Top Twenty-Two e-Discovery Opinions of 2016: Number Four

December 30, 2016

Here is the e-Discovery Team’s fourth most interesting e-discovery opinion of 2016. In re Bard IVC Filters Prods. Liab. Litig., D. Ariz., No. MDL 15-02641-PHX DGC, 2016 U.S. Dist. LEXIS 126448 (D. Ariz. Sept. 16, 2016).

FOURTH – In re Bard IVC Filters Prods. Liab. Litig.

judge_david_campbellIn Re Bard is a very helpful case on limiting discovery and the intent of the new rules, especially Rule 26(b)(1) on scope of discovery and proportionality. In re Bard IVC Filters Prods. Liab. Litig., D. Ariz., No. MDL 15-02641-PHX DGC, 2016 U.S. Dist. LEXIS 126448 (D. Ariz. Sept. 16, 2016). The primary source of our interest in this case, and why we rank it thirteenth, is the author himself. The opinion was written by the one judge who should really know the intent of the new rules, U.S. District Court Judge David G. Campbell. Judge Campbell was the chair of the Rules Committee when the 2015 amendments were passed.

You may want to use some of the language in this decision by Judge Campbell in your briefs going forward. Here is the main language explaining the new rule and commenting on how many judges are not yet following it yet and still operating under the old rules with more expansive discovery:

rule_26b1I. New Legal Standards Governing the Scope of Discovery.

Rule 26(b)(1) of the Federal Rules of Civil Procedure was amended on December 1, 2015. The new rule defines the scope of permissible discovery as follows:

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, considering the importance of the issues at stake in the action, the amount in controversy, the party’s access to relevant information, the party’s resources, the importance of the discovery in resolving the issues, and whether the burden and expense of the proposed discovery outweighs its likely benefit.

Fed. R. Civ. P. 26(b)(1).

A. Relevancy.

To be discoverable under the first part of this test, information must be “relevant to any party’s claim or defense.” Id. This language has not changed from the previous version of Rule 26(b)(1). 

Before the 2015 amendments, Rule 26(b)(1) also provided that inadmissible evidence was discoverable if it “appears reasonably calculated to lead to the discovery of admissible evidence.” Some courts – and many lawyers – used this language to define the scope of discovery. See, e.g., Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005) (“Relevant information for purposes of discovery is information ‘reasonably calculated to lead to the discovery of admissible evidence.’”) (quoting Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir. 1992)).

This phrase was eliminated by the 2015 amendments and replaced with a more direct declaration of the phrase’s original intent: “Information within this scope of discovery need not be admissible in evidence to be discoverable.” Fed. R. Civ. P. 26(b)(1). The Advisory Committee on the Federal Rules of Civil Procedure provided this explanation for the deletion:

The former provision for discovery of relevant but inadmissible information that appears “reasonably calculated to lead to the discovery of admissible evidence” is also deleted. The phrase has been used by some, incorrectly, to define the scope of discovery. As the Committee Note to the 2000 amendments observed, use of the “reasonably calculated” phrase to define the scope of discovery “might swallow any other limitation on the scope of discovery.” The 2000 amendments sought to prevent such misuse by adding the word “relevant” at the beginning of the sentence, making clear that “relevant” means within the scope of discovery as defined in this subdivision . . . .” The “reasonably calculated” phrase has continued to create problems, however, and is removed by these amendments.

Rule 26, Advis. Comm. Notes for 2015 Amends.

The 2015 amendments thus eliminated the “reasonably calculated” phrase as a definition for the scope of permissible discovery. Despite this clear change, many courts  continue to use the phrase. Old habits die hard.1 In this circuit, courts cite two Ninth Circuit cases – Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005), and Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir. 1992) – for the proposition that information is relevant for purposes of Rule 26(b)(1) if it is “reasonably calculated to lead to the discovery of admissible evidence.”2 But these cases, and others like them, simply applied the earlier version of Rule 26(b)(1).

_________

FN 1 – Last month alone, seven cases relied on the “reasonably calculated” language to define the scope of permissible discovery. See Fastvdo LLC v. AT&T Mobility LLC, No. 16-CV-385-H (WVG), 2016 WL 4542747, at *2 (S.D. Cal. Aug. 31, 2016); Sierra Club v. BNSF Ry. Co., No. C13-0967-JCC, 2016 WL 4528452, at *1 (W.D. Wash. Aug. 30, 2016); Shell v. Ohio Family Rights, No. 1:15-CV-1757, 2016 WL 4523830, at *2 (N.D. Ohio Aug. 29, 2016); Arrow Enter. Computing Sols., Inc. v. BlueAlly, LLC, No. 5:15-CV-00037-FL, 2016 WL 4287929, at *1 (E.D.N.C. Aug. 15, 2016); Ecomission Sols., LLC v. CTS Holdings, Inc., No. MISC. 16-1793 (EGS), 2016 WL 4506974, at *1 (D.D.C. Aug. 26, 2016); Clouser v. Golden Gate Nat’l Senior Care, LLC, No. CV 3:15-33, 2016 WL 4223755, at *4 (W.D. Pa. Aug. 9, 2016); Scott Hutchinson Enters., Inc. v. Cranberry Pipeline Corp., No. 3:15-CV-13415, 2016 WL 4203555, at *2 (S.D.W. Va. Aug. 9, 2016). Several other cases cited the language as though it were still part of Rule 26(b)(1). See Fairley v. Wal-Mart Stores, Inc., No. CV 15-462, 2016 WL 4418799, at *2 (E.D. La. Aug. 19, 2016); Kuczak v. City of Trotwood, Ohio, No. 3:13-CV-101, 2016 WL 4500715, at *1 (S.D. Ohio Aug. 26, 2016); Kubik v. Cent. Michigan Univ. Bd. of Trustees, No. 15-CV-12055, 2016 WL 4425174, at *2 (E.D. Mich. Aug. 22, 2016).

FN 2 – See Fastvdo, 2016 WL 4542747, at *2 (quoting Surfvivor Media, 406 F.3d at 635); Sierra Club, 2016 WL 4528452, at *1 (quoting Brown Bag, 960 F.2d at 1470).

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Amended Rule 26(b)(1) was adopted pursuant to the Rules Enabling Act, 28 U.S.C. § 2072, et. seq. That statute provides that “[a]ll laws in conflict with such rules shall be of no further force or effect after such rules have taken effect.” Id., § 2072(b). Thus, just as a statute could effectively overrule cases applying a former legal standard, the 2015 amendment effectively abrogated cases applying a prior version of Rule 26(b)(1). The test going forward is whether evidence is “relevant to any party’s claim or defense,” not whether it is “reasonably calculated to lead to admissible evidence.”

B. Proportionality.

The 2015 amendments also added proportionality as a requirement for permissible discovery. Relevancy alone is no longer sufficient – discovery must also be proportional to the needs of the case. The Advisory Committee Note makes clear, however, that the amendment does not place the burden of proving proportionality on the party seeking discovery. The amendment “does not change the existing responsibilities of the court and the parties to consider proportionality, and the change does not place on the party seeking discovery the burden addressing all proportionality considerations.” Rule 26, Advis. Comm. Notes for 2015 Amends. Rather, “[t]he parties and the court have a collective responsibility to consider the proportionality of all discovery and consider it in resolving discovery disputes.” Id. (emphasis added)

The inquiry to be conducted under the proportionality requirement, therefore, requires input from both sides. As the Advisory Committee explained:

A party claiming undue burden or expense ordinarily has far better information – perhaps the only information – with respect to that part of the determination. A party claiming that a request is important to resolve the issues should be able to explain the ways in which the underlying information bears on the issues as that party understands them. The court’s responsibility, using all the information provided by the parties, is to consider these and all the other factors in reaching a case-specific determination of the appropriate scope of discovery. 

Id. The Court therefore will look to evidence and arguments from both sides in deciding whether discovery from the Bard foreign entities is permitted under Rule 26.

ronald-hedgesOur friend, retired Judge Ron Hedges, publicly commented on this case and said the “collective responsibility” language is vague. “If there is no allocation of burden for showing discovery is proportional, and the committee note refers to a ‘collective responsibility,’ then maybe the burden should fall on the judge, as opposed to both parties.” You probably do not want to make that comment to the judge hearing your case, but you should argue that the burden is not upon you (assuming you are opposing the discovery).

It is interesting to see how many attorneys and judges alike just do not get it. As Judge Campbell said – Old habits die hard. Also remember that the other side may be citing to cases in their discovery briefs that are no longer valid since the change of the rules. Judge Campbell makes a good point on that: “the 2015 amendment effectively abrogated cases applying a prior version of Rule 26(b)(1).” You may need to make this important point in all discovery briefs going forward. Look out for the old phrases in cases Plaintiff’s counsel cites, especially “reasonably calculated.”

It is interesting to note how harshly some judges will react when an attorney before them does not cite to the new rules. Fulton v. Livingston Fin., LLC, No. C15-0574JLR, 2016 WL 3976558 (W.D. Wash. July 25, 2016). In Fulton an attorney at a prominent firm in Seattle cited the old rule and related case law in a memorandum filed with the court pertaining to relevance. The judge called the mistake “inexcusable” and imposed harsh sanctions on the attorney, including requiring him to personally pay opposing counsel fees and costs and to provide a copy of the sanctions order and “offending briefing to senior members of Mr. Ryan’s law firm.” Ouch. 

judge_david_g-_campbellBack to In Re Bard, Judge Campbell went on to deny the discovery request under Rule 26(b)(1) primarily because the requesting party had not shown how the information sought would be of any importance to the case. Here is the operative language from pg. 6 of the opinion:

Courts generally recognize that relevancy for purposes of discovery is broader than relevancy for purposes of trial. Even still, the Court concludes that the discovery sought by Plaintiffs is only marginally relevant. With no foreign-based Plaintiffs, and mere conjecture that communications between foreign entities and foreign regulators might be inconsistent with Defendants’ communications with American regulators, the discovery appears to be only potentially relevant – more hope than likelihood.

I especially like that phrase – “more hope than likelihood.” We see so much of that from opposing counsel.

Judge Campbell went on to analyze the benefit/burden factors in 26(b)(1), some “pro” the discovery sought, and concluded the opinion with the following:

The Court concludes that the burden and expense of searching ESI from 18 foreign entities over a 13-year period outweighs the benefit of the proposed discovery – a mere possibility of finding a foreign communications inconsistent with United States communication.

Because the proposed discovery is not proportional to the needs of the case considering the factors set forth in Rule 26(b)(1), the Court concludes that Defendants need not search the ESI of foreign Bard entities for communications with foreign regulators.

Again, note his use of the phrase “a mere possibility of finding” relevant evidence. That kind of language is appropriate in many discovery disputes we now see. 

This fourth most interesting case of 2016 is one that should be in all court memorandums. It provides a persuasive, authoritative discussion of the new rules, especially scope of relevance under 26(b)(1). In re Bard IVC Filters Prods. Liab. Litig., D. Ariz., No. MDL 15-02641-PHX DGC, 2016 U.S. Dist. LEXIS 126448 (D. Ariz. Sept. 16, 2016).

 


Top Twenty-Two e-Discovery Opinions of 2016 – 6th and 5th

December 29, 2016

This is the ninth in a twelve-part installment on the twenty-two cases that were the most interesting in 2016. This installment covers the sixth and fifth most interesting. Hespe v. City of Chicago, No. 13 C 7998, 2016 BL 417422 (N.D. Ill. Dec. 15, 2016) and Cohn v. Guaranteed Rate, Inc., N.D. Ill., No. 1:14-cv-9369, (N.D. Ill. Dec. 8, 2016).

SIXTH – Hespe v. City of Chicago

judg_jorge_alonsoThis is another interesting case out of Chicago where an employer Defendant’s request for a forensic inspection of employee Plaintiff’s electronic devices was denied. Hespe v. City of Chicago, No. 13 C 7998, 2016 BL 417422 (N.D. Ill. Dec. 15, 2016). This sixth most interesting opinion of 2016  was authored by District Judge Jorge L. Alonso in Chicago. Unlike the fifth ranked Cohn case to be discussed next, the Defendant’s motion in Hespe was not based on spoliation sanctions. It was instead based on an allegations of incompetent, unreasonable review and production of documents by Plaintiff. We have all been there, so what happened in this case is very interesting to the e-Discovery Team.

The case itself is a charge of sex discrimination and hostile work environment by a female police officer under Title VII. This is a bread and butter type of case for my law firm, so I know all about them. The Plaintiff alleges, in the words of Judge Alonso, that her supervisor, in the Chicago Police Dept., defendant Gerald Breimon:

“sexually harassed her by pursuing a romantic relationship with her for over three years, . . . the City created a hostile work environment by failing to take prompt action to protect her, and . . . [defendant Sarah] McDermott threatened to harm plaintiff, in part, because she rebuffed Breimon’s attention.” (Apr. 27, 2016 Order, ECF No. 147, at 1.) The defendants’ position is that Breimon and plaintiff were in a fully consensual, romantic relationship, and there was no unwelcome harassment or discrimination.

Judge Alonso’s opinion considers the objection of the Defendant employer to the April 27th 2016 ruling of Magistrate Judge Mason on Defendant’s Motion To Compel production. The Defendant asked to inspect Plaintiff’s electronic devices for unproduced electronic communications between the Plaintiff and the alleged harasser, her supervisor, Gerald Breimon.

judge_jorge_alonsoHere, in the Judge Alonso words, is the procedural, factual background that led to Defendant’s Motion To Compel Production of Plaintiff’s computers:

In response to discovery requests, plaintiff produced numerous photographs, voice mail messages, emails and text messages that she had received from Breimon. Defendants learned during the October 22, 2015 deposition of plaintiff’s mother, Susan McKay, that McKay was in possession of thousands of additional voice mail and text messages. At plaintiff’s November 30, 2015 deposition, plaintiff confirmed that she had sent these materials to her mother for safekeeping because she was running out of space on her computer.

On December 30, 2015, pursuant to subpoena, McKay produced to defendants all the electronically stored information (“ESI”) concerning plaintiff and Breimon that was in her possession. In particular, she produced 5,748 text messages, a number that dwarfed the 850 plaintiff had initially produced in this case. Based in part on the discovery of this additional information, defendants filed a motion to extend the discovery deadline and [*2] compel plaintiff to submit to an extension of her deposition. Magistrate Judge Mason, who supervised discovery in this case (see ECF No. 67), granted the motion in part, extending the discovery deadline to March 16, 2016, and granting defendants leave to depose plaintiff for three and a half additional hours. (See Jan. 7, 2016 Order, ECF No. 118; Feb. 17, 2016 Order, ECF No. 131.) Judge Mason warned that no further discovery extensions would be granted. (ECF No. 131, at 5.)

Defendants deposed plaintiff again on March 2, 2016. At the conclusion of the deposition, defense counsel informed plaintiff that she “would like an opportunity to inspect plaintiff’s computer . . . and her cell phone” to search for any unproduced communications with Breimon. (Excerpts of Pl.’s Dep., 516:3-7 , ECF No. 133-2, at 96.) Plaintiff’s counsel stated that he opposed the request.

After attempting to confer with plaintiff, as required under Rule 37(a)(1) , defendants filed a motion to extend discovery and compel plaintiff to produce her electronic devices for inspection, arguing that they could not rely on plaintiff’s representation that she had produced all the ESI documenting her correspondence with Breimon because, at her March 2, 2016 deposition, she had made ambiguous statements about the manner and completeness of her production. According to defendants, plaintiff admitted at the March 2 deposition that “the McKay text messages were saved on her (Plaintiff’s) home computer,” although McKay produced them to defendants and plaintiff did not; plaintiff gave her attorneys “some” of the McKay text messages at one point, but she was unsure when or whether she gave them all of them; and plaintiff took no specific steps to preserve electronically stored information (“ESI”), although she did not intentionally delete anything other than “dirty” pictures Breimon had sent her. (Mot. ¶ 18, ECF No. 133; Mot., Ex. 3, Excerpts of Pl.’s Dep., 501:16-503:22 , 506:6-510:21, 512:4-516:9, ECF No. 133-2, at 84-96.) Defendants sought to perform a forensic inspection of plaintiff’s devices to search for unproduced ESI and attempt to recover any relevant ESI that may have been deleted.

As usual in discovery disputes the facts are critical. Under these facts Magistrate Judge Mason denied the motion to compel. He explained that “the requested forensic inspection of plaintiff’s electronic devices was not proportional to the needs of the case, especially considering plaintiff’s privacy and confidentiality interests in her personal devices.”

rule_26b1On appeal of the Magistrate’s order to District Judge Alonso he considered Rules 26(b)(1) on scope of relevance, 26(b)(2)(B) on inaccessible ESI, 26(b)(2)(C) on limiting discovery, and Rule 34 on production. Judge Alonso decided that the key basis of the magistrate’s ruling was proportionality under Rule 26. Here is Judge Alonso’s discussion on the Magistrate’s ruling and the proportionality factors in Rule 26(b)(1):

Rule 26(b)(2)(C)(iii) incorporates by reference Rule 26(b)(1), which, as Judge Mason explained, requires discovery to be “proportional to the needs of the case.” Judge Mason explained that defendants’ request to perform a forensic inspection of plaintiff’s electronic devices for ESI was not proportional to the needs of the case because plaintiff had turned over all the ESI defendants had requested, which was presumably all the ESI she possessed, and in any case “the burden and expense of inspecting plaintiff’s devices and online accounts likely outweigh any benefit because copies of the documents and communications are sufficient to defend [against] plaintiff’s claims in this discrimination case.” (Apr. 27, 2016 Order, ECF No. 147, at 3.) Moreover, Judge Mason explained, inspection of plaintiff’s electronic devices is not “proportional to the needs of this case” because any benefit the inspection might provide is “outweighed by plaintiff’s privacy and confidentiality interests.” ( Id.)

It is important to understand that forensic inspection is an extraordinary remedy and not a routine right of discovery. It requires good cause to obtain such relief. It is surprising how many lawyers still do not know this. Here is Judge Alonso’s good explanation of the law governing forensic inspections.

The discovery process is designed to be extrajudicial, and it relies on responding parties to search their own records and produce documents or other data. See Powers v. Thomas M. Cooley Law Sch., No. 5:05-CV-117, 2006 U.S. Dist. LEXIS 67706 , [2006 BL 100203], 2006 WL 2711512 , at *5 (W.D. Mich. Sept. 21, 2006). The Advisory Committee Notes to Rule 34 recognize that courts must use caution in evaluating requests to inspect an opposing party’s electronic devices or systems for ESI, in order [*5] to avoid unduly impinging on a party’s privacy interests:

Inspection or testing of certain types of electronically stored information or of a responding party’s electronic information system may raise issues of confidentiality or privacy. The addition of testing and sampling to Rule 34(a) with regard to documents and electronically stored information is not meant to create a routine right of direct access to a party’s electronic information system, although such access might be justified in some circumstances. Courts should guard against undue intrusiveness resulting from inspecting or testing such systems.

Fed. R. Civ. P. 34 , Advisory Committee Notes—2006 Amendment (emphasis added). Numerous courts have also recognized this need to “guard against undue intrusiveness” and to be “cautious in requiring” the forensic inspection of electronic devices, in order to protect privacy interests. See John B. v. Goetz, 531 F.3d 448 , 459-60 (6th Cir. 2008) (citing cases and concluding that the “compelled forensic imaging orders here fail[ed] to account properly for . . . significant privacy and confidentiality concerns”). “Mere suspicion” or speculation that an opposing party may be withholding discoverable information is insufficient to support an “intrusive examination” of the opposing party’s electronic devices or information systems. Scotts Co. LLC v. Liberty Mut. Ins. Co., No. 2:06-CV-899, 2007 U.S. Dist. LEXIS 43005 , [2007 BL 297417], 2007 WL 1723509 , at *2 (S.D. Ohio June 12, 2007). In particular, a court must be cautious “where the request is overly broad in nature and where the connection between the party’s claims and the [electronic device] is unproven.” A.M. Castle & Co. v. Byrne, 123 F. Supp. 3d 895 , 900-01 (S.D. Tex. 2015) (collecting cases); see also Kickapoo Tribe of Indians of Kickapoo Reservation in Kan. v. Nemaha Brown Watershed Joint Dist. No. 7, 294 F.R.D. 610 , 619 (D. Kan. 2013) (denying a request to inspect personally-owned devices of defendant’s employees in part because “the Court [had] significant concerns regarding the intrusiveness of the request and the privacy rights of the individuals to be affected”).

Judge Alonso then went on to discuss the case law where a forensic exam is sometimes still ordered:

… when the requesting party is able to demonstrate that “the responding party has failed in its obligation to search its records and produce the requested information,” Midwest Feeders, Inc. v. Bank of Franklin, No. 5:14CV78, 2016 U.S. Dist. LEXIS 93994 , [2016 BL 232120], 2016 WL 3945676 , at *2 (S.D. Miss. July 19, 2016), an inspection of the responding party’s electronic devices may be appropriate. See, e.g., Kilpatrick v. Breg, Inc., No. 08-10052-CIV, 2009 U.S. Dist. LEXIS 52723 , [2009 BL 292853], 2009 WL 1764829 , at *3 (S.D. Fla. June 22, 2009); Jacobson v. Starbucks Coffee Co., No. 05-1338, 2006 U.S. Dist. LEXIS 98174 , [2006 BL 113725], 2006 WL 3146349 , at *6-7 (D. Kan. Oct. 31, 2006). Further, courts may be somewhat less wary of requests to inspect electronic devices when there is a substantiated connection between the device the requesting party seeks to inspect and the claims in the case, or, as one court put it, where the “contents of the [device] go to the heart of the case.” Hedenburg v. Aramark Am. Food Servs., No. C06-5267, 2007 U.S. Dist. LEXIS 3443 , [2007 BL 322260], 2007 WL 162716 , at *2 (W.D. Wash. Jan. 17, 2007); see Wynmoor Cmty. Council, Inc. v. QBE Ins. Corp., 280 F.R.D. 681 , 686 (S.D. Fla. 2012) (forensic search of responding party’s information systems might reveal maintenance records and work orders that responding party appeared to have attempted to hide by shredding hard-copy records, and that might reveal [*6] critical facts concerning when the claimed damage to the responding party’s property occurred); Townsend v. Ohio Dep’t of Transp., 2012-Ohio-2945 , ¶¶ 24-25 , 2012 WL 2467047 , at *7-8 (Ohio Ct. App. 10th Dist. 2012) (court permitted plaintiff to search defendant’s email system for emails that two witnesses recalled exchanging but could not produce and that, if found, would prove notice to defendant of clogged drain that caused the flooding that resulted in plaintiff’s injury); cf. Kickapoo Tribe, 294 F.R.D. at 618-19 (citing and distinguishing cases).

This law is important to follow at all times, but especially when seeking a forensic exam. There are many cases on this issue and the law itself is fairly uniform. Look for local cases in your jurisdiction before you decide whether you have good grounds to seek this extraordinary relief.

Judge Alonso explained that the Defendant employer in Hespe v. City of Chicago failed to provide the necessary evidence to show good cause for a forensic exam. Here is where we can all learn a lesson from the mistakes of the City of Chicago.

Defendants have not demonstrated that the contents of plaintiff’s devices are likely to go to the heart of this case. This case is similar to Hedenburg, an employment discrimination case in which the defendant sought forensic imaging of the plaintiff’s personal home computer, seeking correspondence plaintiff might have sent that might be inconsistent with her testimony in the case. The plaintiff objected to the discovery as a fishing expedition. The court recognized that it had permitted forensic imaging of computers in cases where the “contents of the computer go to the heart of the case,” such as in trade secret cases, where “one party demonstrate[d] the likelihood that trade secrets were forwarded to or sent by [the computer].” Hedenburg, 2007 U.S. Dist. LEXIS 3443 , [2007 BL 322260], 2007 WL 162716 , at *2; see also Byrne, 123 F. Supp. 3d at 900-01 , 908-09 . But in Hedenburg, an employment discrimination case, “the central claims in the case [were] wholly unrelated to the contents of plaintiff’s computer.” 2007 U.S. Dist. LEXIS 3443 , [2007 BL 322260], 2007 WL 162716 , at *2 …

In this case, as in Hedenburg, defendants essentially seek a warrant to search plaintiff’s devices for statements with which to impeach her.3 Their request to search plaintiff’s devices is closer to a “blind” attempt to “find something useful [for their] impeachment of the plaintiff” than to a request to search devices that have been shown to contain information going to “the heart of the case.” See id. True, plaintiff’s complaint does specifically refer to text messaging in describing some of the harassment plaintiff suffered in 2012, so there is a limited sense in which text messaging is at the “heart” of this case—but there is no dispute that McKay produced to defendants several thousand text messages from that time period, and defendants have not provided any compelling reason to believe that this production is incomplete.

This is the key statement and main failure of defense counsel in this case: “defendants have not provided any compelling reason to believe that this production is incomplete.” The reasons they provided were dismissed by Judge Alonso as follows:

The reason defendants give for seeking a forensic search of plaintiff’s devices is to find ESI to support their position that Breimon and plaintiff were in a consensual, romantic relationship (see Defs.’ Objections, ECF No. 151-1, at 6), but plaintiff all but conceded that point in her brief in opposition to defendants’ [*7] motion to compel before Judge Mason, in which she admitted testifying that she had been in a sexual relationship with Breimon, she believed she loved Breimon at one time, and she told Breimon she loved him in 2009. (Pl.’s Resp. Opp. Mot. Compel, ¶ 82, ECF No. 137.) Importantly, defendants do not request to search for any specifically identified text message or messages with particular content that they have shown to have existed at one point and that, if found, will conclusively resolve a contested issue in the case.

Again, the court points to a key failure of proof by defense counsel: “defendants do not request to search for any specifically identified text message or messages with particular content that they have shown to have existed at one point and that, if found, will conclusively resolve a contested issue in the case.” Admittedly, this is hard to prove without access to the original data, but apparently defense counsel made little effort to offer such proof. The judges clearly thought that the Defendant was just fishing and the exercise was disproportionate. In Judge Alonso’s words:

The search defendants want to perform does not go to the “heart” of this case because it does not seek evidence that will conclusively resolve critical factual issues, and even if defendants find evidence they do not already have, they have not demonstrated that the evidence is likely to be more probative than the admissions they do have.

The defense tried to add a spoliation sanction component to their argument by pointing to the Plaintiff’s poor preservation. Here is how the court dealt with that weak argument:

Defendants also argue that plaintiff had a duty to preserve any ESI bearing on her relationship with Breimon, and when asked what steps she took to preserve ESI, she answered that she never deleted anything other than nude pictures Breimon sent her, but took no other steps to preserve evidence. (Excerpts of Pl.’s Dep., at 501:16-503:22, ECF No. 133-2, at 84-86.) Again, the Court fails to see any evidence of misconduct or any reason to conclude that plaintiff is hiding any ESI. Plaintiff often seemed confused about how many text messages, voice mails and other electronically stored communications she had, when she had them, and when and to whom she produced them, but this does not strike the Court as surprising, considering there were thousands of electronic communications and this case has been going on for years. At worst, plaintiff may have failed to prevent some relevant ESI from being unintentionally deleted from her devices due to her unsophisticated grasp of how her iPhone and associated software applications (such as iTunes) store data. But defendants have not shown that this failure was anything but accidental, nor have they shown the importance of any lost ESI, which, even if recovered, will apparently do little more than duplicate admissions plaintiff made during her deposition. (See Pl.’s Resp. Opp. Mot. Compel, ¶ 82, ECF No. 137.) Further, whether the forensic inspection might recover any lost or deleted ESI appears to be little more than speculative. …

The evidence of fault is sparse at best, and, when this evidence is weighed against (1) plaintiff’s interest in protecting her privacy rather than allowing unfettered access to her personal devices and (2) the generic and apparently inconclusive nature of the unspecified ESI for which defendants [*9] want to search, it is insufficient to justify a forensic inspection. Judge Mason did not clearly err in ruling that the inspection defendants seek is not proportional to the needs of the case.

SUMMARY: You have to show good cause to get a forensic exam of all information on a person’s digital device, instead of their just producing the information that their own review determines is relevant. Good cause can come from intentional spoliation wherein the remedy is part of a sanction. This was shown in the next case, Cohn v. Guaranteed Rate, Inc., N.D. Ill., No. 1:14-cv-9369, (N.D. Ill. Dec. 8, 2016). Good cause can also be established by evidence that the search already done was unreasonable and critical information was not produced. This is what the defense attempted to do in Hespe v. City of Chicago, No. 13 C 7998, 2016 BL 417422 (N.D. Ill. Dec. 15, 2016).

The defense failed to show that any ESI existed that, if found, “will conclusively resolve a contested issue in the case.” Instead, they made it seem like they were just seeking redundant information, namely the fact that the sex between Plaintiff and Defendant was once consensual. The Plaintiff admitted that fact. It was uncontested. The request for such an invasion of privacy to review all contents on a computer was burdensome, and yet “the importance of the discovery in resolving the issues,” a proportionality requirement under Rule 26(b)(1), was little or nothing. For this reason the two federal judges in Chicago denied the request for inspection as disproportionate under Rule 26(b)(1) and thus outside of the scope of discovery.

PRACTICE POINTER: The defense here made a serious strategic error. They would have done much better, and probably would have obtained useful information, if they had immediately moved to compel the Plaintiff, under the supervision of her attorney, to search the computer with the additional information. Plaintiff’s counsel had a duty to supervise this review all along and it is apparent from the decision that counsel did not do so. Instead, the P. herself, who was clearly incompetent, did everything. The defense should have pointed this out, and cited to Rule 26(g) case law. They should have sought a re-do of the prior production, this time under the direct supervision of Plaintiff’s counsel as the rules require, instead of a production of the entire computer. They got greedy and paid the price.

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FIFTH – Cohn v. Guaranteed Rate, Inc.

judge_blakeyThis case is the counter point to Hespe v. City of Chicago, and is slightly more interesting, because the Defendant employer was allowed full access to the employee’s personal Gmail account. Cohn v. Guaranteed Rate, Inc., N.D. Ill., No. 1:14-cv-9369, (N.D. Ill. Dec. 8, 2016). This type of forensic inspection was allowed in Cohn as part of a sanction for spoliation, namely the employee’s deletion of relevant emails before she filed suit. The fifth most interesting e-discovery opinion of the year was written by District Court Judge John Robert Blakey of the Northern District of Illinois. Yes, Chicago again.

In Cohn the Defendant employer’s motion for sanctions against Plaintiff employee was granted in part after the court found that the employee, a former Vice President, intentionally destroyed ESI. As a sanction the Defendant was allowed full access to the employee’s personal Gmail account.

rule_37eThe opinion is by Judge John Blakey contains a good analysis of Rule 37, especially 37(e) and general spoliation law. Judge Blakey’s section on the early pre-litigation trigger of a Plaintiff’s duty to preserve is especially helpful to defense lawyers:

Federal courts across the country have recognized that a “plaintiff’s duty [to preserve] is more often triggered before litigation commences, in large part because plaintiffs control the timing of litigation.” Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456, 466 (S.D.N.Y. 2010), abrogated on other grounds by Chin v. Port Auth. of N.Y. &  N.J., 685 F.3d 135 (2d Cir. 2012); see also Innis Arden Golf Club v. Pitney Bowes, Inc., 257 F.R.D. 334, 340 (D. Conn. 2009) (duty to preserve arose when plaintiff retained counsel in connection with potential legal action); Cyntegra, Inc. v. Idexx Labs., Inc., No. 06-cv-4170, 2007 U.S. Dist. LEXIS 97417, 2007 WL 5193736, at *3 (C.D. Cal. Sept. 21, 2007) (“Unlike defendants, plaintiffs may be imputed notice of the duty to preserve potentially relevant evidence prior to the filing of the complaint. Plaintiffs are in control of when the litigation is to be commenced and must necessarily anticipate litigation before the complaint is filed.”) (internal citation omitted).         

In this case the Defendant employer requested production of documents, including emails from Plaintiff’s personal “Gmail” account and LinkedIn account, that pertained to Plaintiff’s communications with any of Defendant’s competitors. After some haggling the Plaintiff admitted that she had deleted all such emails, but had done so well before she filed suit. She never produced any such emails. Still, the Defendant employer was able to obtain some copies of these emails by third party discovery requests of its competitors. 

The Defendant’s efforts at third party discovery is an important point. It is a necessary step, but also somewhat dangerous. You need to conduct this kind of remedial third party discovery to buttress your case against the spoliator. Still, you should expect that these actions will, if successful, be used against you, as seen in this case. Nevertheless, you are required to perform such third party discovery because Rule 37(e) requires proof that the data lost – spoliated – “cannot be restored or replaced through additional discovery.”

judge_john_blakeyHere in Judge Blakey’s words are how these facts played out in Cohn to trigger the Plaintiff’s pre-litigation preservation duty and lay the grounds for this spoliation sanction.

The Court finds that Cohn had a duty to preserve her communications with GRI’s competitors by at least November 30, 2013. By that point Cohn was making explicit references to legal action against GRI and its officers, and she had retained the attorney who represents her in this lawsuit. [64], Ex. 1. She was also making overtures to certain of GRI’s competitors by that time. See supra at 3-4. In light of those facts and her clear obligations under the APA and BMA, Cohn and her counsel should have been able to “foresee” by November of 2013 that her communications with GRI’s competitors “would be material (and thus relevant) to a potential legal action.” Jones, 2010 U.S. Dist. LEXIS 51312, 2010 WL 2106640, at *6.
B. Breach
As discussed above, Cohn admits that she “deleted the subject emails with third-parties from her personal Gmail account in November of 2013, April-June of 2014, and July of 2014.” [68] at 2. These deletions are an obvious breach of her duty to preserve those same materials.

The legal argument that ensued was whether the Defendant moving party would have to prove prejudice from the spoliation, or not. Remember Rule 37(e) reads as follows:

If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;

(B) instruct the jury that it may or must presume the information was unfavorable to the party; or

(C) dismiss the action or enter a default judgment.

The Defendant movant here was seeking sanctions under subsection two, and so did not have to provide evidence of prejudice. Such evidence is only required in subsection one where there is no proof of intent to deprive another party of the information’s use in the litigation. In Cohn the intent was proven and so there was no need to prove prejudice. With intent such prejudice is presumed and the only remaining issues are remedies under subsection two: (A), (B) or (C). 

Here is Judge Blakey’s ruling on this issue, including an explanation of the facts upon which he found intent:

C. Harm/Bad Faith

Cohn insists that GRI cannot demonstrate the requisite harm here, as “GRI is in possession of the emails at issue” by virtue of its third party discovery practice. [68] at 12.

GRI conversely argues that no demonstration of harm is required, as “harm or prejudice is presumed where, as here, the moving party has shown bad faith.” [69] at 13 (internal citation omitted); see also Fuery v. City of Chicago, No. 07-cv-5428, 2016 U.S. Dist. LEXIS 135086, 2016 WL 5719442, at *11 (N.D. Ill. Sept. 29, 2016) (The “Court may still impose sanctions even where there is no prejudice but the actions of the party exhibit such flagrant contempt for the court and its processes that to allow the offending party to continue to invoke the judicial mechanism for its own benefit would raise concerns about the integrity and credibility of the civil justice system that transcend the interests of the parties immediately before the court.”) (internal quotation omitted). 1

GRI’s argument best reflects contemporary Seventh Circuit precedent. Indeed, the “prevailing rule is that bad faith destruction of a document relevant to proof of an issue at trial gives rise to a strong inference that production of the document would have been unfavorable to the party responsible for its destruction.” Crabtree v. Nat’l Steel Corp., 261 F.3d 715, 721 (7th Cir. 2001). A document is destroyed in bad faith if it was done “for the purpose of hiding adverse information.” Faas v. Sears, Roebuck &  Co., 532 F.3d 633, 644 (7th Cir. 2008) (internal citation omitted); see also Norman-Nunnery v. Madison Area Tech. College, 625 F.3d 422, 428 (7th Cir. 2010) (“The crucial element in a spoliation claim is not the fact that the documents were destroyed but that they were destroyed for the purpose of hiding adverse information.”).

In this case, Cohn moved her conversations with GRI’s competitors to her Gmail account, and then asked those same competitors to “hide the info” she sent because “it was the max that [her] atty will allow—actually more. [She] simply cannot put more in writing.” See supra at 3. She acknowledged that her conversations with GRI’s competitors over Gmail were undertaken “against all advise [sic].” Id. She sent data to GRI’s competitors over Gmail that she herself labelled “CONFIDENTIAL.” Id. at 4. Worse yet, she instructed a subordinate at GRI to “delete our grate [Guaranteed Rate] emails to permanent tras[h].” Id.

The explicit language of these communications belies any suggestion that Cohn’s deletion of the subject emails was simply part of her regular business practice. The Court finds that Cohn deleted the subject emails to, in her own words, “hide” adverse information. Deleting material “for the purpose of hiding adverse information” compels a finding of bad faith. Norman-Nunnery, 625 F.3d at 428. This bad faith determination in turn gives “rise to a strong inference that production of the [subject emails] would have been unfavorable” to Cohn. Crabtree, 261 F.3d at 721.

The only part of the Cohn opinion I do not like is the remedy. It was pretty weak, just accessing Plaintiff’s personal Gmail account. The apparent reason for this remedy at this point is that the parties, or at least Judge Blakey, did not know whether or not the emails had actually been deleted as Plaintiff claimed. They wanted to provide Defendant’s experts an opportunity to examine the account and contents to verify that claim. Maybe there was relevant email remaining that she never found to delete.

Based on experience it is quite possible that they will find powerful evidence in this large collection of mails to support the Defendant’s case. If so, they may obtain a summary judgment and not need a sanction remedy to prevail. Still, since according to Plaintiff’s vague testimony there may well be several hundred thousand emails in Plaintiff’s Gmail account, it will take considerable attorney skill, time and expense to find these emails.

ghostsFurther, if the inspection shows that emails were spoliated, at least most of them, as she alleged, then the Defendant’s lawyers stated that they wanted to determine whether the deleted email could be retrieved. They should have known better. All they needed to do was contact Google where they would learn that they are not recoverable, especially at this late date, over two years after the alleged deletion. They are now ghosts, never to be found, in near infinite array of cloud-hosted anonymity.

Judge Blakey’s Order is, in our reading of it, still open as to the award of additional remedies for the defense, including fee awards, inferences and testimony allowance. We predict there will be another ruling after this one after they inspect Plaintiff’s Gmail account. 

Here is how Judge Blakey explained the remedy granted to date in this case:

GRI’s request for an adverse inference instruction is denied without prejudice. Hopefully, the production of Cohn’s full Gmail account will obviate the need for such instructions.2 If, at the time pretrial submissions come due, GRI nevertheless remains convinced that such instructions are appropriate, it is invited to renew its motion with specific proposals regarding the same.

Although it is a close call, I personally think that Judge Blakey erred on this final ruling. Since the judge held that intent had been proven under subsection two, then one of the three remedies listed under subsection two should have been granted. The judge did not do that, instead he invented a lesser remedy (“no greater than necessary”) of the kind that is only talked about in subsection one.

I recognize that the rule in subsection two refers to remedies which the court “may” impose, not must, but I think the court should have exercised its discretion with these facts to impose remedy under (2)(B): “instruct the jury that it may or must presume the information was unfavorable to the party.” The court may well reverse its position after it hears all of the facts, especially the fact that the deleted Gmail cannot be recovered. If it does, it should limit it remedies to one of the three listed in subsection two. This rule interpretation issue is one reason we find this case so interesting.

Bottom Line: The takeaway is how preservation is now both a sword and a shield. It is not only a problem faced by corporate clients defending their preservation efforts, but it is also sometimes an opportunity to attack where the plaintiff has failed to preserve. Cohn is important precedent to provide an example of a Plaintiff’s early, pre-litigation duty to preserve. It also shows the importance and dangers of third party discovery in sanctions cases.

Practice Pointer: Be sure to confront Plaintiff’s counsel with questions on his or her client’s pre-litigation preservation at your Rule 26(f) conference or other early opportunity. Be ready with your own response to the same questions (boomerang effect).


Top Twenty-Two e-Discovery Opinions of 2016 – 8th and 7th

December 29, 2016

This is the eighth in a twelve-part installment on the twenty-two cases that were the most interesting in 2016. This installment covers the eighth and seventh most interesting. Cahill v. Dart, No. 13-cv-361, 2016 WL 7034139 (N.D. Ill. Dec. 2, 2016) and Arrowhead Capital Fin., Ltd. v. Seven Arts Entertainment, Inc., No. 14 Civ. 6512 (KPF), 2016 U.S. Dist. LEXIS 126545 (S.D.N.Y. Sept. 16, 2016).

EIGHTH – Cahill v. Dart

The eighth most interesting opinion in 2016 is a sanctions order by District Judge John Z. Lee in Chicago. Cahill v. Dart, No. 13-cv-361, 2016 WL 7034139 (N.D. Ill. Dec. 2, 2016). The order affirmed in part, and reversed in part, Magistrate Judge Cox’s prior report and recommendation on Plaintiff’s motion for sanctions.

The Plaintiff had sued the Chicago Police Department alleging false arrest by planting a bag of cocaine. A portion of the video of the Plaintiff’s incarceration that showed the first appearance of the cocaine was destroyed by the police. The Plaintiff moved for sanctions based on the partial destruction of the video after the duty to preserve had been triggered.

Magistrate Cox’s recommendation for sanctions was based on her determination that the Plaintiff was severely prejudiced by the loss of the video. Judge Cox also found that their was no intent to deceive by the Sheriff’s Department’s partial destruction of the video, and so denied the case dispositive remedies under 37(e)(2), namely striking defense or adverse inference instruction. The Plaintiff complained that this let the Defendant off too easily and, on review, Judge Lee agreed.

rule_37eredRevised Rule 37(e)  is fairly short and simple, so every e-discovery lawyer should start to memorize this. You are going to see it for years, but note that it does not apply to paper records destruction, only to the destruction of ESI:

Rule 37(e)
If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was unfavorable to the party; or
(C) dismiss the action or enter a default judgment.

First note that the finding of prejudice is not required for the drastic remedies under subsection two, but, as a practical matter, it helps. Still, remember the moving party does not have to prove prejudice to obtain case dispositive sanctions. They only have to prove intentional destruction. You do not have to prove both prejudice and intent. The Rules Commentary leaves no room for doubt on that point and neither does Cahill v. Dart.

If a judge finds any kind of prejudice under subsection one, then you are entitled to lesser sanctions under subsection one without proof of intent. Lesser sanctions include, without limitation, additional discovery, cost shifting and attorney fee awards. The lesser sanctions can also include allowing presentation of evidence to the jury concerning the destruction of the ESI. The idea is to try to “cure the prejudice” with the judge having wide discretion of what is reasonably required, and what might be overkill. Note again that the moving party does not bear the burden of proof of prejudice. It is a shared burden.

The Sheriff defendant in Cahill v. Dart did not appeal the Magistrate’s finding of “severe” prejudice, still the District Judge Lee reviewed all evidence de novo and also concluded there was severe prejudice. He went on to slightly disagree with Judge Cox on the intent issue. Judge Lee found that it was a close question and should be put to the jury to decide the Defendant’s intent. Thus Judge Lee’s ruling keeps alive Plaintiff’s request for dispositive sanctions and opens the door to presentation of all arguments and fact presentation to jury.

Here is Judge Lee’s language:

… the jurors will be instructed that, if they are persuaded that the destruction was intended to deprive Cahill of the evidence, they must presume the lost evidence would have been unfavorable to Defendants.

Note Judge Lee’s ruling is completely inline with the meaning and intent of new rule 37(e). The Commentary expressly states that a judge may put the issue of intent to a jury (unlike the issue of prejudice in subsection one). Here is the appropriate Commentary extract:

Subdivision (e)(2) requires a finding that the party acted with the intent to deprive another party of the information’s use in the litigation. This finding may be made by the court when ruling on a pretrial motion, when presiding at a bench trial, or when deciding whether to give an adverse inference instruction at trial. If a court were to conclude that the intent finding should be made by a jury, the court’s instruction should make clear that the jury may infer from the loss of the information that it was unfavorable to the party that lost it only if the jury first finds that the party acted with the intent to deprive another party of the information’s use in the litigation. If the jury does not make this finding, it may not infer from the loss that the information was unfavorable to the party that lost it.

This is a short, well written opinion and easy read. Cahill v. Dart, No. 13-cv-361, 2016 WL 7034139 (N.D. Ill. Dec. 2, 2016)

SEVENTH – Arrowhead Capital Fin., Ltd. v. Seven Arts Entertainment, Inc.

judge_katherine_faillaThis is another interesting sanctions case where both defendant and its attorney were sanctioned under Rule 37 for e-discovery misconduct. It was written by Katherine Polk Failla, District Judge for the Southern District of NY. She called the misconduct “as deep as it is wide.”  Arrowhead Capital Fin., Ltd. v. Seven Arts Entertainment, Inc., No. 14 Civ. 6512 (KPF), 2016 U.S. Dist. LEXIS 126545 (S.D.N.Y. Sept. 16, 2016).

The sanctions were severe. They included issue preclusion, spoliation instructions, a contempt finding, and attorneys’ fees. The misconduct included a blatant violation by defense counsel of Rule 37(e). He simply forwarded the ESI collected by the client without even reviewing the documents. He completely abdicated the attorney’s duty under Rule 37(e) to supervise the document search, review and production. Here is the description in the opinion by District Judge Katherine Failla:

And during a September 3 telephone conference between the parties, defense counsel allegedly admitted that he had not been reviewing the discovery responses — even as he had personally signed several of them — and was merely forwarding what he had received from Mr. Hoffman.

Practice Pointer: Please do not let this ever happen in your law office. You cannot just sign the response under Rule 26(g) based on your merely forwarding documents that the client finds and decides are relevant. You must closely supervise the response. Your signature vouches for the reasonability of the efforts. You cannot possibly do that unless you have knowledge of what was done.

Another thing defense counsel here did wrong here was designate all documents as confidential. The documents so produced included press releases.

Other mistakes made by Defense counsel include, in Judge Failla’s words:

(i) made untimely and improper objections to Plaintiff’s discovery requests; and (ii) “[p]uff[ed] up” their document production with non-responsive documents, while simultaneously refusing to produce obviously responsive documents (including bank records for various Seven Arts entities.

Defendant also failed to preserve documents located on a third party server by failing to download all of them before they lost access by non-payment.

There were also numerous instances of deposition misconduct, with defense witnesses not showing up, etc. That only aggravated the e-discovery misconduct.

Defense counsel blamed the client for the non-production of documents, causing this reaction by Judge Failla:

Because Mr. Hoffman seemed to be directing defense counsel not to produce responsive documents, Plaintiff’s counsel asked the Court to find Mr. Hoffman in contempt of court.

This led to a contempt hearing where the judge questioned the defendant, Mr. Hoffman. The questioning went on for five hours! In this Sept. 16, 2016 Order months later Mr. Hoffman was held in contempt. This is one of the reasons we found this order so interesting.

In addition to the sanctions mentioned, another unusual sanction was entered. The Defendant was stripped of its right to contest the court’s jurisdiction. I had never seen that before. Here is Judge Failla’s ruling on the point:

However, the Court need not reach the merits of Defendants’ jurisdictional arguments because those arguments have been forfeited. The Second Circuit has long recognized that a defendant can “forfeit[] its argument that personal jurisdiction is lacking.” Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex-Exploración y Producción, _ F.3d _, No. 13-4022, 2016 WL 4087215, at *5 (2d Cir. Aug. 2, 2016); see also, e.g., City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 139 (2d Cir. 2011); Hamilton v. Atlas Turner, Inc., 197 F.3d 58, 62 (2d Cir. 1999). One way to accomplish such a forfeiture is “noncompliance with discovery orders.” Robertson v. Dowbenko, 443 F. App’x 659, 661-62 (2d Cir. 2011) (summary order). Here, the Court believes that Defendants’ persistent violations of the Court’s discovery orders prevented Plaintiff from obtaining evidence that could be used to prove its jurisdictional allegations. The Court will not allow these violations to go unredressed. As one of several sanctions for Defendants’ misconduct, the Court now precludes Defendants from contesting the issue of personal jurisdiction.

Here are more excerpts from Judge Failla’s extended bench slaps, slaps which were, in our opinion, well deserved by this defendant and it’s attorney:

Defendants’ misconduct in this litigation is as deep as it is wide.[15] …

Defendants’ failure to make prompt arrangements to move or copy all of their documents from the Zed One server could be seen as reckless. See Fed. R. Civ. P. 37(e) (noting that a party can be sanctioned if it does not take reasonable steps to preserve discoverable electronic information). But, on this record, the Court is convinced that Defendants’ conduct transcended recklessness. At the December 15 hearing, Mr. Hoffman offered a laundry list of excuses for the deficiencies in Defendants’ document production. (See generally, Goldin Decl., Ex. 10). As this list grew longer, the excuses grew flimsier and Mr. Hoffman grew simultaneously angrier and less credible. By the end of the hearing, and particularly after observing Mr. Hoffman’s demeanor throughout that hearing, the Court was left with the distinct impression that Mr. Hoffman was making it up as he went along in order to conceal his true motive: shielding assets, and the information relating to those assets, from Defendants’ creditors, including Plaintiff in this litigation. ,,,

In light of Defendants’ willful efforts to derail the discovery process, the Court considered entering default judgment against Defendants on all counts in the Amended Complaint. However, precluding Defendants from litigating the issue of personal jurisdiction — and giving a spoliation instruction, as appropriate, on any claims that are ultimately submitted to the jury — are intermediate steps that will give Plaintiff a fair opportunity to present its case to the ultimate finder of fact. This intermediate course of action is sufficient. …

Another unusual sanction is that Judge Failla ordered defendants to:

… retain a second outside counsel — other than Mr. Markovich — to do a thorough review of Defendants’ files and determine whether Defendants possess additional discoverable information. This second outside counsel must represent Defendants for any remaining discovery-related proceedings.

Next the court sanctioned existing defense counsel, Mr. Markovich, by requiring him to pay “some portion” of the attorney fee award taxed on defendant. This vagueness of the allocation is, we note, bound to provoke interesting discussions between Hoffman and Markovich. Judge Failla apparently has a sense of humor.

The sanction of the defendant’s attorney was made under the court’s “inhere authority” as here explained:

The Court has “inherent power to supervise and control its own proceedings and to sanction counsel or a litigant for bad-faith conduct.” Sussman v. Bank of Israel, 56 F.3d 450, 459 (2d Cir. 1995); see also 28 U.S.C. § 1927 (“Any attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”). Here, the Court believes that defense counsel Markovich acted in bad faith and in a manner that improperly lengthened the proceedings in this litigation on at least two occasions.

Abuse is badBottom line: Discovery misconduct, including hide the ball tactics and sharp practices, is a sure-fire way to lose a case. Discovery abuse is bad. Do not do it. Moreover, any counsel of record who signs a document discovery response has a duty to verify that the document review was properly conducted. You cannot just accept and pass through what the client did.


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