A Sour Note
Internet Music Exchange Website Faces E-Discovery Sanctions for Failure to Preserve “Transitory” Electronically Discoverable Information
By K.K.
Arista Records LLC v. Usenet.com, Inc., 2009 U.S. Dist. LEXIS 5185 (S.D.N.Y. Jan. 26, 2009)
Employee/Employer Implicated: Defendant Internet Service Company – Usenet.com
eLesson Learned: Additional action is necessary to preserve all relevant electronically stored information that relates to pending litigation.
Usenet.com is an internet service that provides daily posts and news updates for subscribers. Until the recent lawsuit, subscribers to usenet.com could post a request, upload and download music through the website.
In January 2007, several record companies joined together in a suit against usenet.com for copyright infringement alleging that usenet.com illegally provided access to copyrighted music through its various internet posting groups. The plaintiff record companies requested electronic discovery information relating to the music usage, or “the usage data” on the website.
In response to the March 2007 settlement negotiations, Defendant Usenet.com agreed to provide the requested usage data and eliminate the current exchange of music on the website.
Defendant Reynolds, an employee of Usenet.com, eliminated the music posting groups for a brief period but failed to preserve the usage data that the plaintiffs specifically sought in their discovery requests. The plaintiffs objected to the failure to preserve the usage data and offered to pay for its preservation. Usenet.com reactivated access to some of the music groups but did not effectively preserve the usage data at this time. On March 28th the Usenet.com server died, resulting in the loss of important, discoverable data. Further, the music posting groups were not provided after the server died in March.
The critical issue in this case was whether the defendant’s actions of disabling the newgroups and the subsequent failure to provide usage data should be subject to sanctions.
When a company receives notice of pending litigation, it has a duty to place a litigation hold on any relevant electronic data and to ensure the preservation of relevant electronic information. In this case, the court recognized that the exchange of music files and usage information required additional action to preserve. However, the company was on notice of the litigation when it received the complaint in January 2007 and should have taken the additional steps to preserve the electronic information relevant to the pending litigation.
The defendants argued that the usage data and music exchange was transitory information that served no business purpose for the website. The court acknowledged the transitory nature of the information but found that the defendants still had a duty to preserve the usage data.
Based on an analysis of raw data from the defendant’s server, it was evident that the defendant tampered with and deleted data – data that was specifically requested in the plaintiffs’ discovery requests.
Ultimately, the court imposed sanctions including an adverse inference in the jury instructions as well as attorneys’ fees and costs.
To avoid facing sanctions, businesses with any relevant electronic information, including “transitory information” should attempt to preserve this information by instituting a litigation hold. This means that employees and the IT department should be informed to not delete any relevant information. Furthermore, the company must take additional steps to preserve any information relating to the lawsuit.
Sources:
- “Adverse Inference for Spoilation Granted”, Electronic Discovery Blog http://www.electronicdiscoveryblog.com/?p=325
- “Copyrights and Campaigns”, Ben Sheffner’s Blog, http://copyrightsandcampaigns.blogspot.com/2009/01/record-labels-win-major-discovery.html
- www.usenet.com
KK is a third year law student at Seton Hall University School of Law in Newark, New Jersey. Upon graduation and completion of the bar exam, KK will join a litigation firm in Texas.
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February 16th, 2009 at 7:14 pm
I think courts should differentiate between companies that knowingly tamper and delete important data versus companies that inadvertently delete their data because of a technology glitch. The good faith efforts of the company should be taken into account. Of course, this wasn’t the case here.
February 17th, 2009 at 1:41 pm
This case really illustrates the importance of company diligence upon receiving notice of litigation — particularly because of the breadth of electronic information that must now be preserved. I think this case sends a strong cautionary message to other businesses that operate similar websites.