In CIGNEX Datamatics, Inc. v. Lam Research Corporation, No. 17-320-MN (D. Del. Mar. 11, 2019), the court denied Defendant’s motions for spoliation and for sanctions, finding insufficient evidence that Plaintiff suffered prejudice due to the deleted electronically stored information (“ESI”).
This case stems from a breach of contract in which Plaintiff agreed in January 2015 to provide software development services to the Defendant. Problems arose quickly after Plaintiff began working on the project, including missed deadlines and going above the budget agreed upon in the initial proposal. By late spring 2016, Defendant suggested that it might seek legal recourse if Plaintiff was unable to deliver as promised under the agreement. On August 5, 2016, Defendant issued a stop work order to the Plaintiff. On March 24, 2017, Plaintiff filed the present action alleging that the Defendant breached the agreement by refusing to pay the remainder of the amount due for the performed work.
On August 20, 2018, Defendant filed a motion for a finding of spoliation and sanctions for Plaintiff’s failure to preserve email documents from certain former employees involved in the project. During discovery, Plaintiff stated that the emails of former employees were not preserved and were deleted pursuant to their email-retention policy. According to the policy, former employees’ emails are deleted from the Plaintiff’s internal system on the employee’s last day of employment. For thirty days thereafter, the former employee’s emails remain accessible to the Plaintiff via its third-party hosting provider. After those thirty days, the Plaintiff can elect to continue paying a monthly fee to store the emails or can stop paying and the emails thus become inaccessible to the Plaintiff. In the instant matter, Plaintiff stopped paying to store the emails of many former employees who worked on the underlying project and, as a result, those emails were not preserved (and not available for production in the litigation).
As an initial matter, the Court quickly held that Plaintiff’s conduct satisfied the threshold requirements of Rule 37(e), namely that Plaintiff should have preserved the emails because litigation was anticipated, that Plaintiff failed to take reasonable steps to preserve the email, and that the lost ESI cannot be restored or replaced via other discovery.
However, the Court denied Defendant’s motion on the grounds that there was insufficient evidence of prejudice resulting from the lost ESI. Proceeding under Rule 37(e)(1), the Court stated that it can impose curative measures only “upon a finding of prejudice to another party from the loss of the information.” Fed. R. Civ. P. 37(e)(1). “In order to impose a sanction under Rule 37(e)(1), the court must have some evidence regarding the particular nature of the missing ESI in order to evaluate the prejudice it is being requested to mitigate.” Rule 37(e)(1) does not impose a burden on any party to either prove or disprove prejudice — rather, the Court is to use its discretion to assess whether prejudice exists from the loss of ESI (including which party should bear the burden). See Fed. R. Civ. P. 37(e)(1) Advisory Committee Notes to 2015 Amendment.
In support of its spoliation motion, Defendant claimed that it suffered prejudice because the lost emails may have contained information showing, inter alia, how the Plaintiff viewed the agreement, how the Plaintiff understood the technical requirements of the project, and why the Plaintiff continued to work despite nonpayment. In response, the court held that Defendant’s suggestion as to the potential contents of the lost emails was purely speculative, and, thus it had no choice but to conclude that Defendant had not been prejudiced.