Case Law: Orbit One Commc’ns, Inc. v. Numerex Corp
Court Denies Sanctions For Spoliation Absent Proof of Relevance
Orbit One Commc’ns, Inc. v. Numerex Corp., 2010 WL 4615547 (S.D.N.Y. Oct. 26, 2010). In this corporate litigation, the defendant sought spoliation sanctions. Discussing preservation obligations, the court criticized the standard of “reasonableness and proportionality” articulated in Victor Stanley II and Rimkus Consulting Group as “too amorphous to provide much comfort to a party deciding” what to retain. Instead, the court advised parties to adhere to the Zubulake IV standard of retaining “all relevant documents…in existence at the time the duty to preserve attaches.” Noting that ordinary negligence is sufficient in its circuit for a spoliation inference, the court found the plaintiffs did not adhere to appropriate preservation procedures by implementing an inadequate litigation hold, failing to involve a key IT employee, entrusting data to the individual with the greatest incentive to destroy it and allowing “cavalier” treatment of that information. Nevertheless, the court asserted that although a party’s preservation efforts may be insufficient, sanctions are not warranted unless there is proof that some information has actually been lost and was relevant. In so holding, the court also noted it respectfully disagreed with the Pension Committee ruling that held some level of sanctions are warranted as long as any information was lost due to inadequate preservation practices. Despite the plaintiffs’ failure to “engage in model preservation” of ESI, the court denied the sanctions request determining there was insufficient evidence that any relevant information was destroyed.
Orbit One represents yet another impactful case in the slew of decisions addressing preservation obligations which is certainly the most dominant theme in ediscovery case law from 2010 (apart from the larger conversation of sanctions). This case, issued by Magistrate Judge James Francis from the Southern District of New York, addresses three of the major rulings prior to this decision – Pension Committee (District Judge Shira Scheindlin, Southern District of New York, January 2010), Rimkus Consulting Group (District Judge Lee Rosenthal, Southern District of Texas, February 2010) and Victor Stanley II (Chief Magistrate Judge Paul Grimm, District of Maryland, September 2010).
First, Judge Francis questioned the “reasonableness and proportionality” standard discussed in both Victor Stanley II and Rimkus Consulting Group, noting that the standard seemed “too amorphous to provide much comfort to a party” determining what data to retain and what data to dispose. Instead, Judge Francis endorses more of a “retain all” standard (not including identical copies) that are in existence when the duty to preserve attaches and are relevant for the purposes of discovery (citing Zubulake IV).
Next, Judge Francis respectfully disagreed with the holding in Pension Committee which he read to mean that “at least some sanctions are warranted as long as any information was lost through the failure to follow proper preservation practices, even if there have been no showing that the information had discovery relevance, let alone that it was likely to have been helpful to the innocent party.” Instead, Judge Francis held that sanctions are not warranted unless a party can prove relevance of the lost information (and prove that the information was actually lost). However, if the discovery-related material was destroyed in bad faith or through gross negligence, the harm to the spoliator may be presumed.
Finally, even though Judge Francis disagreed with findings from the above holdings, the problem identified and discussed at length by Judge Grimm in Victor Stanley II persists, and perhaps is now even murkier. Corporations operating in multiple jurisdictions still do not have a consistent preservation standard to uphold as courts across the country (indeed in the same circuit as demonstrated by the contrary viewpoints expressed in Pension Committee and Orbit One) differ substantially on this difficult topic. Efforts to amend the Federal Rules of Civil Procedure are underway, including an attempt to address preservation obligations, but it is far too early to tell whether that will provide much-needed guidance. Until that point, parties may be well served to adhere to Judge Grimm’s advice that parties should follow the requirements of the “toughest court” who has issued an opinion regarding preservation