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Case shelved under Reasonableness

37(e) Requires a Take-Charge Mentality to Preserve Data

Mathew Enter., Inc. v. Chrysler Grp. LLC
N.D. Cal. May 23, 2016
Why This Case Is Important

In today's dynamic corporate data environment, in-house legal teams must take a proactive mentality when preserving data or else risk the inadvertent spoliation of data due to IT/business related activities.

Overview

In this clash between and automobile reseller (plaintiff) and an automobile supplier (defendant), sanctions were motioned for against the plaintiff for making “no effort to preserve communications from customers or internal emails." Both parties stipulated that the preservation duty arose nearly a year after the plaintiff sent a letter threatening litigation to the defendant. During this year-long period, the plaintiff did not take any action to preserve responsive emails, including allowing an outside vendor to delete responsive emails “without complaint," as well as deleting all email communications after changing email system providers. Consequently, the defendant sought spoliation sanctions under Rule 37(e) against defendant.

Ruling
  • Court Opts for “a Middle Ground." The court granted the defendant's motion for spoliation but suggest an alternative from what the defendant proposed, including the option for the defendant to present evidence of spoliation to support its claim. The defendant was awarded reasonable legal fees in bringing this motion.
  • Prejudice is the Key Issue in Question. Under Rule 37(e), the court reasoned that the defendant was ultimately prejudiced by the plaintiff's spoliation based on the deleted emails, which could not be replaced, and which could have “shed some light" on key facts in dispute.
  • Wise Words from the Court on new Rule 37(e). “The rules governing parties' duties to preserve data do not demand perfection. Only when a party should have preserved electronically stored information 'in the anticipation or conduct of litigation' and when that party 'failed to take reasonable steps to preserve it' may a court order corrective measures. The standard is an attainable one."

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Download the PDF version of the Mathew Enter., Inc. v. Chrysler Grp. LLC case law analysis here.

Legal Analysis
On Mathew Enter., Inc. v. Chrysler Grp. LLC
Michael Burg, Corporate Counsel at DISH Network.
BY
Michael Burg, Corporate Counsel at DISH Network.

This is a good example of a party who clearly didn't take anything approaching reasonable steps under Rule 37e, but it's also an example of a judge crafting a remedy that did a great job fitting exactly within the intent of 37e, so it is a really instructive case.

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