Adverse Inference – Electronic Discovery Law

Europe v. Equinox Holdings, Inc. (S.D.N.Y. 2022)

Mar 21 2022

Key Insight: Plaintiff brought a motion for sanctions alleging defendants failed to preserve a key piece of evidence (the September 2019 managers’ schedule from the month when she was terminated) in her employment discrimination suit. The court concluded that defendants should have taken steps to preserve the schedule in December 2019 when plaintiff notified defendants that she intended to initiate litigation, and they failed to do so. The court noted that the harshest sanction of adverse inference was not appropriate because it did not appear by clear and convincing evidence that the failure to preserve the evidence was done in order to gain an advantage in the litigation. The court ordered that plaintiff could present to the jury that the September 2019 schedule was lost and defendants could not compare her lateness to other employees in September 2019 or argue that her co-workers’ lateness in September 2019 was less than hers.

Nature of Case: Employment Discrimination

Electronic Data Involved: Business Documents

Case Summary

Emerson Creek Pottery v. Emerson Creek Events (W.D. Va. 2022)

Feb 18 2022

Key Insight: Plaintiff moved for spoliation sanctions against defendants relying on (1) an inadvertently disclosed email between defendant and his counsel discussing the preservation of emails, and (2) defendants did not produce a “mirror image” of the emails produced by third parties. Plaintiff contended the content of the email between defendant and his counsel is evidence that defendant failed to preserve ESI and defendant countered that it was part of a longer conversation between defendant and defense counsel about how defendants temporarily lost access to some of their emails during a server migration but later recovered them. The court denied plaintiff’s motion, finding that plaintiff failed to provide any evidence that defendants lost ESI and there was nothing to suggest that there were any additional emails that plaintiff had not received from defendants or third parties. If the court were to consider a remedy, the remedy requested by plaintiff was “draconian” and nearly the entirety of what defendants were expected to argue at trial, and the court would have to tailor a remedy to the particular discovery violation in question.

Nature of Case: Intellectual Property

Electronic Data Involved: Email

Case Summary

FTC v. Noland (D. Ariz. Aug. 30, 2021)

Aug 30 2021

Key Insight: The day after learning about the FTC’s investigation, defendant Noland instructed his team to use encrypted communications platforms, Signal and ProtonMail, turn on the “auto-delete” function, and to stop using their previous work-related messaging platforms. During depositions, Noland and others failed to disclose the use of encrypted communications platforms and deleted the encrypted messaging apps from the phones so that no communications could be retrieved. The court granted the FTC’s request for an adverse inference based on defendants’ intentional spoliation of evidence under FRCP 37(e)(2), finding the most decisive factor in its analysis was the timing of installation of the apps – just one day after Noland learned the FTC was investigating him. There was a coordinated effort among Noland and his leadership team to deprive the FTC of the use of the encrypted messages in the litigation – by installing the app, using the “auto-delete” function, failing to disclose the use of the app, and deleting the app the day before the phones were to be examined – resulting in an “outrageous maneuver that raises a strong inference of bad faith.”

Nature of Case: FTC, Pyramid schemes

Electronic Data Involved: Encrypted messaging platforms

Case Summary

FTC v. Vyera Pharms., LLC (S.D.N.Y. June 1, 2021)

Jun 01 2021

Key Insight: Vyera’s company policy was to issue employees iPhones that were backed up through iCloud but one executive, Mithani, whose conduct was central to the government’s antitrust claims, had requested and received a Blackberry as his company phone, which had no systemic back up of text communications. Despite being under an obligation to preserve evidence, the executive confirmed deleting texts on his work and personal mobile phones before and after receiving a hold notice from Vyera, and wiped his work phone upon leaving the company. A forensic expert confirmed no data could be retrieved or restored from the Blackberry. The court concluded Vyera’s conduct constituted spoliation and warranted sanctions as plaintiffs were prejudiced by Vyera’s conduct and the former executive acted intentionally to deprive plaintiffs of discoverable information. The court declined to adopt an adverse inference sanction and instead adopted Vyera’s proposed sanction that it be precluded from calling the former employee to testify in its defense or introducing into evidence documents that he authored.

Nature of Case: Antitrust

Electronic Data Involved: Text messages

Case Summary

Doubleline Capital LP v. Odebrecht Fin., Ltd. (S.D.N.Y. 2021)

Mar 30 2021

Key Insight: Plaintiffs sought sanctions against defendants for intentionally destroying the encryption keys needed to access its internal “shadow” accounting system used to track illicit bribe payments to secure construction contracts. The court imposed sanctions against defendants under Rule 37(e)(1) to allow the jury to consider evidence surround the destruction of the encryption keys but declined to impose a mandatory adverse inference requested by plaintiffs under Rule 37(e)(2) because the moving party did not demonstrate that defendant destroyed the electronic evidence “with the intent to deprive the other party of the information’s use in the litigation” – with the required intent to be established by clear and convincing evidence.

Nature of Case: Securities Fraud

Electronic Data Involved: Encryption Keys

Case Summary

Holloway v. County of Orange (C.D. Cal. 2021)

Jan 20 2021

Key Insight: The court granted defendants’ motion for sanctions based on spoliation of evidence based on plaintiff’s deletion of his Facebook account. “Plaintiff had an obligation to preserve his Facebook account, he deleted the account with a culpable state of mind, and the account was relevant to Defendants’ claims.” The court further ordered that an adverse inference jury instruction was appropriate.

Nature of Case: Civil Rights

Electronic Data Involved: Social Media, Facebook

Case Summary

Bruno v. Peak Resorts, Inc. (N.Y.A.D. Jan. 14, 2021)

Jan 14 2021

Key Insight: The trial court granted an adverse inference instruction and the appellate court affirmed, finding that plaintiff engaged in spoliation of evidence when he (1) posted a comment to a blog entry about trail conditions on the mountain on the date of his injuries and then later deleted the comment, and (2) belatedly produced Facebook posts relating to his injuries. Plaintiff failed to provide “accurate representations” regarding his posts. His deleted blog comment related to whether the ski trail where he sustained injuries was open or closed on the day of his accident and its subject matter went directly to defendants’ defenses.

Nature of Case: Negligence; Personal Injury

Electronic Data Involved: Blog Post

Case Summary

Tag:Adverse Inference