e-Lessons Learned

At issue in this case was a corporation’s failure to comply with its duty to issue a litigation hold in the face of pending litigation. However, the corporation was ultimately not sanctioned for its failure to comply with its obligation because the plaintiff could not establish that the failure resulted in the spoliation of relevant evidence.

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The Background:

Homayoun Ghassemi, Director of Hockey Marketing for Easton Sports, Inc., communicated with a competitor company, Warrior Lacrosse, Inc., about potential employment with Warrior. During the course of Ghassemi’s communications with Warrior, but before he informed Easton that he intended to leave the company and go to work for Warrior, Ghassemi accessed a number of Easton’s files.

Ghassemi used his personal Yahoo email account to send several electronic attachments of Easton files that he later downloaded onto his computer at Warrior. Furthermore, after submitting his resignation to Easton and on his last day on the Easton premises, Ghassemi created a CD that contained several of Easton’s files. A subsequent forensic inspection of Ghassemi’s Warrior computer uncovered that the CD had been “experienced” by the computer’s hard drive.

Easton began to suspect that Ghassemi had stolen trade secrets, and the company filed suit against Warrior.

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An employee plans on leaving his current employer for its competitor. Before he leaves, he decides to send some emails to himself and his soon-to-be employer that may have contained proprietary information and trade secrets. The former employer finds out, and sues for misappropriation of trade secrets. And what does the former employee do after finding out about the lawsuit? He destroys some of the evidence. Didn’t your mom teach you that you destroying things is bad? Guess not.

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Background: A Long History with the IRS

The IRS had Gary Krause on their radar for awhile. Mr. Krause and the IRS were at odds with each other since the early 1980s. The above referenced case was brought by the IRS and later joined by the Chapter 7 Trustee when Mr. Krause filed for bankruptcy.

Through the course of discovery, Mr. Krause initially refused to turn over an electronic data. Once compelled to turnover his laptop and desktop computers, the debtor claimed that his computer crashed. In reality, Mr. Krause thought he could outsmart everyone by using “GhostSurf” software to wipe his hard drives. He was wrong.

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This e-discovery dispute arose out of a case involving the remediation of a Superfund site. A trust had been set up to fund the remediation efforts of the site. The litigation began with the trustees suing Versar, Inc. The trustees claimed that Versar, Inc. had breached its contract by not fully participating in the remediation efforts. In response to the suit, and at issue in this motion, Versar requested the production of the trustees’ e-mails, various other documents, and access to the trustees’ work and home computers.

The core of this case comes down to the lack of communication between the trustees and its counsel. Even though litigation was clearly ongoing, one of the trustees continued to delete his e-mails. Here, counsel waited two years before notifying the trustee that there is an obligation to preserve evidence once it is clear that there might be a suit.

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Dino Broccoli filed a lawsuit against his former employer Echostar for wrongful termination. Echostar’s actions (or lack there of) pursuant to being made aware of his suit were the basis for the sanction of an adverse jury instruction.

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An unreasonable litigant risks spoliation sanctions

After the commencement of this patent litigation in September 2001, Samsung did not place a litigation hold on its document retention policy concerning email. As a result, Samsung’s automatic computer e-mail policy allowed e-mails to be deleted, or at least to become inaccessible. Consequently, “Samsung failed to produce a single technical e-mail in this highly technical patent litigation because none had been preserved. Thus, because of “Samsung’s complete and utter failure to produce e-mails responsive to Mosaid’s document requests” Mosaid sought sanctions before the magistrate judge. After the magistrate judge imposed the spoliation inference sanction, Samsung appealed arguing that it was an extreme sanction. The court here disagreed.

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This case involves evidence spoliation where one party made an amazing gaffe during the information discovery part of litigation, often called “discovery.” Kucala Enterprises and its owner, John Kucala (collectively “Kucala”), filed a lawsuit against Auto Wax Company (“Auto Wax”) in 2001 to invalidate a patent owned by Auto Wax. Auto Wax countersued for patent infringement. After entry of a protective order, Auto Wax, through a court order, sought to inspect Kucala’s computer files for information relating to the manufacture of Kucala’s products. After delaying this inspection for over two months, Kucala allowed Auto Wax to inspect Kucala’s desktop computer on February 28, 2003.

However, on the eve of inspection, Kucala installed a computer program called “Evidence Eliminator” to Kucala’s desktop computer.

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Shortly after being made aware of a lawsuit against his company, Biovail’s General Counsel orally instructed two company executives to preserve any relevant information to the lawsuit. However, the General Counsel never issued any written instructions regarding this litigation hold, nor did he conduct any follow up to ensure actual compliance. While Biovail did in fact preserve and backup much of the necessary information, it failed to take the steps necessary to preserve several key items of ESI, including a high level executive’s e-mails. As a result, the plaintiff asked the court to compel Biovail to produce additional ESI and to have Biovail sanctioned for failing to preserve evidence relevant to the case.

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In August of 2001, Keithley notified an executive officer of Homestore.com that suit would be filed for patent infringement. From that moment forward, Homestore had a duty to preserve any materials that might be relevant to the upcoming litigation. At a minimum, preservation of the related documents would have required recurrent communication of the duty to preserve to all employees with access to the related information. To avoid monetary sanctions and to maintain credibility during litigation, relevant information should also be kept in an easily accessible and safe location.

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