Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 1 of 25
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`08 Civ. 5463 (CM) (GWG)
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`OPINION AND ORDER
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`CENTRIFUGAL FORCE, INC.,
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`:
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`:
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`:
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`Plaintiff,
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`-v.-
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`SOFTNET COMMUNICATION, INC., et al.,
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`:
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`Defendants.
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`GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE
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`Plaintiff Centrifugal Force, Inc., d/b/a Wise Choice Software (“CFI”), has moved for
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`sanctions pursuant to Fed. R. Civ. P. 37 against defendants Beny Sofer, Inc. (“BSI”) and BSI’s
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`principal Beny Sofer (collectively, the “Sofer Defendants”), as well as defendants Michael
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`Mardkha and Aleksander Staszulonek d/b/a PowerLine Computers (“Staszulonek” or
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`“PowerLine”) on the ground that they engaged in the spoliation of evidence. For the reasons
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`stated below, the motion for sanctions is denied.
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`I.
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`BACKGROUND
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`A.
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`The Nature of the Action and the Spoliation Allegations
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`In its amended complaint, CFI alleges that Mardkha and PowerLine infringed its
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`copyright in a computer program called “RightClick” by copying and incorporating elements of
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`RightClick into a program called “Jagsys.” See First Amended Complaint, filed Nov. 14, 2008
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`(Docket # 32) (“Am. Compl.”) ¶¶ 116-20, 147, 150, 154-57. CFI asserts that the Sofer
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`Defendants infringed CFI’s RightClick program by allowing defendant Mardkha and his
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`companies, ISM Software and/or Softnet Communication, Inc., to copy the Sofer Defendants’
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`licensed copy of RightClick. Id. ¶¶ 14-18, 21, 131, 137, 139.
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 2 of 25
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`In this motion, CFI maintains that the defendants, acting in concert, “willful[ly] and
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`deliberate[ly] destr[oyed] . . . electronic evidence highly relevant and probative of plaintiff’s
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`claims of infringement and, in particular, the Sofer Defendants’ contributory infringement.”
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`Memorandum of Law Submitted in Support of Plaintiff’s Motion for Sanctions Against
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`Defendants for their Spoliation of Evidence, filed Oct. 22, 2010 (Docket # 126) (“Pl. Mem.”) at
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`2. CFI claims that this destruction of evidence consisted of: (1) the destruction of email
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`evidence, id. at 9-10; (2) changes to and destruction of elements of the Jagsys program, id. at 6-
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`9; and (3) “removal and replacement of BSI’s computer hard drives,” id. at 2, 10, 19, 20. To
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`remedy the alleged spoliation, CFI seeks “an order striking the pleadings of each of the
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`defendants and entering judgment against them by default, due to their willful, deliberate and
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`bad faith spoliation of material evidence.” Id. at 1. In the alternative, CFI requests an order
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`“granting [CFI] summary judgment on the issue of defendants’ liability on Counts I and IV in
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`the First Amended Complaint”; “precluding each of the defendants from offering evidence of
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`non-infringement and/or evidence supporting defendants’ affirmative defenses”; “precluding
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`each of the defendants from contesting the plaintiffs’ damage calculations”; or “instructing the
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`jury that an adverse inference may be drawn against each of the defendants based upon their
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`destruction of evidence.” Id. CFI also seeks its costs and attorneys’ fees. Id.
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`B.
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`Procedural History
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`CFI filed its original complaint on June 17, 2008, see Complaint, filed June 17, 2008
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`(Docket # 1) (“Compl.”), and an amended complaint on November 14, 2008, see Am. Compl.
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`On October 22, 2010, following extensive discovery, CFI filed the instant motion for sanctions. 1
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` See Notice of Motion, filed Oct. 22, 2010 (Docket # 121); Declaration of Barbara
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`Frederiksen-Cross with Special Expert Report in Support of Plaintiff’s Motion for Sanctions
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`2
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 3 of 25
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`On December 22, 2010, Mardkha filed his opposition to the motion, which included a cross-
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`motion for summary judgment. On January 6, 2011, the Court issued an order stating that it
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`would treat these papers as Mardkha’s opposition to the motion for sanctions to the extent
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`relevant to that motion. See Order, filed Jan. 6, 2011 (Docket # 143). On December 29, 2010,
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`the Sofer Defendants filed their opposition papers, and on February 1, 2011, Staszulonek filed
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`his opposition papers. After CFI filed reply papers, the Court issued an order asking the parties
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`5
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`Against Defendants for Their Spoliation of Evidence, filed Oct. 22, 2010 (Docket # 122)
`(“Frederiksen-Cross Decl.”); Declaration of Steven Mancinelli in Support of Plaintiff’s Motion
`for Sanctions Against Defendants for Their Spoliation of Evidence, filed Oct. 22, 2010 (Docket
`# 124) (“Mancinelli Decl.”); Declaration II of Steven Mancinelli with Appendix of Documents
`Referenced in the JLI Special Expert Report, filed Oct. 22, 2010 (Docket # 125) (“Mancinelli
`Decl. II”); Pl. Mem.
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` See Notice of Cross-Motion for Summary Judgment, filed Dec. 22, 2010 (Docket
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`# 134); Declaration of Dr. Aleksander Staszulonek, filed Dec. 22, 2010 (Docket # 135)
`(“Staszulonek Decl.”); Declaration of Michael Mardkha, filed Dec. 22, 2010 (Docket # 136)
`(“Mardkha Decl.”); Declaration of Catherine M. Clayton, filed Dec. 22, 2010 (Docket # 137)
`(“Clayton Decl.”); Statement of Material Facts Pursuant to Local Rule 56.1, filed Dec. 22, 2010
`(Docket # 138); Memorandum of Law in Opposition to Plaintiff’s Motion for Spoliation and in
`Support of Defendant Michael Mardkha’s Cross-Motion for Summary Judgment, filed Dec. 22,
`2010 (Docket # 139).
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` See Memorandum of Law, filed Dec. 29, 2010 (Docket # 140); Declaration of Lior
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`Sofer, filed Dec. 29, 2010 (Docket # 141) (“Sofer Decl.”); Declaration of Eric Weinstein, filed
`Dec. 29, 2010 (Docket # 142) (“Weinstein Decl.”).
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` See Defendant’s Aleksander Staszulonek d/b/a PowerLine Computers Memorandum
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`of Law Submitted in Opposition to the Plaintiff’s Motion for Sanctions Against Defendants for
`their Spoliation of Evidence, filed Feb. 1, 2011 (Docket # 154) (“Staszulonek Mem.”);
`Defendant’s Aleksander Staszulonek d/b/a PowerLine Computers Motion to Reject the “Special
`Report of Barbara Frederiksen-Cross Addressing Spoliation Issues” Entirely, dated Dec. 23,
`2010 (Docket # 175). By order of this Court, Staszulonek’s “[m]otion to [r]eject” the report of
`CFI’s expert, Frederiksen-Cross, was deemed to constitute opposition to the spoliation motion
`(and not as a motion for affirmative relief). See Memorandum Endorsed, filed Jan. 24, 2011
`(Docket # 152).
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` See Reply Declaration of Barbara Frederiksen-Cross in Further Support of Plaintiff’s
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`Motion for Sanctions Against Defendants for Their Spoliation of Evidence, filed Feb. 5, 2011
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`3
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 4 of 25
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`to state their position as to whether CFI had ever received an email that was allegedly destroyed,
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`see Order, filed Mar. 9, 2011 (Docket # 166), and the parties submitted letters in response. 6
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`Shortly thereafter, with the Court’s permission, Staszulonek filed a sur-reply, and plaintiff
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`submitted a sur-sur-reply.7
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`II.
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`DISCUSSION
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`A.
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`Legal Principles Relating to Spoliation
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`Spoliation is “‘the destruction or significant alteration of evidence, or the failure to
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`preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.’”
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`Byrnie v. Town of Cromwell, Bd. of Educ., 243 F.3d 93, 107 (2d Cir. 2001) (quoting West v.
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`Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)); accord Richard Green (Fine
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`Paintings) v. McClendon, 262 F.R.D. 284, 288 (S.D.N.Y. 2009). “Although a district court has
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`broad discretion in crafting a proper sanction for spoliation, . . . the applicable sanction should be
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`molded to serve the prophylactic, punitive, and remedial rationales underlying the spoliation
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`(Docket # 155) (“Frederiksen-Cross Reply Decl.”); Reply Declaration of Steven Mancinelli in
`Further Support of Plaintiff’s Motion for Sanctions Against Defendants for Their Spoliation of
`Evidence, filed Feb. 5, 2011 (Docket # 156); Reply Memorandum of Law in Further Support of
`Plaintiff’s Motion for Sanctions for Defendants’ Spoliation of Evidence, filed Feb. 5, 2011
`(Docket # 157) (“Pl. Reply”); Reply Declaration of Steven Mancinelli Submitting Certificate of
`Service in Connection with Plaintiff’s Spoliation Motion, filed Feb. 8, 2011 (Docket # 158).
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` See Letter from Steven Mancinelli to Hon. Gabriel W. Gorenstein, dated Mar. 9, 2011
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`(Docket # 167) (“Mar. 9, 2011 Letter from Mancinelli”); Letter from Catherine M. Clayton to
`Hon. Gabriel W. Gorenstein, dated Mar. 11, 2011 (Docket # 168) (“Mar. 11, 2011 Letter from
`Clayton”); Letter from Eric Weinstein to Hon. Gabriel W. Gorenstein, dated Mar. 14, 2011
`(Docket # 169) (“Mar. 14, 2011 Letter from Weinstein”).
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` See Defendant’s Aleksander Staszulonek d/b/a PowerLine Computers Addendum to
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`Memorandum of Law Submitted in Opposition to the Plaintiff’s Motion for Sanctions Against
`Defendants for their Spoliation of Evidence, dated Mar. 17, 2011 (Docket # 177); Letter from
`Steven Mancinelli to Hon. Gabriel W. Gorenstein, dated Mar. 22, 2011 (Docket # 178).
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`4
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 5 of 25
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`doctrine.” West, 167 F.3d at 779 (citation omitted); accord Adorno v. Port Auth. of N.Y. & N.J.,
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`258 F.R.D. 217, 227-28 (S.D.N.Y. 2009).
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`A party seeking spoliation sanctions has the burden of establishing the elements of a
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`spoliation claim. Byrnie, 243 F.3d at 109; accord White v. Fuji Photo Film USA, Inc., 2009 WL
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`1528546, at *1 (S.D.N.Y. June 1, 2009); Adorno, 258 F.R.D. at 227. These elements are (1) that
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`“the party having control over the evidence . . . had an obligation to preserve it at the time it was
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`destroyed”; (2) that the evidence was “destroyed with a culpable state of mind”; and (3) that the
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`destroyed evidence was “relevant” to the party’s claim or defense. Byrnie, 243 F.3d at 107-09
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`(internal quotation marks and citations omitted) (alteration in original). Any sanction imposed
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`should be designed to “(1) deter parties from engaging in spoliation; (2) place the risk of an
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`erroneous judgment on the party who wrongfully created the risk; and (3) restore the prejudiced
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`party to the same position he would have been in absent the wrongful destruction of evidence by
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`the opposing party.” West, 167 F.3d at 779 (internal quotation marks and citations omitted).
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`We now turn to CFI’s claims (1) that the Sofer Defendants deleted relevant email
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`evidence; (2) that all of the defendants destroyed or were complicit in destroying evidence
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`relating to the Jagsys program; and (3) that the Sofer Defendants improperly authorized Mardkha
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`to remove and replace BSI’s computer hard drives.
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`B.
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`Email Evidence
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`The record provides evidence that a single email, dated July 31, 2008, was deleted by the
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`Sofer Defendants. CFI’s discovery of the deleted email apparently came about because CFI
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`received a document production from Mardkha that included an email from BSI employee Terri
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`Biancardi to Mardkha dated July 31, 2008, which had three attachments. See Mancinelli-
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`Weinstein Email Chain (annexed as Ex. 19 to Mancinelli Decl. II) (“Mancinelli-Weinstein Email
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 6 of 25
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`Chain”) at 7; Mar. 9, 2011 Letter from Mancinelli; Mar. 11, 2011 Letter from Clayton; Mar. 14,
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`2011 Letter from Weinstein. This July 31, 2008 email was not, however, included in the
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`production received from the Sofer Defendants. See Mancinelli-Weinstein Email Chain at 7.
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`CFI argues that because “the Sofer Defendants destroyed some relevant emails” – apparently
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`referring to the single July 31, 2008 email – “there is every reason to believe that they destroyed
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`other equally inculpatory emails.” Pl. Mem. at 10 (emphasis in original). Little evidence has
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`been provided by either side as to the particular circumstances under which the July 31, 2008
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`email was deleted. Lior Sofer states only that one of the office assistants at his business deleted
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`the email despite instructions that had been issued to staff to preserve any email relating to
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`Mardkha or Jagsys. See Sofer Decl. ¶¶ 14-15.
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`We now consider the elements of a spoliation claim to determine if they have been met
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`with respect to the deleted email.
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`1.
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`The Duty to Preserve Evidence
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`All parties agree that the Sofer Defendants had a duty to preserve evidence at the latest in
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`June 2008, when the Sofer Defendants were served with the complaint in this matter. The email
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`was written after this date and thus had to have been deleted after this date. Accordingly, at the
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`time of the deletion of the email, the Sofer Defendants were under a duty to preserve it.
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`2.
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`Culpability
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`A party seeking spoliation sanctions must show that “the records were destroyed with a
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`culpable state of mind.” Byrnie, 243 F.3d at 109. In Byrnie, the Second Circuit held that this
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`prong of the spoliation test could be satisfied by showing that “the records were destroyed
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`knowingly . . . or negligently.” Id. CFI argues that the destruction of the email evidence
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 7 of 25
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`amounts to “gross negligence” because the Sofer Defendants failed to issue a timely written
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`litigation hold and failed to oversee compliance with any litigation hold. See Pl. Mem. at 18-22.
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` Some case law holds categorically that “the failure to implement a litigation hold at the
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`outset of litigation amounts to gross negligence.” Toussie v. Cnty. of Suffolk, 2007 WL
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`4565160, at *8 (E.D.N.Y. Dec. 21, 2007) (citing Chan v. Triple 8 Palace, 2005 WL 1925579, at
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`*7 (S.D.N.Y. Aug. 11, 2005)) (additional citation omitted); accord Siani v. State Univ. of N.Y. at
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`Farmingdale, 2010 WL 3170664, at *8 (E.D.N.Y. Aug. 10, 2010); Green, 262 F.R.D. at 290-91;
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`ACORN v. Cnty. of Nassau, 2009 WL 605859, at *4 (E.D.N.Y. Mar. 9, 2009). There was no
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`such failure by the Sofer defendants, however. The uncontradicted sworn testimony reflects that
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`BSI received a letter from CFI “[w]ithin approximately one week after the company was served
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`with th[is] lawsuit” informing BSI of its obligation to preserve evidence, and that Lior Sofer’s
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`brother, Amit Sofer, thereafter instructed the BSI employees “to preserve (not delete) any
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`materials, including documents, emails and other computer files, relating to Michael Mardkha or
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`Jagsys.” Sofer Decl. ¶ 14
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`CFI asserts that the Sofer Defendants’ counsel did not himself take suitable steps to
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`institute and monitor a litigation hold. The record reflects that on August 14, 2008,
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`approximately two weeks after he was formally retained as counsel by the Sofer Defendants,
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`counsel spoke with his clients about the duty to preserve evidence, and on August 18, 2008, he
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`sent the Sofer Defendants “a litigation-hold letter, the first of several.” Weinstein Decl. ¶¶ 5-6.
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`CFI criticizes counsel because he did not advise his clients about instituting a hold sooner, did
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`not “take affirmative steps to monitor compliance” with the hold, failed to consult with
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`appropriate technology personnel regarding the hold, did not implement a “suitable archival
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`protocol,” and did not “properly train necessary individuals.” Pl. Mem. at 19-22. The Court
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 8 of 25
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`recognizes that some case law speaks to the obligation of “counsel” to institute a litigation hold.
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`See, e.g., Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 432 (S.D.N.Y. 2004); Telecom Int’l
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`Am., Ltd. v. AT & T Corp., 189 F.R.D. 76, 81 (S.D.N.Y. 1999). The Second Circuit, however,
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`places the obligation to preserve evidence on the “party,” e.g., Fujitsu Ltd. v. Fed. Exp. Corp.,
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`247 F.3d 423, 436 (2d Cir. 2001), cert. denied, 534 U.S. 891 (2001); Kronisch v. United States,
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`150 F.3d 112, 126 (2d Cir. 1998), not on counsel. If a party has taken reasonable steps to
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`preserve evidence, its attorney’s alleged failures to take additional steps should be of no
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`consequence.
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`Here, the Court is not persuaded that the Sofer Defendants’ efforts to preserve evidence
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`were insufficient. BSI was informed of the obligation to preserve evidence through a letter from
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`plaintiff’s attorney that arrived shortly after service of the complaint. See Sofer Decl. ¶ 14.
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`Amit Sofer then gave an oral instruction to BSI employees to preserve evidence. See id. There
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`has been no showing that this oral instruction was incomplete or was inferior to a written
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`instruction for the purpose of informing BSI employees regarding the requirement that evidence
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`be preserved. See generally Orbit One Commc’ns, Inc. v. Numerex Corp., 271 F.R.D. 429, 441
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`(S.D.N.Y. 2010) (“[I]n a small enterprise, issuing a written litigation hold may not only be
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`unnecessary, but it could be counterproductive, since such a hold would likely be more general
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`and less tailored to individual records custodians than oral directives could be.”). Most
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`importantly, there is no evidence that the destruction of the email was anything but inadvertent
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`or that any other email was deleted. In light of the defendants’ efforts, the mere fact that a single
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`email was deleted in contravention of the instruction to preserve does not reflect either bad faith,
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`the intentional destruction of evidence, or gross negligence. See, e.g., Zimmerman v. Poly Prep
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`Country Day Sch., 2011 WL 1429221, at *22 (E.D.N.Y. Apr. 13, 2011) (“[g]ross negligence has
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 9 of 25
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`been described as a failure to exercise even that care which a careless person would use”)
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`(internal quotation marks and citation omitted). And given that BSI instructed its staff to
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`preserve documents relating to Mardkha and Jagsys, we do not believe that CFI has met its
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`burden of showing that the deletion of a single email by an employee acting contrary to BSI’s
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`instructions amounted even to simple negligence. See generally Marlow v. Chesterfield County
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`School Bd., 2010 WL 4393909, at *3 (E.D.Va. Oct. 28, 2010) (defendant not culpable where a
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`litigation hold was in place and defendant’s employee destroyed handwritten notes because there
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`was no record evidence that the employee “knowingly destroyed relevant evidence . . .[ or] that
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`she made a conscious decision to destroy [the evidence] because of [plaintiff’s] forthcoming
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`lawsuit”). Accordingly, we do not believe that the plaintiff has sustained its burden of proving
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`that the culpability element of a spoliation claim has been met.
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`3.
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`Relevance
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`As noted, the culpability issue turns on our evaluation of BSI’s efforts to preserve
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`evidence – efforts that arguably could have been improved. But even if we found some fault on
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`the Sofer Defendants’ part, it would at most amount to negligence, and no sanction would be
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`appropriate because the CFI has not proven the applicability of the third factor in the spoliation
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`test: that the deleted email was relevant evidence that would have been favorable to CFI. See
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`Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 109 (2d Cir. 2002). With
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`respect to this factor, the Court must determine
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`“whether there is any likelihood that the destroyed evidence would have been of
`the nature alleged by the party affected by its destruction.” Kronisch, 150 F.3d at
`127. The burden falls on the “prejudiced party” to produce “some evidence
`suggesting that a document or documents relevant to substantiating his claim
`would have been included among the destroyed files.” Id. at 128.
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 10 of 25
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`Byrnie, 243 F.3d at 108. In this context, the term “relevance” means “something more than
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`sufficiently probative to satisfy Rule 401 of the Federal Rules of Evidence.” Residential
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`Funding Corp., 306 F.3d at 108-09 (internal quotation marks and footnote omitted). However,
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`courts must take care not to “hold[ ] the prejudiced party to too strict a standard of proof
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`regarding the likely contents of the destroyed [or unavailable] evidence,” because doing so
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`“would subvert the . . . purposes of the adverse inference, and would allow parties who have . . .
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`destroyed evidence to profit from that destruction.” Kronisch, 150 F.3d at 128.
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`Relevance may be established in two ways. “First, it may be inferred if the spoliator is
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`shown to have a sufficiently culpable state of mind.” Chan, 2005 WL 1925579, at *8. Where
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`the moving party “adduces evidence that its opponent destroyed potential evidence (or otherwise
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`rendered it unavailable) in bad faith or through gross negligence (satisfying the ‘culpable state of
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`mind’ factor), that same evidence of the opponent’s state of mind will frequently also be
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`sufficient to permit a jury to conclude that the missing evidence is favorable to the party
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`(satisfying the ‘relevance’ factor).” Residential Funding Corp., 306 F.3d at 109. As we have
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`noted, here there has been no showing of bad faith or gross negligence with respect to the
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`deletion of the email. Accordingly, we cannot infer that the deleted email was relevant based on
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`the Sofer Defendants’ state of mind alone.
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`CFI may also demonstrate relevance by submitting evidence tending to demonstrate that
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`the deleted email would have been favorable to it. See id. at 109; Golia v. Leslie Fay Co., 2003
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`WL 21878788, at *10 (S.D.N.Y. Aug. 7, 2003) (plaintiffs established that the missing
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`“documents were relevant, by proffering sufficient evidence from which a jury could conclude
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`that the documents contained evidence that would have been favorable to their claims”).
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`Counsel for CFI, however, concedes that he obtained a copy of the deleted email when it was
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 11 of 25
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`produced by the Sofer Defendants’ co-defendant, Mardkha, who was the addressee of the email
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`at issue. See Mar. 9, 2011 Letter from Mancinelli. While the attachments to the email were
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`withheld in Mardkha’s production on privilege grounds, both Mardkha and the Sofer
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`Defendants’ attorney confirm that the attachments concern possible terms of settlement and the
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`parties’ defense of this action. See Mar. 11, 2011 Letter from Clayton; Mar. 14, 2011 Letter
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`from Weinstein. Thus, there is nothing to suggest that the deleted email or its attachments would
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`have constituted evidence favorable to plaintiff. Accordingly, sanctions for the deletion of the
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`email are not warranted.
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`C.
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`Evidence Relating to the Jagsys Program
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`CFI also seeks sanctions on the ground that defendants destroyed certain computer files
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`relating to the Jagsys program. The defendants produced 53 installation files for the Jagsys
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`program, the first version of which dates from several months before the lawsuit. CFI finds
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`them wanting, however, because they “do not account for every version of Jagsys known to have
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`been used by BSI” and that they do not provide information on “what files were added,
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`modified, or removed from the operational version, or ‘runtime environment,’ post-installation.”
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`Pl. Mem. at 6-7. The crux of CFI’s complaint is that the defendants should have preserved the
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`“runtime environment” and associated files or data (such as “report files” or metadata) beginning
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`with versions dating from June 2008. It argues that the defendants were “obligated to preserve
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`their runtime environments . . . for every version installed on any of their computers and/or used
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`by them or their employees since the inception of this lawsuit.” Id. at 7. In other words, plaintiff
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`contends that the defendants’ failure to preserve a particular manifestation of the Jagsys program
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`– specifically, the runtime environments and associated files – entitles them to sanctions.
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 12 of 25
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`CFI’s expert, Barbara Frederiksen-Cross, defines the “runtime environment” as “the
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`version of the software that has been installed and is actually running on the computer,” which
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`includes “both the files that were automatically created during the installation process and any
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`additional files that were manually added, removed or modified after the installation process was
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`completed.” Special Report of Barbara Frederiksen-Cross Addressing Spoliation Issues
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`(annexed as Ex. 1 to Frederiksen-Cross Decl.) (“Frederiksen-Cross Special Report”) ¶ 8 n.8.
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`Frederiksen-Cross concedes that the installation files defendants have produced “are sufficient to
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`demonstrate the existence of numerous versions of Jagsys,” but she asserts that the installation
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`files are “insufficient to identify the versions of Jagsys that were used by Beny Sofer since the
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`start of this lawsuit,” id. ¶ 16, and insufficient to identify Jagsys modifications “made directly on
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`the Beny Sofer computer system,” as opposed to those “provided as part of an installation file,”
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`id. ¶ 10.
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`CFI’s argument that the defendants should have preserved the runtime environments
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`must be viewed in light of two important facts. First, the defendants created various versions of
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`Jagsys because, for many months both before and after the lawsuit was filed, defendants were
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`making changes to the Jagsys program as part of their effort to make the program work on the
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`BSI computers. See Sofer Decl. ¶¶ 8, 12; Mardkha Decl. ¶ 14; Staszulonek Decl. ¶¶ 5-7. These
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`efforts included numerous fixes to the Jagsys program. Thus, the fact that defendants were
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`working to change and create new versions of Jagsys after the complaint was filed does not
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`reflect any inherently improper conduct.
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`Second, it is undisputed that the defendants have supplied to plaintiffs in discovery 53
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`installation files for the Jagsys program, dating from April 2, 2008 through December 17, 2008 –
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`in other words, from more than two months before the commencement of the lawsuit until the
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 13 of 25
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`time defendants abandoned their efforts to update Jagsys. See Staszulonek Decl. ¶ 9; Mardkha
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`Decl. ¶ 19; Frederiksen-Cross Special Report ¶ 5 n.5. These installation files allow the user to
`8
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`install the Jagsys program onto a computer and to run the Jagsys program as it existed on the
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`date of the installation file, which produces the “runtime environment” as of that date. See
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`Staszulonek Decl. ¶ 10. As a result, the defendants contend that they “have produced installation
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`files sufficient to enable Plaintiff to examine the runtime versions of Jagsys that were used by
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`BSI from April 2, 2008 through December 17, 2008,” and “[t]here were no later versions of
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`Jagsys installed on BSI’s computers.” Id. ¶ 11.
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` As for the source code for the Jagsys program, the source code was only in the
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`possession of Staszulonek, not Mardkha or the Sofer Defendants, and Staszulonek produced the
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`versions he had, which date from August 5, 2008. Id. ¶¶ 13-15. In any event, the source code
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`existing as of the date of any of the 53 installation files can be decompiled from any of these
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`installation files. Id. ¶ 16. Thus, source codes from versions of Jagsys beginning prior to the
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`lawsuit are available to plaintiff.
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`The main factual dispute between the parties centers on whether using the installation
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`files to create a runtime environment discloses every single change that the defendants made to
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`the Jagsys program during the period they were modifying Jagsys on the BSI computers after the
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`complaint was filed. Frederiksen-Cross rejects Staszulonek’s opinion that installation files
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` The plaintiff goes to great lengths to analyze the Sofer Defendants’ production
`8
`independent of the production of the other defendants. See Frederiksen-Cross Special Report at
`¶¶ 7-15. But the Court does not find it significant that the Sofer Defendants preserved only a
`subset of the 53 installation files inasmuch as Mardkha and PowerLine preserved all 53 versions;
`the Sofer Defendants relied on Mardkha and PowerLine to preserve the pre-litigation version of
`the program, see Sofer Decl. ¶ 16; and the parties are co-defendants working together in defense
`of this lawsuit, despite any cross-claims among them. In addition, Staszulonek points out that
`some files were installed “remotely or onsite from a laptop computer.” Staszulonek Decl. ¶ 7.
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`Case 1:08-cv-05463-CM-GWG Document 185 Filed 05/11/11 Page 14 of 25
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`disclose every possible change that was made to the Jagsys program. See, e.g., Frederiksen-
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`Cross Special Report ¶ 16. Frederiksen-Cross states that “comparisons of the runtime
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`environments demonstrate that the Jagsys runtime environments can be modified in an infinite
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`number of ways subsequent to the installation process,” and thus, “where a runtime environment
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`ha[s] been modified post-installation and outside the installation process, it would not be
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`possible for the installation file to recreate that corresponding runtime environment as it existed
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`in its modified state.” Frederiksen-Cross Reply Decl. ¶ 25. Staszulonek asserts that any changes
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`to the Jagsys program would be reflected in the new version of the installation file created, and
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`that if it were not so reflected, the change would be overwritten and lost. Staszulonek Decl. ¶ 6.
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`Thus, he asserts that “every change made to the Jagsys program from April 2, 2008 through
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`December 17, 2008 is reflected in the fifty-three (53) installation files for the program,” which
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`have been produced, and that the installation files “also establish the timing of those changes,”
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`id. ¶ 9, with a margin of error of one or two business days, id. ¶ 12. In addition, Staszulonek
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`contends that “[t]he method of creating archives requested by Plaintiff, i.e. preserving runtime
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`files, is not proper procedure and would not have been an effective way of transmitting evidence
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`to Plaintiff.” Id. ¶ 17. He states that “by using the installation files produced by defendants,
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`Plaintiff ha[s] the ability to restore the runtime environment as it was, and to avoid the technical
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`problems that would undoubtedly have arisen if they were only provided runtime versions of the
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`program.” Id.
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`With this factual background, we now examine whether plaintiff has met its burden of
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`proving its entitlement to sanctions for spoliation.
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`1.
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`The Duty to Preserve Evidence
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`As previously noted, a party seeking sanctions for destroyed evidence must show that
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`“the party having control over the evidence . . . had an obligation to preserve it at the time it was
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`destroyed.” Kronisch, 150 F.3d at 126. In general, “[t]he obligation to preserve evidence arises
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`when [a] party has notice that the evidence is relevant to litigation or when a party should have
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`known that the evidence may be relevant to future litigation.” Fujitsu Ltd., 247 F.3d at 436
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`(citation omitted); accord R.F.M.A.S., Inc. v. So, 271 F.R.D. 13, 23, adopted by 271, F.R.D. 55
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`(S.D.N.Y. 2010); Scalera v. Electrograph Sys., Inc., 262 F.R.D. 162, 171 (E.D.N.Y. 2009);
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`Treppel v. Biovail Corp., 249 F.R.D. 111, 118 (S.D.N.Y. 2008). This obligation to preserve
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`evidence arises “most commonly when suit has already been filed, providing the party
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`responsible for the destruction with express notice, but also on occasion in other circumstances,
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`as for example when a party should have known that the evidence may be relevant to future
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`litigation.” Kronisch, 150 F.3d at 126 (citations omitted).
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`CFI argues that the duty to preserve in this case “arose the minute [defendants] started
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`making literal copies of RightClick materials.” Pl. Mem. at 13. Given that the defendants deny
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`they committed any act of copyright infringement, plaintiff’s argument boils down to the
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`proposition that where a plaintiff alleges that a defendant committed a tortious act, the defendant
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`has a duty to preserve evidence as of the time the plaintiff later alleges the tortious act was
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`committed – even in the absence of any evidence that the defendant believed it committed a
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`tortious act or otherwise anticipated future litigation. The only case cited in support of this
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`argument, Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003), contains no
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`such holding but rather notes that in that particular case, “it appear[ed] that almost everyone
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`[employed by the defendant who was] associated with [the plaintiff] recognized the possibility
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