E-Discovery Law Review : Electronic Discovery Lawyers & Attorneys : Cozen O'Connor Law Firm : Data Preservation & E-Discovery Disputes

United States District Judge Carl Barbier recently affirmed Magistrate Judge Sally Shushan’s denial of BP’s motion for spoliation sanctions against Halliburton Energy Services, Inc. BP alleged that Halliburton “intentionally destroyed evidence” and “violated the Court’s orders regarding the production of documents.” For these violations, BP sought sanctions including an adverse finding against Halliburton, attorneys’ fees, and an order compelling Halliburton to deliver a computer used in producing 3D modeling results. Judge Shushan refused to make an adverse finding and refused to award attorneys’ fees but ordered Halliburton to deliver the modeling computer for forensic testing. 

            By way of background, one of Halliburton’s main defenses in this multi-district litigation included the assertion that foam cement that Halliburton pumped into the Macondo well on April 19, 2010 was stable. Access to Halliburton’s testing results was integral to prove or disprove this defense. Another of Halliburton’s main defenses involved BP’s alleged engineering decisions to use fewer centralizers than Halliburton had recommended inside the well. Halliburton’s proprietary Displace 3D Simulator (“Simulator”) allowed engineers to predict with accuracy the possibility of channeling. Halliburton employees conducted an analysis of the April 19 cementing operation using the Simulator that allegedly indicated that there was no channeling at the Macondo well.

            BP asserted that Halliburton intentionally destroyed the results of physical slurry testing as it related to foam cement used in the wells because “it wanted to eliminate any risk that this evidence would be used against it at trial.” Judge Shushan, however, determined that BP failed to establish the three elements necessary to secure an adverse inference: 1) Halliburton’s duty to preserve; 2) Halliburton’s bad faith breach of the duty; and 3) that BP was prejudiced. Judge Shushan determined that BP had not demonstrated prejudice and refused BP’s request for an adverse finding as to the cement tests. 

            Similarly, BP sought Halliburton’s post-incident Simulator modeling. BP argued that the proprietary nature of the model rendered it unavailable to BP or other litigants. Halliburton, however, revealed that the results of the Simulator modeling were “gone.” BP then argued that Halliburton should transfer the computer on which the Simulator modeling had been completed to a third party for forensic testing. Halliburton agreed to submit the computer to a third-party and to make its software available to BP pursuant to a software escrow agreement. Judge Shushan ordered Halliburton to produce the computer for forensic testing and ordered the parties to split the costs. 

            The mysterious disappearance of evidence in most cases would result in a plethora of sanctions. How, then, did Halliburton fare so well? One possible reason might be Halliburton’s contention that the cement testing that BP referenced used off-the shelf materials that had little or no relevance to the case. Perhaps this fact contributed to Master Shushan’s finding that BP was not prejudiced. Another likely reason includes Halliburton’s willingness to cooperate with BP to conduct forensic testing of its computer. In contentious cases, a little cooperation goes a long way. In all cases, especially in the e-discovery context, sound record-keeping and cooperation with all parties remains essential to avoiding costly and embarrassing sanctions. 

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At 3:40 on the morning of April 3, 2003, Tamara Greene, an exotic dancer, was shot multiple times and killed while sitting in a car at the intersection of Roselawn and West Outer Drive in Detroit. According to the complaint filed by Greene’s next of kin in Flagg v. City of Detroit and Kwame Kilpatrick, (E.D. Mi. Nov. 7, 2005), the head of the Internal Affairs Department of the Detroit Police Department was fired a mere nine days following Ms. Greene’s murder. It is alleged he was dismissed for investigating a party at the Mayor’s mansion, known as the Manoogian Mansion, during which exotic dancers, including Ms. Greene, performed. As a result of this firing, the Flagg complaint alleged that members of the Detroit Homicide Department refused to investigate the Greene murder case for fear of losing their jobs. The Flagg complaint further alleged that the case was labeled “cold” only eleven months following the crime, which falls well short of the two-year period typically required by the cold case squad.  Most shockingly, plaintiffs contend that the Police Department deliberately avoided sending the spent casings and bullets collected from the crime scene to the appropriate agency to determine if they came from the gun of a Detroit Police Officer. Against this backdrop, we examine the decision rendered by Chief Judge Rosen in this case on October 5, 2011 in which he finds that the defendants deliberately deleted relevant emails in bad faith and failed to disseminate a Court Order to preserve evidence to the appropriate city departments. 2011 U.S. Dist. LEXIS 114772 (E.D. Mi. Oct. 5, 2011). Judge Rosen’s searing opinion highlights several key electronic discovery issues, including the presumption of relevance that will attach where discovery is destroyed willfully and the parameters of the permissive adverse inference sanction.

Judge Rosen initially adopted the Report and Recommendation of Magistrate Judge R. Steven Whalen recommending that the Court give a permissive adverse inference instruction at any eventual trial to sanction the electronic discovery abuses of defendants, including the destruction of incoming and outgoing emails to and from the accounts of former Mayor Kwame Kilpatrick, his Chief of Staff, former “corporation counsel” and the former Chief of Police. The Report also found that the City failed to advise the appropriate City Departments of the Court’s Order to preserve relevant evidence. Id. at *5. Both Plaintiffs and Defendants objected to the Report. 

Defendants “express[ed] confusion” as to the basis for the Magistrate’s conclusion that the lost emails were relevant – a finding necessary for an adverse inference instruction – given that the four individuals whose accounts were deleted testified that they did not send any emails concerning the homicide investigation. Id. at *6. Judge Rosen agreed with the Magistrate that “the law expressly dictates a finding of relevance where, as here, it is determined that evidence has been ‘destroyed in bad faith (i.e. intentionally or willfully”).”  Id. 

Next Defendants argued that the evidence did not support the Magistrate’s finding that the City and its counsel failed to take action to disseminate to the appropriate City Departments the Court’s March 5, 2008 Order to preserve evidence. Defendants pointed to the Chief of Staff’s knowledge of the Order as evidence that the Order was distributed. The Court concluded, however, that there was nothing to suggest her knowledge was a result of any action by the City or its in-house counsel. Defendants also relied on the testimony of the former Police Chief that she was advised of the Order and prepared a memo to the Detroit Police Department advising them of it. The Court, however, discredited the Chief’s testimony given that she was unable to recall the date of the memo and whether it was actually based on the March 5, 2008 preservation Order. The Court also found suspect the fact that the Chief testified that her outside counsel was involved in preparation of the memo despite the fact that he did not enter an appearance on her behalf until April 7, 2008. Id. at 9.

The City argued its “corporation counsel” disseminated the March 5, 2008 Order with the assistance of an outside law firm that was acting as its co-counsel at the time. However, the testimony of the “corporation counsel” contradicted this argument. He testified that he never discussed the order with the Mayor, did not communicate with outside counsel regarding the Plaintiffs’ motion to preserve evidence, believed that the outside law firm would have been responsible for handling the requirement to preserve, and that he did not know what the City might have done in response to the Order. According to the Court, this testimony “disproves” the position that the March 5^th Order was disseminated by its corporation counsel.

The City then attempted to prove that the March 5^th Order was disseminated because it was able to produce some emails from the Police Chief and two police officers. The Court held that “if the City’s in-house attorneys stood idly by as emails were deliberately destroyed in contravention of this Court’s express order – to say nothing of the more general duty of all parties to preserve evidence that is relevant to pending litigation – they should hardly pat themselves on the back for any emails that were overlooked or otherwise survived this effort.” Id. at 14.

Next, the City challenged the appropriateness of the imposition of a permissive adverse inference instruction, essentially claiming the punishment did not fit the crime. The City argued that the sanction was too steep given that the reason for the lost emails was unknown. The Court reasoned that the “short answer to this, as Plaintiffs recognize, is that the City, through its attorney Mr. Schapka, filed papers in this case affirmatively stating that ‘upon their resignations during February of 2008, Beatty and Kilpatrick’s email accounts and collected emails whether in-coming or out going, were deleted and purged from the electronic storage system.” Id. Thus, the finding of willfulness and bad faith of the defendants was based on the evidence. The Court reasoned that “it is difficult to read the City’s present objections as anything other than a continuation of the persistent effort by the City and its in-house counsel to avoid taking responsibility for egregious conduct that has seriously undermined the truth-seeking mission of civil litigation.” Id. at 18. 

Plaintiffs similarly objected to the adverse inference instruction claiming that a more severe  sanction, such as entry of a default judgment or a mandatory adverse inference instruction, were warranted. But the Court agreed with the Magistrate’s conclusion that these sanctions would “give the Plaintiffs an undeserved evidentiary windfall.” Id. It further reasoned that, given the lengthy discovery period and the voluminous records produced therein, it would be difficult to conclude that the deleted emails from the 10 month period at issue were likely to provide information not otherwise available. Id. at 27.

In connection with the adverse inference instruction, the City further complained that a permissive adverse inference instruction will permit a jury to engage in “speculation and conjecture.” Id. at 18. While the Court acknowledged that it prefers that factual findings made by a trier of fact be based on the record, it reasoned that the City’s destruction of the emails “thwarted this goal.” Id. It reminded the City that the permissive adverse inference instruction allowed the City to argue that the “inferences proposed by Plaintiffs are implausible and should be rejected.” Id. 

In sum, this opinion offers guidance concerning the imposition of the adverse inference instruction as a sanction for the deliberate destruction of electronic discovery and the refusal to properly disseminate a Court Order to preserve evidence.

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