In the SDNY, a Party Is Sanctioned for the Preservation Failures of a Third-Party
October 11, 2017
Ronnie Van Zant, Inc. v. Pyle, No. 17 Civ. 3360 (RWS), 2017 WL 3721777 (S.D.N.Y. Aug. 28, 2017)
In this case, the Southern District of New York imposed an adverse inference against defendants for their failure to preserve text messages that were in the possession of a non-party. Specifically, Judge Sweet imposed an adverse inference against defendants based upon the spoliation of non-party text messages after concluding that as a result of the non-party’s: close working relationship with the defendants; his prior production of documents in the litigation; and his financial interest in the at-issue film, defendants had the practical ability to obtain the text messages, irrespective of any legal right to those messages.
The underlying dispute involves certain prohibitions on the use of Lynyrd Skynyrd’s likeness and name. For the readers who may be too young to have a full appreciation of the band and its traumatic history, a brief factual background is provided.
On October 20, 1977, two members of the Lynyrd Skynyrd rock band, and a number of other people were killed in a plane crash in Mississippi.* However, a number of people, including Artimus Pyle (“Pyle”) (the band’s drummer), survived the crash. In the years that followed, the three surviving band members and Ronnie Van Zant’s surviving spouse (“Judy”) entered into what has been called a “blood oath.” Under the blood oath, it was agreed that no surviving band member would ever perform again as Lynyrd Skynyrd.
In 1987, to commemorate the ten year anniversary of the crash, the band’s surviving members reunited for a tribute tour. Judy disputed use of the band’s name and sought to enjoin use of the band’s name in the performance (the “1988 Lawsuit”). The 1988 Lawsuit was resolved by the parties’ entry of a consent order, judgment and decree (the “Consent Decree”). Pyle – who was represented by counsel in connection with the 1988 Lawsuit – was a signatory to the Consent Decree. Among other things, the Consent Decree set forth various restrictions on the how the parties to the 1988 Lawsuit could use the name Lynyrd Skynyrd, and the name/image/likeness of Ronnie Van Zant and band member Steve Gaines, who also perished in the crash. Among other restrictions, the parties were prohibited from commercially exploiting the history of Lynyrd Skynyrd without prior written approval.
In 2016, defendant Cleopatra Records, through one of its affiliate divisions (collectively, “Cleopatra”), sought to make a feature-length film based on the 1977 crash. Jared Cohn (“Cohn”) was hired as the director and writer for the proposed film. Former Lynyrd Skynyrd drummer, Pyle, was hired to work on the script with Cohn and ultimately signed an agreement with Cleopatra that entitled him to 5% of the film’s net receipts. Pyle also contracted to narrate the film, make a cameo appearance and contribute an original song to the film. In the course of his work on the film (tentatively titled, Free Bird), Cohn (who was paid by, but not an employee of Cleopatra) worked closely with Pyle, relying almost exclusively on phone calls and text messages to communicate.
Around the end of June, 2016, Cleopatra put out press releases advertising the film and Pyle’s involvement. On July 15, 2016, Plaintiffs** sent Cleopatra a cease and desist letter (“Letter”). In the Letter, Plaintiffs requested a copy of the film’s script and outlined the various restrictions in the Consent Decree. Soon thereafter, Plaintiffs sent Cleopatra a copy of the Consent Decree. When, many months later, Plaintiffs discovered Cleopatra was proceeding with production, they filed an action in the Southern District of New York alleging a violation of the Consent Decree, seeking a permanent injunction against Cleopatra and an award of costs and attorneys’ fees (“SDNY Lawsuit”).
Cohn was not a party to the SDNY Lawsuit.
While the Opinion and Order of the Court (“Order”) determined the merits of the lawsuit (spoiler alert – Judge Sweet granted the permanent injunction and awarded attorneys’ fees to Plaintiffs), the balance of this blog discusses only that portion of the Order relevant to a party’s preservation obligations. (Ronnie Van Zant, Inc. v. Pyle, No. 17 Civ. 3360 (RWS), 2017 WL 3721777 (S.D.N.Y. Aug. 28, 2017)).
In May 2017 — after commencement of the SDNY Lawsuit — Cohn switched cell phone providers and began using a new phone. “Although certain data on Cohn’s old phone was backed-up, such as pictures, other data was not preserved, such as Cohn’s text messages, including those sent and received from Pyle.” As a result, Plaintiffs moved, “either pursuant to Federal Rule of Civil Procedure 37(e) or the Court’s inherent authority” for an adverse inference with respect to the unpreserved text messages between Cohn and Pyle.
In response to Plaintiffs’ motion, Cleopatra argued that it could not be sanctioned for the actions of Cohn (a non-party) because neither Cohn nor his phone were within its control. The Court, however, disagreed with Cleopatra. Specifically, Judge Sweet noted the “concept of control”—pursuant to which documents are considered to be under a party’s control—has been construed broadly and is satisfied “if the party has the practical ability to obtain the documents from another, irrespective of his legal entitlement.” The Court continued:
Here, while Cohn is a non-party, his text messages were, practically speaking, under Cleopatra’s control. Cohn was contracted by Cleopatra to work on the Film, and the evidence has establishes [sic] that he worked closely with Cleopatra for over the past year. Over the course of the instant litigation, Cohn has participated by providing documents and took a deposition sought by Plaintiffs during discovery. As has been found relevant in other cases determining the relationship between a party and non-parties, Cohn also has a financial interest in the outcome of this litigation, since he is entitled to a percentage of the Film’s net receipts, which would be zero should Plaintiffs prevail. In sum, while determining practical control is not an exact science, “common sense” indicates that Cohn’s texts with Pyle were within Cleopatra’s control, and in the face of pending litigation over Pyle’s role in the Film, should have been preserved.
The Court further noted that Cohn’s actions (i.e., “getting a new phone after Plaintiffs brought the instant action and managing to back-up pictures but, somehow, not text messages”) demonstrate the “kind of deliberate behavior that sanctions are intended to prevent and weigh in favor of an adverse inference.” Docket No. 61, p. 28-29. Ultimately, the Court concluded that an adverse inference would be presumed against Cleopatra as to the missing text messages.
Because this decision concludes a party can be sanctioned for the failures of a third-party, it is critically important to assess what third-parties, if any, you have a practical ability to secure documents/information from when issuing your hold notices.
For example, does your client have the “practical ability” to retrieve documents from its software vendor? From its payroll provider? From its accountant? If so, and that third-party may have responsive information, you should seek to preserve that information and give serious consideration to issuing a litigation hold to that non-party.
*Among those who lost their lives were lead singer and song writer, Ronnie Van Zant.
**Plaintiffs include Ronnie Van Zant, Inc., Gary R. Rossington, Johnny Van Zant, Barbara Houston as the Trustee of the Allen Collins Trust, and Alicia Rapp and Carinna Gaines Biemiller as personal representatives of the estate of Steven Gaines.
*** It is also interesting to note that there was no analysis of prejudice suffered, if any, by plaintiffs as a result of this preservation failure. This is interesting in light of the fact that the 2015 Amendments to the Federal Rules of Civil Procedure were intended, in part, to allow a party to secure sanctions only when failures to preserve resulted in an actual prejudice or harm. Here, the decision and order seems to infer there was prejudice – an inference more typically permitted under the pre-amendment rules.