The Modern Archivist

To Preserve or Not to Preserve- Is that the Question?

By Alexander Gershon

After much fanfare, Judge McMahon of the Southern District of New York Federal Court upheld the lower court’s ruling in the case of Pippins v. KPMG LLP that the defendant, KPMG must preserve all hard drives that may be related to the case. How does this ruling affect future cases? It is important to first understand the basis of this case.
Audit Associates and Audit Associate Seconds, which worked in the KPMG Audit practice group, filed a class action against KPMG. They claim KPMG misclassified their employment to avoid paying overtime salaries.
KPMG was asked to preserve existing hard drives that may be relevant to the case. KPMG argued using the Proportionality Claim[1], that because the number of plaintiffs was so high, preserving all of this data would be unnecessarily expensive.
KPMG had to preserve any hard drive that could contain relevant information to this case and the “key players” in the case. “Relevant” could be interpreted as anything that could reasonably lead to other information that could have an effect on the case, and “key players” are anyone who is likely to have any discoverable information that may be used to support claims of the defense or plaintiff. When these definitions were applied to the court’s view that any person who might opt into the class action would be a potential plaintiff which meant that their data would also have to be preserved. One can readily see how the costs of preservation could potentially skyrocket. .
Yet the decision of Judge McMahon, and the lower court, was a rejection of this proportionality claim on the basis that the court could not conduct an accurate cost-benefit analysis since neither the cost nor the benefit of preservation had never been determined, even on a partial basis. Judge McMahon decided that he, alongside the plaintiffs, were never given adequate opportunity by KPMG to understand the costs or benefits of preservation thereby making the proportionality test impossible.
What does this mean for the future of eDiscovery? If you are a big-name company with a lot of data to preserve, an inexpensive and efficient means to preserve all of your data should be one of your top priorities. Additionally, the retrieval process must be fast enough for both sides to have ample opportunity to review it.

[1] The Proportionality Claim (or Proportionality Test) is a cost-benefit analysis in which the court weighs the cost of producing evidence against the benefit of producing it. This is done in order to limit the frequency or extent of discovery where the expense of it likely outweighs its benefit. What is interesting about this case is that this test is being applied to preservation and not production.

Hide the Matches!!

By Elle Byram. Esq., CEDS

While some destroy records through shred days (no names mentioned), others do it by burning technology. I presume that’s one way to try to ensure your data is destroyed. It’s also one way to ensure you will be sanctioned. Which is exactly what happened in Evans v. Mobile County Health Department, 2012 WL 206141.
Sandra Evans brought suit against her employer for reverse discrimination and retaliation. Plaintiff filed suit in November 2010 and was subsequently ordered in the spring of 2011 to retain all relevant electronic materials. In June or July of 2011, Plaintiff’s computer allegedly “crashed” and she was advised by the Geek Squad at Best Buy to just buy another computer. Despite her suit and preservation requirements, plaintiff chose to burn her computer. She did not transfer the contents from the old computer to the new computer she had purchased. And, she did not to mention in her deposition that she had burned her computer. Her rationale for burning the computer: she did not want anyone to access the confidential information she had on the computer. But who would when you are in the midst of a lawsuit?
In discovery, defendant learned that plaintiff had taken notes of the alleged discrimination and had other emails and materials as well. Plaintiff produced excerpts of her notes but not complete copies. Defendant repeatedly asked for the information to no avail. The reason for plaintiff’s failed production are now, of course, obvious.
The court gave little credit to plaintiff’s cries that she needed to protect her confidential information and did not seem to understand why protection such as burning a computer would be bad in the middle of a lawsuit. “Given that plaintiff knew enough about computers to know someone could access the information/data on her computer even though it had ‘crashed,’ the [Court] finds that plaintiff fully appreciated that she could have transferred the information from her ‘crashed’ computer to the new computer she purchased.” Id. at 12. The court determined that plaintiff’s “culpability is excessively high. After all, she burned her personal computer after she filed her lawsuit … and an order was entered by this Court that she take steps to preserve all relevant electronically-stored information in her possession.” Id. at 19.
As a result of her willful destruction of evidence, the Court ordered an adverse inference instruction – if plaintiff survived summary judgment – and was required to pay attorney’s fees and expenses for the defendant’s motion to dismiss as a result of the destruction. If plaintiff fails to pay up, her suit will be dismissed.

Havana Bar Brawl? Nope, just sanctions!

By Elle Byram. Esq., CEDS

It’s not too often that you see a case in which both the plaintiff and the defendant receive sanctions for spoliation. This is exactly what happened in Patel v. Havana Bar, Restaurant and Catering, 2011 WL 6029983 (E.D. Pa. 2011). The case arose from injuries sustained by plaintiff when he fell from a second floor balcony at an engagement party in the defendant’s bar. Both parties, perhaps one more egregiously than the other, spoliated evidence.

Defendant, who routinely recorded video surveillance of the bar, and which was recorded on the night of the injury, failed to preserve the video. The surveillance system was programmed to record over the existing footage every three weeks. Defendant, claiming that he attempted to prevent the footage from the night of the accident being erased, was unsuccessful in such attempts.

The plaintiff’s part appears to be substantially more egregious. About a year after plaintiff was injured, plaintiff’s sister-in-law sent a Facebook email to the engagement party guests to request a statement of what they witnessed that evening. However, her email requested that the guests state that plaintiff was not intoxicated at the time of the fall and that he is “a hyper guy who acts all wild and crazy without being drunk… .” No statements from this request were ever produced to defendants. Two years after this email, plaintiff’s sister-in-law again requested statements, but because the direction of the case had changed, her request sought statements indicating that plaintiff was in fact drunk.

Note that reading the sister-in-law’s emails sent to the guests requesting their statements is painful. No attorney ever wants a written word requesting evidence to be tailored to the outcome you desire.

Defendant knew nothing about either of the emails requesting statements or the purported statements until one of the plaintiff’s witnesses was deposed and admitted to sending a statement to plaintiff. Despite this admission and defendant’s subsequent requests to plaintiff to produce the statements, no statements from the first email were produced and only 16 of the 20 from the second email were produced in a piece-meal fashion. The court found plaintiff spoliated evidence as well.

The result of both parties’ spoliation: an adverse inference sanction was granted for defendant’s spoliation of the video and for plaintiff’s spoliation of the statements from the earlier email request. Plaintiff was also sanctioned for defendant’s costs for the original requests for production as well as re-deposing witnesses.
And so the lessons to be learned? Make sure you halt routine destruction of evidence. This cannot be emphasized enough. Additionally, if you are advising your clients on a suit, don’t let them create evidence that could impact the case. It should go without stating that you should not let your witnesses fabricate evidence either, but it never hurts to remind some attorneys.

A Rambus in the SEC?

In the world of e-discovery and spoliation, the Securities and Exchange Commission in some respects committed a Rambus-level spoliation violation.  We all know what happened in the Rambus cases – Rambus’s “shred days” were, to say it nicely, not looked upon favorably.  The company’s “shred days” policy resulted in severe sanctions effectively terminating some of the disputes it brought.  But, the SEC is not Rambus or a private company, and we are not in court.  Moreover, if the SEC did receive sanctions (or if it receives fines as a result of any justice department action), the costs of such sanctions would be paid for by the taxpayers.  That would only mean more costs for taxpayers adding to what has been a costly few years taxpayers.  Regardless, the repercussions of their destruction policies have also been paid for by taxpayers.

The story goes like this:  In early 2010, an SEC whistle-blower, Darcy Flynn, raised questions about the document retention policies of the SEC.  According to a New York Times article, the SEC had a policy in which it routinely destroyed documents for “matters under investigation” that had been closed.  These “matters under investigation” were in essence preliminary investigations that did not result in full investigations.  Apparently, the SEC policy was an internally posted policy that dated to at least the early 1990s and allowed documents for such closed matters to be destroyed.  At first glance, that doesn’t sound so bad.

But, according to some, these closed “matters under investigation” involved many investigations of individuals who were involved in or were subsequently charged with SEC violations relating to the 2008 Wall Street collapse as well as economic crises from earlier times.  No one knows whether some of those destroyed documents may have contained evidence that could have aided subsequent investigations.  Destruction may have also wiped out evidence that showed SEC investigators providing favors to private-sector former colleagues or future employers.  If the SEC were a company, it would have faced serious spoliation charges.

The good news is that the SEC has amended its policy, hopefully in compliance with a deal it worked out with the National Archives and Records Administration requiring it to retain documents for 25 years.  Perhaps this new policy is more akin to one of the purposes of the SEC – to ensure Wall Street retains its records and to fine those who fail to do so.  They may be well-advised to look into better records management solutions that allow for appropriate retention, storage and disposition of documents.

Tags: spoliat, spoliation