New York Court: Can't Point to Sheer Number of Emails Withheld as Evidence of Improper Withholdi

This month, Judge Sylvia G. Ash issued a decision, 255 Butler Assoc. LLC v. 255 Butler LLC, Index No. 511560/2015, 2019 N.Y. Misc. LEXIS 4629 (N.Y. Sup. Ct. Aug. 14, 2019) ruling on the Plaintiff's motion to strike. The Court previously issued an order directing the Defendants to produce all documents collected by its electronic discovery consultants responsive to certain search terms and excluding privileged information. The Court's order was in response to the Defendants' unexplained failure to produce certain emails that were produced by the Plaintiff and should also have been in the Defendants' possession. The Defendants' subsequent production included some emails with redacted privileged information. The Plaintiff's motion contended that the Defendants' email production should not have any redacted financial or business information, and that its answer should be struck because they intentionally deleted or withheld responsive ESI.

The Defendants submitted affidavits by two electronic discovery experts attesting to the fact that they saw no evidence of intentionally deleted emails. The Plaintiff accused the Defendants of failing to produce emails from personal email accounts; cell phone data; and meta data for a contract. The Plaintiff could only provide one example of an incorrectly designated privileged document.

Judge Ash ruled that, "the fact that the 'missing emails' were not a part of the 'hit emails' does not establish that Defendants willfully destroyed evidence." Id. at *8. She directed the Plaintiff to make reference to specific examples on the Defendants' privilege log to establish improperly withheld documents. "It is insufficient to merely point to the sheer number of documents withheld as evidence that Defendants are improperly withholding discovery." Id. at *9.

She did order the in camera review of a chain of emails on which counsel for the Plaintiff was not copied. Productions from personal email accounts must be requested from individuals who are not employees of the Defendants. Requests for cell phone call logs; and a search of employee gmail accounts were found not to be unreasonable. The Defendants were ordered to comply with the parties' ESI agreement in 45 days.

Access to Madoff Database Denied

Yesterday, Judge Stuart M. Bernstein issued a decision, Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Secs. LLC, Adv. Pro. No. 08-01789 (SMB) (Bankr. S.D.N.Y. Aug. 26, 2019) affirming the order of a Discovery Arbitrator denying the Defendants' motion to compel the Plaintiff under the Securities Investor Protection Act to produce data from the Bernard L. Madoff Investment Securities LLC ("BLMIS") database and produce documents from 13,000 boxes stored in a warehouse. The suit concerns the infamous Ponzi scheme operated by Madoff. The Trustee alleged in this suit that Defendants withdrew more from their accounts than they had deposited.

In another proceeding, the Trustee agreed to make available 4 million documents in a virtual data room. A manual was prepared showing how to search for data. More than 4,000 microfilm reels existed which had not been processed for the database. The Defendants in this case sought records of pre-1992 trading. They rejected the Court's suggestion that they could review an index for this microfilm and select a sample of 20 reels to see if it contained relevant information. The Court declined to simply force the Trustee to hand over the reels. The Defendants filed a motion for sanctions on the basis that the Trustee had failed to turn over trading records as required by two Court orders. The Court warned the Defendants that it would likely lose and might be liable for fees and costs. After this warning the Defendants agreed to the sampling of the microfilms.

The Defendants then submitted a letter to the Discovery Arbitrator seeking access to the complete BLMIS database, as well as access to hard copy records on the basis that Trustee had only loaded data into the database which would support its claims. The Defendants initially asked for a search to be run using 22 terms, and then continuously asked for additional productions, without proposing searches more likely to return relevant documents. As they also failed to support their assertion that the Trustee acted in bad faith, the Discovery Arbitrator refused their request for unfettered access to the database and the boxes in the warehouse.

Judge Bernstein concluded that the Discovery Arbitrator, ". . . reviewed the motion in light of the requirements of Rule 26 and concluded that although the Trustee was exceptionally well-funded, the request to produce the entire BLMIS Database and 13,000 boxes of hard copy documents was disproportionate and burdensome. In essence, the Trustee should not have to bear the cost associated with the Defendants' ever changing and ever growing discovery requests to review 30 million electronic documents in the BLMIS Database or 13,000 boxes of hard copy documents without some evidence to show that BLMIS made some trades for the benefit of the IA customers before 1992." Id. at *34-35.

Rule 37(b) Sanctions Issued for Fishing Expeditions at Depositions in Defamation Suit Against Cyber

Today, Magistrate Judge Maureen Kelly issued a decision, LabMD v. Tiversa Holding Corp., No. 15-92, 2019 U.S. Dist. LEXIS 139196 (W.D. Pa. Aug. 16, 2019) granting the Defendant's motion for sanctions pursuant to Rule 37(b)(2). LabMD's suit alleged that Tiversa made defamatory statements on a blog and to the Wall Street Journal stating that it had leaked confidential patient information through the use of the LimeWire file sharing software. LabMD was a small business that specialized in cancer detection. The Federal Trade Commission brought an enforcement action against it for its cyber security practices. Tiversa provided cyber security services to LabMD, and LabMD has accused it of improperly accessing its patient data, and then making it appear as though hackers had stolen the data.

Magistrate Judge Kelly previously granted a protective order limiting questioning at depositions to the claims that remained after a motion to dismiss. She admonished LabMD for previously conducting fishing expeditions for related qui tam and state court cases, and put them on notice that a violation of order would result in Rule 37(b) sanctions.

LabMD's questioning at the deposition included inquiries about Tiversa's use of Embedded Peer-to-Peer (EP2P) systems; alteration of metadata; its data retention practices; database updates; changes to download dates; false file spread; as well as irrelevant subjects such as the ability of employees at Tiversa; its worksplace culture; and Edward Snowden. Judge Kelly noted that LabMD's questioning regarding the defamatory statements at issue was "very minimal". Id. at *44. She further found that LabMD's suit filed in federal court in Virginia, "was part of a litigation strategy by LabMD to purposefully interfere with discovery" in this case, and cautioned its counsel that, "his pro hac vice admission status could be removed for a pattern of abusive litigation practices." Id. at *46.

Fees and costs related to the motion for sanctions and court reporter fees for the depositions were awarded to Tiversa. Use of testimony at six depositions was precluded for any reason in this case (including for responding to a motion for summary judgment) and in litigation in any other forum. Magistrate Judge Kelly noted that while she could have issued a dispositive sanction, she was only, "put[ting] LabMD and Attorney Hawkins on final notice that any further litigation misconduct or disregard of orders of this Court will result in the dismissal of this case and the termination of the pro hac vice admission of Attorney Hawkins." Id. at *49-50.

Magistrate Judge Kelly also denied a contempt motion that sought a password for a disc. "[T]he Court finds that the instant Motion and LabMD's pursuit of the password are further attempts by LabMD to misuse discovery in this case to assist it in other litigation and in other forums." Id. at *22 n. 9.