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Sent to you by pakurilecz via Google Reader: Rejecting Arguments
Regarding "Transitory Nature" of Data and Server Limitations, Court
Finds Defendants Failed to Preserve Evidence in Bad Faith, Orders
Adverse Inference and other Sanctions via Electronic Discovery Law by
[log in to unmask] (K&L Gates) on 2/5/09
Arista Records, LLC v. Usenet.com Inc., 2009 WL 185992 (S.D.N.Y. Jan.
26, 2009)

Upon finding that defendants acted in bad faith to deliberately destroy
relevant evidence despite a duty to preserve, the court imposed severe
sanctions.

Defendant Usenet.com, operated by defendant Gerald Reynolds, is a
commercial Usenet provider. Usenet is a “network of loosely connected
computer servers that share message traffic for discussions.” Users are
able to upload content to the system and download content from other
users’ postings. Postings to Usenet are known as “articles.” “Articles”
are organized into “newsgroups” – including Music Groups. In this case,
“Plaintiffs contend that Defendants provided their subscribers access
to hundreds of music piracy newsgroups containing vast amounts of
infringing digital music files copyrighted by Plaintiffs.”

Plaintiffs filed suit and issued discovery requests for certain
categories of information. Among the information sought was Usage Data
and Digital Music Files.

Plaintiffs alleged that defendants affirmatively acted to spoliate
large portions of the requested data. For example, plaintiffs claimed
that on the same day defense counsel assured production of Usage Data,
defendant Reynolds disabled access to over 900 Music Groups, but failed
to preserve the Usage Data. Plaintiffs also alleged that defendants
acted affirmatively to manipulate their server system to prevent the
retention of relevant data, namely Digital Music Files, and to speed
the pace with which those files were overwritten, to prevent their
recovery later on.

Soon after the purposeful disablement of the system, defendants
re-enabled a significantly smaller number of Music Groups that were
then re-populated with new articles and generated new Usage Data. The
server housing those groups was allegedly re-configured to capture and
preserve the information requested, but crashed in response to the high
volume of data in a matter of days. Following the crash, no Music
Groups were re-enabled.

Some of the data from the re-enabled Music Groups was eventually
produced to plaintiffs. Some “junk” Usage Data was also produced that
reflected subscribers failed attempts to access the Music Groups while
they were shut down. For various reasons, however, plaintiffs argued
the information produced was not a sufficient replacement for what was
lost.

Defendants presented several arguments in their defense. In large part,
however, defendants relied on the automatic operations and limitations
of their system as justification for the alleged spoliation.
Specifically, defendants asserted that the systems’ normal operation
mode did not preserve the requested data. Moreover, defendants argued
that even if the servers were re-set, the resulting volume of data
collected would crash the system. In fact, defendants asserted that
such a crash occurred as a result of their attempts to extract the
requested data from the small number of Music Groups that had been
re-enabled following defendant Reynolds’s actions. The system preserved
approximately ten days of data prior to the crash and portions of that
information were eventually produced to plaintiffs, as discussed above,
although portions of that information were also missing or
irretrievable.

Regarding the disablement of the Music Groups that resulted in the loss
of Usage Data, defendants claimed that this action was taken upon
plaintiffs’ insistence that defendants disable access to the allegedly
infringing material. As a result, the requested data “expired off the
system ‘through normal system operational attrition.’” In support of
that claim, defendants argued that the information sought was
“transitory in nature meaning that in-flow of new articles pushes out
the old articles present on the Usenet.” Thus, defendants argued, any
loss of information, specifically during the period of disablement,
resulted from the normal function of new articles pushing old articles
off the server, and not from the deliberate actions of defendants.

In its analysis, the court first determined that defendants’ duty to
preserve arose no later than upon receipt of specific requests for the
spoliated information. Answering defendants’ assertions that there was
no such duty in light of the transitory nature of the data, its lack of
business purpose, and their systems’ lack of capacity, the court
concluded that “once Defendants had actual notice that Plaintiffs were
requesting the data, Defendants had the obligation to preserve it…or at
least to negotiate in good faith what data they could produce.”
Applying Fed. R. Civ. P. 37(e) by analogy in footnote, the court stated:
Rule 37(e) 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 Advisory
Committee notes make clear, however, that "[w]hen a party is under a
duty to preserve information because of pending or reasonably
anticipated litigation, intervention in the routine operation of an
information system" is required. Advisory Committee Note to the 2006
Amendment to Federal Rule of Civil Procedure Rule 37(e).
Moreover, "[a]mong the factors that bear on a party's good faith in the
routine operation of an information system are the steps the party took
to comply with a ... party agreement requiring preservation of specific
electronically stored information ."

The also court found defendants’ assertions concerning their systems’
capacity to preserve data unpersuasive. First, the court noted
defendants’ failure to address the alleged burden of responding to
discovery with a motion pursuant to Rule 26(c). Second, the court
pointed to the inconsistency between defendants' claimed inability to
preserve the requested data and their later productions of that same
information. Defendants’ claims were further challenged by statements
from plaintiffs’ expert that defendants could have preserved Usage Data
that was lost by “changing the size of the files or by copying the
files from the servers’ hard drives” and by revelations that Usage Data
was logged in the course of normal server operation, contrary to
defendants' assertions, among other things.

Turning to the issue of culpability, the court concluded that
defendants’ failure to preserve was in bad faith. In so finding, the
court first rejected defendants’ claim that the disablement was at
plaintiffs’ behest. The court then addressed defendants’ claim that
“there is no authority to support the culpability of a party in a
situation where the alleged despoiled data is of a transitory nature
and where no mechanism exists for saving or backing up the massive
amount of data and information that is flowing through the server at
any given moment.” Once again, the court rejected this argument on the
basis of the inconsistency created by defendants’ later production of
exactly the information they claimed they were unable to preserve and
revelations that defendants’ claims about system limitations and
capacity, especially surrounding the loss of Digital Music Files, were
untrue. For example, the court discussed at length the extensive system
manipulation undertaken by defendants to speed the loss of Digital
Music Files from the servers, despite plaintiffs’ specific request to
preserve them.

Responding to defendants’ arguments that equivalent data could be
gathered by allowing re-enabled Music Newsgroups to re-populate, the
court reasoned that “the data would likely understate the
pre-spoliation infringement activities” because users likely changed
their “usage patterns” following the server crash. That is to say, when
the service crashed and did not return, users likely went elsewhere to
find music and were unlikely to come back.

Regarding the relevance of the lost data, the court stated that
“[u]ltimately, there can be no dispute that the [requested data] in
issue are extremely relevant to Plaintiffs’ claims.” Thus, the court
found, the imposition of sanctions was warranted.

The court rejected a number of plaintiffs’ requested sanctions as
dispositive, “a result that would go far beyond simply restoring
Plaintiffs to the same position they would have been in had there been
no spoliation of evidence,” but granted an adverse instruction as to
several issues and precluded defendants from challenging plaintiffs’
statistical evidence “on the grounds that it did not accurately reflect
pre-spoliation data.”

The court also awarded plaintiffs attorneys’ fees and costs in an
amount to be determined at a later time.

A copy of the full opinion is available here.

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