Stop Putting Words in My Mouth!
May 23, 2011“STOP PUTTING WORDS IN MY MOUTH” is something you might expect to be screamed during a typical fight on the Jersey Shore. However, if you are not careful complying with electronic discovery requests – you’re going to have a “Situation” in the form of a big fat SANCTION that leaves you saying, “but that’s not what my emails said.”
What can no longer be seen, found, or read can’t hurt you – right? WRONG. Failing to preserve documents can easily come back to bite you in the ass. Be careful with the documents you have, but don’t be quick to cast aside those you claim are missing or destroyed.
In Dzung Chu v. Oracle Corp. the Plaintiffs (common stockholders of Oracle) were suing the Defendant Company Oracle and three of its Officers alleging securities fraud. In the course of discovery requests, the Plaintiffs sought the emails and notes of Oracle CEO; coincidentally the Defendants claimed that these materials were missing or no longer existed. The District Court found that Oracle had willfully failed to preserve its CEO’s emails and recordings. As a result, the court took action against the Defendants an issued a sanction in the form of an adverse inference. The District Court granted the Plaintiffs the ability to infer that the missing evidence demonstrated Oracle’s CEO’s knowledge of any material facts that the Plaintiffs could otherwise establish. Yikes.
The Defendants then moved for summary judgment. Despite the Plaintiffs adverse inference ruling, the District Court found that Plaintiffs were still unable to prove the elements of security fraud and granted the Defendant’s summary judgment motion. The Plaintiffs appealed alleging that the District Court’s adverse inference ruling should have been construed broadly as to establish the elements of a prima facie case for the Plaintiffs.
The Court of Appeals upheld the District Courts limited adverse inference ruling. Aside from the emails and recordings of Oracle’s CEO, Plaintiffs discovery request resulted in over 2.1 million documents. The Court of Appeals found that if Plaintiffs could not establish the elements of fraud based on these documents, then there was no genuine issue of facts supporting such a claim. The adverse inference ruling was appropriate to allow the Plaintiffs to show Oracle’s CEO’s knowledge of fraud ONLY after the elements of fraud had been independently established.
Here, the Company and CEO got lucky. You might not. Failing to preserve documents can and will lead to sanctions in the form of ADVERSE INFERENCE rulings. This can be extremely damaging to your case, and is simply NOT something you want to take a chance with. If Plaintiffs had been able to establish the elements of fraud in any of the documents, then Oracle’s CEO would have been presumed to have had knowledge of such. You’d rather take the time and precautions to preserve documents than have a jury decide for you what those documents may or may not have meant.
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Tagged as: Production of Data, Sanctions, Spoliation.
View more articles implicating: Owners/Executives, Upper Management
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You’d rather take the time and precautions to preserve documents than have a jury decide for you what those documents may or may not have meant.
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, then Oracle’s CEO would have been presumed to have had knowledge of such. You’d rather take the time and
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