Gibbons Law Alert

Gibbons Law Alert

Category: General Litigation

Inviting Scrutiny: “Obstructionist” Conduct Leads to District Court Ordering Forensic Examination of Defendant’s Cell Phone

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Posted in General Litigation

On June 23, 2021

Courts have been authorizing forensic experts to conduct examinations of electronic devices for decades. However, we have noticed a recent uptick of district courts ordering the appointment of an independent forensic expert to create images of and forensically examine cell phones to ensure the preservation and production of relevant electronic data particularly where the party in control of the evidence has been less than forthcoming in their discovery obligations. The District Court for the Southern District of Florida is one of the latest courts to order such a remedy, granting plaintiff’s motion to compel a forensic examination and ordering that an independent expert “mirror image and/or acquire all data present on Defendant’s cell phone.”

Timing Is Everything: SDNY Limits Relief for Plaintiffs Prematurely Seeking Serious ESI-Related Sanctions Under Rule 37(e)(2)

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Posted in General Litigation

On June 3, 2021

In DoubleLine Capital LP v. Odebrecht Finance, Ltd., the Southern District of New York issued a decision with important implications regarding the timing of spoliation motions and imposition of e-discovery sanctions under Federal Rule of Civil Procedure 37(e)(2). The decision highlights the challenges litigants face when seeking relief under this provision and, in particular, satisfying the onus to establish an “intent to deprive” the opposing party of deleted discovery. As this blog has previously discussed, the sanctions available under this subsection are available only in “egregious cases,” require a high evidentiary bar, and are highly dependent on timing and the proper development of a factual record. In this securities fraud case, the plaintiffs sought a mandatory adverse inference based on the claim that the defendants destroyed encryption keys needed to access the “MyWebDay” platform, an internal “shadow” accounting system used to track illicit bribe payments, which they contended contained evidence essential to the litigation. Despite ultimately admitting to destroying the encryption keys, the defendants argued that it was too early in discovery for the court to impose sanctions. Specifically, the defendants argued that spoliation sanctions would be inappropriate because the plaintiffs “have not (and cannot) demonstrate that the lost information cannot be replaced in discovery, and therefore have not shown that any relevant facts ‘have...

“The Death Penalty Lives”: Magistrate Judge Recommends Entry of Default Judgment After Defendants Manipulate and Permanently Delete Electronic Data

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Posted in General Litigation

On May 20, 2021

This blog has previously discussed cases in which district courts considered and sometimes ultimately entered the so-called sanctions “death penalty” – a default judgment order of terminating sanctions, pursuant to Rule 37(e)(2), as a result of a party’s destruction of evidence. Recently, a U.S. District Court for the Southern District of Texas magistrate judge recommended granting terminating sanctions, i.e., default judgment, after finding that the defendants “delayed discovery, manipulated electronic data, and permanently deleted a significant amount of electronic data.” The magistrate judge noted that the deletions that occurred required the user to “go into the bowels of the system, requiring advanced knowledge,” and the electronic data was deleted “within days” of an agreed upon preliminary injunction. In Calsep Inc. v. Intelligent Petroleum Software Solutions, LLC, the plaintiffs alleged misappropriation of trade secrets after their employee, one of the defendants, left their employment and allegedly downloaded the plaintiffs’ trade secret information to a personal device. According to the plaintiffs, the former employee then used the trade secret information with the other defendants to develop oil and gas industry software to compete with the plaintiffs’ software. The plaintiffs attempted to obtain discovery, including specifically the defendants’ “source code control system, which ordinarily contains the complete, auditable, and accurate history of the creation and evolution of software...

Amateur Hour Is Over! DR Distributors LLC Offers Crash Course on the Importance of E-Discovery Compliance

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Posted in General Litigation

On March 29, 2021

In DR Distributors, LLC v. 21 Century Smoking, Inc., et al., United States District Judge Iain D. Johnston issued a scathing 256-page opinion, dropping the proverbial hammer on the defendant and its counsel for repeated and egregious e-discovery failures – a veritable Keystone Kops series of discovery errors and misrepresentations spanning several years. The court imposed sanctions pursuant to Federal Rules of Civil Procedure 26(g) and 37, as well as monetary sanctions, and required the defendants’ former counsel to participate in continuing legal education on electronically stored information (ESI). In sum, Judge Johnston put all attorneys on notice that it “is no longer amateur hour” for attorneys grappling with e-discovery – compliance is not merely “best practices,” but required under the Rules, and courts will address incompetence accordingly. The dispute arose from alleged trademark infringement claims involving electronic cigarettes with confusingly similar marks. The case was initiated in 2012 and assigned to Judge Johnston in 2014, who immediately held a case management conference. At this conference, the court asked counsel if litigation holds were issued, and defense counsel neglected to inform the court that no litigation holds had been issued at that point. Defense counsel also affirmatively stated that the defendant, Brent Duke, the principal of 21 Century Smoking, was generally knowledgeable about ESI, including...

Getting Your Ducks in a Row: Court Stresses High Evidentiary Threshold for Rule 37 Sanctions and Cautions Against Precipitous Motions

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Posted in General Litigation

On March 22, 2021

A recent case out of the Middle District of Florida illustrates the importance for parties contemplating motions under Fed. R. Civ. P. 37 to first understand the high threshold required for the court to grant their motions and impose sanctions. Examining a barrage of sanction motions, the court highlighted that a party needs to present a strong factual record when seeking charges of spoliation, as it takes more than simple allegations of destruction or non-retention of evidence to find sanctions appropriate under Fed. R. Civ. P. 37. Further, the decision provides a clear-cut example of unnecessary costs incurred and wasted judicial resources resulting from the failure of the parties to cooperate throughout the discovery process. As discussed below, while a number of the parties in the litigation entered into an electronically stored information (ESI) protocol, it appears that many of the discovery disputes could have been avoided if certain key areas, including the temporal scope of the documents to be produced, were addressed in that protocol. In Centennial Bank v. ServisFirst Bank, Inc., several former employees allegedly violated non-compete provisions of their employment agreements with the plaintiff, Centennial Bank (“Centennial”), when they left to work for the defendant, ServisFirst Bank. Beginning in 2016, the protracted discovery in this litigation involved countless disputes ranging from the...

Don’t Sleep on Service of Process: The Middle District of Pennsylvania Denies Motion to Remand Because Plaintiffs Could Not Justify Out-of-State Service via Certified Mail

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Posted in General Litigation

On March 8, 2021

A recent decision from the United States District Court for the Middle District of Pennsylvania emphasizes the importance of meticulous adherence to the rules governing service of process. In Fox v. Chipotle, the plaintiffs’ failure to properly serve an out-of-state corporation via certified mail – where the plaintiffs’ service of process did not utilize the restricted delivery option offered by the United States Postal Service – resulted in the denial of the plaintiffs’ motion to remand and the associated loss of any tactical advantage the plaintiffs may have believed to exist in litigating their class action in state court instead of federal court. The plaintiff filed a class action complaint against Chipotle in the Court of Common Pleas of Allegheny County of Pennsylvania asserting violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 Pa. Cons. Stat. § 201-1, based on claims that Chipotle was “shortchanging” customers who made cash payments. Chipotle is a Delaware corporation with a principal place of business in California, and the plaintiffs’ motion to remand focused on the sufficiency of the plaintiffs’ attempts to serve Chipotle as an out-of-state defendant via certified mail, pursuant to Pennsylvania Rule of Civil Procedure 403. In particular, the plaintiffs claimed to have served Chipotle by certified mail at its corporate headquarters in...

“Accidentally” Destroying Years of Text Messages Is No Defense to Spoliation Sanctions

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Posted in General Litigation

On March 1, 2021

The New York Supreme Court recently granted a defendant spoliation sanctions, in the form of an adverse inference instruction, against the plaintiff for the “accidental” destruction of years’ worth of text messages from the plaintiff’s cellphones. In Iacovacci v. Brevet Holdings, LLC, the plaintiff was terminated from his employment with the defendants in October 2016, through a letter that referred to “possible litigation” and requested that the plaintiff “preserve … electronically stored information (‘ESI’) relating” to the defendant’s business, “includ[ing] all emails, text messages, … and the like, … [including] material on a phone.” Several days after receiving the termination letter, the plaintiff filed a wrongful termination and breach of contract action, and the defendants filed an answer with counterclaims alleging misappropriation of the defendants’ documents, breach of fiduciary duty, and self-dealing. Thereafter, a years-long discovery dispute ensued. The defendants served several requests for documents, including text messages, but the plaintiff objected to the demands as irrelevant and overbroad, and in March 2018, the plaintiff filed a motion for a protective order. In May 2018, the court ordered the plaintiff to produce cellphone and electronic calendar records as requested by the defendants, and at a status conference in December 2018, the court, again, directed the plaintiff to produce the text messages within 30 days. Finally,...

Avoiding Unnecessary Costs: Court Reminds Parties to Narrowly Tailor Discovery Requests

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Posted in General Litigation

On February 16, 2021

As previously highlighted by this blog, discovery is best effectuated through cooperation by the parties in a litigation. A baseline to cooperation is adhering to the discovery rules set forth in the Federal Rules of Civil Procedure. The Supreme Court of Idaho recently issued a reminder to parties that discovery requests must be narrowly tailored in proportion to the needs of the litigation and that serving overly broad discovery requests is not a court-approved negotiation tactic. Further, prior to seeking court intervention, the parties should cooperate in an effort to resolve any discovery disputes by meeting and conferring with sincerity. In Oswald v. Costco Wholesale Corp., the plaintiff was struck by a car and pinned against another car in one of the defendant’s parking lots, causing significant and permanent injuries. The plaintiff sued the defendant, alleging the parking lot was unsafe in its design and construction. In discovery, the plaintiff propounded extremely broad discovery requests, requesting that the defendant disclose “on a nationwide basis any incident [involving] a vehicle impacting anything.” In turn, the defendant sought a protective order asserting the discovery requests were overly broad and unduly burdensome. The court agreed with the defendant, stating that the plaintiff inappropriately used the “hearing as a sort of negotiation whereby the court is expected to replace...

Opening Pandora’s Box: A Preliminary Showing of Spoliation May Result in the Compelled Production of a Litigation Hold Notice

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Posted in General Litigation

On January 28, 2021

In Radiation Oncology Servs. of Cent. N.Y., P.C. v. Our Lady of Lourdes Mem’l Hosp., Inc., the New York Supreme Court reminded litigants that while litigation holds are generally protected by the attorney-client privilege or under the attorney work product doctrine, a preliminary showing of spoliation of evidence may compel the production of an offending party’s litigation hold documentation. In this litigation involving clinical privileges related to an exclusive radiation oncology services agreement, the plaintiffs identified seven specific instances of spoliation by the defendants. These included certain emails that the defendants produced in hard copy form, but for which they were unable to produce the corresponding electronic version and the related metadata – which the court seemed to globally refer to as the “electronically stored information,” or ESI, relating to the emails – because they had been deleted. The plaintiffs successfully argued that the failure to produce the ESI constituted spoliation because it deprived them of the ability to understand whether there were follow-up discussions with other individuals about the content of the communications, including those who may have been copied on the communications or follow-up emails. The court granted the plaintiffs’ motion to compel the production of the defendants’ litigation hold notice because it found that the permanent deletion of the ESI “potentially deprived...

Pushing the Limit: The District of Oregon Concludes that the Attorney-Client Privilege May Apply to Communications Not Involving Attorneys

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Posted in General Litigation

On December 22, 2020

In Ozgur v. Daimler Trucks N. Am. LLC, Judge Mosman, from the United States District Court for the District of Oregon, found that certain emails in the possession of Daimler Trucks North America LLC (“Daimler”) and that were sought by plaintiff were protected by the attorney-client privilege, as the communications were made for the purpose of obtaining legal advice, despite some of the emails not including an attorney as an author or recipient. In this action, plaintiff filed suit against Daimler for age discrimination in connection with his unsuccessful job application for a position opening posted by Daimler. The position that Daimler posted was already held by a foreign national whom Daimler sought to sponsor for a H1B1 visa so that he could remain in his position. In order to sponsor its employee, Daimler had to advertise the position and establish that there were no U.S. citizens who were willing and able to perform the position, then submit such proof to the Department of Labor. To assist in complying with the Department of Labor and immigration laws, Daimler retained outside immigration counsel. The emails disputed in this proceeding were communications involving outside counsel and Daimler employees, including a recruiting manager and a hiring manager. In determining whether the disputed emails were privileged, the court stated...

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