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Sanctions Issued Against Government in Case Where Litigation Hold Notices Were Issued Three Months A

This past month, Judge Eric G. Bruggink of the United States Court of Federal Claims issued a decision, 4DD Holdings, LLC v. United States, No. 15-945C, 2019 U.S. Claims LEXIS 494 (Fed. Cl. Apr. 23, 2019), granting the plaintiffs' motion for sanctions for spoliation of evidence. The plaintiffs filed a claim for copyright infringement against the United States for infringing its data federation software. (Data federation is the consolidation of multiple data sources. A single virtual database provides an access point to a data set.) 4DD contended that it was owed money because of the government's over-installation of the software.

Judge Bruggink found that the government destroyed relevant evidence with a culpable state of mind that it had a duty to preserve. The Department of Defense's Defense Health Agency deleted all instances of its TETRA healthcare data federation software; destroyed its Development Test Center's server hard drives; and erased information on laptops used for a medical information exchange project.

The decision recognized that a court can impose sanctions either on the basis of its inherent authority or pursuant to Rule 37 of the Rules of the United States Court of Federal Claims. Rule 37(e) requires that an intent be found to deprive another party of the use of electronically stored information in order for the most severe sanctions to be imposed. The government argued that the instances of TETRA it deleted were non-functional because they could not work in a particular environment or because of security concerns. The contention was that the deletion was not prejudicial because the agency would not have to pay 4DD for these copies of TETRA. However, deletion orders gave the reason as "a license issue". Hard drives were shredded and laptops were reimaged after 4DD gave notice that its software was used in a manner that was inconsistent with a license agreement. Evidence was deleted as part of an investigation in which documents were created that were marked as work product on a privilege log.

Judge Bruggink's opinion observes that, "[T]he government never attempted to accurately account for TETRA used on the DTC servers. It simply arbitrarily assigned the original 64 paid-for cores to the DTC and allowed the DTC to continue along the path to decommissioning without making records of how many copies of TETRA had existed. During the true up process and thereafter, the agency did the opposite of taking reasonable steps to preserve a record of TETRA use, leaving the DTC servers and other environments where TETRA was installed as the only complete record." Id. at *35. [True-up is a term used to describe an evaluation of how many end users of software there are after an agreement is signed to use the software estimates a certain number of users.]

The government only issued preservation notices three months after 4DD filed its complaint, and this notice did not reach some of the personnel responsible for decommissioning until two years later. The court rejected the government's argument that deleted copies could be replaced by other discovery because of the failure to note the copies of TETRA in use when deletion orders were given, and the incompleteness of hard drive images and server diagrams.

The plaintiffs suffered prejudice because gaps were caused by the deletion of evidence that has to be filled in by secondary evidence. Accordingly Judge Bruggink awarded 4DD costs for bringing its sanction motion and prevented the government from arguing that evidentiary gaps created by its spoliation of evidence could be construed in its favor.

Under Rule 37(e)(2) the Court would need to find that the government acted with intent to deprive in order to find that the lost evidence should be construed in 4DD's favor. The notice to delete TETRA instances because of "a license issue" was sufficient to demonstrate that the data was deleted with an intent to deprive and so a presumption can be made that a count of the deleted instances would be unfavorable to the government. Despite the fact that it could not be shown that the government considered that the reimaged laptops might contain relevant information, "[t]he lack of any credible explanation for the deletion of the laptop data months into this litigation and in the face of a preservation hold is sufficient to infer that the agency deleted information that was detrimental to it." Id. at *40. The court did not find that the decommissioning of servers, conducted according to a regular process, was intentional, and so no adverse inference was made. Judge Bruggink declined to a enter a default judgment.

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