”

During discovery, Plaintiff performed a search of his email account for responsive documents, including communications from his doctor, and provided the emails he found to his attorney, which did not include the May 28, 2020, email at issue. At the doctor’s subsequent deposition, the doctor voluntarily provided Defendants the May 28, 2020, email from Plaintiff. Id. at *2. After the doctor’s deposition, Plaintiff’s counsel helped him conduct a second search of his email, which led to the discovery of 75 new emails and documents. Plaintiff’s email referencing his erasure of his work phone was apparently included in this production. 

Defendants moved for sanctions pursuant to Federal Rule of Civil Procedure 37(e). They argued that Plaintiff engaged in the “intentional, bad-faith spoliation of evidence” and sought dismissal of Plaintiff’s complaint with prejudice or, in the alternative, lesser sanctions.

Magistrate Judge Netburn began her analysis with a summary of the standards applicable to a claim of spoliation under Rule 37(e), noting that “[s]poliation is 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.” After surveying the requirements of Rule 37(e), she noted that it authorizes courts to impose severe sanctions only where “the party that lost the information acted with the intent to deprive another party of the information’s use in the litigation.” Id. at *3. In addition, the movant must show some prejudice, which may either be inferred from evidence that the spoliator “acted with the intent to deprive” or be proven circumstantially. 

Quoting from the advisory committee notes to Rule 37(e)(1), Magistrate Judge Netburn explained that “an evaluation of prejudice from the loss of information necessarily includes an evaluation of the information’s importance in the litigation … which can either be interpreted as requiring merely that the spoliated evidence be probative, or alternately that it would affirmatively support the movant’s claim.” Again quoting from the advisory committee notes, she explained that “[t]he rule does not place a burden of proving or disproving prejudice on one party or the other” but rather “leaves judges with discretion to determine how best to assess prejudice in particular cases.” Magistrate Judge Netburn further explained that the clear and convincing standard is the appropriate standard of proof to apply to a claim of spoliation where “the defendants seek terminating sanctions and the plaintiff’s state of mind is at issue.”

Applying these standards to the case, Magistrate Judge Netburn quickly disposed of Defendants’ request for sanctions in connection with the May 28, 2020, email because that email had been produced. Rule 37(e) applies only where ESI has been “lost” and “cannot be restored or replaced through additional discovery.” Id. (citing Fed.R.Civ.P. 37(e)). Because the email had been produced, spoliation sanctions may not be awarded and there was no need to inquire into Plaintiff’s state of mind with respect to the email.

Defendants argued that Plaintiff’s post-termination email to his friend that he “erased” his phone established intent to deprive Defendants of the ESI, but Magistrate Judge Netburn found that Defendants did not show that any information was “lost” or “cannot be restored.” Id. at *4. She noted that the requirement in Rule 37 that ESI be lost reflects that ESI “often exists in multiple locations” and so “loss from one source may often be harmless when substitute information can be found elsewhere.” To the extent Defendants sought access to Plaintiff’s work email or phone records from his work cell phone, they unquestionably had access to them as his former employer.

Magistrate Judge Netburn found that Defendants failed to show that Plaintiff acted with the intent to deprive them of the phone records. In particular, she concluded that Plaintiff saying “I erased the Solil phone” did not establish by clear and convincing evidence that Plaintiff acted with the intent to deny Defendants access to this ESI. She also noted that Plaintiff’s own litigation conduct demonstrated his belief that the information would be available to Defendants and favorable to him.

Finally, Magistrate Judge Netburn found that Defendants failed to make a showing of prejudice. Defendants asserted that the deleted phone records “must have been relevant because Plaintiff would not have destroyed it in his fit of anger if the data would not have benefited or been relevant.” However, Magistrate Judge Netburn noted that “[c]ourts in this Circuit generally require some proof that the evidence would affirmatively support the movant’s claim before sanctions will issue,” and the mere fact that data has been lost or destroyed is not sufficient to support an inference that it would have been favorable to Defendants.

Ultimately, Magistrate Judge Netburn found that Defendants had not established the elements of a spoliation claim under Rule 37(e) and denied their request for sanctions. Id. at *5.

2. An order from the U.S. District Court for the Eastern District of Louisiana declining to compel Defendant to re-produce its PDF format production in native form, finding that the parties had never discussed production in native format and that the PDF production was sufficiently usable.

In Metro Service Group, Inc. v. Waste Connections Bayou, Inc., No. 21-1136, 2022 WL 2255203 (E.D. La. May 31, 2022), U.S. Magistrate Judge Dana M. Douglas denied Plaintiff’s request to compel Defendant to re-produce its PDF format production in native form, finding that the parties had never discussed production in native format and that the PDF production was sufficiently usable.

This action arose from an alleged breach of contract. During discovery, Plaintiff claimed that Defendant took ordinary email files and deleted all the electronic data, rendering the files much more difficult and burdensome for Plaintiff to use efficiently in the litigation. Id. at *1. Plaintiff also complained that Defendant produced 534 pages marked as placeholders for the production of responsive native files but refused to produce the files. Plaintiff moved to compel Defendant to produce the files as properly separated individual documents with the ordinary metadata attached or included in appropriate load files and to produce the “placeholder” native files in their native digital format. 

In response to the motion, Defendant argued that Plaintiff never specified the form of production of the ESI and did not request metadata or native emails associated therewith until after Defendant produced the initial tranche of emails. Id. at *2. Defendant claimed that it had recovered and searched 14,000 emails and 24 gigabytes of data, which counsel reviewed to narrow to relevant emails, and converted to PDF to review and redact privileged information. Defendant argued that the PDF files it produced were “text searchable,” rendering them reasonably usable.

Plaintiff claimed that it was never informed of any issues presented with the ESI requiring conversion and was not allowed input or early objection to the ESI plan. Plaintiff argued that Defendant took the ESI and “converted that information into a minimally useful form that made the material dramatically more difficult for [Plaintiff] to use.”

Magistrate Judge Douglas began her analysis by surveying the applicable Federal Rules of Civil Procedure, starting with Rule 26(b)(1), which provides that “parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.” In assessing the proportionality of discovery, courts consider “the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.”

Magistrate Judge Douglas also explained that Rule 34 provides that responses to requests for production of documents may state an objection to a requested form for producing ESI. Id. at *3. “If the responding party objects to a requested form — or if no form was specified in the request — the party must state the form or forms it intends to use.” Id. (quoting Fed. R. Civ. P. 34(b)(2)(D)). In addition, Federal Rule of Civil Procedure 34(b)(2)(E) provides that “(ii) If a request does not specify a form for producing electronically stored information, a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms; and (iii) a party need not produce the same electronically stored information in more than one form.” Id. (quoting Fed. R. Civ. P. 34(b)(2)(E)(ii)-(iii)).

Applying these rules to Plaintiff’s discovery requests in this case, Magistrate Judge Douglas noted that the instructions provided with the requests asked that the documents be produced as they are kept in the usual course of business or organized and labeled to correspond with the categories and the document request. Magistrate Judge Douglas stated that these instructions do not clearly state a form of production and that there was no evidence that Defendant informed Plaintiff that it intended to produce ESI in a PDF format. She therefore found that Defendant violated the rules because Defendant was required to inform Plaintiff of the form it intended to use where none was stipulated.

Magistrate Judge Douglas next addressed whether Defendant’s production in PDF form was reasonable. She explained that Rule 26(b)(2)(B) provides that “[a] party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost.” She further explained that if the producing party shows that an undue burden or cost would be required to produce the information as requested, the requesting party must show “good cause” for the production of the requested information in an alternative format.

Magistrate Judge Douglas found that despite the failure to inform Plaintiff of the form it intended to produce the ESI, Defendant made a strong showing that producing the documents in native format would have created the undue burden of waiving certain privileges and that the shift to PDF documents was intended to make it possible to review and redact privileged information from the 14,000 emails and 24 gigabytes of data without inadvertently waiving those privileges. She found that this showing, coupled with the failure of Plaintiff to file its motion in time to be set before the end of the discovery deadline, detracted from any “good cause” required by Rule 26(b)(2)(B) to require the production of the requested information in another format. Id. at *4.

Magistrate Judge Douglas further found that the PDF documents, while certainly not ideal, did constitute a reasonably usable format. She noted that Plaintiff was able to review and search the documents (although they were “less searchable” than native formats) and had been able to build chronologies of the documents.

Magistrate Judge Douglas noted that production in native format would allow Plaintiff to digitally search the documents and that metadata would reflect when the files were changed and by whom. Here, Plaintiff failed to originally request production in native format, and Defendant showed that production in native format would be unduly burdensome. According to Defendant, there were 534 native files representing 103,000 pages of documents. Defendant declined to produce these documents in bulk but stated that it would produce the native format of any emails Plaintiff specifically asked for.

Magistrate Judge Douglas declined to order Defendant to review 103,000 pages for privilege because Plaintiff had not made a clear showing that the production was relevant and proportional to the needs of the case, particularly given the late stage in the proceeding. She noted that if Plaintiff had raised the issue prior to or soon after the production was made, there would have been time to review the documents. Moreover, “had Plaintiff initially requested native files or metadata, or specified the form in which they wished to receive ESI, it is feasible that Defendant could have prepared its document production in a manner more pleasing to Plaintiff.” But Plaintiff did not specify a form until four months after Defendant responded to the requests. 

3. A decision from the U.S. District Court for the District of New Mexico granting in part spoliation sanctions based on a party’s failure to take adequate steps to monitor compliance with a proper litigation hold.

In In re: Gold King Mine Release in San Juan County, Colorado, on August 5, 2015, No. 1:18-md-02824-WJ, No. 18-cv-319-WJ, 2022 WL 2230759 (D.N.M. June 21, 2022), Chief Judge William P. Johnson granted in part a motion for discovery sanctions based on spoliation of potentially relevant documents by one Defendant because the Defendant did not take adequate steps to monitor compliance with a proper litigation hold.

This litigation arose from an environmental disaster that caused toxic waste to spill out of the Gold King Mine in Colorado and into Utah. After the spill, Utah sued the U.S. Environmental Protection Agency (EPA) and two contractors the EPA hired to assist with the work at the Gold King Mine: Environmental Restoration (ER) and Weston Solutions (Weston). ER had hired Harrison Western Construction Corporation (Harrison) to assist in the re-opening of the mine.

Harrison claimed that although it was involved with the planning of the work at the Gold King Mine, Harrison employees were not present during the release of the toxic waste from the mine, and the release did not result from any work performed by Harrison. Id. at *1. Harrison claimed that the release was caused by excavation performed by the EPA’s on-site team that was done without Harrison’s knowledge, direction, or supervision. Utah claimed the release resulted from Harrison’s intentional and/or reckless or negligent actions.

A dispute arose during discovery as to whether Harrison had produced all relevant documents requested by Utah. Id. at *2. Utah sought documents related to the work Harrison performed or planned to perform at the Gold King Mine, but the only pre-release emails Harrison produced were those that pertained to its being awarded the subcontract work at the mine and related funding issues, and the only post-release documents were emails and an employee’s journal (and no other types of documents, i.e., memoranda, reports, and non-email correspondence).

After counsel for Utah conferred with counsel for Harrison regarding the unproduced documents, counsel for Harrison stated that Harrison did not have any emails from the time periods reflected in the emails produced by other defendants. Harrison’s counsel further stated that Harrison’s third-party information technology consultant had twice searched Harrison’s current server and also searched its previous server for responsive documents and concluded that a “catastrophic event” occurred at some time prior to the migration of information and data from the prior server resulting in information and data that were corrupted and inaccessible. As a result, Harrison did not have any additional emails to produce.

After quoting extensively from Federal Rule of Civil Procedure 37(b) and 37(e) regarding a party’s obligations to preserve ESI, Chief Judge Johnson addressed the facts related to Harrison’s preservation of ESI. Id. at *3.

Harrison claimed that it took reasonable steps to preserve ESI, including storing its ESI on its office server and then a Microsoft Office 365 server, “no different than countless litigants involved in lawsuits throughout the country.” Harrison also claimed that it implemented a litigation hold on documents related to the Gold King Mine project immediately upon being made aware of imminent litigation. 

Utah, on the other hand, claimed that Harrison must have had a backup storage system and used qualified experts to ensure that data would not be erased during a server migration and that it is implausible that its data for the Gold King Mine was destroyed. Id. at *4. Utah also claimed that Harrison did not implement a proper litigation hold, including because Harrison did not disclose whether it had a backup storage system or whether it used qualified staff or experts to ensure that data would not have been erased before, during, or after a server migration.

Utah sought sanctions based on Harrison’s loss of data, including an order permitting Utah to introduce evidence of Harrison’s spoliation at trial; awarding Utah all reasonable attorneys’ fees and costs associated with investigating Harrison’s spoliation and preparing its motion to compel; precluding Harrison from proffering other evidence that it was not invited to attend or informed of the plans and actions to take place on the day of the Gold King Mine release; and an adverse inference instruction or presumption that the spoliated evidence would have been unfavorable to Harrison with respect to its participation, planning, recommendations, and communications with EPA and its other employees and contractors and its invitation to attend and notice of the plans and actions to take place on the day of the Gold King Mine release. Id. at *5.

Chief Judge Johnson found that some spoliation sanctions were proper. Id. at *6. He explained that spoliation sanctions are proper when “(1) a party has a duty to preserve evidence because it knew, or should have known, that litigation was imminent, and (2) the adverse party was prejudiced by the destruction of the evidence. But if the aggrieved party seeks an adverse inference to remedy the spoliation, it must also prove bad faith. Mere negligence in losing or destroying records is not enough because it does not support an inference of consciousness of a weak case.” Without a showing of bad faith, a district court may only impose lesser sanctions.

Chief Judge Johnson explained that counsel for parties have a continuing responsibility to ensure that the parties preserve relevant information. This responsibility obligates counsel to do more than simply notify all employees of a litigation hold and expect that the party will then retain and produce all relevant information. Chief Judge Johnson explained that counsel must go beyond mere notification and take affirmative steps to monitor compliance, to talk to key employees in an effort to understand how evidence will be stored, to continually ensure that the party is preserving relevant evidence: “At the end of the day, however, the duty to preserve and produce documents rests on the party.”

Chief Judge Johnson found that Harrison failed to take reasonable steps to preserve its ESI. Other than implementing a litigation hold, Harrison did not identify any other steps it took to preserve its ESI, such as taking affirmative steps to monitor compliance, talking to key employees in an effort to understand how evidence will be stored, and continually ensuring that Harrison was preserving relevant evidence, for example by having a backup storage system in place to ensure that the relevant ESI would be preserved.

Chief Judge Johnson further found that Utah was prejudiced by the spoliation of Harrison’s ESI. He noted that the spoliated ESI was relevant to issues such as whether (i) Harrison declined or had other reasons for not being present at the on-site meeting scheduled for August 4, 2015; (ii) Harrison knew ER was planning to conduct excavation activities on August 4-5, 2015; and (iii) miscommunications created confusion regarding how to safely and properly accomplish work at the Gold King Mine.

Chief Judge Johnson agreed with Utah that the “destroyed documents could either corroborate or impeach Harrison’s witnesses” and “the testimony of its witnesses is not enough to replace the destroyed documents” because “it is unlikely they will be able to remember the specific contents of each destroyed work order.” Id. at *7. However, Chief Judge Johnson was not persuaded by Utah’s assertion that “none of these documents can be replaced.” Utah has not shown that some of the documents at issue cannot be obtained from EPA and/or ER.

Chief Judge Johnson granted Utah’s request for an order permitting Utah to introduce evidence of Harrison’s spoliation at trial. He denied Utah’s request for an order precluding Harrison from proffering other evidence that it was not invited to attend or informed of the plans and action to take place on the day of the Gold King Mine release, finding that precluding Harrison from putting on such evidence while allowing Utah to introduce evidence of Harrison’s spoliation at trial would undermine the court’s interest in promoting accurate fact-finding by the jury. 

In addition, Chief Judge Johnson denied Utah’s request for an adverse inference instruction or presumption that the spoliated evidence would have been unfavorable to Harrison because “Utah has not persuaded the Court that Harrison acted with the intent to deprive another party of the information’s use in the litigation.” He noted that Harrison’s spoliation appears to be the result of one “catastrophic” server event. 

Finally, Chief Judge Johnson granted Utah’s request for an order awarding Utah all reasonable attorneys’ fees and costs associated with investigating Harrison’s spoliation and preparing its motion for sanctions.

4. An opinion from the U.S. District Court for the Northern District of Texas denying a motion to compel documents listed in the Defendants’ Rule 26 initial disclosures, finding that Rule 26 did not require production, only description, of the documents.

In Olmos v. David B. Giles P.C., Civil Action No. 3:22-CV-0077-D, 2022 WL 2104506 (N.D. Tex. June 9, 2022), Senior Judge Sidney A. Fitzwater denied a motion to compel documents listed in the Defendants’ Rule 26 initial disclosures, finding that Rule 26 did not require production, only description, of the documents.

In this action involving claims for legal malpractice, breach of fiduciary duty, and fraudulent misrepresentation, Plaintiff alleged that Defendants wrongfully took funds belonging to Plaintiff that she had deposited into Defendants’ Interest on Lawyer’s Trust Account (IOLTA). 

In April 2022, Defendants served Plaintiff with their Rule 26(a) initial disclosures, in which Defendants stated that they had in their possession, custody, or control “[d]ocuments concerning Defendants’ attorney-client relationship with Mr. Robert Shambora,” another party involved in Plaintiff’s investment. Plaintiff moved under Fed. R. Civ. P. 37(a) to compel Defendants to produce the documents described in their Rule 26(a) initial disclosures related to the existence of Defendants’ attorney-client relationship with Shambora and sought attorney’s fees and costs incurred in bringing the motion to compel. Plaintiff contended that Defendants wrongfully withheld these documents as privileged.

Judge Fitzwater explained that under Rule 26(a)(1)(A)(ii), a party must provide to other parties “a copy — or a description by category and location — of all documents, electronically stored information, and tangible things that the disclosing party has in its possession, custody, or control and may use to support its claims or defenses, unless the use would be solely for impeachment.” Id. at *2. He further explained that under Rule 37(a)(3)(A), “if a party fails to make a disclosure required by Rule 26(a), any other party may move to compel disclosure and for appropriate sanctions.”

Judge Fitzwater noted that Plaintiff did not challenge the sufficiency of Defendants’ description of documents in their Rule 26(a) disclosures; rather, she maintained that Defendants were required to produce the documents they described in their initial disclosures, and she moved to compel their production on that basis.

But Judge Fitzwater found that Plaintiff’s position rested on a misreading of Rule 26(a)(1)(A)(ii). He explained that Rule 26(a)(1)(A)(ii) “does not require production of documents but merely allows for production in lieu of a description.” Because Rule 26(a)(1)(A)(ii) does not require a party to produce documents — it allows a party the option either to produce documents or to provide a description of the documents by category and location — Plaintiff cannot compel Defendants to produce the documents in question. Judge Fitzwater therefore denied Plaintiff’s motion to compel.