A story of a water pipe burst in a room where backup tapes were kept was one excuse provided for not producing emails in a recent case in New York. Toussie v. County of Suffolk, 2007 WL 4565160 (E.D.N.Y. December 21, 2007). The defendant county offered the pipe burst excuse to try to avoid the expense of backup tape restoration, and side step charges of spoliation. Sanctions were sought based on gross negligence by the county and its attorneys for failing to implement a litigation hold and preserve evidence. The county compounded their errors by making wildly exaggerated claims of the cost and time to restore and search the backup tapes.
The case started when the plaintiffs filed suit in 2001 claiming that their rights had been violated by the county’s refusal to allow them to participate in an auction of several parcels of real estate. A second action was commenced with more plaintiffs in 2005 and the cases were consolidated. Apparently the plaintiffs in the 2001 case were under a federal criminal investigation at the time the county would not let them participate in the auction. My guess is, the county considered their case frivolous, and that is why they never implemented a litigation hold. That turned out to be a very expensive mistake for everyone, except Kroll Ontrack.
After five years of litigation, a discovery dispute arose between the parties in 2006 as to the adequacy of the county’s production of emails. It had only produced two emails! The plaintiffs moved to compel.
United States Magistrate Judge Arlene Rosario Lindsay responded by ordering the County to have its Information Technology Department search the County’s servers for responsive emails, and supplement its prior meager production of two emails. The County did not comply, and so on Halloween 2006 the plaintiffs moved for sanctions. The county responded by claiming it “lacked the resources to perform the court ordered search for additional e-mails.” Id.The county CIO further explained in an affidavit that they had no archive system. He claimed that in order to look for emails in that time period they would have to restore and search backup tapes at a costs of $32,000, plus 1,700 man hours of search time.
This affidavit caused the magistrate to schedule a hearing where she expressed her admitted “exasperation” with the County’s position by stating:
You can’t just throw up your hands and say we don’t store [e-mails] in an accessible form and then expect everybody to walk away.
Id. at *2. The court then helped the County out somewhat by narrowing the search to “35 search terms on the servers of five key County departments for the period May, 2001 thru January, 2006.” The County was ordered to prepare a plan to comply and, despite Judge Lindsay’s exasperation, no sanctions were imposed.
Two weeks later the county wrote Judge Lindsay a letter claiming that the narrowed search ordered would require the restoration and search of 470 backup tapes. The letter claimed that the costs for this search was estimated to be $934,000, plus 960 man hours. That is quite a dramatic increase in cost, from $32,000 to $934,000, especially when you consider the scope of discovery was supposedly tightened.
Naturally the court responded by scheduling another hearing. There Judge Lindsay again expressed her concerns that:
… notwithstanding the County’s clear obligation to preserve relevant e-mails, the County had taken no steps to preserve its e-mails or to store them in a manner which would permit ready access and review.
The court still did not impose sanctions, but instead directed the parties to meet with their respective e-discovery consultants “to discuss how to implement a better, and perhaps less costly plan, for this production” and prepare and submit a joint discovery plan.
The parties and their IT experts met only by phone. In my opinion, they should have met in person on multiple occasions. That, along with a substantial shift to a non-adversarial attitude, by both sides, was the only way the judge’s plan could have possibly worked. Predictably, the phone call approach failed, and no agreements were reached. Instead of filing a joint plan, the plaintiffs’ again filed a motion to impose sanctions against the county. The motion outlines a list of IT incompetency by the county, including the county’s failure to explain how the cost estimate went from $32,000 to $934,000, and failure to preserve emails after the suit was filed.
The county responded by submitting a search plan, which they again said required exorbitant costs and burden beyond their ability to pay. This time the number of backup tapes they said they would have to search was 412, and not 470. (Judge Lindsay points out that the number of backup tapes changes without explanation in all of the county’s filings with the court.) The County still claimed it would cost $934,000, plus the full time efforts of two of its employees over 450 days just to restore the tapes. Then to really pile it on, they claim that after the restoration work a computer forensic detective from the police department would have to spend another 70 weeks to search through the restored tapes.
This is one of those cases where you need a calculator to understand a party’s truly incredible position. By my calculation the county now claimed that it would take 10,000 hours to restore and search the tapes! It would take 7,200 hours to restore the tapes, and 2,800 of police detective time to search them. The 7,200 hours to restore assumes an 8 hour day, and 2 employees (16 x 450 = 7,200). The 2,800 hour search calculation assumes a 40 hour week (70 x 40). So, once again the county makes an astronomical increase in its cost estimate, increasing its projected time from 960 hours to 10,000 hours. As the court points out, this represents an estimate of over two and a half years to complete the discovery request. Id. at *3.
Once again, the court responded by scheduling another hearing for February 2, 2007. This time both sides were ordered to bring their IT witnesses with them to answer the court’s questions. At this hearing the county came up with a new excuse for the great expense, claiming that a water pipe had burst in 2004 where the backup tapes were stored. This accident supposedly made 3 out of 4 of the tapes unrecoverable. Apparently the county’s IT department waited quite some time to tell the lawyers about their little accident, and then, as we will see, greatly exaggerated the consequences of the water damage. Id. at *4 and FN3. This is a good example of the failure of IT and Law to communicate. It is also a good example of the common false assumption by IT professionals, that they can bluff their way in court with wild unsubstantiated claims, so long as they dress them up in technical jargon. This may work back in the office, but it will not fly in most federal courts. See: IT Tech’s Fast Talk Had Zero Persuasive Value With Judge.
Magistrate Lindsay responded to the testimony at the hearing by the county’s IT department by telling the county’s lawyers that she was considering the entry of spoliation sanctions. Specifically, she was considering the imposition of an adverse jury instruction, which is usually a fatal blow to a defense. Suddenly the frivolous case looked like it was going to be lost because of e-discovery blunders and IT hubris. This warning from the bench produced what the court called a “sea change” in the county’s attitude. The county then agreed to “solicit bids and hire an outside vendor to recover the e-mails.” The court ended the hearing by making this agreement into an Order.
Next, the county reported to the court that it had received a bid from Kroll Ontrack to do the work at a price range of between $418,000 to $963,500. The county did not say whether Kroll had actually been retained, and so the court scheduled another hearing on March 22, 2007, and again ordered the IT technicians to appear and answer questions.
At this hearing the county reported it had not yet retained Kroll, but somehow had managed to recover a number of emails from key players on its own. Moreover, the county reported that the water pipe break had only destroyed a few of the backup tapes, and not three quarters as they had previously thought. I certainly would not have wanted to be the lawyer bearing that news to the judge. The county’s CIO also testified at the hearing, testimony which Judge Lindsay called contradictory. Id.
After this hearing the county then notified the court that the county legislature had passed a special bill to pay for Kroll’s services. Id.at *5. The county advised that they would hire Kroll soon. The plaintiffs responded by calling this a delay tactic, and renewed their motion for sanctions. The court then ordered the county to provide a specific time table. The county complied with Kroll’s estimate that they could complete the work in 74 days. Based on that, the court ordered the county to complete production by August 10, 2007.
In spite of the county’s earlier estimate that it would take two and a half years to restore and search its water logged tapes, Kroll met its deadline. In fact, Kroll is the only one in this case who came out looking good. Here is the court’s description of what Kroll accomplished in 74 days (we are never told the final bill):
Kroll has restored 417 back up tapes and searched for e-mails responsive to the criteria set by the court. 18 of the 417 tapes were damaged and Kroll was required to implement disaster recovery procedures on those tapes. Data from 2 of the 18 damaged tapes was ultimately recovered. Kroll also determined that 20 additional tapes were in “brick format,” meaning they could not be converted into a readable format. Thus, Kroll was unable to recover e-mails from approximately 36 tapes or 9% of the tapes.
In the end, the Kroll process yielded 2403 pages of e-mails and attachments to those e-mails, of which approximately 200 were withheld on the basis of privilege, a far cry from the two e-mails originally produced by the County.
After receiving this production, the plaintiffs complained again that this was inadequate and renewed their motion for sanctions. This motion is the subject of the December 21st order.
Plaintiffs complained that most of the email produced was not useful, and most of the 2,403 pages consisted of “inane” attachments to e-mails. They refused to believe that all relevant emails had in fact been produced, arguing that in view of the number of people involved, there just had to be more. They argued that email had been destroyed, and asked for a default judgment, or at least an adverse inference. With these long and convoluted facts as background, the court for the first time ruled on plaintiffs’ motion for sanctions.
The court began its legal analysis by holding that the county’s duty to preserve began when suit was filed, and not before, as plaintiffs had argued, when a few of its employees should have reasonably anticipated litigation:
In this case, it is likely that a handful of County employees anticipated that the plaintiffs would sue after they were denied the right to purchase real estate at the 2001 auction, but there is no evidence to suggest that a substantial number of key personnel anticipated litigation prior to October 11, 2001. Accordingly, the duty to preserve arose in October 2001, when the complaint was first filed.
The court held that the county was not under a duty to backup and save every email it generated, but should have saved email in four key departments that concerned the real estate transactions at issue. The county should have implemented a litigation hold to suspend its normal document retention/destruction policies. The county did not do that in this case. In fact, it appears that a litigation hold notice was never provided. For that reason, emails were made inaccessible or destroyed according to county’s usual practices. The court concluded that this was a violation of the county’s obligation to preserve this limited set of highly relevant emails. Id. at *7.
Having found a breach of duty, the court then considered the second prong of the spoliation test, whether there was a culpable state of mind. Unlike some circuits which require proof of actual malice, or at least gross negligence, to prove culpability, the Second Circuit only requires a showing of negligence. Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 108 (2d Cir.2002).
The plaintiffs in this case argued that the county had been grossly negligent because the county’s attorneys had never informed key employees of the need to maintain relevant e-mails. Due to this failure, key employees were free to delete e-mails from hard drives, back up procedures were not modified, and highly relevant e-mail exchanges were lost. Notice how the attack at this point is getting personal, and plaintiffs are now pointing their fingers at both the county and their attorneys.
The court agreed with the plaintiffs in part, rejecting their argument on the backup tapes, but still holding that the second culpable state prong of the spoliation test had been met:
Thus, while the County’s failure to implement a litigation hold amounts to gross negligence, its failure to preserve all potentially relevant back up tapes was “merely negligent.” Id. In either case, the second requirement for the imposition of spoliation sanctions is met.
Id. at *8.
The third and final prong of the spoliation claim required the plaintiffs to prove that the missing e-mails were relevant and that they would have been favorable to them. That can be tricky to prove, as many courts have noted, since you “don’t know what you don’t know.” This final prong of the test is usually presumed to be met, absent evidence to the contrary, when the culpability is shown by malice, but requires evidence when culpability is established by gross or simple negligence.
In this case, in spite of the strong facts against the county, the court concluded that plaintiffs failed to prove that the emails destroyed were relevant or helpful. This result was clearly influenced by the great cost and expenses that the county finally incurred with Kroll. Equally as important is the fact that the emails recovered at such great expense proved to be a waste of time. The plaintiffs could not point to a single relevant email that helped their case from the 2,403 pages produced. Plaintiffs attached six emails to their final sanctions motion, but the court pointed out that these emails helped the defense, not the plaintiffs. The emails showed that one reason the county opposed the plaintiffs proposed purchase, is that the county learned the plaintiffs were under criminal investigation by federal authorities. Here is Judge Lindsay’s ruling on this issue:
While the evidence is clear that at least 9% of the back up tapes were destroyed and the plaintiffs may be correct that e-mails have been deleted by users, there is no reason to believe that any of those e-mails would have provided any additional support of plaintiffs’ claims. Accordingly, the plaintiffs have not sufficiently demonstrated that the destroyed/lost emails were favorable or relevant and the motion for a default judgment or an adverse inference instruction is denied.
Still, even though there was insufficient evidence of relevance to justify an adverse inference instruction, the court had witnessed for itself a long series of e-discovery failures. The water pipe burst story, and the widely varying estimates of cost to restore tapes, to name just a few. All this had forced five hearings on the subject and clearly aggravated the judge. Since the county’s e-discovery negligence and IT hubris caused significant unnecessary expenses, the plaintiffs were awarded fees. But for the last minute heroics and sanity of Kroll, the results for the county could have been much worse.