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Henryk Oleksy v. General Electric Co

August 8, 2011


The opinion of the court was delivered by: Martin C. Ashman Magistrate Judge

Judge Robert W. Gettleman


Before the Court is Plaintiff Henryk Oleksy's ("Oleksy") Renewed Motion to Compel and Motion to Compel Litigation Hold Documents from Defendant General Electric Co. ("GE"). Oleksy seeks to compel three types of discovery from GE: (1) documents responsive to his Request for Production No. 30; (2) the deposition of a document collection witness; and, (3) information relating to GE's document hold practices. The first two elements were resolved in the hearing on Oleksy's motion, and only the litigation hold issue remains before the Court. The parties agree that GE discovered at some point in April, 2011 that a data purge had taken place in 2009 at GE's Bangor, Maine facility. Oleksy contends that GE's actions constitute the spoliation of relevant evidence and asks the Court to require GE to produce copies of its document retention policies, the litigation hold letters issued in this case, documents relevant to the steps GE took to institute the hold, and a description of all purged data relevant to Oleksy's claims. For the reasons discussed below, the motion is granted on the litigation hold issue.

I. Background

From 1989 through 2000, Oleksy worked at the Preferred Machine and Tools Products Corporation in Bedford Park, Illinois. Preferred was eventually acquired by a subsidiary of GE following a series of acquisitions and stock transfers. As described in detail by the District Judge's denial of GE's motion for summary judgment, Oleksy developed a computer-controlled process for improving the manufacture of steam turbine blades at the Bedford Park plant. United States Patent No. 6,449,529 B1 ("the '529 patent") covering Oleksy's method was issued to him on September 10, 2002. On March 8, 2006, Oleksy filed this action pursuant to 35 U.S.C. §§ 271 & 281, claiming that GE infringed the '529 patent. GE subsequently filed a counterclaim seeking declaratory judgment that the '529 patent claims are invalid, that no infringement occurred, and that Oleksy breached a contractual agreement assigning the '529 patent to GE. On May 23, 2011, the District Judge denied GE's motion for summary judgment, finding that Oleksy had not contractually assigned his rights to the '529 patent to GE and that GE had no "shop right" in the patent's invention.

As the summary judgment matter was proceeding before Judge Gettleman, the parties were also engaged in a discovery dispute before this Court. The Court granted Oleksy's motion to compel the production of documents related to his damages but continued the motion concerning the production of data related to GE's machine methods. GE had recently given Oleksy several hundred thousand documents responsive to his request, and Oleksy sought additional time to review them. Following a hearing on April 15, 2011, Oleksy withdrew his motion without prejudice.

On April 12, however, GE sent a letter to Judge Gettleman advising him that GE had discovered that the terms of a litigation hold that was issued when this suit was filed had not been fully honored. According to GE, information concerning the time and labor costs associated with work at its Bangor, Maine facility are stored and managed in a database in Alpharetta, Georgia. When data threatens to exceed capacity, data is removed from the Alpharetta database. This ordinarily includes data more than one year old that does not otherwise appear in GE's open inventory lots. The data purge eliminated 498 "buckets" -- a term GE uses to describe orders for air foil turbine blades -- out of 1,618 buckets in the Bangor database. Although the missing information was only discovered in 2011, the database purge itself took place in April, 2009.

II. Discussion

When a party first reasonably foresees that litigation is on the horizon, it is required to suspend its ordinary policies governing how information is retained or destroyed and put into place a litigation hold to preserve relevant documents. Krumwiede v. Brighton Associates, L.L.C., No. 05 C 3003, 2006 WL 1308629, at *8 (N.D. Ill. May 8, 2006) (citing Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003)). This extends to all evidence that is discoverable under Fed. R. Civ. P. 26, which provides for the kind of electronically stored information ("ESI") at issue in this case. Fed. R. Civ. P. 26(a)(1)(A); Wiginton v. Ellis, No. 02 C 6832, 2003 WL 22439865, at *4 (N.D. Ill. Oct. 27, 2003). Hold letters of the kind GE claims it issued are ordinarily not discoverable. Major Tours, Inc. v. Colorel, No. 05-3091, 2009 WL 2413631, at *2 (D.N.J. Aug. 4, 2009). Oleksy argues that GE's data purge constitutes spoliation and that the Court should order the production of all documents related to the litigation hold as a sanction pursuant to Fed. R. Civ. P. 37.

As an initial matter, Oleksy's reliance on Rule 37 is misplaced. "The court may sanction a party for spoliation of evidence under either its inherent authority or under Federal Rule of Civil Procedure 37." Haynes v. Dart, No. 08 C 4834, 2010 WL 140387, at *3 (N.D. Ill. Jan. 11, 2010). Contrary to Oleksy's assumption, however, Rule 37 pertains only to circumstances in which a party has violated a court order such as a discovery ruling. Fed. R. Civ. P. 37(b)(2); Brandt v. Vulcan, Inc., 30 F.3d 752, 756 (7th Cir. 1994). By contrast, the Court's own authority encompasses its "inherent power to impose sanctions for abuse of the judicial system, including the failure to preserve or produce documents." Northington v. H & M Int'l, No. 08 C 6297, 2011WL 663055, at *12 (N.D. Ill. Jan. 12, 2011); see also Barnhill v. United States, 11 F.3d 1360, 1367 (7th Cir. 1993) (stating that this power stems from a court's authority to manage its own affairs). Oleksy does not allege that GE violated any discovery order or other directive by the Court, and his motion is properly stated pursuant to the Court's inherent powers, not under Rule 37. Notwithstanding, the analysis that applies to both is essentially the same. Danis v. USN Communications, Inc., No. 98 C 7482, 2000 WL 1694325, at *30 (N.D. Ill. Oct. 23, 2000).

GE first argues that Oleksy's motion is improper because the parties did not meet and confer before the motion was filed on how to resolve their differences on the full range of issues presented in the motion. Northern District of Illinois Local Rule 37.2 provides that the Court will refuse to hear discovery motions unless the moving party states that it consulted in person or by phone with the opposing party and made good faith attempts to resolve differences, providing the date, time, and place of such a conference as well as the names of the participating attorneys. N.D. Ill. R. 37.2. Oleksy's motion's certifies that he met this standard. Even assuming that the parties did not discuss all of the matters Oleksy now raises, the letters and emails attached to the motion reflect a lengthy and admirably professional exchange of ideas on a wide range of issues related to the motion. These documents show that the litigation hold issue was discussed. If the parties have not resolved all of their differences in the course of their previous discussions, they are unlikely to do so at this point if the Court delays considering the merits of Oleksy's motion.

More substantively, GE argues that the Bangor data purge does not rise to the level of spoliation and that, as a result, Oleksy has "failed in his burden to demonstrate why [the hold] documents are not protected by privilege or work product." (Def's. Resp. at 1.) Assuming that by "privilege" GE means the attorney-client privilege, Oleksy is not obligated to demonstrate why a privilege should be set aside until GE itself first shows that a privilege actually applies to its documents. "The party claiming the privilege has the burden of showing the specific facts giving rise to the privilege; blanket claims of privilege are improper." Schachar v. Am. Acad. of Ophthalomology, Inc., 106 F.R.D. 187, 191 (N.D. Ill. 1985); see also United States v. BDO Seidman, 337 F.3d 802, 811 (7th Cir. 2003) (stating that the party asserting a privilege has the burden of showing all of its elements). GE, however, has not presented any argument as to why the documents Oleksy seeks are privileged. It has long been the rule that the kind of broad and conclusory assertions GE relies on are improper to demonstrate that a privilege applies. See, e.g., Federal Trade Comm'n v. Shaffner, 626 F.2d 32, 37 (7th Cir. 1980); Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 152 F.R.D. 132, 139 (N.D. Ill. 1993) ("[M]ere conclusory statements will not suffice to meet that burden.").

The authority cited by GE shows that litigation hold documents are frequently privileged but that such a determination is based on the specific facts involved in the documents at issue, not on a per se rule that a privilege applies in all cases. See Muro v. Target Corp., 250 F.R.D. 350, 360 (N.D. Ill. 2007) (finding that litigation hold documents were privileged based on an in camera review of the disputed items); see also Major Tours, 2009 WL 2413631, at *2 (stating that hold letters are not discoverable "particularly when a party has made an adequate showing that the letters include material protected under attorney-client privilege or the work-product doctrine.") (emphasis added). Here, GE has not made any showing of a privilege and has not submitted the documents for an in camera review. Thus, the Court has no information as to what the documents specifically state or who issued them, and any finding that they are privileged would be based on speculation instead of evidence.

Even if a privilege does apply, moreover, GE has not shown why the Court should not exercise its inherent power to order their production in light of Oleksy's spoliation claim. Spoliation occurs when a party destroys evidence relevant to an issue in the case. Smith v. United States, 293 F.3d 984, 988 (7th Cir. 2002). GE argues that its data purge was unintentional and that a party must act in bad faith before a spoliation sanction can be imposed. Although bad faith is required for a harsh sanction such as dismissal or an adverse inference, courts in this District have not interpreted Seventh Circuit ...

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