Stolen Laptops, Lost Data, But No Sanctions For Spoliation

Posted by Gregg Mayer on Monday, February 25th, 2008   

In a lawsuit in Texas, both sides claimed that the other side failed to preserve email that was relevant to the litigation. However, the judge in a Feb. 5, 2008 decision declined to order sanctions.

As brief background, Diabetes Center of America, Inc. (DCOA), a treatment center for persons with diabetes, is suing Healthpia America, Inc., a company that develops mobile healthcare devices, for breach of contract. As part of the litigation, both sides sought email.

First, DCOA alleged Healthpia should have backed-up email messages that were lost when two laptop computers were stolen. According to the court opinion, one laptop was stolen “from a friend’s car outside Kennedy Airport,” and the other laptop was stolen from an employee’s Healthpia office cubicle. Healthpia had a standard procedure of not backing up email from laptops. The court declined to order sanctions. The judge wrote:

Defendants may not have taken adequate steps to preserve emails through a back-up process, but Defendants followed the company’s standard procedures. If anything, there has been a showing of negligence derived from lax electronic document maintenance procedures.

But any “negligence” was not enough to warrant sanctions. Consequently, the judge denied DCOA’s request that Healthpia be sanctioned.

Next, Healthpia argued DCOA failed to preserve email that was contrary to DCOA’s position in the litigation. Healthpia later obtained the relevant email from third parties, but Healthpia argued there may be more email that it had not received. DCOA acknowledged that a junior lawyer was assigned to search through the databases for the appropriate email messages to give to Healthpia. The junior associate used “inadequate” search terms, the judge wrote, but neither the junior associate nor DCOA’s senior lawyer acted in bad faith. The judge wrote:

(A)t most, Plaintiff’s counsel may have been lax in that inadequate direction and oversight was given to the associate to guide her search for relevant and responsive emails. There is no evidence that he or the associate acted in bad faith.

As a result, the judge declined to order sanctions.

As an aside, in regard to the stolen laptops from Healthpia, it is worth noting that this is not a Rule 37 (“safe harbor” provision) ruling from the judge, but the underlying premise for the rule is important here. As you may know, Rule 37 provides:

Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.

Here, stolen laptops do not equate losing data as part of a routine, good faith operation. However, the fact that Healthpia maintained a formal retention policy, and followed that policy, certainly was helpful – if not determinative – in precluding sanctions once those laptops were stolen and there was nowhere else to gather the email.

The case is Diabetes Centers of America, Inc. v. Healthpia America, Inc. It is filed in the southern district of Texas. Read more about the case and see the opinion at this blog.

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