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Court Finds Failure of Counsel to Determine Existence of Backup Tapes an Unlikely Mistake that Cannot Be Countenanced

Posted in CASE SUMMARIES

Housing Rights Ctr. v. Sterling, 2005 WL 3320739 (C.D. Cal. Mar. 2, 2005)

Plaintiffs sued Defendants alleging housing discrimination as evidenced by a preference for Korean residents. Defendants allegedly committed discovery violations in connection with the ensuing litigation by failing to instigate a litigation hold, destroying relevant documents, and failing to instruct agents to search for responsive materials. Judge Fischer granted Plaintiffs’ motion for an adverse inference jury instruction and other relief.

The Court relied upon Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) (“Zubulake IV”) and Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004) (“Zubulake V”) in determining that Defendants had committed discovery abuses. Testimony indicated that a litigation hold had not been properly communicated and put into effect. Custodians apparently continued to destroy potentially relevant documents even after litigation had commenced. Declarations indicated that Defendants’ counsel had informed other counsel of the need to preserve documents, but there was no declaration by in-house counsel affirming that a litigation hold had been communicated to employees.

Defendants asserted that allegedly destroyed documents were not relevant and thus not subject to retention obligations. In a transcript of argument before Magistrate Judge Eick, defense counsel indicated that as long as destroyed documents did not constitute “smoking gun issue[s],” “it’s a big so what.” The Court found this apparent attitude “exceedingly troublesome in a member of the bar of this court.”

Defendants claimed that the routine destruction of inspection notes and memos was irrelevant because no destruction occurred during the relevant timeframe (after February 2003.) However, Plaintiffs countered that the duty to preserve would actually apply beginning in December 2002 when Defendants had been sent a demand letter and should have reasonably anticipated litigation. Plaintiffs asserted that they suffered prejudice due to the destruction of this potentially relevant evidence, which might be relevant to the claim that Defendants conducted bogus inspections to determine tenants’ race, national origin, and familial status. The Court held that an adverse inference instruction might be appropriate, depending upon testimony at trial.

Darren Schield testified that employees’ computers were never searched for responsive documents, but later issued a declaration stating that he had followed up and learned that counsel had asked two employees to search for relevant electronically stored information. Plaintiffs noted that those who searched would only constitute two of thirty-six employees. Testimony by some employees who apparently might have had responsive documents (although Defendants asserted otherwise) indicated that they had not been asked to conduct any search.

Forms and stamps containing references to the “Korean” building names had apparently been destroyed. Plaintiffs argued that such materials constitute relevant evidence that was subject to requests for production. Including the word “Korean” in the names allegedly demonstrated an unlawful preference for Korean residents. Defendants replied that blank forms and stamps containing the Korean names had been destroyed to prevent accidental use by employees in violation of the Court’s preliminary injunction, and responsive documents were limited to those regarding the naming of the buildings or changes to the names. Defendant, however, testified that at least one of the buildings was intended to be named “Wilshire Korea Town Towers” but a sign painter mistakenly wrote “Wilshire Korean Towers.” Materials showing old names would be “directly relevant to rebutting this claim.”

Plaintiffs claimed that Defendants’ responses to discovery requests were improperly delayed. Defendants allegedly produced 2,701 highly relevant documents on October 29, 2004, the discovery cut-off date. This was followed by another 135 pages sent on the October 29 but not received until November 1. Defendants replied that the vacancy reports included in the 2,701 documents were not responsive to any request for production (Plaintiffs argued otherwise) and the October 29 response to an informal request made on October 12 was timely.

No email had been produced until October 29, 2004. In June 2004, Defendants stated that no responsive emails had been produced because none had been found. However, September 2004 testimony indicated that email back-up tapes had not even been searched. Defendants claimed that there had been “an honest miscommunication regarding the production of emails” and an exhaustive search had been conducted for responsive material as soon as the existence of email backups had been realized.

To the extent there is any explanation, it is patently insufficient. At the hearing another of Defendants’ counsel, Mr. James, simply volunteers that “Mr. Platt [who apparently was not present at the hearing] at the time he made the statement [that there were no backup tapes] was simply unaware because his knowledge was there was not such a system in place.” Ex. O at 137:25–138:2. Paragraph 26 provides no further explanation of the alleged miscommunication or misimpression that resulted in at least 226 responsive e-mail messages and attachments being provided on the last date for discovery. Thus nowhere do Defendants state under oath how this unlikely mistake came to be made. The Court does not consider this an adequate explanation of Defendants’ conduct, and finds it was at least grossly negligent.

In considering the granting of an adverse inference jury instruction, The Court reasoned that unless it finds that Defendants acted in bad faith, Plaintiffs must show that a reasonable fact finder could infer that the destroyed evidence would have been adverse to the destroying party. Judge Fischer proceeded to find that a reasonable fact finder could indeed make such an inference in connection with destruction of stamps and forms which showed “Korean” names for certain buildings.

Plaintiffs argued that all allegedly destroyed evidence should be considered adverse to the Defendants based on Defendants’ failure to ensure a litigation hold and their delay in responding to discovery requests. “Intentional or grossly negligent acts that hinder discovery” can support an inference that that the destroyed evidence was harmful to the destroying party. Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 110 (2d Cir. 2002). The Court, however, did not immediately find that the requirements for an adverse inference jury instruction had been met in connection with evidence other than the destroyed stamps and forms showing “Korean” names discussed above.

Plaintiffs were found entitled to monetary sanctions for costs incurred in investigating, conducting “meet and confer” conferences, and filing this motion.