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Finding Burden of Retention and Production Outweighs Benefit, Court Allows Recycling of Back Up Tapes

Posted in CASE SUMMARIES

Gulfstream Worldwide Realty, Inc. v. Phillips Elecs. N. Am. Corp., 2007 WL 5685128 (D.N.M. Oct. 19, 2007)

In this case, arising out of a claim for a commission on the sale of a semiconductors plant, Phillips Electronics North America (“PENAC”) moved the court for a protective order to allow NXP Semiconductors USA, Inc., a non party, to erase and reuse backup tapes that potentially contained information relevant to the lawsuit.  NXP’s backup tapes are implicated by its relationship with Royal Phillips, PENAC’s parent company and the holder of a 19.9% interest in NXP, a company formed following Royal Phillips’s sale of its semiconductor business.  Many of the former employee’s of Royal Phillip’s semiconductor business went to work for NXP.

Per the court’s instruction, PENAC worked with NXP to obtain the discovery that Gulfstream sought.  Eventually, NXP advised PENAC that it planned to “follow its normal course of business” and erase and reuse the backup tapes for one of its computer systems.  NXP indicated that there were 1080 tapes at issue, each of which would take approximately four hours to individually search, and that the tapes began in September 2006, several months following the close of the sale at issue.  If the tapes could not be reused, the cost to NXP to acquire new tapes would have been $60,000.00 and a three-week-wait for the tapes to arrive.  PENAC advised the court in its motion that the tapes did contain a few documents created by Brian Sloan, an individual deposed by Gulfstream.  However, PENAC testified that Sloan no longer worked for NXP, that his relevant information had been separately preserved, and that there was no need to take his information from the back up tapes.

Gulfstream opposed allowing the reuse of the backup tapes. It argued that PENAC failed to show the “extraordinary circumstances” required to justify the protective order, that the tapes could contain relevant documents from Sloan and others, and that “[w]ithout sufficient information as to whether those documents have been produced, whether they are responsive, and what the documents contain, Gulfstream simply has to assume the worst that these documents set forth the information Gulfstream has been seeking but has yet to receive from [PENAC]-a simple accounting of what happened to the property at issue in this case.”

At a hearing, PENAC addressed the issue of Sloan’s documents and indicated that it was unsure whether the backup mirrored Sloan’s hard drive but that Sloan’s computer was preserved as a “separate entity” and not simply “dumped” on “this backup system.”  PENAC further argued that although they would concede that there was no guarantee that the information on the tapes was only from 2006, whatever was on Sloan’s laptop was not on the back up tapes at issue.  PENAC also conceded that it did not know how Sloan’s laptop information would have physically been transferred to the backup system nor whether Sloan might have saved specifically to the backup tape system.  On the other hand, the court noted that “Gulfstream could not respond to the Court’s question of whether it would expend any effort to search thorough [sic] the back up tapes if they were produced.”  Gulfstream also conceded that it would not object to reusing the tapes if NXP or PENAC could offer assurance that the information on the backup tapes was still on the system and would not be lost.

The court’s analysis focused on the issue of burden vs. benefit.  The court ruled in favor of PENAC stating, “[t]he burden of requiring NXP to retain and produce the backup tapes…outweighs any possible benefits flowing from their production.”  The court also indicated its belief that that the court could “put in place certain conditions that will protect Gulfstream from the remote possibility that there is useable evidence on the backup tapes.”  Those conditions required PENAC and NXP to instruct their employees not to delete anything from their laptops and to require NXP’s recycling to be undertaken “as slowly as possible so that if the parties discover it is erasing evidence, it can salvage as much as possible for use in this case.”  Accordingly, the court granted the motion for a protective order, in part, but indicated NXP would be allowed to begin recycling only after filing its own motion and affidavit noting that under Rule 26(c) a protective order will be granted to the party from whom discovery is sought.