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Sanctions Imposed for Manipulation of Metadata to Conceal Use of Unproduced Computer

Posted in CASE SUMMARIES

T&E Investment Group, LLC v. Faulkner, Nos. 11-CV-0724-P, 3:11-CV-1558-P, 2014 WL 550596 (N.D. Tex. Feb. 12, 2014)

In this case, the District Court adopted the recommendation of the Magistrate Judge and ordered an adverse inference and monetary sanctions for Defendant’s manipulation of metadata using a bulk file changer in an attempt to conceal his use of an unproduced computer.

The defendants were ordered to provide access to “all of the computers used by Defendants during the year 2011, wherever located, for examination of the computers’ hard drives” by a third party independent expert.  The expert subsequently reported that the data on one of the computers produced by individual defendant Christopher Faulkner had been manipulated.  Specifically, the expert reported that “Defendant Faulkner created a new profile on PCL-03, copied data to it, and used a bulk file changer to alter the data in an apparent ‘attempt to make it look like that was his computer that he used all the time.’”  Notably, the bulk of the data at issue was not related to the subject matter of the lawsuit.  The expert further reported that “he believed that someone used the bulk file changer to hide the existence of a computer that had not been produced in this case” and specifically noted Defendant Faulkner’s failure to produce a computer identified as “Alienware,” which the expert believed was used in the Faulkner home during the relevant time period.  Indeed, the evidence indicated that the unproduced Alienware computer had last been used inside the Faulkner home on the day after the court ordered the production of all relevant computers and had in fact been connected to PCL-3, the computer containing the manipulated data.  Evidence also indicated that Defendant Faulkner had sent emails from the Alienware computer during the relevant time period. 

Defendant Faulkner admitted using the bulk file changer but indicated he had only intended to set the files to “read-only” to prevent their deletion and further indicated that he had produced all computers in his possession custody or control. The Magistrate Judge ultimately concluded, however, that this testimony was false.

Plaintiffs sought sanctions.  For reasons beyond the scope of this summary, the Magistrate Judge indicated that he would limit his consideration to three specific computers: PCL-02, PCL-03, and PCL-06.  Notably, the Alienware computer is absent from this list (prompting Defendants to object to its consideration for the purpose of sanctions).  Nonetheless, the Magistrate Judge later indicated in footnote that “a finding that Defendants manipulated data on PCL-3 in order to avoid production of the Alienware computer or any other relevant evidence remains a viable ground for sanctions.”

Summarizing broadly, the Magistrate Judge found that the defendants had a duty to preserve “the evidence at issue, including PCL-3, the Alienware computer, and any other computer used by Defendants in 2011 in their possession, custody, or control.”  Acknowledging Defendant Faulkner’s resistance to the conclusion that the Alienware computer was located within his home, the Magistrate Judge concluded that the “evidence overwhelmingly support[ed]” the expert’s determination.

Turning to the question of culpability, the Magistrate Judge concluded that the “totality of the evidence presented” established that Defendant Faulkner “acted in bad faith” where the record indicated that the defendant had altered metadata in an effort to make it appear that he had used PCL-3 “for a number of years,” that he made false statements to the court about doing so, and that all of this was done “in the context” of Defendants’ failure to produce the Alienware computer.

Regarding prejudice, the Magistrate Judge acknowledged that it was the “most difficult” element for Plaintiffs to meet, where the altered files did not relate to the subject matter of the lawsuit and where it was impossible to prove that the contents of the Alienware computer were relevant because it was not produced.  Also noting the availability of other evidence, the Magistrate Judge concluded that the Plaintiffs could not be said to have been “irreparably prejudiced.”  However, the Magistrate Judge further indicated that it was “not difficult to conclude, based on ‘the totality of the circumstantial evidence’” that “a reasonable fact finder could conclude” that the Alienware computer contained relevant information.  Accordingly, the Magistrate Judge found that the “requisite prejudice” had been established from the spoliation of PCL-3 “in an apparent effort to conceal the existence and significance of the Alienware computer.”  In so finding, the Magistrate Judge rejected Defendants’ argument that the failure to produce the Alienware computer was beyond the scope of the motion for sanctions (recall the Magistrate Judge had limited his consideration to three computers) reasoning that while the failure itself was not sanctionable, it was “a related circumstance that [could not] be disentangled from Defendants’ spoliation of PCL-3. . . .”

The Magistrate Judge therefore recommended that the jury be “given a spoliation instruction that would entitle the jury to draw an adverse inference that a party who intentionally spoliated evidence did so in order to conceal evidence that was unfavorable to that party” and that Defendants be sanctioned in the amount of $27,500.

Upon Defendants’ objections, including that the Magistrate Judge had exceeded the scope of the spoliation motion by considering the Alienware computer, the District Court reviewed and adopted the recommendations of the Magistrate Judge, except to make clear that the sanctions were limited to Defendant Faulkner and his employer (also a defendant).

The District Court’s opinion and order (including the recommendations of the Magistrate Judge) are available here.