- Rimkus v. Cammarata
- April 22, 2010
- Law Firm: Jennings, Strouss & Salmon, P.L.C. - Phoenix Office
To summarize the Rimkus v. Cammarata case, a group of employees left and filed a suit against their former employer, Rimkus Consulting, to release them from their non-compete agreements. In a countersuit, Rimkus alleged that the former employees violated their non-competes and additionally made off with trade secrets and proprietary information.
Judge Rosenthal's opinion in Rimkus expands on the "culpability continuum" of Pension Committee and introduces the concept of "preservation proportionality". Unlike Pension Committee, which involved negligent actions, Rimkus involved the intentional destruction of emails and other ESI when they were known to be relevant to anticipated or pending litigation. Further, the "spoliators" concealed and delayed providing information that would have revealed their spoliation.
Much of what was deleted was no longer available from alternative sources; however, despite the deletions of emails subject to the duty to preserve, the adverse party had evidence available to prosecute its claims and respond to defenses. Because the Court found that there was sufficient evidence for the other side to prove its case, it declined to impose the most drastic sanction (judgment for the other party) and instead decided that the appropriate sanction was to inform the jury about what had been done and to give the jury the option of applying an adverse inference instruction, i.e. that the evidence that should have been preserved and if produced would have been unfavorable to the spoliating party.
Judge Rosenthal emphasized the need to consider both the spoliating party's culpability and the level of prejudice to the party seeking discovery. Even though there was willful destruction of evidence, a significant amount of the incriminating evidence was recovered by the plaintiff, meaning that the prejudice to the other party was not so great. In light of those facts, the Court was unwilling to issue the harshest sanctions.
Judge Rosenthal stated in her opinion:
Spoliation is the destruction or the significant and meaningful alteration of evidence. ...Electronically stored information is routinely deleted or altered and affirmative steps are often required to preserve it. Such deletions, alterations and losses cannot be spoliation unless there is a duty to preserve the information, a culpable breach of that duty and resulting prejudice.
These general rules [of spoliation] are not controversial. But applying them to determine when a duty to preserve arises in a particular case and the extent of that duty requires careful analysis of the specific facts and circumstances. It can be difficult to draw bright-line distinctions between acceptable and unacceptable conduct in preserving information and in conducting discovery, either prospectively or with the benefit (and distortion) of hindsight. Whether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done-or not done-was proportional to that case and consistent with clearly established applicable standards.
Quoting from The Sedona Principles for Electronic Document Production, Judge Rosenthal noted: "Electronic discovery burdens should be proportional to the amount in controversy and the nature of the case. Otherwise, transaction costs due to electronic discovery will overwhelm the ability to resolve disputes fairly in litigation." She then goes on to state: "For example, the reasonableness of discovery burdens in a $550 million case arising out of the liquidation of hedge funds, as in Pension Committee, will be different than the reasonableness of discovery burdens in a suit to enforce noncompetition agreements and related issues, as in the present case."
Judge Rosenthal concluded:
Applying a categorical approach to sanctions issues is also difficult, for similar reasons. Determining whether sanctions are warranted and, if so, what they should include, requires a court to consider both the spoliating party's culpability and the level of prejudice to the party seeking discovery. Culpability can range along a continuum from destruction intended to make evidence unavailable in litigation to inadvertent loss of information for reasons unrelated to the litigation. Prejudice can range along a continuum from an inability to prove claims or defenses to little or no impact on the presentation of proof. A court's response to the loss of evidence depends on both the degree of culpability and the extent of prejudice. Even if there is intentional destruction of potentially relevant evidence, if there is no prejudice to the opposing party that influences the sanctions consequence. And even if there is an inadvertent loss of evidence but severe prejudice to the opposing party, that too will influence the appropriate response, recognizing that sanctions (as opposed to other remedial steps) require some degree of culpability.
The best way to avoid such risks and consequences? Have an effective litigation hold process in place which includes the following:
- Issue a legal hold that is written and that clearly articulates the preservation process. A written notification serves as a foundation for a defensible fact trail that will make it less likely for opposing counsel to bring spoliation into play.
- Sending a written hold is not sufficient. You must take proactive steps to ensure understanding and compliance on behalf of the custodians. As in the Rimkus case, such action is a critical step toward isolating any "bad actors" that seek to inadvertently (or overtly) destroy evidence.
- Ensure a means to effectively defend your actions and preservation process. In the case of spoliation motions, a well-understood and consistently applied process will always support the litigant faced with defending their actions as being reasonable and in good faith.
The real takeaway here is that preservation and the use of litigation holds continue to be a hot issue in the courts. With this level of notoriety, the courts are unquestionably becoming less tolerant of improper hold implementations. Take appropriate steps now, including contacting your outside litigation counsel, before you too become an example what not to do when it comes to legal holds.