This Sidley Update addresses the following recent developments and court decisions involving e-discovery issues:
- an order from the U.S. District Court for the Southern District of New York denying spoliation sanctions and declining to extend the Defendants’ preservation obligations to require them to create new documents by recording content streaming over social media applications that was not otherwise recorded
- a decision from the U.S. District Court for District of Columbia granting Plaintiffs a default judgment against former New York mayor Rudy Giuliani as sanctions for Giuliani’s repeated noncompliance with discovery requests and for failing to take steps to preserve documents other than turning off the auto-delete functions for his devices and accounts
- a ruling from the U.S. District Court for the Southern District of New York denying a motion to compel Defendants to produce all documents that hit on the parties’ agreed search terms, finding that this obligation would be inconsistent with a parties’ obligations under Rules 26 and 34 of the Federal Rules of Civil Procedure to produce information that is relevant and responsive
- an opinion from the U.S. District Court for the Eastern District of Pennsylvania compelling a nonparty to produce data that was encrypted, over the nonparty’s objection that the encryption rendered the data inaccessible, and compelling the party to identify the individual who could decrypt the data
In Walkie Check Productions, LLC v. ViacomCBS Inc., No. 21 Civ. 1214 (KPF), 2023 WL 5154416 (S.D.N.Y. July 24, 2023), U.S. District Court Judge Katherine Polk Failla addressed whether spoliation sanctions could be awarded against a party that failed to record video content livestreamed over social media after receiving notice of Plaintiff’s intent to file litigation regarding the video content.
In this copyright infringement action, Plaintiff alleged that Defendants’ series of livestreamed episodes called House Party infringed on Plaintiff’s copyright for the same name. Id. at *1. Plaintiff owned the copyright for House Party, the concept of a broadcast of an “exclusive and engaging” afterparty with both musicians and celebrities in a New York City brownstone. Id. at *6. Plaintiff pitched the House Party idea to Defendants, including the Black Entertainment Television network (BET), but BET passed on the idea twice. In 2020, during the global COVID-19 pandemic, BET developed a streaming series called House Party, which involved guests who were frequently alone or in small pods of people and were often working from their own homes to bring content to others quarantined at home.
The BET series, which ran from March 29, 2020 to January 20, 2021, did not appear on television — rather, each episode was livestreamed to Instagram Live and/or Facebook Live. Id. at *3. Many of the episodes of the BET series were not recorded because they were debuted via livestreaming platforms that do not automatically record streamed video content.
When Plaintiff learned about the BET series, it began to record some of the episodes as they streamed. On July 2, 2020, an attorney representing one of the Defendants was copied on an email that referred to Plaintiff’s intention to bring a lawsuit for copyright infringement against Defendants. This same attorney received another email on July 15, 2020, regarding Plaintiff’s potential claims, and on the same day Defendants received a demand letter from Plaintiff regarding Plaintiff’s intent to file suit for copyright infringement.
During discovery, Plaintiff argued that Defendants should be sanctioned through an adverse inference because Defendants failed to record various episodes of the BET series as they were being livestreamed and thus produced only 39 of the approximately 90 BET series’ episodes that streamed. Plaintiff argued that because it notified one of Defendants’ attorneys that it intended to bring claims against Defendants relating to the BET series, each episode after that notice that was not recorded and preserved was a failure to comply with Defendants’ preservation obligations and should be subject to spoliation sanctions. Id. at *7.
Judge Failla began her analysis with a survey of the relevant rules regarding spoliation, defined as “the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Id. at *5. She explained that Rule 37(b)(2) allows for sanctions for failure to comply with a discovery order, while Rule 37(e) allows for sanctions when a party has failed to preserve electronically stored information (ESI). She added that “[e]ven in the absence of a discovery order, a court may impose sanctions on a party for misconduct in discovery under its inherent power to manage its own affairs.”
Judge Failla next set out the standard for assessing whether spoliation sanctions were warranted: “The party seeking discovery sanctions on the basis of spoliation must show by a preponderance of the evidence: (i) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (ii) that the records were destroyed with a culpable state of mind; and (iii) that the destroyed evidence was relevant to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.” She added that “[f]or spoliation sanctions to be appropriate it is necessary that the sought-after evidence actually existed and was destroyed.” Id. at *6.
Applying these standards, Judge Failla found that Plaintiff had failed to show that Defendants violated a preservation obligation. She noted that Plaintiff did not dispute Defendants’ assertion that “because many of the episodes were not recorded when they were livestreamed, they are no longer available.” Id. at *7. She explained that given the nature of the technology at the time, “Defendants would have had to take an extra, affirmative step to record the livestreams being broadcast over social media platforms.”
Judge Failla concluded that she was unwilling “to extend Defendants’ preservation obligations” to require recording of the streaming episodes. She explained that “preservation obligations are exactly that — obligations to preserve potential evidence that, by definition, must already exist,” and “a failure to create records — as opposed to the destruction of records that were kept — is not spoliation.” Because preservation obligations do not include an affirmative duty to produce new records, she held that Defendants’ failure to implement a practice of recording the BET series’ livestreams, even after receiving the alleged infringement notice from Plaintiff, could not be the basis for spoliation sanctions.
Judge Failla next distinguished the case law that Plaintiff cited to support its spoliation argument. First, she noted that Moody v. CXS Transportation, Inc., 271 F.Supp.3d 410 (W.D.N.Y. 2017), involved a litigant’s alleged mishandling of data that was automatically recorded (and thus created) by a locomotive’s event recorder system, whereas Plaintiff did not allege that the livestreams of Defendants’ show were automatically recorded. Second, Aktas v. JMC Development Co., 877 F.Supp.2d 1, 14-15 (N.D.N.Y. 2012), aff’d, 563 F. App’x 79 (2d Cir. 2014), centered on a litigant’s demolition of the opposing party’s work product on a construction site. She concluded that neither case supported Plaintiff’s argument that a party has an affirmative duty to create new records as part of its preservation obligations.
Judge Failla recognized that “the increased proliferation of livestreamed content may make it less likely that information relevant to litigation is memorialized,” but she explained that Plaintiff did not provide “a compelling reason why livestreamed content should be treated differently than other situations in which potentially relevant information exists in some temporary form but is not, as a matter of course, automatically condensed into a record that may be either maintained or destroyed.” She concluded that she would not create an exception for livestreamed content to the general rule that parties have no obligation to affirmatively create new records.
Finally, Judge Failla explained that even if she were to find that Defendants had an obligation to record the livestreams after receiving notice from Plaintiff’s counsel, she would conclude that sanctions were not warranted on this record, because Defendants were negligent at most in failing to take measures to record the livestreams after July 2020, and negligence was insufficient to warrant the sanctions Plaintiff sought. Id. at *8. In addition, she found that an adverse inference would not be warranted because Plaintiff could not establish Defendants’ failure to preserve the livestreams with a culpable state of mind. In that context, she noted that the record evidence demonstrated that there was no substantial similarity between the Plaintiff’s and Defendants’ works, so production of the unrecorded livestreams in discovery would not have generated a genuine dispute of material fact sufficient to defeat Defendants’ motion for summary judgment.
In Freeman v. Giuliani, --- F.Supp.3d ----, 2023 WL 5600316 (D.D.C. Aug. 30, 2023), U.S. District Court Judge Beryl A. Howell addressed whether Plaintiff was entitled to a default judgment as sanctions for Defendant’s spoliation of evidence.
Plaintiffs, two election workers for the 2020 presidential election, brought this litigation against former New York mayor Rudy Giuliani and others for defamation, intentional infliction of emotional distress, and civil conspiracy related to statements regarding the election being “stolen.” During discovery, Giuliani advised Plaintiffs that the Federal Bureau of Investigation (FBI) had seized his electronic devices in April 2021 and that he had lost access to some of his accounts after the seizure. Id. at *3-4. Giuliani’s counsel also informed Plaintiffs of a dataset held by TrustPoint One (TrustPoint), which he said contained all of the data collected by the FBI from Giuliani’s seized devices. Giuliani later claimed that his devices seized by the FBI in April 2021 were found to be “wiped out” when returned to him. Id. at *4.
Giuliani produced what Plaintiffs believed was a “meager number of documents” during discovery and Plaintiffs requested confirmation from Giuliani’s counsel that Giuliani had taken reasonable steps to preserve his electronic evidence. However, Giuliani’s counsel disclaimed awareness of his preservation efforts. Giuliani himself testified at a deposition that he used multiple phones, email addresses, and messaging applications in the months following the 2020 presidential election and that he had taken “a quick look” for responsive material on messaging platforms and some of his devices, without providing any detail as to whether that “quick” search was tailored to the litigation or whether he ever reached out to any of the companies he used for messaging applications to ask that his data be preserved.
At a March 21, 2023 court hearing, Giuliani’s counsel equivocated about Giuliani’s preservation efforts but also indicated that the TrustPoint dataset contained complete images of all data on Giuliani’s devices seized by the FBI in April 2021. Id. at *5. The court later ordered Giuliani to submit a written explanation describing in specific terms the data on the TrustPoint dataset that were searched in response to Plaintiffs’ production requests, in response to which Giuliani filed a report that failed to describe in specific terms the data sources located on TrustPoint or what locations and data sources remained to be searched.
Plaintiffs then filed a motion to compel Giuliani to produce all materials responsive to Plaintiffs’ requests for production and to provide a sworn declaration regarding his preservation efforts. Id. at *6. In response, Giuliani submitted a declaration about his efforts to preserve and search for records, including additional statements that the TrustPoint dataset contained all documents that were extracted from his electronic devices taken by the U.S. Department of Justice (DOJ), and that he had conducted manual searches of his electronic devices obtained after the April 2021 DOJ seizure for text messages, emails, and other documents, as well as all of his social media messaging accounts. Giuliani also, for the first time, claimed that any further searches of the TrustPoint dataset would not be possible because those “documents have now been archived.”
At a May 19, 2023 hearing, Giuliani acknowledged his obligation to preserve documents and that this obligation arose before Plaintiffs filed the litigation. Id. at *7. Giuliani also represented that he had not deleted any documents and blamed the government’s seizure of his devices in April 2021 for his purported loss of access to data created before that date. Thereafter, the court ordered Giuliani to provide another declaration describing his efforts to preserve, collect, and search potentially responsive data and locations that may contain responsive materials. Giuliani filed this declaration, which summarized six different data sources as likely to contain or having contained at some point, responsive information, including (1) three personal email accounts; (2) an iCloud account; (3) three phone numbers; (4) three messaging applications; (5) five social media handles; (6) and nine devices, two of which were not seized by the FBI. Giuliani also stated in his declaration that his only step to preserve evidence on his devices and accounts was to turn off the auto-delete function “sometime in late 2020 or early 2021” on his “email, messaging, communication, or other document storage platforms” and that “he did not manually delete any electronic documents or dispose of any paper files.”
In a June 30, 2023 joint status report, Plaintiffs claimed that Giuliani had “taken no steps to collect and search repositories outside of TrustPoint” and had produced no materials from his businesses. Id. at *9. Giuliani did not dispute these discovery shortcomings, but the court provided Giuliani with another opportunity to comply with his discovery obligations and cautioned that a failure to comply “may result in severe discovery sanctions.” Notwithstanding these warnings, Giuliani did not comply with the court’s orders, and Plaintiffs filed a motion for sanctions, including for the sanction of a default judgment. Id. at *11.
Judge Howell began her analysis with a survey of the relevant federal rules authorizing the imposition of sanctions for the failure by a party to a civil lawsuit to preserve ESI and to comply with a court’s discovery orders, including Rules 37(b) and (e). Id. at *12. She explained that a party to federal litigation that is either anticipated or pending is required to preserve potentially relevant evidence. When ESI “that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery,” a court may “order measures no greater than necessary to cure the prejudice.” Id. (quoting Rule 37(e)(1)). Moreover, upon a finding “that the party acted with the intent to deprive another party of the information’s use in the litigation,” a court is empowered to impose serious sanctions, including “presum[ing] that the lost information was unfavorable to the party; instructing the jury that it may or must presume the information was unfavorable to the party; or dismissing the action or entering a default judgment.” Id. (quoting Rule (e)(2)). Judge Howell noted that similarly serious sanctions were authorized under Rule 37(b) if a party fails to obey an order to provide or permit discovery.
Judge Howell found that Plaintiffs had met their burden of establishing that spoilation sanctions were warranted under Rule 37(e) by proving the four required elements: (1) ESI should have been preserved in the anticipation or conduct of litigation; (2) a party failed to take reasonable steps to preserve the ESI; (3) ESI was lost as a result; and (4) the ESI could not be restored or replaced by additional discovery. Id. at *13.
First, Judge Howell found that Giuliani should have, but did not, preserve ESI by early 2021. She noted that Giuliani admitted in a declaration that he received “notice of potential litigation issues surrounding his involvement in contesting the 2020 Election in late 2020 or early 2021.” Thus, Giuliani had a duty to preserve potentially relevant ESI on his devices and accounts by at least early 2021.
Second, Judge Howell found that Giuliani did not take reasonable steps to preserve his ESI. She explained that once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure the preservation of relevant documents. She further explained that courts have normally held that litigants must prevent destruction of ESI on phones or other electronic devices by backing up the data to that device’s cloud network.
Judge Howell agreed with Plaintiffs that Giuliani did not take reasonable efforts to preserve his ESI by turning off auto-delete at some time “in late 2020 or early 2021” on his email, messaging, communication, or other document storage platforms and by refraining from manually deleting electronic documents or disposing of paper files. Id. at *14. She noted that Giuliani could have, but chose not to, take any other reasonable steps to preserve his ESI, such as backing up his iMessage communications to his iCloud account, downloading the contents of his other messaging and email applications onto an external storage device or confirming that the contents of communications on those platforms were preserved on the cloud, or otherwise engaging an expert to preserve the material that existed outside of his physical devices. Citing to the advisory committee notes to Rule 37, Judge Howell also found Giuliani’s sophistication as a litigant — including serving as the U.S. Attorney for the Southern District of New York — “only underscores his lackluster preservation efforts.”
Judge Howell also rejected Giuliani’s efforts to shift blame for his preservation failures to the government. She noted that a declaration submitted by Giuliani’s attorney established, among other things, that the TrustPoint dataset did not contain a full extraction of Giuliani’s devices, that the TrustPoint dataset contained some corrupted files, and that there were other devices that had not been seized by the government, all of which cast doubt on Giuliani’s assertion that the TrustPoint dataset contained the entire repository of his pre-April 2021 ESI. Judge Howell noted that Giuliani “plainly should have known better, and had he taken the proper steps prior to or even after the FBI’s seizure of his devices, his potentially relevant ESI could have been preserved.” She added, “Simply put, the government is not Giuliani’s ESI preservation team, and the FBI’s seizure of Giuliani’s electronic devices did not obviate his obligation to take additional preservation efforts before and after the seizure.”
Third, Judge Howell found that Giuliani’s ESI was irretrievable. She explained that ESI is irretrievable when it “cannot be restored or replaced through additional discovery.” She concluded that Plaintiffs established this element because Giuliani admitted that his ESI had either been “wiped” or that he has lost access to it, and Giuliani had not shown that any of his potentially responsive ESI could be retrieved through alternative means.
Fourth, Judge Howell found that sanctions under Rule 37(e)(2) were warranted. Id. at *16. She explained that Rule 37(e) authorizes district courts to (1) order measures no greater than necessary to cure the prejudice or (2) upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation, then presume that the information was unfavorable to the party, instruct the jury that it may or must presume the information was unfavorable to the party, or dismiss the action or enter a default judgment.
Judge Howell found that Plaintiffs were prejudiced by Giuliani’s failure to preserve his ESI. She explained that prejudice from the loss of ESI is judged by “the information’s importance in the litigation” and “ranges along a continuum from an inability to prove claims or defenses to little or no impact on the presentation of proof.” Under this standard, Judge Howell found that Giuliani’s ESI was relevant to each of Plaintiffs’ claims and that Plaintiffs were “severely hampered in being able to refute Giuliani’s defense that he made his statements about Freeman merely negligently.” Judge Howell also found that several communications involving Giuliani that Plaintiff received from third parties but not from Giuliani showed that relevant evidence that “goes to the heart of claims in this lawsuit” were not preserved. Id. at *17. Ultimately, Judge Howell held that Giuliani’s failure to preserve his ESI significantly prejudiced Plaintiffs’ ability to prove their claims because circumstantial evidence of Giuliani’s knowledge of the falsity of his claims concerning Plaintiffs likely would have existed in his lost ESI. Id. at *18.
Judge Howell concluded that Plaintiffs had proven that the only reasonable explanation for Giuliani’s failure to take any reasonable preservation steps “is that he did so deliberately to deny Plaintiffs evidence that would be helpful to their case.” She noted that Giuliani was responsible for preserving his own ESI and that he was sophisticated and understood his obligations. Accordingly, she found that Giuliani’s failure to preserve potentially relevant ESI warranted Rule 37(e)(2) sanctions.
Judge Howell also concluded that an entry of default against Giuliani was an appropriate sanction under the circumstances. She explained that “default judgment is inappropriate unless the litigant’s misconduct is accompanied by willfulness, bad faith, or fault.” Id. at *20. Accordingly, the grant of default judgment must be based upon a finding of “clear and convincing evidence of misconduct” and accompanied by “a specific, reasoned explanation for rejecting lesser sanctions, such as fines, attorneys’ fees, or adverse evidentiary rulings.” According to Judge Howell, a default judgment was appropriate under this standard because Giuliani deliberately failed to preserve his ESI and to comply with several court orders, repeatedly “flaunted his discovery obligations,” and forced Plaintiffs to waste time by wading through irrelevant discovery and forced the expenditure of judicial resources to assess and ensure compliance with the most basic of discovery obligations. Id. at *20-21. She rejected Giuliani’s argument that his stipulation to the factual elements of Plaintiffs’ claims obviated his discovery obligations, finding that “this discovery shortcut is simply unfair and will not be permitted here.”
Judge Howell next found that lesser sanctions would not deter the conduct at issue. Id. at *21. She explained that a default judgment is warranted as a sanction when “the party typically has engaged in a pattern of disobedience or noncompliance with court orders and the noncompliance most often has prejudiced the opposing party, so that the court concludes that no lesser sanction is warranted.” She concluded that the seriousness of Giuliani’s multiple discovery violations over the course of the litigation made plain that Giuliani had no interest in participating in discovery and that an entry of default was warranted.
In United States, for the Use and benefit of M. Frank Higgins & Co., Inc. v. Dobco Inc. et al., No. 22-cv-9599 (CS) (VR), 2023 WL 5302371 (S.D.N.Y. Aug. 17, 2023), U.S. Magistrate Judge Victoria Reznik addressed whether parties could be required to produce all documents that included agreed-on search terms without regard to whether the documents were responsive to the parties’ requests for production.
During discovery, the parties disagreed on how searches for ESI should be conducted. Id. at *4. Plaintiffs argued that the parties should be required to produce all nonprivileged documents that hit on one or more of the search terms agreed between the parties. Defendant argued that Plaintiffs’ proposed approach was beyond the scope of permissible discovery because it would require Defendant to produce every single document that included at least one of the agreed search words, without considering relevance or proportionality to the needs of the case.
Magistrate Judge Reznik first noted that “there is nothing improper about parties agreeing to produce all documents generated from an ESI search protocol,” but she declined to impose this obligation on Defendant involuntarily. Id. at *4. She explained that ESI is not exempt from Rules 26 and 34 of the Federal Rules of Civil Procedure, which only obligate a party to produce information that is relevant and responsive. Id. (citing Rule 26(b)(1) and Rule 34(a)). Because search terms may produce some amount of nonresponsive documents, she concluded that Defendant was entitled to review its documents to ensure that they are responsive to the discovery demands even if they hit on one or more of the parties’ agreed-on search terms. However, she noted that Defendant must “promptly produce all non-privileged documents responsive to the parties’ document demands, except for those that it properly withholds based on an objection.”
Magistrate Judge Reznik next noted that the parties had not yet “engaged in any meaningful dialogue about proposed search terms, custodians, and date ranges to be applied to any searches for ESI.” She explained that without such discussions, arguments about relevance and burden were “speculative at best.” Rather, “[i]t is standard practice for the negotiation of search protocols to be an iterative process that allows parties to narrowly tailor search terms, custodians, and date ranges to locate responsive and non-privileged documents for production.” She further noted that parties can minimize concerns about producing large quantities of nonresponsive documents by narrowly tailoring and testing their search protocol.
Ultimately, Magistrate Judge Reznik ordered the parties to meet and confer to negotiate search terms, custodians, and date ranges that are (1) narrowly tailored to achieve responsive search results, (2) proportional to the needs of the case, and (3) not unduly burdensome, costly, or voluminous.
In Estate of Daher, by and through Daher v. LSH Co., No. 23-0088, 2023 WL 4670997 (E.D. Pa. July 12, 2023), U.S. District Court Judge Nitza I. Quiñones Alejandro addressed whether a nonparty could be compelled to produce data in the possession of a sister company, over the nonparty’s objection that the data was encrypted and therefore inaccessible.
In this action seeking to recover the proceeds of a life insurance policy, the Plaintiff served subpoenas on nonparty Coventry related to a finance program administered by Coventry under which Plaintiff claimed the policy at issue was generated. Id. at *1. Plaintiff later moved to compel certain categories of documents from Coventry, including documents related to the deceased obtained by Coventry from American Viatical Services (AVS), a now-defunct company that prepared life expectancy reports on insureds. Coventry had purchased AVS data, a computer server, and software systems after AVS’ closure. Id. at *2.
Coventry opposed the motion to compel AVS documents and data on several different grounds. First, Coventry argued that it should not be required to produce an AVS database because it contained confidential information pertaining to tens of thousands of people. Judge Quiñones Alejandro rejected this argument because Plaintiff sought AVS documents and information concerning only the deceased, not any other person. As a result, no confidential information concerning people not involved in the litigation would necessarily be disclosed through compliance with the subpoena.
Second, Coventry argued that the requested AVS documents and data were not within Coventry’s possession, custody, or control but rather were owned by a sister company. Judge Quiñones Alejandro rejected this argument as well. She noted that Rule 45(a)(1)(A)(iii) requires production of documents that are in a party’s “possession, custody, or control,” and when a corporate entity is requested to produce documents owned by another entity, “separate and distinct corporate identities are not readily disregarded.” Id. at *2-3 (citing cases). However, she explained that Coventry clearly had the “ability to obtain upon demand” the requested documents from its sister company because some of its personnel had limited access to the AVS server, including access to “search for life expectancy reports.” Id. at *3.
Third, Coventry argued that much of the requested AVS data was encrypted and thus inaccessible. Coventry claimed that it would need to engage a third-party information technology consultant to decrypt the data and that doing so would pose an undue burden on Coventry. Judge Quiñones Alejandro explained that Rule 26(b)(2)(B) provides that a party need not produce ESI upon a showing that the information is “not reasonably accessible because of undue burden or cost.” Fed. R. Civ. P. 26(b)(2)(B). However, she noted that Coventry had not shown that engaging a consultant to decrypt the AVS data would pose an undue burden or cost “beyond its bald assertion.” As such, she found that Coventry’s undue burden argument was insufficient to overcome its disclosure obligation under the rules.
Finally, Coventry argued that it could not be compelled to provide the name and contact information of a data consultant who could decrypt the AVS data, on the grounds that Rule 45 does not “require the creation of documents that do not already exist.” Judge Quiñones Alejandro also rejected this argument because Coventry had informed Plaintiff that it possessed the requested contact information for the consultant who could decrypt the AVS data. As such, Coventry’s compliance with the subpoena would not require Coventry to create new documents that do not already exist.
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