Legal Technology
CASE LAW
Animal Welfare International Inc. v. W3 International Media Ltd. 2011 BCSC 299.
Application by the plaintiff to settle the terms and conditions that should attach to the production of documents pursuant to an Order of the Court and to compel the defendant to produce certain documents. The parties had carried on business under a profit sharing agreement until the agreement was terminated by the plaintiff. By previous Order of the Court the defendant was to deliver to the plaintiff two customer databases for two separate websites. The defendant argued that there were privacy concerns relating to production of the databases since the databases contained confidential client information such as credit card numbers, addresses, etc., and as such information contained in the databases should be redacted.
The Court held that the privacy concerns were satisfied by ordering the principals of the plaintiff to sign confidentiality agreements and as such ordered the defendant to turn over the databases. Further, the Court ordered that the defendant was to produce to the plaintiff any data relating to a report prepared that disclosed sales, profits and costs for a material period of the agreement. The Court ruled and affirmed that electronic data is a document for purposes of production. Accordingly, any of the data underlying the report that was stored electronically was to be produced along with any supporting paper documents.
Naaco Materials Handling Group, Inc. v. Lilly Co., No. 11-2415 AV, 2011 WL 5986649 (W.D. Tenn. Nov. 16, 2011).
Motion by the plaintiff to prevent further spoliation by the defendant. In the main action, the plaintiff claimed damages for economic and competitive injury in relation to an alleged unauthorized and improper access to the plaintiff's secure dealer website. The plaintiff manufactured and sold lift trucks and aftermarket parts. The defendant was a dealer of the plaintiff's product. Through the plaintiff's secure website, authorized dealers could access proprietary information, including information for servicing lift trucks, such as maintenance manuals, diagnostics, and pricing information. By contract, dealers were required to keep confidential the contents of the website. The defendant was terminated as a dealer, and sold its computers to another dealer. One of the defendant's employees went to work for the other dealer and the plaintiff issued the employee new access information for the website. The plaintiff alleged that, despite this, the defendant continued to access its website. The defendant admitted unauthorized access but denied claims that it obtained trade secrets or infringed plaintiff's copyright by such access. The defendant's counsel instructed the defendant's President to take various steps to preserving electronic data in light of ongoing litigation. These instructions were forwarded to several senior employees within the company.
Three to four months later, a similar notice was sent to all of the defendant's employees.
Forensic examinations of the defendant's computers were conducted to identify which computers had accessed the secure website. Hard drives of identified computers were preserved. However, as a witness testifying on behalf of the company, the defendant's President had testified that the defendant did nothing at several key times to preserve evidence of access to the website. In particular, it took no steps towards preservation when the defendant's access information was initially cancelled upon termination of the dealer agreement, when it was served with the plaintiff's complaint, nor when it received a "document hold" letter from the plaintiff. The plaintiff argued that any evidence lost was at the very core of its claim, and that having been denied the opportunity to fully support its claim, it had been prejudiced by the failure to preserve evidence. In response, the defendant insisted that spoliation was not proven and that the plaintiff's own server logs were the best evidence of access to the website.
The court found that the defendant had failed to meet its obligation to provide a proper and prepared witness on behalf of the corporation. The defendant had a duty to produce a knowledgeable person as to each topic to the deposition and to adequately prepare the deponent. The defendant's President could not identify who had learned of the access information, nor could he indicate what portions of the website had been accessed. He should have spoken with each of the employees who admittedly accessed the website and examined each of the computers identified as having been used to access the website. Re-examination was ordered with costs to the defendant.
With respect to spoliation, the defendant's duty to preserve arose upon the anticipation of litigation triggered only when it received the plaintiff's complaint. The fact that the defendant knew of its employees' access prior to that time was not reason enough for the defendant to anticipate litigation. In this regard, the Court noted, the plaintiff had not sent any pre-litigation or cease-and-desist letters prior to launching its complaint. The defendant's preservation and collection efforts were insufficient in the circumstances in that the defendant failed to issue a written company-wide litigation hold in a timely fashion, and failed to take additional steps to prevent emails from being deleted, to prevent data from being overwritten, or to identify and preserve backup tapes. In terms of collection, three months had elapsed from the time of the complaint before the defendant began searching for evidence of access. Collection efforts were improperly left to employees to complete on their own with no managerial oversight, follow-up, or documentation of collection procedures. Proper technicians were not retained to assist with these efforts.
The defendant's conduct with respect to preservation and collection of evidence constituted negligence at a minimum. In determining whether sanctions were appropriate, the Court concerned itself less with whether relevant documents were in fact lost given that the plaintiff was only seeking costs associated with the forensic examinations. Instead, the Court focused on the defendant's conduct in the circumstances. The lack of evidence as to spoliation was primarily the product of the defendant's failure to take steps toward preservation of electronic data, as was the need for forensic examinations. Costs of the forensic examinations were awarded to the plaintiff.
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