S.D. Ohio: Lawyers Must Understand Cloud Computing

In Brown v. Tellermate Holdings, Ltd., No. 2:11-cv-01122-JLG-TPK, 2014 U.S. Dist. LEXIS 90123 (S.D. Ohio July 1, 2014), Magistrate Judge Terence Kemp faulted the Defendant for failing to identify and preserve data saved with salesforce.com. He ruled that counsel did not meet its obligation under Rule 26(g) to make a reasonable inquiry into the existence of relevant documents, and issued sanctions.

Specifically, Judge Kemp found that Tellermate:

1. Failed to uncover any information about a salesforce.com database.

2. Did not preserve the data on salesforce.com

3. Made false statements to the Plaintiff's counsel that damaged their ability to conduct discovery efficiently.

The Court concluded that, ". . . it is not fair to place the entire blame on Tellermate, even if it must shoulder the ultimate responsibility for not telling counsel what, collectively, it knew or should have known to be the truth about its ability to produce the salesforce.com information. it is hard to overemphasize the fact that none of these representations made any sense at all in light of the way in which Tellermate employees used salesforce.com to improve their sales performance; if they could not go back and see the information after they entered it, it was of little use to them, and Tellermate would not have paid for the licenses for them to use it. Finally, to make matters worse, counsel interjected the totally frivolous argument that the licensing agreement prevented Tellermate from obtaining and disclosing its own information, when the terms of that agreement said just the opposite. This was more than just an abdication of responsibility; it was deliberate obfuscation of the issue. As the facts also demonstrate, this course of conduct was in direct violation of the duty, imposed by federal common law, to preserve relevant evidence. " Id. at *32-34.