Failure to timely object to production format constitutes a waiver

Ford Motor Co. v. Edgewood Properties, Inc., 2009 WL 1416223 (D.N.J. May 19, 2009)

This lawsuit arose out of the distribution of contaminated concrete following the demolition of a Ford assembly plant in Edison, New Jersey. Edgewood entered into a contract with Ford to haul 50,000 cubic yards of concrete from that site which turned out to be contaminated. Ford then brought a claim against Edgewood under CERCLA and the New Jersey Spill Act for contribution and indemnification of all costs as provided under the contract.

In discovery, Edgewood demanded that Ford produce documents in their native format with accompanying metadata. Ford objected and affirmatively indicated that it would produce documents in a tagged image file format (“TIFF”) with accompanying searchable text. Apparently, the parties never agreed on a production format, and Edgewood waited approximately eight months before objecting to Ford’s production. It then waited two additional months to bring their objection to the court’s attention. This delay led the court to conclude that Edgewood had waived any objection to Ford’s production format.

Because the production of electronically stored information (ESI) can occur in various formats, Rule 34 sets up a process through which parties are supposed to resolve disputes over production. Rule 34 requires the parties to dance with one another – the requesting party specifies the format to produce the ESI, the producing party can agree or object and must then indicate the format in which it will produce the ESI, and where the parties cannot agree on a production format they are to let the court decide. We refer to it as Rule 34’s “cha-cha.” Rule 34’s dance is supposed to occur before any production occurs, and Edgewood Properties demonstrates that any misstep with Rule 34’s requirements can result in you stepping on your partner’s toes. The rule is not difficult to follow, but like high school freshmen, many parties appear reluctant to get involved in the dance.

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General concern over litigation does not trigger a duty to preserve evidence

Realnetworks, Inc. v. DVD Copy Control Ass’n, Inc., 2009 WL 1258970 (N.D. Cal. May 5, 2009)

Determining when the duty to preserve evidence arises can be a “sticky wicket” as our friends “across the pond” like to say. Clearly, when a party has decided it will pursue litigation, a duty to preserve ESI or documents potentially relevant to the claim is triggered. On the other side of the ledger, certainly by the time a defendant is served with a lawsuit, the duty to preserve relevant information has arisen. However, courts have recognized that a duty to preserve can be triggered long before a lawsuit is filed – the duty is recognized once litigation is “reasonably anticipated.” There are no bright lines to follow under the “reasonable anticipation” standard. Attempting to determine when the potential for litigation crosses the threshold from mere possibility to reasonable anticipation can depend on a number of different factors that can vary in importance from case to case.

In Realnetworks, the district court concluded that “[a] general concern over litigation does not trigger a duty to preserve evidence.” A “theoretical threat of litigation” or a “general apprehension of lawsuits,” does not suffice. The district court in Realnetworks held that a duty to preserve relevant documents or information was not triggered until a specific potential claim was identified or future litigation became probable.

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Default judgment entered as a sanction for spoliation and deliberate withholding of ESI

MeccaTech, Inc. v. Kiser, 2008 WL 6010937 (D. Neb. April 2, 2008)

You know things are bad when the lawyers withdraw. In MeccaTech (MTI), the magistrate judge observed: “Misconduct of this magnitude is a rare occurrence.” It was determined through discovery that one of the defendants employed a consultant to intentionally erase items from his computer before he left MTI’s employment in attempt to shield his activities from discovery. Another instructed his co-defendants to make sure that all emails were on a platform to which MTI did not have access. The defendants, in response to MTI’s discovery requests, also claimed that there was no responsive information prior to February of 2005. However, ESI recovered from a discarded hard drive of one of the defendant’s computers established that the defendants were actively working on strategies to transfer business from MTI during that time frame.

The magistrate judge concluded that the failure to impose severe sanctions on the defendants “would only serve to reward their obvious disrespect for the judicial process and encourage others to engage in the same conduct.” Therefore, the magistrate recommended the entry of a default judgment against one defendant, that three other defendants should be precluded from defending the plaintiff’s claims of breach of duty and fraud, that the documents recovered from one of the defendant’s hard drives should be admissible in evidence, and that the facts contained therein should be considered established for purposes of the pending action. On April 23, 2009, the district court adopted the magistrate’s report and recommendations, and entered the proposed sanctions except as to one defendant, who in the interim had reached a settlement with MTI.

While MTI is notable for the sanctions that were imposed, the decision brings into focus the reality that where a client refuses to follow an attorney’s advice on the preservation or production of ESI, that attorney should carefully evaluate whether to withdraw from the engagement, and the potential for adversity that can occur when the attorney and client disagree on preservation and production issues.

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