Nursing Home Pension Fund v. Oracle Corp., 2008 WL 4093497 (N.D. Cal. Sept. 2, 2008)

In this class action securities litigation, plaintiffs sought sanctions based on alleged evidence spoliation by defendants.  Plaintiffs moved for terminating sanctions or, in the alternative, for lesser sanctions in the form of adverse inference instructions and an order precluding defendants from relying on spoliated evidence.  Plaintiffs submitted a long list of actions allegedly taken by defendants that led to the failure to preserve or the affirmative destruction of evidence relevant to this lawsuit.

District Judge Susan Illston declined to impose terminating sanctions because the actions alleged to have been taken by defendants did not “eclipse entirely the possibility of a just result.”  The court found that plaintiffs had not demonstrated the degree of prejudice necessary to warrant terminating sanctions, primarily because plaintiffs had received a large quantity of materials in discovery.  In addition, the court noted that public policy strongly favored deciding the case on its merits, and that less drastic sanctions could be imposed that would permit a decision on the merits while also ensuring that defendants did not benefit from any spoliation.

As to lesser sanctions, the court found that adverse inferences in plaintiffs’ favor were warranted with regard to some categories of evidence that defendants had conceded was not produced or preserved.

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Infinite Energy, Inc. v. Thai Heng Chang, 2008 WL 4098329 (N.D. Fla. Aug. 29, 2008)

In this breach of employment agreement and misappropriation of trade secrets case, plaintiff moved to compel production of emails from defendant’s personal Yahoo! account.  Plaintiff contended that it only recently learned of the account, and that defendant should have disclosed the account in response to an earlier discovery request.  Plaintiff argued that emails from the account contained highly relevant information crucial to the issues in the case.

Although defendant claimed he could not produce the emails because they had been destroyed by Yahoo!, he offered only a copy of a generic response from Yahoo! about deactivating accounts.  The court observed that Yahoo! may have a process for obtaining emails from deactivated accounts, and declined to accept defendant’s explanation that production was “impossible,” particularly given the important evidentiary value of the emails and the “feeble offering” by defendant in support of the contention.

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Atlantic Recording Corp. v. Howell, 2008 WL 4080008 (D. Ariz. Aug. 29, 2008)

In this copyright infringement litigation, seven major recording companies alleged that defendant Howell had used the KaZaA file-sharing program to download their sound recordings and distribute them to other users of the network.  Howell had previously resisted plaintiffs’ efforts to conduct a forensic examination of his computer hard drive, and the court had granted plaintiffs’ motion to compel and granted leave to take additional discovery.  With the benefit of this additional discovery, plaintiffs moved for terminating sanctions based on Howell’s willful spoliation of material evidence.

Based on the evidence presented, the court found that:

•  Defendant removed the KaZaA program from his computer and deleted the contents of the shared folder shortly after receiving notice of the lawsuit

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Flagg v. City of Detroit, 252 F.R.D. 346 (E.D. Mich. 2008)

In an earlier decision in this case, the court denied defendants’ motion to quash subpoenas to SkyTel for the production of text messages.  The court found that plaintiff was entitled to pursue the production of certain text messages sent or received by specified officials or employees of the City (some of whom were also named as individual defendants in the suit) during specified time frames, using text messaging devices supplied by SkyTel.  The court observed that the relevance (and hence discoverability) of the text messages necessarily turned upon the content of the communications.  Thus, it was essential to establish a procedure for the review of the content of each such communication, for determining both relevance and the application of any privilege.  The court appointed two magistrate judges to review the communications and make the initial determination as to which were discoverable.  Our post on that March 20, 2008 order is available here.

In this recent decision, the court ruled upon motions by the City and one of the individual defendants seeking to prevent the discovery from going forward.  The moving defendants argued that the federal Stored Communications Act (“SCA”), 18 U.S .C. § 2701 et seq., wholly precludes the production in civil litigation of electronic communications stored by a non-party service provider.  The court rejected this proposed reading of the SCA, observing that “[d]efendants’ position, if accepted, would dramatically alter discovery practice, in a manner clearly not contemplated by the existing rules or law, by permitting a party to defeat the production of electronically stored information created by that party and still within its control – information that plainly is subject to civil discovery, see Fed. R. Civ. P. 34(a)(1) – through the simple expedient of storing it with a third party.”  The court concluded that, because nothing in the plain language of the SCA requires this extraordinary result, and because defendants had not identified any other support for this proposition, the discovery effort contemplated in its March 20, 2008 opinion could go forward (albeit through slightly different means).

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Keithley v. Home Store.com, Inc., 2008 WL 3833384 (N.D. Cal. Aug. 12, 2008)

In this patent infringement case, plaintiffs sought terminating, evidentiary and monetary sanctions based upon defendants’ spoliation of evidence.  Plaintiffs argued that defendants had destroyed three types of evidence:  (1) source code; (2) early architectural, design and implementation documents; and (3) reports.  Plaintiffs contended that the spoliation of these materials impacted plaintiffs’ ability to meet their burden of proving infringement.

The court held several hearings and received extensive briefing on the spoliation issue, which the court observed “became a moving target because of Defendants’ belated production of evidence that it had previously stated was either nonexistent or destroyed.”  In the end, the magistrate judge imposed a monetary sanction of fees and costs associated with defendants’ discovery misconduct, and recommended that the district court give an adverse inference jury instruction to address the spoliation that occurred.  Although the magistrate judge found that the discovery misconduct by defendants in the case was "among the most egregious" the court had seen, she declined to recommend terminating sanctions because there was no evidence that defendants engaged in deliberate spoliation, and because the extreme sanction of dismissal would go beyond what was necessary to cure the prejudice to plaintiffs.

Some examples of defendants’ “reckless and egregious discovery misconduct” include the following:

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