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Sent to you by pakurilecz via Google Reader: K&L Gates Obtains Ruling
Denying Defendant's Motion for Contempt Against Plaintiff's Technical
Consultant, and Court Grants Plaintiff's Motion for Sanctions for
Deletion of Data during Pendency of Litigation via Electronic Discovery
Law by [log in to unmask] (K&L Gates) on 3/20/09
Technical Sales Assocs., Inc. v. Ohio Star Forge Co., Nos. 07-11745,
08-13365 (E.D. Mich. Mar. 19, 2009)

In this case arising from a dispute over sales commissions, the court
denied Defendant Ohio Star Forge Company’s (“OSF’s”) motions for
contempt and sanctions and granted plaintiff, Technical Sales
Associates, Inc.’s (“TSA”), motion for sanctions for destruction of
electronic evidence. The court concluded that OSF deleted approximately
70,000 files and moved several email folders to the recycling bin
despite a duty to preserve relevant evidence.

In July 2007, TSA sought the production of all emails between certain
specified persons for the purpose of obtaining a particular email
alleged by TSA to exist on OSF’s information system and, specifically,
in the e-mailbox of OSF employee Patrick Billups. Notwithstanding
numerous targeted requests for the e-mail, OSF did not produce it.

Thereafter, TSA sought and received permission to examine OSF’s
computer system. The parameters of the examination were set forth in a
Stipulated Order. Essentially, Midwest Data Group, LLC (“Midwest”), a
consulting company retained by TSA to conduct the examination, was to
make a mirror image of OSF’s system hard drive and each of two
computers previously or currently used by OSF employee Patrick Billups.
Midwest was then to perform a narrowly tailored search and provide the
results to OSF’s counsel along with an acquisition report detailing
additional information about the search. Midwest was not to provide the
search hit results or the acquisition report to TSA until OSF had had
the opportunity to conduct a privilege and confidentiality review.

Midwest conducted the inspection, but did not locate the email in
question or any other relevant electronically stored information. In
other words, it had no “hits” from the court-ordered searches.

However, in the course of its examination, Midwest determined that in
April 2008, eight months after TSA’s initial discovery requests had
been served on OSF, OSF moved what OSF deemed to be the “necessary”
files from Billups’ computer to a new computer assigned to him, and
then deleted from the old computer approximately 70,000 files through
the use of a software wiping tool called “Eraser.” Midwest also
discovered that, at 2:08 a.m. on the morning after the court signed the
order allowing Midwest to inspect OSF’s computer systems, OSF moved
folders named “Pat’s Personal Folder Mailbox” and “Pat’s Mailbox” to
the recycle bin. Midwest drafted a report outlining these discoveries
(the “Examination Report”) and provided it to TSA. A copy was not
provided to OSF. Upon receipt of the report, TSA filed its motion for
sanctions.

In response, OSF filed a motion for contempt and for sanctions against
Midwest and TSA, arguing that Midwest violated the Stipulated Order by
providing its Examination Report to TSA , and arguing that TSA violated
the Stipulated Order by using the Examination Report to file TSA’s
motion for sanctions. In other words, OSF claimed that the Stipulated
Order precluded Midwest from providing any information whatsoever to
TSA, even information about OSF’s own apparent spoliation.

After entertaining briefing and oral argument, the court determined
that Midwest did not violate the Stipulated Order. Specifically, the
court found that there was nothing in the order requiring Midwest to
disclose only to OSF and not to TSA the absence of data or its
conclusion that OSF had deleted data. In so holding, the court reasoned
that the “Stipulated Order is clearly aimed at protecting the discovery
of actual data, not the absence of data.”

Regarding TSA, the court again determined that no violation occurred
where the Examination Report revealed an absence of evidence, a subject
not covered by the Stipulated Order.

The court then turned to TSA’s motion for sanctions. OSF presented
several arguments in its defense, including that if the email ever
existed it would have been on TSA’s own computer, but apparently was
not, that the email could still be found on other sources like servers
or back up tapes, and that the deletions on Billups’ old computer were
done in the ordinary course of business because of severe operational
issues and that “all of the necessary files” were transferred to
Billups’ new workstation. OSF further asserted that if the email was
not found, it either never existed or Midwest performed an incomplete
search.

The critical portion of TSA’s response was, essentially, that the
important issue was not the existence of the email, but rather the fact
that 70,000 files were deleted and others were moved to the recycle bin
during litigation.

The court agreed and stated, “it is difficult to find that OSF did not
intentionally destroy electronic information on both of Billups’
computers after such information was requested.”

Supporting its conclusion, the court noted that although OSF made
assurances that “all necessary files” had been transferred to Billups’
current computer and that any files deleted were irrelevant, there was
no way to verify that claim where the deleted files had been
overwritten with a series of zeros. The court also relied on Midwest’s
explanation that moving files to the recycle bin resulted in a change
to the dates of the emails therein such that they would be dated
outside of the relevant search range, and on its own observation that
“the timing of the destruction appears more than coincidental.” For
example, the 70,000 files were erased “at about the same time TSA
informed OSF that it wished to conduct a forensic examination” and, as
the court pointed out in footnote, “There is no explanation as to the
reason that the move of the emails [sic] folders to the recycle bin
occurred during the middle of the night. It is odd to say the least.”

Finally, the court held that “Fed. R. Civ. P. 37(e) does not provide
safe harbor for OSF’s conduct.” The rule states: “Absent exceptional
circumstances, a court may not impose sanctions under these rules on a
party for failing to provide electronically stored information lost as
a result of the routine, good-faith operation of an electronic
information system.” The court explained, “[t]he rule is intended to
protect a party from sanctions where the routine operation of a
computer system inadvertently overwrites potentially relevant evidence,
not when the party intentionally deletes electronic evidence.”

Accordingly, the court determined that “[w]hile we may never know
whether the [emails] ever existed, OSF’s conduct merits a sanction.”
Determination of a dollar amount for a monetary sanction as well as
TSA’s entitlement to an adverse jury instruction was delayed until
trial, however, when the harm of OSF’s actions could be better
determined.

A copy of the opinion is available here.

Midwest Data Group, LLC was represented in this action by Thomas J.
Smith, a Partner in the e-Discovery Analysis & Technology Group at K&L
Gates, and his team.


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