Commercial Litigation and Arbitration

Spoliation — the Ellison/Oracle Decision — Adverse Inference Applied on Summary Judgment

The press has widely reported the fact that Larry Ellison, founder of Oracle, has been sanctioned for spoliation. The opinion, Nursing Home Pension Fund v. Oracle Corp., 2008 U.S. Dist. LEXIS 66740 (N.D. Cal. Sept. 2, 2008), has a few points of interest.

First, the plaintiffs complained that the litigation hold notice went out to only 30 of Oracle’s 40,000 employees. The Court declined to impose sanctions on this ground because no missing documents were identified and large volumes of data were produced.

Second, the plaintiffs complained that Ellison’s email files were not adequately preserved. The fact that 1,650 of his emails were produced by others did not insulate Ellison from sanction:

Defendants, relying on Wachtel v. Health Net, Inc., 2007 WL 1101436 (D.N.J. Apr. 10, 2007), argue that plaintiffs are not entitled to receive multiple copies of Ellison's emails. The Court disagrees. It could have been helpful to plaintiffs to demonstrate that certain emails were discovered in Ellison's files; otherwise, for instance, Ellison could argue that he never actually read or received an email that was sent to him, and thus had no knowledge of its contents. Moreover, having established with certainty that numerous emails were not produced from Ellison's email files — because the emails were produced from other files or accounts — it is impossible to know whether additional unproduced emails were also deleted or not turned over. This uncertainty about the existence of other emails is precisely the reason all of Ellison's emails should have been preserved and produced.

Third, the date of the litigation hold notice that was disseminated to preserve documents was used by the Court as a date after which failure to take reasonable preservation efforts constitutes spoliation.

Fourth, the spoliated documents as to which the inference was to be applied related to 135 hours of interviews Ellison gave the author of a book about him ("Softwar”).

Fifth, the adverse inference was applied on summary judgment:

The Court will take these adverse inferences into account when deciding the parties' summary judgment motions. Specifically, the Court believes that it is appropriate to infer that the emails and Softwarmaterials would demonstrate Ellison's knowledge of, among other things, problems with Suite 11i, the effects of the economy on Oracle's business, and problems with defendants' forecasting model, but the Court notes that such inferences will not assist plaintiffs in demonstrating the existence of genuine issues of material fact for every element of their § 10(b) claims, such as the element of loss causation.

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