By Bradford Muller
Metrokane, Inc. v. Built NY, Inc., Nos. 06 Civ. 14447 (LAK) (MHD), 07 Civ. 2084 (LAK) (MHD), 2008 WL 4185865 (S.D.N.Y. Sept. 3, 2008).
Employees Implicated: Upper Management
eLesson Learned: Metrokane’s problems derived from their negligence in either failing to produce available e-mails or in failing to maintain e-mails that it had a duty to preserve, and in their “deliberate and inexcusable” decision to improperly redact produced e-mails. Metrokane’s problems began with their upper management failing to create a written policy on document retention. Had such a policy been in effect, perhaps Metrokane would have preserved the e-mails in question and properly produced them during discovery, avoiding sanctions. Therefore, every business must have a document retention policy in place that states that if the company is anticipating litigation, it will suspend its routine document destruction activities and put in place a litigation hold to ensure the preservation of all relevant documents, including e-mails. The company must also be honest players in discovery, and should not redact discoverable information from properly produced documents. Finally, business people must be aware of the fact that unlike a casual phone conversation, e-mail creates a discoverable document trail, and thus must be careful when making potentially damaging comments through e-mail exchanges.
Summary: In a motion seeking discovery sanctions against Metrokane, Built NY (BNY) contended that Metrokane failed to produce a series of highly damaging e-mails, and that BNY’s unearthing of those e-mails came too late to allow them to pursue discovery. BNY also claimed that a partial redaction of a produced e-mail exchange was improper.
I. Metrokane Failed to Produce Relevant E-mails During Discovery and Redacted the E-Mails it Chose to Produce
During discovery, Metrokane produced one partially redacted page displaying two of the e-mails between itself and Edward Kilduff, the man who designed the Metrokane bags that BNY claimed were infringing upon their design. Metrokane’s redaction concealed an exchange in which a Metrokane representative made a statement that was damaging to Metrokane’s case. After the close of discovery, BNY successfully compelled the deposition of Kilduff. Among the documents presented at the deposition was an e-mail exchange between Kilduff and Metrokane. In that exchange, a principal of Metrokane and Kilduff discussed the potentially problematic similarity between Metrokane’s bag design and BNY. Those e-mails had never been fully produced by Metrokane during discovery and were damaging to several aspects of their case.
The production of the e-mails from Kilduff took place months after the end of discovery and deprived BNY of the opportunity to explore these matters during the discovery period. Metrokane offered no explanation for failing to produce the e-mails, and instead asserted that they had no written policy on document retention; thus implying that they had failed to preserve the e-mails.
II. Metrokane’s Lack of a Document Retention Policy Led to a Failure in their Duty to Preserve and Produce Relevant E-mails and their Deliberately Improper Redaction of the Produced E-mails was Similarly Inexcusable
The court found that Metrokane’s failure to offer evidence regarding their retention or deletion of the non-produced e-mails created the inference that Metrokane possessed the e-mails during the discovery period. That inference was bolstered by Metrokane’s partial production of the redacted e-mails from the relevant time period. The court found that if Metrokane had been systematically deleting e-mails, the company would not have been able to produce the redacted e-mail exchange.
The court found that even if Metrokane had deleted the e-mails prior to discovery, it did not help its case, as the courts have repeatedly found that an organization that is aware of potential litigation has an obligation to preserve relevant documents. Quoting the language of Zublake v. UBS, the court found that “‘once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure the preservation of relevant documents.’”
The court found that at the time of the relevant e-mail exchange Metrokane was aware of the potential litigation with BNY. Therefore, if Metrokane erased the e-mails thereafter it violated its duty of preservation.
Finding that Metrokane had engaged in improper activities, the court moved on to determine sanctions. The court inferred that Metrokane was negligent either in failing to produce available documents or in failing to maintain documents that it had a duty to preserve. The court also found a greater level of fault as to the redaction of the produced e-mail, which the court said was “deliberate and inexcusable.”
III. Metrokane’s Negligence in Failing to Preserve and Produce Relevant E-mails and Intentional Wrong-doing in Making the Improper Redactions to Produced E-mails led to Stern Sanctions.
After analyzing Metrokane’s degree of fault and finding that BNY had been prejudiced, the court fashioned discovery sanctions. First, for the purposes of pending summary-judgment motions, the court deemed a statement in the e-mail to be binding against Metrokane. Second, the court found that Metrokane would be required to make relevant witnesses available for deposition, with Metrokane paying the associated costs and reasonable attorneys’ fees. Third, the court found that, at trial, BNY would be allowed to offer evidence regarding Metrokane’s concealment of the e-mail and was entitled to a favorable jury instruction. Finally, the court awarded BNY the expenses and reasonable attorneys’ fees incurred in this motion.
Bradford is a third year student at Seton Hall Law and is the Comments Editor of the Seton Hall Law Review.
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January 17th, 2009 at 7:27 pm
Great Article!!! This truly shows how business people need to be careful about what they say in e-mails. Like the author says, an e-mail is NOT a phone call and could come back to haunt you. Also, this company should have known better than to try and hide relevant information in the redacted e-mail. Trying to be “cute” never works.