Author: Brielle A. Basso

“The Death Penalty Lives”: Magistrate Judge Recommends Entry of Default Judgment After Defendants Manipulate and Permanently Delete Electronic Data

This blog has previously discussed cases in which district courts considered and sometimes ultimately entered the so-called sanctions “death penalty” – a default judgment order of terminating sanctions, pursuant to Rule 37(e)(2), as a result of a party’s destruction of evidence. Recently, a U.S. District Court for the Southern District of Texas magistrate judge recommended granting terminating sanctions, i.e., default judgment, after finding that the defendants “delayed discovery, manipulated electronic data, and permanently deleted a significant amount of electronic data.” The magistrate judge noted that the deletions that occurred required the user to “go into the bowels of the system, requiring advanced knowledge,” and the electronic data was deleted “within days” of an agreed upon preliminary injunction. In Calsep Inc. v. Intelligent Petroleum Software Solutions, LLC, the plaintiffs alleged misappropriation of trade secrets after their employee, one of the defendants, left their employment and allegedly downloaded the plaintiffs’ trade secret information to a personal device. According to the plaintiffs, the former employee then used the trade secret information with the other defendants to develop oil and gas industry software to compete with the plaintiffs’ software. The plaintiffs attempted to obtain discovery, including specifically the defendants’ “source code control system, which ordinarily contains the complete, auditable, and accurate history of the creation and evolution of software...

“It Wasn’t My Fault”: Court Rejects Attempts by Client and Attorney to Duck Responsibility and Sanctions Both Jointly

This blog has previously discussed the importance of cooperation among parties in a litigation to effectuate a comprehensive discovery framework; however, a recent decision from the District Court for the Northern District of California exemplifies the importance of joint responsibility and collaboration between attorneys and their clients when dealing with e-discovery matters, including preservation, collection, and production of electronically stored information (ESI). In a case that ultimately settled and involved both foreign and domestic parties, the court granted a motion for monetary sanctions pursuant to its inherent authority and Rule 37, after finding that the plaintiff’s discovery misconduct “not only forced [defendant] to incur additional attorneys’ fees but … also forced the court to expend considerable resources beyond what was necessary.” Because both the plaintiff and its former counsel “failed in their responsibilities,” the court imposed sanctions jointly and severally against them. In Optrics Inc. v. Barracuda Networks Inc., the plaintiff, a Canadian engineering firm, filed suit in August 2017 against the defendant, an American company, “bringing trademark, contract, and other claims stemming from allegedly unfair and deceptive business practices by [defendant] during the parties’ thirteen-year business relationship.” Beginning in June 2019, discovery disputes and “discovery violations” by the plaintiff plagued the litigation. In February 2020, “with discovery still mired in disputes,” the parties stipulated...

“Accidentally” Destroying Years of Text Messages Is No Defense to Spoliation Sanctions

The New York Supreme Court recently granted a defendant spoliation sanctions, in the form of an adverse inference instruction, against the plaintiff for the “accidental” destruction of years’ worth of text messages from the plaintiff’s cellphones. In Iacovacci v. Brevet Holdings, LLC, the plaintiff was terminated from his employment with the defendants in October 2016, through a letter that referred to “possible litigation” and requested that the plaintiff “preserve … electronically stored information (‘ESI’) relating” to the defendant’s business, “includ[ing] all emails, text messages, … and the like, … [including] material on a phone.” Several days after receiving the termination letter, the plaintiff filed a wrongful termination and breach of contract action, and the defendants filed an answer with counterclaims alleging misappropriation of the defendants’ documents, breach of fiduciary duty, and self-dealing. Thereafter, a years-long discovery dispute ensued. The defendants served several requests for documents, including text messages, but the plaintiff objected to the demands as irrelevant and overbroad, and in March 2018, the plaintiff filed a motion for a protective order. In May 2018, the court ordered the plaintiff to produce cellphone and electronic calendar records as requested by the defendants, and at a status conference in December 2018, the court, again, directed the plaintiff to produce the text messages within 30 days. Finally,...

District Court Denies Protective Order in Putative Class Action: Production of Relevant ESI May Be Time Consuming and Expensive, But Not Unduly Burdensome

The District Court for the Eastern District of California recently denied a defendant’s motion for a protective order in a putative class action, finding that the information requested by plaintiff was relevant and subject to pre-certification discovery, and that defendant did not show that the electronically stored information (ESI) was inaccessible due to undue burden or cost, pursuant to Rule 26(b)(2)(C). Additionally, the court determined that even if defendant could show that the ESI was “inaccessible,” plaintiff demonstrated “good cause” to order production of the ESI notwithstanding the potential burden and cost. In Sung Gon Kang v. Credit Bureau Connection Inc., plaintiff, a consumer, filed a putative class action alleging that defendant provided businesses with inaccurate consumer credit information, including that plaintiff and the proposed class of consumers were included on the United States Treasury Department’s Office of Foreign Assets Control (OFAC) list. A consumer is ineligible for credit in the United States if he or she is included on the list. Plaintiff sought to “represent classes consisting of individuals ‘about whom Defendant … sold a consumer report to a third party’ that included an OFAC Hit.” The discovery dispute centered on defendant’s objections to plaintiff’s first set of written discovery requests. Specifically, defendant objected to requests seeking the identities of individuals who had an...

The Destruction of a “Startling Amount of Discovery”: District Court Imposes Severe, Case-Ending Sanctions Pursuant to Rule 37(e)(2)

The United States District Court for the Eastern District of Washington recently entered a default judgment order of terminating sanctions against defendants pursuant to Rule 37(e)(2), as a result of defendants’ wholesale destruction of a “startling amount of discovery” as part of defendants’ adoption of a document disposition program during the course of the litigation. The district court found that the defendants “purposefully destroyed” relevant electronically stored information (ESI) “to avoid their litigation obligations.” This decision highlights the importance of extreme caution in the adoption of a document disposition or information governance program, which necessarily eliminates typically large quantities of ESI, during the time period when the duty to preserve relevant ESI has been triggered. In Moreno v. Correctional Healthcare Companies, Inc., plaintiffs filed constitutional claims against defendants–providers of healthcare services to inmates–after plaintiffs’ eighteen-year-old son died while in defendants’ custody. In January 2018, prior to filing the lawsuit, plaintiffs sent a letter to defendants notifying defendants of their plan to file a lawsuit and advising defendants to “preserve all paper and electronic records that may be relevant to our clients’ claims” including “all e-mails and other electronic and paper records regardless of where they are maintained.” Plaintiffs filed the lawsuit in October 2018 and, in December 2018, served discovery requests on defendants, seeking certain categories...

Non-Consensual “Quick Peek” Revisited: FRE 502(d) Cannot Be Used to Compel Production of Potentially Privileged Information Without a Privilege Review

The District Court for the District of Columbia recently confirmed that FRE 502(d) orders cannot be used to force a responding party to produce potentially privileged documents without the opportunity to first review them. In doing so, the court found that such an order would not only violate the producing parties’ right to determine in the first instance how it reviews and produces, but would potentially compel the production of privileged information and thus would constitute “an abuse of discretion.” In Equal Employment Opportunity Commission v. George Washington University, the EEOC filed a discrimination action on behalf of a former executive assistant against defendant, George Washington University, alleging that defendant’s former athletic director treated the former executive assistant less favorably compared to her male co-worker, a former special assistant. The discovery dispute concerned four requests for production of documents served by plaintiff: three seeking thousands of emails from the work accounts of defendant’s former athletic director and his two assistants; and one seeking information related to workplace complaints against the former athletic director. Defendant argued that plaintiff’s requests were overbroad and unduly burdensome—that is, that compliance with the requests would impose costs that were “not proportional to the needs of the case,” under the proportionality dictates of FRCP 26. By its decision, the court resolved...

Second Circuit Holds Injunctive Class of Past Purchasers Not Certifiable Under Rule 23(b)(2)

The Second Circuit recently resolved a conflict among district courts, holding that past purchasers of a product are ineligible for class certification under Rule 23(b)(2) because not all class members would benefit from injunctive relief. Specifically, explained the Court, it is unlikely a purchaser will buy the allegedly deceptive product again, and if they do, they do so with the knowledge of the alleged deception. In Berni v. Barilla S.p.A., plaintiffs initiated a class action alleging that defendant intentionally sold its pasta in misleading boxes that concealed non-functional “slack-fill,” i.e., excessive empty space in the box. The parties reached a settlement, agreeing that defendant would include a minimum “fill-line” on its boxes, to indicate how much pasta was in the container, and a disclaimer that the pasta is sold by weight and not by volume. Neither party challenged the settlement; however, an absent class member objected, arguing that the group of past purchasers could not be certified under Rule 23(b)(2) because past purchasers were ineligible for injunctive relief. The district court disagreed and certified the injunctive class and approved the settlement. The objector appealed. The Circuit Court vacated the district court’s order granting approval of the settlement class, reasoning that injunctive relief was not proper for the group of past purchasers and, thus, the group...

Third Circuit Reverses Denial of Class Certification: Holds Ascertainability Satisfied Even with Gaps in Records

On September 9, 2020, a split panel of the Third Circuit issued a precedential opinion in Hargrove v. Sleepy’s LLC, reversing the denial of class certification because the district court “misapplied” the Circuit’s ascertainability case law and was “too exacting” when it “essentially demanded” that plaintiffs identify the class members at the certification stage. The circuit court also determined that the district court erroneously applied the motion-for-reconsideration standard to plaintiffs’ renewed motion for class certification, and held that courts should apply “the usual Rule 23 standard.” In Hargrove, the plaintiffs, delivery drivers, brought an employee misclassification suit alleging that defendant misclassified them as independent contractors, rather than employees, and thus violated several New Jersey labor laws. The district court denied class certification, twice, on the ground that the ascertainability requirement was not satisfied. In denying plaintiffs’ renewed motion for certification, the Court held that plaintiffs’ proposed class was “not ascertainable because the records kept by Sleepy’s regarding the identity of the drivers lacked critical information.” The plaintiffs sought leave to appeal pursuant to Rule 23(f), and the Third Circuit granted their request. First, the circuit court addressed the split among the district courts, both in and out of the Third Circuit, on the issue of the standard that applies to renewed motions for class certification....

Third Circuit Affirms Class Certification in In re Suboxone Antirust Litigation

On July 28, 2020, the Third Circuit in In re Suboxone (Buprenorphine Hydrochloride & Nalaxone) Antitrust Litigation, affirmed certification of a direct purchaser class, concluding that common evidence existed to prove the plaintiffs’ antitrust theory and resulting injury and that the proposed class representative, Burlington Drug Company, Inc., was an adequate class representative. The direct-purchaser plaintiffs alleged that the defendant drug manufacturer of the opioid-treatment drug, Suboxone, engaged in anticompetitive conduct that impeded the entry of generic versions of the drug into the market. Specifically, plaintiffs asserted that defendant “shifted the market” from Suboxone tablets to Suboxone film by the time generic tablets entered the market, thereby maintaining a monopoly and suppressing competition. According to plaintiffs, the defendant’s transition from tablets to film was coupled with six tactics to “eliminate demand for Suboxone tablets and to coerce prescribers to prefer film,” including making false statements about the safety of the tablets and withdrawing brand-name Suboxone tablets from the market. The plaintiffs argued that due to defendant’s anticompetitive conduct, they paid more for brand Suboxone products than they would have for generic tablets. The district court certified the class, and the Third Circuit granted the defendant’s petition for leave to appeal under Rule 23(f). First, the Third Circuit addressed defendant’s argument that plaintiffs did not provide...

New Jersey Supreme Court Holds That Individualized Proof of Damages Is Required Absent a Basis for Presumption of Class-Wide Damages Capable of Reliable Mathematical Calculation

In Little v. Kia Motors America, Inc., a litigation spanning nearly two decades, the New Jersey Supreme Court held that, although aggregate proof of damages can be appropriate in some settings, individualized proof of damages based on the actual costs incurred by the class members was required in the case before it. Class members had to show they incurred “actual costs” as a result of an alleged defect in order to recover damages. In 2001, plaintiff filed a putative class action asserting breach of warranty and other claims on her behalf and on behalf of other New Jersey owners and lessees of certain Kia models. Plaintiff alleged that the vehicles had a defective brake system which rendered the vehicles’ front brakes susceptible to premature wear. After a four-week trial, the jury returned a verdict in favor of plaintiff and the class on the class-wide warranty claim, awarding zero damages for alleged diminution-in-value but $750 per class member on the out-of-pocket loss theory, which had been premised on an expert’s estimate of the amount of money an average owner would pay for brake repairs over the vehicles’ lives as a result of the alleged defect. On defendant’s motion for a new trial and to decertify for purposes of repair damages, the trial court decertified the class...