via JD Supra – 4/29/2019
Whether we like it or not, a reality of today’s world is that often important business is conducted by text messages. And so, when it is time to issue a litigation hold notice, you must include an instruction to preserve text messages as well as the devices from which they are sent/received (i.e., smartphones). Your failure to do so can be a costly mistake as learned by defendants in the Paisley Park case — a litigation involving the Estate of the late musical artist known as Prince — in the district of Minnesota.
In Paisley Park Enters. v. Boxill, No. 0:17-cv-01212, (D. Minn., 3/5/19) (copy here: Prince_Discovery_Order), Magistrate Judge Tony N. Leung reminded us of the obligation to preserve electronically stored information (“ESI”) that is relevant to the lawsuit, including text messages.*
Simply stated, Plaintiffs claimed they were deprived of relevant discovery; defendants argued they did what was required by the law (i.e., preserve emails and computer data). Defendants claimed ignorance that they had any obligation to preserve their text messages.
In reaching the merits of the spoliation motion filed by Plaintiffs, the Court concluded that Defendants’ failure was intentional and sanctions appropriate. In reaching this conclusion the Court made a number of salient observations.
First, the Court observed that the executives – as principals of the corporate defendant – were they types of individuals likely to have relevant information.
Next, the Court observed that the text messages of the individual defendants were likely to contain relevant information because, as demonstrated by text messages secured by Rule 45 subpoena, the executives often discussed the very matters in the lawsuit by text message. The Court therefore concluded that under the Federal Rules the parties were required to take reasonable steps to preserve ESI, including text messages (which are included in the standard, expansive term “documents”).**
Despite this obligation to take reasonable steps to preserve relevant information, the Court observed the defendants failed entirely to take any reasonable steps. Indeed, the defendants failed to take any number of simple, basic steps including:
- the executives did not suspend the auto-delete functionality on their respective phones — a failure that the Court observed “takes, at most, only a few minutes” to implement;
- the executives did not put in place a litigation hold to ensure that they preserved text messages; and
- the executives failed to take any number of “relatively simple options to ensure that their text messages were backed up to cloud storage” – processes that would have cost “little, particularly in comparison to the importance of the issues at stake and the amount in controversy here.”
The Court concluded that defendants’ failure to follow these simple steps alone was sufficient to show defendants acted unreasonably. However, if the defendants’ absence of reasonable efforts was not enough, the evidence submitted demonstrated the defendants each wiped and intentionally destroyed their phones after the lawsuit was commenced (and, in the instance of one executive, he wiped a second phone and discarded it after the Court ordered the parties to preserve all relevant electronic information and after receipt of a letter advising of the need to produce text messages).
And so, having concluded both that the defendants failed to take reasonable steps to preserve relevant information and intended to destroy relevant ESI, the Court analyzed the prejudice caused to plaintiff. Specifically, was the destroyed ESI able to be replaced from any other source Fed. R. Civ. P. 37(e).
Defendants argued there was no prejudice because plaintiffs were able to secure from third-parties some text messages sent to or received by the executive defendants. The Court dismissed this argument and observed these were “scattershot texts and [e-mails],” rather than “a complete record of defendants’ written communications from defendants.” According to the Court, Plaintiffs were, for example, unable to recover text messages that the two individual defendants sent only to each other. The Court therefore concluded the missing text messages could not be replaced or restored by other sources making it “impossible to determine precisely what the destroyed documents contained or how severely the unavailability of these documents might have prejudiced [Plaintiffs’] ability to prove the claims set forth in [their] Complaint.” Telectron, Inc. v. Overhead Door Corp., 116 F.R.D. 107, 110 (S.D. Fl. 1987). Therefore, the Court concluded sanctions were appropriate under Rule 37(e)(1).
Because the Court concluded that the executive defendants acted with the intent to deprive Plaintiffs of evidence, the Court ordered sanctions, pursuant to each of Rules 37(b)(2)(C), 37(e)(1), and 37(e)(2) and directed the executive defendants to pay reasonable expenses, including attorney’s fees and costs, that Plaintiffs incurred as a result of the defendants’ misconduct. The Court further directed the defendants pay into the Court a fine of $10,000.
While this case is an egregious example of discovery violations, the message to internalize is to include text messages (and other forms of messaging) in your hold notice.
*For those of you interested in the specifics of the lawsuit, the case involved the Estate of the late Prince Rogers Nelson (“Prince”) and the Estate’s interest in various songs created by Prince, including certain ones not released to the public.
**In rendering his decision to impose sanctions, Judge Leung provided a useful summary of the relevant law:
The Federal Rules of Civil Procedure require that parties take reasonable steps to preserve ESI that is relevant to litigation. Fed. R. Civ. P. 37(e). The Court may sanction a party for failure to do so, provided that the lost ESI cannot be restored or replaced through additional discovery. Id. Rule 37(e) makes two types of sanctions available to the Court. Under Rule 37(e)(1), if the adverse party has suffered prejudice from the spoliation of evidence, the Court may order whatever sanctions are necessary to cure the prejudice. But under Rule 37(e)(2), if the Court finds that the party “acted with the intent to deprive another party of the information’s use in the litigation,” the Court may order more severe sanctions, including a presumption that the lost information was unfavorable to the party or an instruction to the jury that it “may or must presume the information was unfavorable to the party.” The Court may also sanction a party for failing to obey a discovery order. Fed. R. Civ. P. 37(b). Sanctions available under Rule 37(b) include an order directing that certain designated facts be taken as established for purposes of the action, payment of reasonable expenses, and civil contempt of court.