Reliance on Employee's Judgment in Document Retention Policy Results in Finding of Culpability for Spoliation where Documents were Not Preserved

Phillip M. Adams & Assoc., LLC v. Dell, Inc., 2009 WL 910801 (D. Utah Mar. 30, 2009)

In this patent infringement case, plaintiff, Phillip M. Adams & Associates (“Adams”), alleged that defendants ASUSTEK Computer Inc. and ASUS Computer International (collectively “ASUS”) spoliated relevant evidence and should therefore be sanctioned. Finding that ASUS violated its duty to preserve and that the loss of evidence could not be excused as a “routine, good faith operation of electronic information systems,” the court ruled that sanctions were appropriate, but reserved imposition pending the close of discovery and a determination of prejudice.

This case addresses the alleged infringement of several patents developed to resolve defects discovered in a commonly used floppy disk type in the late 1980’s. The patents were developed by Dr. Phillip Adams and later assigned to Phillip M. Adams & Associates. Alleged misuse of those patents gave rise to several lawsuits, including litigation against Gateway that was settled before trial.

In the case at issue, Adams alleged that ASUS destroyed critical evidence. Adams’ allegations of spoliation were based on the assumption that ASUS had obtained Adams’ proprietary test programs and used them in its own attempts to address the disk defect and thus that ASUS should have had evidence related to such use for production during discovery. ASUS’ failure to produce such evidence, therefore, was indicative of sanctionable spoliation. Adams had no direct evidence of spoliation.

ASUS’ response to the allegations of spoliation included an extensive description of its email management practices, meant to explain the absence of email related to subject of the litigation. ASUS explained that “its email servers are not designed for archival purposes, and employees are instructed to locally preserve any emails of long term value.” According to ASUS, an employee’s failure to download an email from the server would result in the email being automatically overwritten. A determination of what emails were of “long term value” was left to the individual employee. Additionally, ASUS’ employees’ computers were routinely replaced and individual employees were responsible for determining what information should be transferred to a new computer. Any information not saved by the individual employee was erased. ASUS also had no centralized storage for other electronic documents, choosing instead to allow employees to maintain the documents on their individual work stations.

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Source: ediscoverylaw.com