In re Napster, Inc. Copyright Litig., 2006 WL 3050864 (N.D. Cal. Oct. 25, 2006)
In this opinion, the court denied plaintiffs’ request for spoliation sanctions in the form of a default judgment, and instead granted plaintiffs’ alternative request for a preclusion order, an adverse inference instruction and an award of attorneys’ fees. Plaintiffs’ motion for sanctions argued that defendant Hummer Winblad (“Hummer”) knowingly and intentionally deleted an undetermined number of emails which they had a duty to preserve and to produce in response to plaintiffs’ document requests.
Hummer invested in Napster in May 2000, a time when several lawsuits were pending against Napster (collectively “the Napster I litigation”). The litigation prompted Hummer to enter into a Common Interest and Defense Agreement with Napster as part of its investment. On June 1, 2000, deposition and document subpoenas were issued for Hummer officers John Hummer and Henry Barry in the Napster I litigation, calling for all communications regarding Napster. Two days later, Ann Winblad, an officer of Hummer, sent an email to nine Hummer employees, copying Hummer’s counsel, with the subject line “a/c: E-mails regarding Napster and review of our long standing doc retention policies.” The email (referred to as “the June 3, 2000 email”) read in its entirety as follows:
Hank has asked me to send this out to everyone.
All emails re napster at this point are related to the litigation and should contain the “a/c” (attorney communications) symbol in the subject line and firstname.lastname@example.org should be ccd. We should not be sending e-mails on this subject anyway. Items from outsiders such as resumes do not require this.
Hank Barry, [signature information]
Please also be aware of our e-mail policy. As we have all been required to surrender Napster e-mails this should reinforce compliance with our long standing policies.
1. we do not retain e-mails, it is your responsibility to delete your handled e-mails immediately 2. we do not use e-mail to chat about matters related to public companies or matters such as the above
3. we do not retain written copies of e-mails in our files
4. our document retention policy is that we do not retain documents on any public or acquired company and retain limited information on private companies. all retained information is stored in central files, pls do not retain other docs in your own files unnecessarily
5. we do not retain files separate from our central files which are periodically checked for compliance to policies
Please also review the above policies with any summer associates.
That same month, John Hummer met with a recording company representative who advised that the recording companies intended to sue Napster’s investment firms if the alleged copyright infringement continued. In August 2000, a preliminary injunction issued, enjoining Napster from "engaging in, or facilitating others in copying, downloading, uploading, transmitting, or distributing plaintiffs’ copyrighted musical compositions and sound recordings . . . without express permission of the rights owner." The injunction was modified in March 2001. After concluding that it was not technologically feasible to comply with the March 2001 order and continue operating its file-sharing network, Napster ceased operations on July 1, 2001.
The Napster I litigation continued, however, and during settlement negotiations with other defendants the following August, counsel for plaintiffs sent a letter to Hummer threatening litigation. The instant action was filed in April 2003, and Hummer was served with the complaint in August 2003.
In February 2004, plaintiffs requested production of all Napster-related communications up through the filing of plaintiffs’ complaint in 2003. Plaintiffs were dissatisfied with the number of emails produced in response to this request, particularly in light of document productions from other parties which included Napster-related communications involving Hummer that had not been produced by Hummer. Plaintiffs initiated a meet and confer process in July 2005 which included a 30(b)(6) deposition regarding Hummer’s document preservation and collection efforts. Hummer maintained throughout that its document production was proper and complete. The exact number of Hummer Winblad emails produced by Hummer was in dispute – plaintiffs claimed that Hummer produced less than 300 emails; Hummer claimed to have produced 1,450 emails.
Near the close of discovery in April 2006, Hummer produced the June 3, 2000 email to plaintiffs, claiming to have mistakenly neglected to produce it earlier. Based on the June 3, 2000 email and plaintiffs’ perceived problems with Hummer’s document production, plaintiffs alleged that Hummer personnel continued to communicate with each other via email regarding Napster, including discussions about issues relevant to the claims and defenses in this action. Plaintiffs further alleged that Hummer personnel willfully deleted all of their Napster-related emails in order to avoid turning them over in this litigation.
Hummer did not dispute that they deleted Napster-related emails on the Hummer Winblad system that were generated after June 3, 2000 – Hummer acknowledged that its personnel routinely deleted emails on their system without regard to whether the deleted emails were relevant to the instant litigation. However, Hummer alleged that Napster-related email communication within Hummer Winblad decreased dramatically beginning in June 2000, and any Napster-related emails involving Hummer Winblad personnel were preserved on Napster servers. Hummer further claimed that no Napster-related communications were deleted willfully or intentionally, and that any relevant communications that were deleted were deleted by inadvertence or mistake.
The court concluded that Hummer’s duty to preserve evidence attached in June 2000, and that once the duty took effect, Hummer was required to suspend any existing policies related to deleting or destroying files and preserve all relevant documents related to the litigation. Thus, even if Hummer’s “long standing policies” included deleting emails, Hummer was required to cease deleting emails once the duty to preserve attached. “Since Hummer acknowledges that it did not cease its document policy, the court may impose sanctions for Hummer’s deletion of documents.”
The court went on to reject default sanctions, explaining:
At this stage of the proceedings, when the full evidentiary record has not yet been considered by the court or by a jury, the court cannot determine the extent of prejudice created by Hummer’s failure to preserve its emails. Although Hummer is at fault for deleting emails, plaintiffs have not shown that Hummer acted willfully in destroying its emails, and there is evidence that the actual number of emails lost is small. The court will therefore engage in a full analysis of the evidence regarding the quality and quantity of emails improperly deleted by Hummer at the Summary Judgment or trial stage. At this point the court can only conclude that plaintiffs have not produced sufficient evidence of prejudice to justify default sanctions.
The court concluded that Hummer’s behavior did not constitute a pattern of deliberately deceptive litigation practices, and that lesser sanctions would adequately remedy Hummer’s failure to preserve and produce email. It concluded that plaintiffs demonstrated sufficient prejudice to warrant some degree of preclusion sanctions, and that the nature and extent of these sanctions would be determined at summary judgment or trial. The court further concluded that Hummer’s conduct amounted to gross negligence, if not willfulness, which was sufficient culpability to justify an adverse inference. It advised that the precise wording of the adverse inference instruction would be determined at trial.
Finally, the court found that monetary sanctions were warranted, since “Hummer could have forestalled a great deal of time and effort by simply acknowledging early on that it was not preserving its internally generated Napster-related communications.” The court ordered plaintiffs to submit a request for a specific amount of fees, with evidentiary support, for the court’s consideration.