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Finding “No Reason to Treat Websites Differently than Other Electronic Files,” Court Grants Adverse Inference for Failure to Preserve Website

Posted in CASE SUMMARIES

Arteria Prop. Pty Ltd. v. Universal Funding V.T.O., Inc., 2008 WL 4513696 (D.N.J. Oct. 1, 2008) (Not for Publication)

In this case arising from failed negotiations for a long term development loan, the plaintiff filed a motion for spoliation sanctions and sought an adverse inference in its favor.  Specifically, plaintiff alleged spoliation of the contents of the defendants’ website as it existed at the time the dispute between the parties arose, and of a particular letter from the Bank of New York.

Regarding defendants’ website, plaintiff sought “electronic snapshots or paper copies of the website” indicating the content of the website at the time of the negotiations, specifically, statements that Universal was “one of the leading lenders serving the real estate market” with more than “50 years of Commercial Mortgage Banking experience.”  Defendants advised that they had requested their own copies of the site and that they would provide the same to the plaintiff.  Although defendant O’Hara confirmed during his deposition testimony that statements cited by the plaintiff were indeed present on the website at the time of the negotiations, the defendant did not produce the requested snapshots.

At a hearing on January 3, 2007, the Honorable Ronald J. Hedges heard arguments and entered an order that as of December 18, 2006 defendants were “deemed to have admitted that…they do not have within their possession, custody, or control” the two categories of evidence sought by the plaintiff.  Judge Hedges’s order also permitted plaintiff to file a motion for spoliation in conjunction with the final pretrial order.

In the meantime, defendants’ counsel withdrew and defendant O’Hara sought and received several extensions of time while he attempted to retain counsel.  In a belated submission to the Court on September 3, 2008, defendant O’Hara’s response to the motion for spoliation was simply:  “Universal-Funding VTO, Inc. disagrees on ‘The Motion for Spoliation’[.]  This never happened.”

Analyzing the issue of spoliation as to Universal’s website, the court noted that there “seemed to be no dispute” that the website was in existence when the plaintiff filed suit and that defendants were therefore required to maintain the website.  According to the court, the only remaining issue was the question of control:

The only question is whether or not the website was under the control of Defendants.  This Court sees no reason to treat websites differently than other electronic files.  Where, as here, Defendants had control over the content posted on its website, then it follows a fortiori that it had the power to delete such content.  Although Defendants do not so posit, it may be argued that the website was maintained by a third party, perhaps a web design company who posted content on behalf of Defendants.  But this is irrelevant, just as it’d be irrelevant if the website was maintained on a third party server rather than Defendant’s own server (as is likely the case here).  Despite the inevitable presence of an intermediary when posting content on the Web, the Court finds that Defendants still had the ultimate authority, and thus control, to add, delete, or modify the website’s content.  There is no evidence to the contrary.

Accordingly, the court found that an adverse inference was warranted where the defendants failed to produce the relevant content from the website.