Envy Hawaii LLC v. Volvo Car USA LLC
Filing
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ORDER DENYING DEFENDANT VOLVO CAR USA LLC'S MOTION FOR SPOLIATION SANCTIONS re (ECF NO. 116 ), 147 - Signed by JUDGE HELEN GILLMOR on 3/20/2019. (emt, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
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Plaintiff,
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vs.
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VOLVO CAR USA LLC,
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Defendant.
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VOLVO CAR USA LLC,
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Counter-Claimant, )
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vs.
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ENVY HAWAII LLC doing business )
as Volvo Cars Honolulu; MIKHAIL )
FEDOTOV,
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Counter-Defendants.
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__________________________________
ENVY HAWAII LLC doing business
as Volvo Cars Honolulu,
Civ. No. 17-00040 HG-RT
ORDER DENYING DEFENDANT VOLVO CAR USA LLC’S MOTION FOR SPOLIATION
SANCTIONS (ECF No. 116)
This case involves contract disputes and claims of improper
business practices between a local automobile dealership and the
national distributor of Volvo automobiles.
Envy Hawaii LLC, doing business as Volvo Cars Honolulu, was
established in December 2012.
Envy Hawaii LLC purchased the
rights to operate the sole Volvo franchise in Hawaii.
Envy Hawaii LLC contracted with Volvo Car USA LLC to operate
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its franchise.
Volvo Car USA LLC is located in New Jersey and is
the exclusive importer and wholesaler of Volvo automobiles in the
United States.
In 2015, Mikhail Fedotov became the sole owner and manager
of Envy Hawaii LLC.
In January 2017, Envy Hawaii LLC filed suit against Volvo
Car USA LLC.
Envy Hawaii LLC’s First Amended Complaint alleges
eight causes of action, including claims that Volvo Car USA LLC
violated the Automobile Dealers’ Day in Court Act, 15 U.S.C. §
1221 et seq., the Robinson-Patman Act, 15 U.S.C. § 13(a), and
several Hawaii state statutes.
Volvo Car USA LLC has filed counterclaims against both Envy
Hawaii LLC and its owner Mikhail Fedotov.
The Second Amended
Counterclaim contains eleven causes of action including claims
for fraud, misrepresentation, breach of contract, unlawful
recording, cybersquatting, and unjust enrichment.
The Parties have engaged in two years of litigation,
produced discovery, and conducted depositions.
Volvo Car USA LLC has now filed a Motion for Spoliation
Sanctions.
Volvo Car USA LLC claims that Envy Hawaii LLC and
Mikhail Fedotov failed to preserve certain electronically stored
information in violation of Federal Rule of Civil Procedure
37(e).
Specifically, Volvo Car USA LLC claims Fedotov did not
preserve Google e-mail accounts and electronic dealer management
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system records.
Envy Hawaii LLC and Mikhail Fedotov claim no spoliation has
occurred because any relevant records are available from thirdparties and sanctions are not appropriate.
Defendant Volvo Car USA LLC’s MOTION FOR SPOLIATION
SANCTIONS (ECF No. 116) is DENIED.
PROCEDURAL HISTORY
On January 16, 2019, Defendant filed DEFENDANT’S MOTION FOR
SPOLIATION SANCTIONS.
(ECF No. 116).
On February 1, 2019, Plaintiff/Counterclaim Defendants filed
ENVY HAWAII LLC AND MIKHAIL FEDOTOV’S MEMORANDUM IN OPPOSITION TO
DEFENDANT VOLVO CAR USA LLC’S MOTION FOR SPOLIATION SANCTIONS.
(ECF No. 127).
On February 15, 2019, Defendant filed DEFENDANT’S REPLY IN
SUPPORT OF MOTION FOR SPOLIATION SANCTIONS.
(ECF No. 133).
On March 6, 2019, the Court held a hearing on Defendant’s
Motion for Spoliation Sanctions.
(ECF No. 147).
The Court
issued an oral ruling denying Defendant’s Motion for Spoliation
Sanctions.
This order provides the written basis for the Court’s
March 6, 2019 oral ruling.
STANDARD OF REVIEW
Pursuant to Federal Rule of Civil Procedure 37(e), if
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electronically stored information that should have been preserved
in the anticipation or conduct of litigation is lost because a
party failed to take reasonable steps to preserve it, and it
cannot be restored or replaced through additional discovery, the
court:
(1)
upon finding prejudice to another party from
loss of the information, may order measures
no greater than necessary to cure the
prejudice; or
(2)
only upon a finding that the party acted with
the intent to deprive another party of the
information’s use in the litigation may:
(A)
presume that the lost information was
unfavorable to the party;
(B)
instruct the jury that it may or must
presume the information was unfavorable
to the party; or
(C)
dismiss the action or enter a default
judgment.
Fed. R. Civ. P. 37(e).
A party that destroys or fails to preserve evidence pursuant
to Fed. R. Civ. P. 37(e) may be subject to sanctions for
spoliation, including dismissal.
Leon v. IDX Sys. Corp., 464
F.3d 951, 958 (9th Cir. 2006).
Rule 37 was amended in 2015.
Pursuant to the 2015
amendment, the court may order measures no greater than necessary
to cure prejudice from the failure to store electronically stored
information.
Moore’s Fed. Prac. 3d § 37.121A; see Fed. R. Civ.
P. 37(e) Advisory Committee Note of 2015.
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ANALYSIS
I.
Fed. R. Civ. P. 37(e)’s 2015 Amendment
The text of Federal Rule of Civil Procedure 37(e) provides
that evidence is “lost” and subject to spoliation sanctions when
a party failed to take reasonable steps to preserve it, and “it
cannot be restored or replaced through additional discovery.”
Fed. R. Civ. P. 37(e) (emphasis added).
Information is “lost” for purposes of Rule 37(e) only if it
is irretrievable from another source, including other custodians.
Oracle Am. Inc. v. Hewlett Packard Enterprise, Co., 328 F.R.D.
543, 552 (N.D. Cal. 2018).
Cases decided after the implementation of the 2015 amendment
to Fed. R. Civ. P. 37(e) have highlighted the 2015 Advisory
Committee Notes to the Rule.
The 2015 Advisory Committee stated
that “because electronically stored information often exists in
multiple locations, loss from one source may often be harmless
when substitute information can be found elsewhere.”
Fed. R.
Civ. P. 37(e), 2015 Advisor Committee Notes.
Spoliation sanctions are not available pursuant to the 2015
Amendment to Rule 37(e) when information is not lost.
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II.
The Electronically Stored Information Defendant Seeks Is Not
Lost Within The Meaning Of Fed. R. Civ. P. 37(e)
Defendant Volvo Car USA LLC seeks two types of information
from Plaintiff.
First, Volvo Car USA LLC seeks financial and accounting
records from Envy Hawaii LLC’s dealer management system
maintained by CDK Drive.
Second, Volvo Car USA LLC seeks e-mail accounts from a
Google Enterprise e-mail server for Mikhail Fedotov and John
Martinho relating to Envy Hawaii LLC.
Volvo Car USA LLC admits that it has not sought any of the
discovery from either CDK Disk or Google Enterprise.
Volvo Car
USA LLC’s Motion is focused on Envy Hawaii LLC’s failure to
preserve the information.
Volvo Car USA LLC has not established that spoliation
sanctions are available because the information it seeks is not
“lost” within the meaning of Fed. R. Civ. P. 37(e).
A.
Dealer Management System Records
Volvo Car USA LLC has not demonstrated that any financial
information maintained in Envy Hawaii LLC’s Electronic Dealer
Management System provided by CDK Drive is unavailable.
Spoliation sanctions pursuant to Fed. R. Civ. P. 37(e) are
generally only appropriate “where extensive [electronically
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stored information] recovery efforts have failed, or after
forensic review gives the movant a much better idea of the
quantity and nature of unproduced, deleted ESI.”
Steves and
Sons, Inc. v. JELD-WEN, Inc., 327 F.R.D. 96, 108 (E.D. Va. 2018).
Rule 37(e) sanctions are foreclosed if the purportedly “lost”
electronically stored information may be retrieved from
additional discovery or discovery from third-parties.
EPAC
Techs., Inc. v. HarperCollins Christian Publ’g, Inc., 2018 WL
1542040, at *27 (M.D. Tenn. Mar. 29, 2018).
Volvo Car USA LLC concedes that it has not subpoenaed any
records from CDK Drive.
It has not attempted to retrieve the
information from any other third-parties.
Volvo Car USA LLC also has not demonstrated that it is not
in possession or does not otherwise have access to any
information due to its own use of the Electronic Dealer
Management System.
Rule 37(e) sanctions are not available when the information
may be sought from third-parties and Volvo Car USA LLC has not
demonstrated that the information is irretrievable.
B.
E-Mails
Defendant claims that Envy Hawaii LLC used Google Enterprise
to store its e-mails.
Defendant states that it believes Google
Enterprise’s policy is to delete e-mails within a short number of
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days after the client’s service is ended.
Defendant has not sought any e-mails or discovery directly
from Google and cannot demonstrate that the e-mails are otherwise
lost.
Numerous cases have addressed the availability of deleted emails in the context of Rule 37(e).
In CAT3, LLC v. Black
Lineage, Inc., 164 F.Supp.3d 488, 497 (S.D.N.Y. 2016), the court
explained that the party seeking spoliation sanctions must
demonstrate that the e-mails are irretrievable.
The court stated
that e-mails are not lost when one custodian deletes them from
his mailbox but they remain available in the records of another
custodian.
Id.
Defendant has not demonstrated that Google Enterprise no
longer has access to any of Envy Hawaii LLC’s deleted e-mails.
Agility Pub. Warehousing Co. K.S.C. v. Dep’t of Def., 2017 WL
1214424, at *2 (D.D.C. Mar. 30, 2017) (finding e-mails were lost
only if not turned over to movant by a third party); Living Color
Enters., Inc. v. New Era Aquaculture, Ltd., 2016 WL 1105297, *5
(S.D. Fla. Mar. 22, 2016) (text messages provided to movant by
another party were not “lost” for purposes of Rule 37(e)).
Volvo Car USA LLC may issue subpoenas to obtain records from
Google and/or CDK Drive prior to May 15, 2019.
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CONCLUSION
Defendant Volvo Car USA LLC’s Motion For Spoliation
Sanctions (ECF No. 116) is DENIED.
IT IS SO ORDERED.
Dated: March 20, 2019, Honolulu, Hawaii.
Envy Hawaii LLC dba Volvo Cars Honolulu v. Volvo Car USA LLC;
Counter-Claimant Volov Car USA LLC v. Mikhail Fedotov; Envy
Hawaii LLC; Civ. No. 17-00040 HG-RT; ORDER DENYING DEFENDANT
VOLVO CAR USA LLC’S MOTION FOR SPOILATION SANCTIONS (ECF No. 116)
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