164 F. Supp. 3d 488
S.D.N.Y.2016Background
- Plaintiffs Cat3, LLC and Suchman, LLC (owners of "SLAMXHYPE" and www.SLAMXHYPE.com) sued defendants Black Lineage, Inc. and Vahe Estepanian for trademark claims including cybersquatting and alleged defendants used FLASHXHYPE/www.FLASHXHYPE.com to trade on plaintiffs' mark.
- Defendants discovered discrepancies between email versions: produced PDFs had @slamxhype.com or @thecollective.com addresses while deleted/native versions recovered by forensic analysis showed @ecko.com addresses.
- Defendants retained a forensic expert (Kunkel) who concluded originals with @ecko.com were deleted and replaced with altered versions before production; plaintiffs’ IT witness and late-retained expert offered migration/default-server explanations but could not account for deleted originals.
- Defendants moved for sanctions under Fed. R. Civ. P. 26 and 37 and the court’s inherent authority seeking dismissal, adverse inference, preclusion, and fees; evidentiary hearing was held and the court applied the amended Rule 37(e) (effective Dec. 1, 2015) to the pending case.
- The court found by clear and convincing evidence that plaintiffs intentionally altered ESI to mislead and to affect litigation, that relevant information was lost and could not be adequately restored, and that defendants suffered prejudice and expense.
- Remedy: court precluded plaintiffs from relying on the subject emails to prove defendants’ notice and ordered plaintiffs to pay defendants’ attorneys’ fees and costs incurred in proving the spoliation; other severe sanctions (dismissal/adverse inference) were declined as disproportionate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether amended Fed. R. Civ. P. 37(e) applies to this pending case | New rule should not apply or is inapplicable because information was not "lost" in substance | New Rule 37(e) applies to pending cases and was more lenient; should govern | Applied amended Rule 37(e); its application here is just and practicable |
| Whether ESI was lost/irretrievable and whether substitution destroyed the evidentiary value | No evidence was destroyed; defendants were not deprived of the content; near-duplicates suffice | Original/native versions were deleted and replaced, leaving deleted originals recoverable only by forensics; alteration undermines authenticity | Found loss that could not be adequately "restored or replaced" for litigation use; originals undermined authenticity |
| Whether plaintiffs intentionally manipulated emails (state of mind) | Alterations plausibly explained by server defaults or migration; no knowledge by plaintiffs' IT or officers | Forensic evidence shows deliberate deletion and replacement; pattern not consistent with migration/defaults | By clear and convincing evidence, plaintiffs intentionally altered ESI (intent to deprive) |
| Appropriate remedy for spoliation | Lesser measures or none because content was recovered; severe sanctions unnecessary | Preclusion/adverse inference/dismissal appropriate given intent and prejudice; fees to compensate defendants | Court precluded plaintiffs from using the subject emails to prove notice and awarded defendants fees/costs; declined dismissal/adverse inference as disproportionate |
Key Cases Cited
- Chambers v. NASCO, 501 U.S. 32 (U.S. 1991) (court’s inherent power to sanction abuse of judicial process)
- Residential Funding Corp. v. DeGeorge Capital Corp., 306 F.3d 99 (2d Cir. 2002) (Second Circuit standard prior to Rule 37(e) on negligent loss of ESI)
- Kronisch v. United States, 150 F.3d 112 (2d Cir. 1998) (allocation of risk and burden for lost evidence and adverse inference rationale)
- West v. Goodyear Tire & Rubber Co., 167 F.3d 776 (2d Cir. 1999) (dismissal under inherent authority for willfulness/bad faith)
- Haeger v. Goodyear Tire & Rubber Co., 793 F.3d 1122 (9th Cir. 2015) (discussion of inherent power and sanctions scope)
- Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001) (spoliation doctrine and preserving integrity of judicial process)