Disney Enterprises, Inc. et al v. Hotfile Corp. et al

Filing 48

REPORT REGARDING JOINT REPORT ON PLAINTIFFS' MOTION FOR AN ORDER PROHIBITING SPOLIATION AND TO PRESERVE EVIDENCE by Columbia Pictures Industries, Inc., Disney Enterprises, Inc., Hotfile Corp., Anton Titov, Twentieth Century Fox Film Corporation, Universal City Studios Productions LLLP, Warner Bros. Entertainment Inc. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D)(Stetson, Karen)

Disney Enterprises, Inc. et al v. Hotfile Corp. et al

Doc. 48 Att. 3
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 REPORTED BY: vs.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION Case No. 11-Civ-20427-JORDAN/McALILEY DISNEY ENTERPRISES, INC., et al.,

Plaintiffs.

MIAMI, FLORIDA MARCH 7, 2011

HOTFILE CORPORATION, et al., Defendants. TELEPHONIC STATUS CONFERENCE HEARING TRANSCRIPT ON PLAINTIFF'S MOTION PROHIBITING SPOLIATION & TO PRESERVE EVIDENCE BEFORE THE HONORABLE CHRIS M. McALILEY, UNITED STATES MAGISTRATE JUDGE APPEARANCES:

FOR THE PLAINTIFF:

JENNER & BLOCK 1099 New York Avenue, N.W. Suite 900 Washington, D.C. 10022 BY: STEVEN B. FABRIZIO, ESQ.

J.M. COURT REPORTING, INC. JERALD M. MEYERS, RPR. Telephone: [phone]
Dockets.Justia.com

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1 2 FOR THE DEFENDANTS: 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 REPORTED BY: 22 23 24 25 JERALD M. MEYERS, RPR. J.M. COURT REPORTING, INC. 1601 N.W. 109TH TERRACE Pembroke Pines, FL 33026-2717 Telephone: [phone] E-Mail Address: [e-mail] RASCO KLOCK REININGER PEREZ ESQUENAZI VIGIL & NIETO 283 Catalonia Avenue Suite 200 Coral Gables, Florida 33134 BY: JANET T. MUNN, ESQ. FARELLA BRAUN & MARTEL, LLP 235 Montgomery Street 17th Floor BY: RODERICK M. THOMPSON, ESQ. BY: DEEPAK GUPTA, ESQ. BY: N. ANDREW LEIBNITZ, ESQ.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (Call to order of the Court) THE CLERK: The United States District Court is now in session; The Honorable Magistrate Judge Chris McAliley presiding. Calling the case of Disney Enterprises, Incorporated, case number 11-20427-Civil-Judge Jordan. THE COURT: Okay. Good morning, counsel. If you

would, give your appearances beginning with the plaintiff. MR. FABRIZIO: Good morning, Your Honor. My name is

Steven Fabrizio for plaintiffs. THE COURT: Okay. Welcome and for the defendant? This is

MR. THOMPSON:

Good morning, Your Honor.

Roderick Thompson with the firm of Farella Braun & Martel in San Francisco, and with me are my colleagues Andy Leibnitz and Deepak Guptak, and also on the line is Janet Munn, our colleague from Florida. THE COURT: Okay. Welcome everybody. All right. I

thought it would be helpful if we just talked for a few minutes about plaintiff's emergency motion for order prohibiting spoliation. There has been a response and a reply. I was hopeful,

after reading the reply, that possibly by having you all talk to each other some and share some information about the activity that the defendant has been engaging in regarding their Website, that you might reach some greater understanding

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of what the defendant is doing and possibly resolve the issue, or if not that, narrow it, and so I wanted to see what your thoughts were on that. MR. FABRIZIO: Sure. Your Honor, this is Steve Would you like me to address you?

Fabrizio for the plaintiffs. THE COURT: Sure.

MR. FABRIZIO:

We had a very good dialogue with

Mr. Thompson and Ms. Munn beforehand, so I think we had a pretty good understanding of what defendants say they will do, and even to some degree of what the defendants have been doing over that holiday weekend, and we also see from the opposition papers that the defendants now say they are prepared to preserve even more categories of evidence that had been under discussion that previously they had not been willing to agree to preserve, but the biggest problem, from our perspective, Your Honor, is that defendants that are going to destroy volumes of data are not usually deterred by private agreement. So there is no teeth to a private agreement. We had

asked from the very outset, and it was sort of the essence of our effort to try and resolve this, that the defendants agree to a stipulation that we could present to the court, that if the court was so willing that the court would order, and that would give us at least all of the remedies that come with violations of court orders when it comes to spoliation of evidence, and to date nothing in our discussions with the

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defendants and nothing in their papers have suggested to us that they were prepared to do that. THE COURT: wanted to say? MR. FABRIZIO: I am sorry, Your Honor. One thing we Okay. Is there something further you

do know is that defendants are currently taking steps to manipulate the data, and let me explain what that means, Your Honor, in context here. We referred to the events over the holiday weekend of defendants terminating, en masse it appears, some users that they have identified as their most egregious copyright violators. Well, as they are doing that, they have advised us and the court that they are beginning to preserve a crucial category of data. That data is the data that would show each download by each user of the records of the files that are being downloaded and by the users that are downloading them. That server data, Your Honor, in past cases has proven to be invaluable. It is critical to many issues, not the least

of which, and perhaps one of the most important of which it will show the overwhelming use of this service to engage in infringement. In past cases similar types of statistical analyses have showed 85, 90, 95 percent of the uses of site are for

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copyright infringement, and almost every court that has seen those sorts of statistics has said it is a very influential piece of evidence. So, Your Honor, if you consider the juxtaposition of two acts, either of which independently defendants would say, "Well, those are good things and the plaintiff should be thanking us for doing them," if you consider them together, you can understand how we are not happy about this. Defendants previously had not been preserving this server log date for downloads. THE COURT: But are they doing it now? They are doing it now, but at the same

MR. FABRIZIO:

that they are doing it they have terminated some of their, you know, thousands or hundreds or, you know, en masse their worst offenders. So the data that they are preserving is, in some senses, sanitized. The data that we will get today is not the

same as the data we would have gotten on the day we filed this complaint because of defendant's actions. THE COURT: infringing users? MR. FABRIZIO: Your Honor, absolutely, and that's why But don't you want them to terminate the

I said defendants would say that preserving this data is a good thing and terminating infringing users is a good thing, but when you do them at the exact same time, what you do is you

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create data that is no longer reflective of the actual use of the site. THE COURT: So what is it that you want? I am not

clear on what it is that you want them to do. MR. FABRIZIO: Well, what we would have wanted them to

do, Your Honor, is to allow us to take a snapshot of the data so we have a fixed snapshot in time, and then they could have done whatever they wanted to address and terminate repeated infringers or blatant infringers. We are not suggesting for a second that we don't want them to take action to clean up their copyright infringement. We have wanted them to do that for years, but as a litigant, we are entitled to the data as it existed, not the data as it exists after they take these steps to fix some of the problems. THE COURT: So when you say that you want to take a

snapshot of the data, do you mean while the infringing is going on, right, before -MR. FABRIZIO: THE COURT: Your Honor, what -- I am sorry. I

Well, I am just trying to understand.

am not clear what you are asking them to do. MR. FABRIZIO: Sure. Let me explain it. Every time a

user requests a file to be downloaded, entries are made in a log on the server that would indicate the user that was requesting that download and the particular file that was

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requested to be downloaded. Now, other data, too, but you can just call that the core of the download data. That is kept in files; log files,

and previously they had not or at least they told us they had not been preserving that data, as such, but that they started to recently. So very quickly there are going to be millions and millions of entries showing downloads. What we wanted and what we still want is to very quickly require defendant to produce for us those logs. That

may create a snapshot in time, at least as to the period of time covered by those logs as to what was happening with the system. Thereafter, changes that the defendants might make to the system will obviously affect the new log data coming in, but it will not affect the log data that we already have. So we will effectively have a preserved snapshot of how the system was being used at a given point in time, and that is what we wanted and that is what we asked for starting from our very first conversation, but when defendants then changed the system before they gave us that log data, that log data now is biased in light of the changes that the defendants made. Now, there may be nothing that we can do about the bias that has already been introduced into that data. What is

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terminated is terminated, but it does serve to illustrate, Your Honor, the importance of getting a snapshot in time when we are talking about data that is so easily manipulated and changed, and that's whether it was done with all of the best intentions. You know, this is not the place or the time to say why they are doing what they did. We are just simply saying the

effect of it is now we get data that is different than the data that we would have gotten on the date of this complaint. THE COURT: Well, obviously in a minute I am going to

hear from defense counsel, but is it not possible for you all to talk about where you find yourselves today? All right. What is done is done. I think it makes

sense to me that you are not suggesting that this was done to try to destroy evidence. I mean, the record seems to suggest otherwise. So

assuming that they are trying to terminate infringing users for all of the right reasons, can you all talk to each other about what discovery you might get for prior events that led up to the termination of these infringers and how you might go forward? Can you have a discussion about that and possibly reach an agreement? MR. THOMPSON: for the defendants. THE COURT: Yes. And I just wanted the plaintiff's Your Honor, this is Roderick Thompson

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lawyer to tell me if he thinks that is possible, and then obviously I want to hear from the defendant. MR. THOMPSON: MR. FABRIZIO: Thank you, Your Honor. Yes, Your Honor. If defendants were

prepared to allow us the immediate limited discovery we have requested which would give us the log data tables, there are tables and data bases that are on defendants servers. They are organized. The defendants need to organize They are relatively small in

and collect them in one place.

volume, and they would be relatively easy to copy. That's all according to our experts, and defendants have, frankly, not challenged, but if the defendants would give us the limited discovery that we have asked for right away, then we could have that snapshot in time. Again, it would include whatever data exists at this time which would include some older data and also some data post the change they made to their policy determining repeat infringers, but at least we would be assured of having data that is not subject to constant change as we go forward as we wait for regular discovery to begin. THE COURT: Well, here is my question, though:

Assuming this server log data can be preserved, why is it that you need it now as opposed to during the discovery process, assuming it can be preserved? MR. FABRIZIO: Well, it cannot be. The way the

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defendants have it set up, absent physically making the copy that we want, it cannot be preserved because it is constantly being added and changed, and that's one of the reasons we wanted, you know, immediate discovery of it. It is also the case, Your Honor, that it is very easily subject to manipulation, and we want to get it in our hands as quickly as we can so that we can be assured that as much as possible it has not been subject to manipulation. THE COURT: ahead, Mr. Thompson. MR. THOMPSON: Thank you, Your Honor. Let me just say This Okay. I understand. All right. So go

I am very encouraged that we are having this dialogue. should have happened before this motion was filed.

The motion was filed without any further dialogue with us. It was based on an assumption that the heightened That was false. In

termination policy was destroying data.

It showed in our declaration through Mr. Keytak.

fact, all evidence was preserved from those accounts which were terminated over the holiday weekend. So we are very encouraged in having this dialogue clarifying what evidence is being preserved, and this should have happened a while ago. but the -THE COURT: the whole debate. Right. Now is not the time to get into I won't react in detail to this,

I would like to focus it more, you know,

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about how you might resolve it at this point. MR. THOMPSON: Certainly, Your Honor. And what I hear

from Mr. Fabrizio is the argument that the user data logs are not being preserved. Well, that's just simply not the case.

They are being preserved. They have been preserved from the first time we got notice of this lawsuit. What he is complaining about is their dynamic. are being added to a lot. business. They

That's the nature of our client's

I think the plaintiffs understand that well.

What I heard him say just now was the real reason he wants immediate discovery is he is suspicious of manipulation. So we come back down to the innuendo that our clients are bad people and, therefore, they cannot be trusted. Frankly, we resent that, Your Honor. There is no

evidence to support that, and we have preserved the data, and I am very willing to speak with Mr. Fabrizio and his team to try to work out whatever assurances they may need, but we should not proceed with this motion based on an assumption of our people are bad people because of other cases involving other parties and other technology. is not accurate. THE COURT: Okay. And I understand that, and I That simply is not fair, and it

understand why you feel the need to respond to that now. That's the nature of these kind of, you know, complaints.

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Two different thoughts occur to me, and I don't have an opinion yet on whether early discovery makes sense or not. I just don't know enough, but I have two thoughts on either side. One is, and this would probably be more appealing to the defendant, to have the defendant in some way show the plaintiff that you are preserving the data in a way that is meaningful, and I don't know if that requires or if that can be done in some sort of written statement or if that can be done by a declaration by an IT person who knows your system and if that requires the plaintiff's IT person to come over to your office and sit with your IT person and see that you really, really are preserving it, but maybe there is some process that allows a little more transparency, from the plaintiffs point of view, to reassure them as to what you are saying. So that's one thought on one end, and the other thought, and I am sure I am not telling you anything that you all haven't thought of yourselves, but another thought on the other end is for the defendant to give a snapshot, you know, an example of the data that you preserved and produce it to the plaintiff so they see what you have and the plaintiff knows what is being preserved and what will be available in the discovery process. So those are two thoughts that I have being from the top of a tall building and you are down close.

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So are there any thoughts about that or any better ideas of how you all might have a conversation about this? Because what I wanted to do was talk to you today and see if we could set up some sort of process by which you try to resolve the issues rather than spending, frankly, a lot of your clients' money and time, and some of you are out of state, so I don't know if the out of state counsel will come in for an evidentiary hearing, and these evidentiary hearings, you know, because of the nature of the accusations, people feel the stakes are very high and want to turn it into sometimes my experience a bit of a mini trial, which is not what I am going to do, but it is a little challenging to keep it focused on what the issues are. In the end I just think we could counsel on both sides and I would like to think that maybe with a little help on my end that you all can reach a better conclusion than you are going to get from me after I hold an expensive and lengthy evidentiary hearing. MR. FABRIZIO: plaintiffs again. THE COURT: Yes. We appreciate the suggestions coming Your Honor, this is Steven Fabrizio for

MR. FABRIZIO:

from the court, and they may very well provide a road map to some solution, but one of our fundamental concerns would remain and has from the outset, and let me first make one thing clear.

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We have leveled some accusations about defendants, but if it is not already abundantly clear, let me make it clear that we are not leveling any accusations against counsel. We have had an opportunity to get to know Mr. Thompson and Ms. Munn and we know them by reputation, and we have nothing but the highest regard for them. THE COURT: Right. That is understood, at least

certainly by me, but you have got the burden of proof here, and I think it is rather steep, and the remedy of a preservation order can be rather kind of onerous, and so you have got a pretty big burden, and we are going to have to go next in this conversation with what witnesses do you all want to call, the scope of this hearing, and I am just questioning if we have to get there. MR. FABRIZIO: Well, Your Honor, one, I am not sure

that an evidentiary hearing itself is required. The standard and the material part is whether there is a legitimate concern, and we think on this record that there is plainly a legitimate concern. You know, Mr. Thompson might take issue with it. We

are talking about a set of defendants that don't operate as a legitimate business, Your Honor. They do operate in the shadows. anywhere as far as we can tell. Every address that they list, whether it is in Panama, They have no presence

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Bulgaria or Florida, it is either a fictitious address or it is a mail drop box. They operate through shell companies, and they admit they have 700 servers in Texas, but yet they are not registered to do business in Texas, in violation of Texas law. So, clearly, in terms of the nature of the defendant, we are not dealing with a major company that, you know, can be expected to be respectful of the judicial process. I mean, I know Mr. Thompson does not like it when we refer to past cases, but the law allows the court to consider the conduct of comparably situated defendants in past cases, and it has become motus operandi of defendants like this to engage in the sort of evidence spoliation. I mean, just in cases that we have handled over the past, you know, half of a decade it has been almost in every case. THE COURT: But, Mr. Fabrizio, I understand why you

get kind of passionate about this subject, but what about what would you like now? What information, if you could sit down with Ms. Munn and Mr. Thompson and get some information to assure you that evidence is being preserved, what would you like? MR. FABRIZIO: I would like them to agree with a I had

stipulation that could then be presented to the court. been in a situation not too long ago --

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THE COURT:

Okay.

You said that before.

That makes

Mr. Thompson, what about that? pretty standard procedure.

I mean, that is a

All of the time I get proposed confidentiality orders, for example, that the parties draft and I sign them and turn them into a court order, and all of the time, you know, well, not all of the time, but quite often I have the parties come up with a discovery plan, and when they are really having trouble, a whole schedule and they give it to me and it becomes a court order and it becomes enforceable. MR. THOMPSON: So why not do that?

Your Honor, I think we would be These are 5

interested in a reciprocal preservation order.

plaintiffs, very large companies with ESI around the world who have been investigating our client for well over a year. I think if we have a reciprocal order requiring both sides to preserve relevant information, I am sure we can work it out with Mr. Fabrizio. What we object to is the assumption that the defendants are somehow wrongdoers, and I should just correct Mr. Fabrizio's statement. His version of proof is to show significant imminent harm to get a preservation order. MR. FABRIZIO: is the standard. He has not done that.

I would disagree, Your Honor, that that

That I believe is the standard if you are

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moving ex-parte, which obviously we are not. THE COURT: Okay. Well, put that aside. Okay. So

this is coming down to a very human dynamic from my perspective. Disney, the plaintiff, by making these accusations against the defendant, however well-founded they are, Mr. Fabrizio, I have no opinion on it, is insulting. Hotfile, the defendant, who doesn't like the words they are hearing, okay, this happens all of the time in disputes. So, you know, that is not helping the conversation

move forward. Now, what about that, Mr. Fabrizio? What about if you

all came up with an agreed order from me on preservation of evidence for both sides and how you will manage your ESI in discovery? MR. FABRIZIO: Well, Your Honor, we will obviously

deal with the managing ESI discovery when we get into sort of the case management and the discovery plan, but there is no basis, none whatsoever, except a tit-for-tat for suggesting that there needs to be an order against the plaintiffs. The

plaintiffs are some of the most prominent companies in America. THE COURT: I agree with you. No. Mr. Fabrizio, I

completely agree with you. It did sound tit-for-tat for me, but sometimes, you know, we have to do things. You know, you do things to get

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things done. Is there any reason why your client would not want to commit to some basic preservation of evidence procedures that both sides would be held accountable to? MR. FABRIZIO: Well, Your Honor, we have worked with

our clients about fairly extensive evidence preservation and litigation hold, and we have received information from Mr. Thompson about his best use as to what that should be. The issue here is, and the issuance of an order of preservation requires more, and it comes with greater consequences and greater burdens. We don't ask defendants to do it willy-nilly. We ask

defendants to do it because we believe that the record shows that there is a very legitimate concern about evidence spoliation; a concern that Mr. Thompson has not even pretended to show to our clients. They have never been accused as far as I know of destroying evidence in cases like this. MR. THOMPSON: Your Honor, this is Rod Thompson. If I

may, one concern we have is our clients allows copyright holders, such as Warner Brothers, one of Mr. Fabrizio's clients, one of the plaintiffs here, to have special rights holder accounts which gives them extraordinary powers to take down content from our Website. This is not the typical BMCA notice. This gives the

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special rights holder the ability to say, "That file is infringing. Take it down." Just willy-nilly.

They have to attest that it is, in fact, a copyrighted work of theirs. Warner Brothers, one of the plaintiffs here,

has a special rights holder account and has been using that extensively in the months leading up to this lawsuit. That is very relevant information that we think is very helpful to our case. And as I told Mr. Fabrizio, he is

right, we have exchanged letters. I have asked him to make sure that that evidence is preserved. Now, I am not accusing anyone of spoliation. no basis to say that. Frankly, there is no basis to say that of plaintiffs, either. So we come back to if we want to talk about an agreed There is

order, I think Your Honor is on the right track here. Let the lawyers work it out, but it should be a two-way street. MR. FABRIZIO: Well, again, Your Honor, I would

suggest that the defendants are proposing a tit-for-tat simply because they realize that major corporations are going to be reluctant to enter into orders on preservation because of the burden and consequences, and that is the reason that there is a standard to get such an order. I believe we can make it or have made it. I believe

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that when you look at the defendant's do not operate legitimately, that as I explained to Your Honor, whether intentional or not, and I am not prepared to say it has not been intentional, but intentional or not, defendants have already taken steps to manipulate key data. I think that they have already demonstrated that they have not complied with litigation obligations, litigation hold obligations in other cases. And, frankly, Your Honor, I think

we can demonstrate that Mr. Ketak has not been completely forthright with this court. I think these are the factors. These sorts of factors

clearly differentiate this set of defendants from plaintiffs who are major U.S. corporations that have physical addresses, that have boards of directors. Many of them are publicly traded and there have never been any accusations by any defendants in any case that I have been involved with about evidence spoliation. I think turning this into a tit-for-tat is really defendants way of trying to take attention off of themselves and shift the dialogue. THE COURT: Well, I will tell you how it looks to me, A couple of things I say

okay, and I say this often to folks. often.

First of all, I think it is very hard for any of us to be in the other person's shoes anywhere in life. So, standing

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in my shoes, things look a little differently then they do maybe in each of your shoes, and it doesn't make me right, but it is just the way it looks, and you are kind of stuck with me because I am managing your discovery. So here you go. You two sound extremely entrenched,

and you are caught up with a broader battle where it strikes me that you don't need to be. Mr. Fabrizio, I am hearing you say, "My client is superior and I am not going to be held to be in the same club as the defendant," and you are offended at the thought that your client would be subject to the same order that the defendant would. The defense lawyer strikes me, it does feel tit-for-tat. As you say, you have no suggestion that the

plaintiff is, you know, preserving their evidence. So it sounds to me like you are kind of shifting the discussion, also, and neither one of you, and I don't mean to offend anybody. You are very good lawyers, but the way it sounds, sitting in the middle, neither one of you really want to talk about solving the problem in a way that you kind of let go of your positions. So I am kind of wondering if it makes sense, it will be a lot cheaper than having a hearing in front of me, I wonder if we should get you a mediator to sit down and talk to you

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about this and come up with just to kind of broker an agreement. What about that? Your Honor, this is Rod Thompson. If I

MR. THOMPSON:

may, first of all, I think a mediator is necessary. We have no objection, but I do think Mr. Fabrizio and I have had a good dialogue in the recent past, and I am just conferring with the client that if a sample of the server log is something he wants to see, we can certainly get him that. think that was one of your suggestions. THE COURT: That sounds like a great idea to me. I don't I I

mean, again, I am at the top of a tall building.

understand, you know, the systems that you all are dealing with, but it sounds like a good idea to me. MR. THOMPSON: MR. FABRIZIO: Okay. What we had proposed, Your Honor, is a

method where we could actually get some samples, some limited discovery of these logs, and then we can actually do a sampling of other data, and after we finish that sampling of other data which would or can happen relatively quickly, we could actually relieve defendants of their obligations to put litigation holds on all of this data that they say is, you know, difficult for them to simply preserve. So maybe this is a solution that has some merit. If

we were to get some of the limited log type data which would be pretty easy to produce, we can, in very short order with the

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help of our expert statistician, give them a sample list of, you know, a few thousand or probably less content files that we would be prepared to say we will live with that as our discovery of content files, and that is a few thousand out of many millions, Your Honor. THE COURT: Have you each retained yet experts who are

going to be, you know, your computer experts? MR. THOMPSON: Your Honor, this is Roderick Thompson. We have not yet had a chance to

We have just been engaged. retain an expert.

I do want to clarify something. shifted to a different subject. of content files.

Mr. Fabrizio has

He was talking about discovery

What I suggested was as a way of showing we are preserving evidence, we can provide a sample of a server log file which is what his stated concern was before. They are really very different animals. Content files

are very much larger, and that is a different issue, plus he was talking about actual discovery. THE COURT: Right. Mr. Fabrizio, I did make a note

that you are talking about server log data that you wanted. MR. FABRIZIO: Oh, that is absolutely right. The

reason or one of the reasons we want server log data is also linked to draw a sample of content files, but Mr. Thompson is right.

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This motion concerns the server log data, but I want to make sure we don't get confused between what I just heard Mr. Thompson say they would give us a log file just so we could basically see the parameters of the log file and what is being preserved. That, in our mind, is meaningless. Your Honor, if I

can convey a story that will inform the court as to why we are somewhat entrenched on this. A couple of years ago in a case that I was handling for different copyright clients against a similarly situated defendant, we engaged or we had counsel, by the way, Your Honor, that I knew very well. I had known this lawyer probably close to a decade, and we had a personal friendship as well as knowing each other professionally for years. Counsel spent weeks negotiating the terms and conditions of the production of this very type of data, and on the day that we had reached agreement that defendant was supposed to start preserving and producing this data to plaintiffs, on that very day defendants took steps to make sure all of the data would disappear and was erased. That was not anything counsel did, obviously, but in situations like this, counsel are powerless to stop their clients from pushing a button and deleting data. That gives us such great concern, given all of the

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telltale signs from these defendants that we are going to end up in a situation where we spend years fighting about what data was destroyed rather than the merits of this case. THE COURT: So what about if you each engage an expert

and you have your experts sit down and let them guide you, help guide you towards some sort of agreement? sense? MR. THOMPSON: This is Roderick Thompson, Your Honor. Does that make

I think we need some time to find the expert, but certainly that sounds like a promising prospect. Unfortunately, Mr. Fabrizio keeps going back to other cases, and he is not talking about this case. THE COURT: Right. I will be happy to try to work on it.

MR. THOMPSON: THE COURT:

Right. I will be happy to talk about this

MR. FABRIZIO: case, Your Honor.

I mean, again, whether it was deliberate or

not, an issue we will save for later, defendants have already engaged in spoliation of data or at least a manipulation of data. THE COURT: ourselves now. All right. I think we are repeating

The question is what can I set up with an order

for you all that will be a path for you to, with some time limits that works for all of us, there is nothing like a deadline for me to get something done, so we have some

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deadlines and maybe something else in there for you to try to reach some agreement that you could present to me that would resolve this motion. MR. THOMPSON: Your Honor, this is Rod Thompson. If I

may, I think that we could provide Mr. Fabrizio informally some examples of a server log data that he is talking about and try to work with him to try to satisfy him that proper preservation measures have been taken. Hopefully that will work. If it does not, then we can

get experts involved on both sides, and I think that whole process could be concluded in two weeks. If we are not able to resolve things, we can come back to Your Honor, but I am hopeful we can. I agree with

Mr. Fabrizio, despite the offensive harsh words, I think we get along well, and I trust his professionalism. So I would say just please give us two weeks, and I think we can work something out. THE COURT: All right. Well, that time frame makes So it is not

sense for me because next week I am not here. like you can be in front of me next week. MR. FABRIZIO:

Your Honor, this is Steven Fabrizio.

Look, I appreciate the sort of seemingly reasonableness to try to take more time to resolve this, but I do want to mention that we did take a lot of time to try and resolve this. I mean, I know Mr. Thompson said that we rushed to

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court after their weekend of activity, but we had been in touch with defendant's counsel almost from the day the complaint was filed and have been in discussions for periods of weeks. So we are not coming to this as lawyers who have not spoken to each other, nor as lawyers who don't get along. THE COURT: Well, what is that you want, Mr. Fabrizio?

What do you want me to do at this point? MR. FABRIZIO: If Mr. Thompson is saying that he is

prepared to discuss an agreement that will then be presented to the court and so ordered, that is something that I think may be meaningful, but if we are talking about plaintiffs getting comfort based on what defendants tell us they are doing, given our history of these cases and what we see of these defendants already, that's not something that is likely to lead to an agreement, which is why we have asked the court for an order. THE COURT: this to you: Regardless of the plaintiff's accusations that the defendants are not the most honorable companies, putting that aside, if that were not even here, what I would expect to do if you could resolve this is you would present me with an order that would resolve the issue, and so that's not a remarkable concept. So, in the broadest sense, again, without having heard the details of this dispute, but in the broadest sense that Right. Well, Mr. Thompson, let me say

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makes a lot of sense to me, and the only question is whether it should be bilateral, and I don't have an opinion on that one at this point. MR. FABRIZIO: into that issue? Well, Your Honor, can I offer one input

We have actually made a motion where we have

put forward evidence and what we believe is something sufficient to be a standard. They don't have -THE COURT: I know that, Mr. Fabrizio, but Defendants have made a motion.

understandably you are very focused on your motion. I am focused on the bigger picture, and that is how you are going to move forward with your discovery in this case, and obviously your client is going to have to produce electronically stored information. So, to the extent that you all could have a really bona fide conversation about how that is going to go forward and reach maybe some basic agreements, that would be progress in the case. So that's not dependent upon your motion. And just so

you know, because I forget, but you are not from Florida, right? MR. FABRIZIO: Honor. THE COURT: Right. Okay. Okay. So you don't have a No. We are in Washington, D.C., Your

scheduling order yet, but what will happen with Judge Jordan --

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well, actually pretty soon it won't. Well, Judge Jordan's piece will happen when he issues a scheduling order. He will be referring all discovery to his As of April 1st, that's not me.

paired magistrate judge.

We are all shifting, but I believe the magistrate judge who will be paired with Judge Jordan as of April 1st does something similar to me, and that is somewhat of an abbreviated discovery process. When I manage discovery and I see a case like this, often I will just kind of get more involved than just the motion. I mean, if people are having a hard time, I will engage the parties in a discussion about how are you going to get your discovery done and what are the issues and maybe get me a discovery plan, you know. So I understand you filed one motion, but clearly it seems to me that you all have some or may need some court involvement in your discovery process. MR. FABRIZIO: And we may, Your Honor, but on the

issue of preservation from plaintiffs, we have not yet even have a had a discussion. We got a letter. First of all, even without a letter,

we, of course, spent some great deal of time with our clients organizing their preservation, and then we got a letter from Mr. Thompson, and we expect to have a discussion with him where

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I think, in large part, we are prepared to tell him that everything, you know, but for a few keep exceptions everything in his letter, I mean his letter is not a problem. MR. THOMPSON: Your Honor, this is Rod Thompson again.

Maybe I am the optimist, but I hope that if Mr. Fabrizio and his team and our team can sit down and talk, we can explain to him and show him the evidence we are preserving, as we should be on our server logs. And if that doesn't convince him, if he wants an order, then we can talk a suitable order. I do think going in

that our mind set should be reciprocal since there is no reason to think that our clients have done anything wrong, but let's put that aside. If he does not prejudge things, if he comes in with an open mind, we can try to persuade him that, "Look, here is proof we are preserving things, maybe that will satisfy him. If it doesn't, then we can present an order to the court and, if necessary, we can present competing forms of orders. We can present one and he can present one. THE COURT: That's right. That's an option. Okay.

So what I am going to do then is I am going to issue an order that is going to say that we held a status conference today, and based on that, I am going to give the parties two weeks to meet and confer in an effort to reach an agreement that resolves the plaintiffs motion.

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I understand that at minimum the defendant will be providing plaintiff with some server log data that the defendant says should demonstrate that the defendant is preserving the necessary evidence, but I am going to encourage the parties to have a more expansive exchange of information to attempt to reach agreement on a proposed order that will resolve this dispute and possibly address broader preservation of evidence issues that the parties foresee, you know, being important in the case. So that will be by the 18th, a week from Friday will be the deadline, and I will be back in the district after the 18th. And if I need to do something more, then I will figure Okay? Your Honor, this is Andy Leibnitz. I

out what to do.

MR. LEIBNITZ:

work with Rod Thompson for Hotfile. THE COURT: Yes. Can we make clear that any document

MR. LEIBNITZ:

production by Hotfile be for attorneys eyes only until we get a protective order in place? THE COURT: Mr. Fabrizio? MR. FABRIZIO: I don't see a problem with that as long I don't see a problem with that. Do you,

as counsel for MCCA, who are counsel of record in this case, are included in the attorneys eyes only. That is as long as it is without prejudice in the

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ultimate protective order. THE COURT: Right. Right. Okay. Well, so the

parties I think also need to be considering preparing a proposed confidentiality order for the court, too. MR. FABRIZIO: THE COURT: Yes, Your Honor.

Okay. And, Your Honor, what is the mechanism

MR. FABRIZIO:

for us to address the court again in the event we are not able to reach resolution? THE COURT: Well, I need to get by the 18th a joint

report from the parties as to the outcome of your conferral process. Either you are going to submit a proposed order for me that is going to resolve everything, that would be the best case circumstance and you will tell me, you know, you have resolved the motion. The motion is being withdrawn or can be denied as moot because you have resolved it. Either way works, or you are not

going to be successful, and then by the 18th file with me a joint report that tells me the nature of your discussions and what if any agreements were reached and what the disagreements are and how you each propose to go forward. MR. FABRIZIO: MR. THOMPSON: THE COURT: Okay? Yes.

Thank you, Your Honor. Thank you, Your Honor. Thank you.

All right.

Good luck.

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MR. FABRIZIO: MR. THOMPSON: MS. MUNN:

Thank you, Your Honor. Thank you.

Goodbye, Your Honor

(Whereupon the proceedings were concluded)

C E R T I F I C A T E I hereby certify that the foregoing is an accurate transcription of proceedings in the above-entitled matter. MARCH 13, 2011 ________________ DATE S/JERALD M. MEYERS ______________________________________ JERALD M. MEYERS, RPR-CM

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