Gibbons Law Alert

Gibbons Law Alert

Tagged: Sanctions

Establishing “Intent to Deprive” Under Rule 37(e): District Court Imposes Adverse Inference Instruction Based on Timing of Spoliation

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Posted in General Litigation

On October 28, 2021

This blog has previously discussed the challenges a litigant faces in moving for the so-called “severe sanctions” pursuant to amended Rule 37(e). With the 2015 amendment to Rule 37(e), a moving party seeking severe spoliation sanctions must establish that the opposing party “acted with the intent to deprive” the requesting party of the electronically-stored information (ESI) in the litigation at issue. In the absence of an explicit admission that a responding party deleted ESI with the subjective intent to deprive the requesting party of the same, a requesting party often faces an uphill battle establishing the “intent to deprive” requirement. A recent decision from the District Court for the District of Arizona provides an example of the type of circumstantial evidence – including the timing of the spoliation at issue – a moving party can rely on to potentially support the imposition of severe sanctions. In Federal Trade Commission v. Noland, the Federal Trade Commission (FTC) was investigating defendant Noland and his business, Success By Health (“SBH”), for allegedly “operat[ing] as an illegal pyramid scheme” and making false statements to SBH’s affiliates. In May 2019, Noland inadvertently discovered the FTC’s investigation and, when the FTC realized Noland found out about the investigation, the FTC advised SBH and Noland to preserve relevant documents. The day after...

Buckle Up: Facebook and Instagram Seek Extreme Sanctions in Trademark Litigation Following Extensive Spoliation

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Posted in General Litigation

On July 27, 2021

In a recently filed motion in the United States District Court for the Northern District of California, plaintiffs Facebook, Inc. and Instagram, LLC (collectively, “the plaintiffs”) requested terminating sanctions pursuant to Federal Rule of Civil Procedure 37 in a trademark infringement and cybersquatting litigation against a domain registrar, based on the registrar’s destruction of over 11 million records. The motion relies heavily on a Special Master’s detailed report, which outlines egregious discovery abuses, including “ample evidence that Defendants failed to preserve responsive ESI, deleted ESI and withheld ESI.” In the motion, the plaintiffs requested a default judgment in the amount of $3.5 million ($100,000 for each of the 35 infringing domain names registered by defendant ID Shield), attorneys’ fees in the amount of $2,057,782.17, costs of the action, costs of the Special Master in the amount of $88,937, and a permanent injunction. As background, the plaintiffs sued the defendants for cybersquatting pursuant to the Anti-Cybersquatting Consumer Protection Act, trademark infringement, false designation of origin, and dilution. Numerous discovery disputes arose in the litigation, including motion practice after the defendants: (1) failed to produce documents with proper metadata; (2) designated public documents as “confidential”; and (3) did not deduplicate hundreds of thousands of pages of documents. The plaintiffs subsequently requested the appointment of a Special Master...

Clearing the Bar: SDNY Reminds Litigants of High Standard for Imposing Sanctions Under Rule 37(e)(2)

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Posted in General Litigation

On July 12, 2021

A recent decision out of the Southern District of New York once again illustrates the risk of sanctions under several sections of Fed. R. Civ. P. (“Rule”) 37 for spoliation of evidence and discovery misconduct, as well as the high burden a party must satisfy when seeking sanctions under Rule 37(e)(2). In Bursztein v. Best Buy Stores, L.P., despite finding that defendant flouted discovery obligations, failed to communicate promptly with its adversary, and raised baseless objections throughout discovery, the Court declined to impose sanctions under Rule 37(e)(2), though it did award sanctions – both monetary and in the form of evidence submission to the jury – under Rule 37(e)(1).

A Poor Substitute: The Eastern District of Texas Holds That Facebook Screenshots Are Not Sufficient to Avoid Sanctions Under Rule 37

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Posted in E-Discovery: Legal Decisions and Court Rules

On July 7, 2021

In Edwards v. Junior State of America Foundation, the Eastern District of Texas determined that screenshots of social media messages are not sufficient evidentiary substitutes for spoliated native files. As a result of the plaintiffs’ discovery misconduct and spoliation of relevant electronically stored information (ESI), the court imposed sanctions under Rule 37(c) and (e) against the plaintiffs for failing to preserve Facebook messages in native format, including its metadata, which prevented the defendant from authenticating the messages. The plaintiffs filed a complaint against the defendant alleging that a student member of the defendant, a youth organization, sent “racist and homophobic Facebook messages” to one of the plaintiffs (the “Messages”). After the alleged Messages were sent, the student’s father filed a complaint with the youth organization which included .jpeg “snapshot” images of the Messages. During the litigation, the defendant served written discovery requests on the plaintiffs, seeking production of ESI from the plaintiff’s Facebook Messenger account to authenticate the alleged Messages, including the production of the Messages in HTML or JSON format. The native format of Facebook messages can typically be retrieved and produced in HTML or JSON format and contain metadata that can be used for authenticity purposes. The defendant’s request for native format would have allowed the defendant to authenticate the Messages. The plaintiffs never...

“The Death Penalty Lives”: Magistrate Judge Recommends Entry of Default Judgment After Defendants Manipulate and Permanently Delete Electronic Data

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Posted in General Litigation

On May 20, 2021

This blog has previously discussed cases in which district courts considered and sometimes ultimately entered the so-called sanctions “death penalty” – a default judgment order of terminating sanctions, pursuant to Rule 37(e)(2), as a result of a party’s destruction of evidence. Recently, a U.S. District Court for the Southern District of Texas magistrate judge recommended granting terminating sanctions, i.e., default judgment, after finding that the defendants “delayed discovery, manipulated electronic data, and permanently deleted a significant amount of electronic data.” The magistrate judge noted that the deletions that occurred required the user to “go into the bowels of the system, requiring advanced knowledge,” and the electronic data was deleted “within days” of an agreed upon preliminary injunction. In Calsep Inc. v. Intelligent Petroleum Software Solutions, LLC, the plaintiffs alleged misappropriation of trade secrets after their employee, one of the defendants, left their employment and allegedly downloaded the plaintiffs’ trade secret information to a personal device. According to the plaintiffs, the former employee then used the trade secret information with the other defendants to develop oil and gas industry software to compete with the plaintiffs’ software. The plaintiffs attempted to obtain discovery, including specifically the defendants’ “source code control system, which ordinarily contains the complete, auditable, and accurate history of the creation and evolution of software...

Negligent Deletion of Meeting Notes Does Not Warrant Adverse Inference Sanctions

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Posted in Litigation Preparedness and Strategies

On April 15, 2021

Recently, in the District Court for the Southern District of California, Magistrate Judge Karen Crawford declined to impose adverse inference sanctions against the defendants, despite the defendants’ negligent destruction of relevant evidence. Instead, the court found that the plaintiffs were not severely prejudiced by the defendants’ spoliation of relevant handwritten notes from meetings pertaining to the subject matter of the litigation. Therefore, the court opted for the “least burdensome sanction” and recommended that the defendants be precluded from offering testimony or other evidence about the discussions at the meetings, during which the handwritten notes at issue were taken, in support of their defenses during the trial. In Al Otro Lado, Inc., et al. v. Chad v. Wolf, Acting Secretary, U.S. Department of Homeland Security, et al., the plaintiffs claimed that the U.S. Department of Homeland Security (the “Department”) implemented a policy, known as the “Turnback Policy,” at the U.S.-Mexico border that discouraged individuals from seeking asylum in the U.S.. The plaintiffs requested that adverse-inference sanctions be imposed against the Department due to the admitted destruction of handwritten notes by two senior officials within the U.S. Customs and Border Protection (CBP) made during the Department’s daily operation meetings where the Turnback Policy would be discussed. Essentially, the plaintiffs sought an adverse inference finding (to be adopted...

“It Wasn’t My Fault”: Court Rejects Attempts by Client and Attorney to Duck Responsibility and Sanctions Both Jointly

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Posted in E-Discovery: Legal Decisions and Court Rules

On April 6, 2021

This blog has previously discussed the importance of cooperation among parties in a litigation to effectuate a comprehensive discovery framework; however, a recent decision from the District Court for the Northern District of California exemplifies the importance of joint responsibility and collaboration between attorneys and their clients when dealing with e-discovery matters, including preservation, collection, and production of electronically stored information (ESI). In a case that ultimately settled and involved both foreign and domestic parties, the court granted a motion for monetary sanctions pursuant to its inherent authority and Rule 37, after finding that the plaintiff’s discovery misconduct “not only forced [defendant] to incur additional attorneys’ fees but … also forced the court to expend considerable resources beyond what was necessary.” Because both the plaintiff and its former counsel “failed in their responsibilities,” the court imposed sanctions jointly and severally against them. In Optrics Inc. v. Barracuda Networks Inc., the plaintiff, a Canadian engineering firm, filed suit in August 2017 against the defendant, an American company, “bringing trademark, contract, and other claims stemming from allegedly unfair and deceptive business practices by [defendant] during the parties’ thirteen-year business relationship.” Beginning in June 2019, discovery disputes and “discovery violations” by the plaintiff plagued the litigation. In February 2020, “with discovery still mired in disputes,” the parties stipulated...

Opening Pandora’s Box: A Preliminary Showing of Spoliation May Result in the Compelled Production of a Litigation Hold Notice

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Posted in General Litigation

On January 28, 2021

In Radiation Oncology Servs. of Cent. N.Y., P.C. v. Our Lady of Lourdes Mem’l Hosp., Inc., the New York Supreme Court reminded litigants that while litigation holds are generally protected by the attorney-client privilege or under the attorney work product doctrine, a preliminary showing of spoliation of evidence may compel the production of an offending party’s litigation hold documentation. In this litigation involving clinical privileges related to an exclusive radiation oncology services agreement, the plaintiffs identified seven specific instances of spoliation by the defendants. These included certain emails that the defendants produced in hard copy form, but for which they were unable to produce the corresponding electronic version and the related metadata – which the court seemed to globally refer to as the “electronically stored information,” or ESI, relating to the emails – because they had been deleted. The plaintiffs successfully argued that the failure to produce the ESI constituted spoliation because it deprived them of the ability to understand whether there were follow-up discussions with other individuals about the content of the communications, including those who may have been copied on the communications or follow-up emails. The court granted the plaintiffs’ motion to compel the production of the defendants’ litigation hold notice because it found that the permanent deletion of the ESI “potentially deprived...

The Destruction of a “Startling Amount of Discovery”: District Court Imposes Severe, Case-Ending Sanctions Pursuant to Rule 37(e)(2)

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Posted in General Litigation

On November 18, 2020

The United States District Court for the Eastern District of Washington recently entered a default judgment order of terminating sanctions against defendants pursuant to Rule 37(e)(2), as a result of defendants’ wholesale destruction of a “startling amount of discovery” as part of defendants’ adoption of a document disposition program during the course of the litigation. The district court found that the defendants “purposefully destroyed” relevant electronically stored information (ESI) “to avoid their litigation obligations.” This decision highlights the importance of extreme caution in the adoption of a document disposition or information governance program, which necessarily eliminates typically large quantities of ESI, during the time period when the duty to preserve relevant ESI has been triggered. In Moreno v. Correctional Healthcare Companies, Inc., plaintiffs filed constitutional claims against defendants–providers of healthcare services to inmates–after plaintiffs’ eighteen-year-old son died while in defendants’ custody. In January 2018, prior to filing the lawsuit, plaintiffs sent a letter to defendants notifying defendants of their plan to file a lawsuit and advising defendants to “preserve all paper and electronic records that may be relevant to our clients’ claims” including “all e-mails and other electronic and paper records regardless of where they are maintained.” Plaintiffs filed the lawsuit in October 2018 and, in December 2018, served discovery requests on defendants, seeking certain categories...

Federal Court Sanctions Defense Attorney Under § 1927 for Unreasonably Vexatious Conduct During Discovery

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Posted in E-Discovery: Legal Decisions and Court Rules

On November 12, 2020

A Minnesota federal court recently issued a stern warning to attorneys and litigants who ignore court orders and fail to make any effort to engage in meet and confers during the discovery process. In Management Registry, Inc. v. A.W. Companies, et al., the District Court for the District of Minnesota ordered a defense attorney to pay $25,000 in attorney’s fees, pursuant to 28 U.S.C. § 1927, in addition to other forms of sanctions for the attorney’s “pervasive discovery misconduct.” This case arose from plaintiff’s claims against defendants “after a corporation acquisition went wrong.” The litigation has a tortured procedural history during which the parties fought for almost two years over various discovery disputes, a number of which involved the format of production of certain documents. The parties had participated in a telephonic conference in late 2018, during which time the court ordered defendants to produce ESI in the same manner that plaintiff was required to produce ESI. Following that conference, a number of issues arose with respect to defendants’ production, and counsel for the defendants (at that time) agreed to make a supplemental production to resolve the technical issues. Defendants then obtained new counsel, and the new counsel proceeded to file a motion to compel without: (1) first reviewing the status of documents that had...

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