Inadequate Preservation Efforts Necessitate Restoration and Production of Email from Backup Tapes, and Forensic Search of CEO’s Laptop

Treppel v. Biovail Corp., 2008 WL 866594 (S.D.N.Y. Apr. 2, 2008)

In this case, plaintiff alleged that Biovail Corp., its CEO, general counsel and others engaged in a "smear campaign" that destroyed plaintiff’s career as a securities analyst.  He asserted claims of defamation, tortious interference with prospective economic advantage and civil conspiracy.  In February 2006, as previously summarized here, Magistrate Judge James C. Francis, IV declined to enter a preservation order and ordered defendants to answer a “document retention questionnaire” and produce documents in native format.  In response that order, Biovail proceeded with the search protocol it had previously proposed, using the search terms (i) Treppel, (ii) Jerry, (iii) Bank of America, (iv) Banc of America, (v) BAS, and (vi) BofA.  Biovail searched the individual emails and files of certain key players, as well as the shared file drives of relevant departments.  It conducted the search by accessing certain backup tapes it had preserved, and images of the custodians’ hard drives.

Subsequently, plaintiff requested that Biovail expand its search for electronic documents by adding some 30 search terms and numerous individual custodians to the original search.  Biovail declined on the grounds that plaintiff’s request came too late and was overbroad.  Biovail produced the results of its search in May 2006.  After some additional discovery relating to Biovail’s preservation of electronic data, discovery closed in December 2007.

Plaintiff then moved for an order compelling Biovail to search for additional ESI and imposing sanctions, alleging that the defendants did not adequately preserve evidence.  Defendants opposed both applications, contending that their production was complete and that their steps to preserve evidence were sufficient.

The court granted the motion to compel in part.  The court ordered that five of the 18 backup tapes identified by plaintiff be searched, offering two reasons.  First, the court found that it was possible that relevant email was created after suit was commenced, since at least one witness had produced emails dated in 2005.  Thus, it ordered that three backup tapes covering 2004, 2005 and 2006 be restored and searched.  Second, the court ordered that two backup tapes covering a particular server be searched.  The court noted that the CEO’s assistant had used that server during the relevant time period, and that “it may well contain relevant documents and should have been searched.”

Ruling on the motion for sanctions, the court found that defendants had failed to take adequate measures to preserve documents.  It found that Biovail was tardy in initiating a comprehensive preservation program, and faulted Biovail’s general counsel for “clearly deficient” efforts to preserve ESI.  The court noted that, although the general counsel claimed to have instructed two key players (Biovail’s CEO and VP of Finance and Corporate Affairs) to preserve ESI in 2003, it was unclear at what point the two actually began preserving evidence or what materials they preserved.  Further, the court stated it was clear that the two had not informed the general counsel about what steps they took, and the general counsel “took no action to follow up on his instructions to the two men.”  The court further observed that the general counsel had not made any effort to ensure that any other employees, such as their support staff, took any steps to preserve relevant information.  “While the defendants aver that only these three were involved in the events from which the lawsuit arises, the plaintiff reasonably suggests that assistants and support staff to these high-level executives were likely to be in possession of some discoverable evidence.”

The court also faulted Biovail’s failure to preserve certain monthly backup tapes:

Moreover, irrespective of the instructions given to Mr. Melnyk and Mr. Howling, Biovail failed to institute a full preservation program; specifically, Biovail did not back up its servers until December 2003, seven months after it should have been aware of its obligation to begin preserving data.  This failure is most troubling with regard to the failure to preserve the monthly backup tapes that existed when litigation commenced in May 2003.  Since Biovail’s policy is to retain its monthly backups for one year before overwriting them, as of May 1, 2003, it presumably possessed backups dating back to May 2002, the month in which many of the underlying events at issue in this action ensued.  That backup, however, was subsequently overwritten and destroyed.

Even after receiving the plaintiff’s letter apprising it of its preservation obligations, Biovail still failed to preserve backup tapes that existed in December 2003.  Again, given Biovail’s backup retention policy, as of December 2003, it would have had monthly backup tapes dating as far back as December 2002, a period encompassing the filing of the plaintiff’s complaint.  However, Biovail apparently allowed those tapes to be overwritten as well, preserving only a single backup tape from December 12, 2003.

The court agreed that Biovail was certainly right that it need not have retained "every backup in existence at the time [its] preservation obligation began" and "every backup created thereafter."  However, it found that "it is equally clear that Biovail should have retained the monthly backup tapes of the relevant servers from the previous year, since these were quite likely to contain files that were later deleted.”

In addition, the court noted that the “unique procedure” by which the CEO’s email was downloaded to his personal laptop and then deleted from Biovail’s servers resulted in his email not being preserved on the backup tapes at all.  Since the CEO’s laptop was not backed up until 2005, the court found that it was possible that relevant emails had been deleted.  “Indeed, the plaintiff points to a number of emails to or from Mr. Melnyk that were produced by other individuals at Biovail but not from his laptop, a number of which post-date May 2003.”

In the end, the court declined plaintiff’s request for sanctions in the form of an adverse inference instruction, since plaintiff could not show that any lost evidence would have supported his claims.  The court instead concluded that plaintiff was entitled to a thorough forensic search of the CEO’s laptop computer at defendants’ expense, in an effort to recover additional relevant emails he may have deleted.  It ordered defendants to turn over the computer to plaintiff’s forensic expert within 10 days, and ruled that defendants would be allowed to review any evidence recovered from the computer for privilege, before producing the material to plaintiff.