Case Report – Court puts off spoliation claim until trial

On February 13th, Mr. Justice Peter Lawers of the Ontario Superior Court of Justice rejected a motion to dismiss a personal injury claim based on the defendant’s allegation of spoliation. The idea that spoliation claims should generally be settled at trial is not remarkable, but the Court did reject the defendant’s argument that spoliation claims relating to records of loss of earnings should be treated differently:

I am also alive to the real concern of the defendants, expressed on the issue of prejudice by Mr. Forget; in a case involving loss of income, the defendant should not be forced to gamble that the jury will appropriately punish the plaintiff for his failure to keep proper records when a loss of income case is normally based thereon.

Mr. Stephenson notes the irony in that position, since the plaintiff objected to the defendants’ jury notice on the basis that, as noted in the endorsement of Ferguson J., dated December 20, 2007:

That evidence would unfairly influence the verdict if trial were by jury. He relied on the evidence indicating the failure of the plaintiff to keep proper records that is potentially adversely affecting a jury’s assessment of his credibility or reliability – he used the term “trustworthiness.”

In upholding the jury notice, Ferguson J. held that:

The evidence of the plaintiff’s bookkeeping practices is directly relevant to his claim for damages and any affect of that evidence on his credibility and reliability is clearly a relevant factor which the jury may consider.

I agree.

Also notable is the ambiguity in the claim, which seems to be more about bad record keeping than spoliation itself: “The heart of the problem from the viewpoint of the defendants is the lack of documents relating to Mr. Carleton’s income.” If there is no duty to keep records, there can be no valid spoliation claim when records are not available for production. This seems to be a simple case where bad business record keeping may prevent a plaintiff from meeting its burden of proving loss.

Carleton v. Beaverton Hotel, 2009 CanLII 4245 (CanLII).

Information Roundup – 11 January 2009

This edition of the Information Roundup is brought you by Twitter.

No kidding! I’ve been on it for about a week and half now and it’s caused quite a switch in how I pick up information from the web. Many thanks to the folks at Unfiltered Orange, who are the likely source of two out of the three topics that I think will interest you this week. They relate to… personal e-mails on work computers, the management of social insurance numbers by employers and National Instrument 31-103 and security firm record-keeping.

Personal e-mails on work computers

Personal use of employer computer systems is a pet issue for me, and I was blown away to read about how “personal” e-mails on work computers are treated under European data collection laws in Data Collection: Nothing Personal. This article, by litigation support professional Bill Onwusah, describes how European companies have to mind their process of collecting e-mails for production in litigation so that employees’ personal e-mails are not collected for subsequent review. He says:

Particularly in mainland Europe, you cannot collect personal data and the mere act of doing so may contravene the local data protection legislation. The fact that it’s stored on a work PC is irrelevant. Users retain personal data as their own.

Wow! Canadian law still allows employers full control over their e-mail systems provided they give employees notice that they should not expect any privacy in their personal use. Most of the jurisprudence is arbitral and therefore based on collectively bargained rights, but our employment privacy statutes do not necessarily change this basic rule. And recently, in Johnson v. Bell Canada, our Federal Court held that our federal-sector employment privacy statute, PIPEDA, does not even apply to “personal” employee e-mails.

My view is that managing personal information in the production process is a newly important issue for Canadian organizations to reckon with insofar they are willing custodians. Employee personal e-mails do not fit within this category and, given the costs and complexities of of managing production from “mixed” e-mail systems, an approach that relies on clear notification makes for fair and sensible workplace policy.

Management of SINs by employers

This Proskauer Rose client alert talks about a recently in force New York regulation that deals with employers’ management of Social Security Numbers and other employee “personal identifying information” – including drivers license numbers.

I don’t believe we have similar legislation regarding drivers licenses in any Canadian province, but our Social Insurance Numbers are regulated by section 237(2)(b) of the federal Income Tax Act. This provision prohibits employers from using, communicating or “allowing to be communicated” a Social Insurance Number for purposes not related to tax administration without written consent. Our clients often ask whether SINs (or a variant of them) can be used as identifiers and we generally advise them to stay away from such practices in light of the ITA.

Proskauer also notes that New York’s General Business Law appears to allow employers to collect an SSN on an employment application form. Since there is no purpose related to tax administration for doing so, this practice is rightly avoided in Canada. If a Canadian employer needs to ask for a SIN to conduct a background check, this should generally be done towards the end of the recruitment process subject to written consent.

National Instrument 31-103 and security firm record-keeping

I’m just starting my learning process on National Instrument 31-103, so will just link to this Wall Street Technology article on how this new piece of securities regulation will affect record-keeping and e-discovery at Canadian securities firms.

On a personal note, Seanna was off at Deerhurst this week for a five day sales conference. Being a single father was rewarding and not as hard as I thought it would be, but I’m still recovering from being a solo bedfellow to our hairless cat. “Buffalo” is a Cornish Rex and, if you know the breed, they are very lovable and very needy. He normally sleeps under the covers with his head on Seanna’s pillow. She’s fine with this and I’m happy to give them both a kiss when I leave early to work. (He’ll actually protest if I ignore him!) Dear Buffalo, however, drives me nuts when Seanna goes away. I finally got fed up on her last night of absence and locked myself in the walk-in closet with a sleeping bag. Not to slight Seanna in any way, but I’m sure glad to have my side of the bed back!

See ya!

Dan

Information Roundup – 3 January 2009

I took a break from case law over the holiday, but did do some other reading and listening. Here are some bits you might find interesting on the recent FERPA “health and safety exemption” amendments, privacy as a concept and data and records administration.

FERPA amendments. The Proskauer Rose Privacy Law Blog reports that the United States Department of Education has published finalized amendments to the Family Educational Rights and Privacy Act. Notably, the Department received comments critical of its proposed “rational basis” standard for disclosure in health and safety emergencies. (See Yasmin Nissim’s paper for a view that would suggest the amendment is a consequence of “moral panic.”) The DOE defends the new standard in the comments to the final regulations, but has reacted to the pro-privacy feedback by requiring institutions to record the “articulable and significant threat” to health and safety that forms the basis for a health and safety related disclosure.

Privacy as a concept. If you’re inclined to academic writing, you may like an article by Karen Eltis of the University of Ottawa entitled, “Can the Reasonable Person Still Be ‘Highly Offended’? An Invitation to Consider the Civil Law Tradition’s Personality-Rights Based Approach to Tort Privacy.” As you might expect, it’s a critique of the reasonable expectation of privacy doctrine, which Professor Eltis describes as the prevailing tort standard in common law jurisdictions. I’ve read similar critiques before, but wasn’t familiar with the strong dignity-based conception of privacy that prevails in civil law, a conception that Professor Eltis supports. Check out Dan Solove’s Understanding Privacy if you’re interested in reading more about conceptualizing privacy.

Data and records administration. Lastly, this New York Times article on the archiving of Bush administration data is worth a check. Would it surprise you that the administration is not immune from the problem of ballooning data stores? The article does raise how open government legislation adds some significant complexity to the challenge of records management, an issue for the public sector as a whole and one touched on in the most recent This Week in Law. Also related: this video lecture of computer scientist Kai Li on “disk-based de-duplication storage.” Super-technical and mostly over my head, but I did find the general description of how corporate data management works very enlightening. You may too.

We had a great holiday at home in TO. Unable to get away, we had a nice time kicking around with family. Hugo (20 months now) discovered snow. I got all excited after a big storm and hauled him over to nearby Withrow Park with a new toboggan at 7:30 am. Not a sole around and it was about minus fifteen centigrade. I gave him serious snow job on our first run and he freaked. So we’re more into father-son shoveling now and, as the attached picture might suggest, he’ll live to toboggan another day. (Seanna and I got each other a new camera over the holiday. We’re having great fun with it and she’s encouraged me to post this picture. You may see more personal pictures over time, though I’m still feeling somewhat shy.)

I hope you’re as rested and charged up about this year as I am. Best wishes.

Dan

Case Report – BCCA speaks on spoliation

On November 18th, the British Columbia Court of Appeal dismissed an appeal in which allegations of spoliation were made. The outcome is not remarkable, as the claim was based on the routine destruction of records pursuant to policy before litigation was reasonably contemplated. In a testament to how interesting this issue has become, however, Madam Justice Rowles went on gratuitously about spoliation in great detail, describing the debate about the doctrine in both Canadian and American law. If you too are interested in the issue, this case is worth a read.

Holland v. Marshall, 2008 BCCA 468 (CanLII).

Case Report – Federal OPC dimisses complaint about cross-border personal information transfer

On August 7th, the Office of the Federal Privacy Commissioner of Canada issued a report dismissing a PIPEDA outsourcing complaint filed by Philippa Lawson of the Canadian Internet Policy an Public Interest Clinic.

The report echoes the position the OPC established in Case Summary 313 and Case Summary 333 – that is, that the transfer of personal information into the United States does not necessarily breach the safeguarding requirement in PIPEDA because it exposes the information to the dictates of United States law, but that notification is required given the principle of openness. The OPC does give a little more detail on the required standard of notification in this report than it has done in the past:

Finally, organizations that outsource the processing of personal information must provide sufficient notice with respect to the existence of service-provider arrangements, including notice that any foreign-based service provider may be required by the applicable laws of that country to disclose personal information in the custody of such service provider to the country’s government or agencies. In this respect, CanWest respected its obligation by reliably informing its subscribers, new and existing, of its arrangement with a new U.S.-based e-mail provider and of the potential impact on confidentiality of subscriber information. Consequently, Principle 4.1.3 was not contravened.

The report has been posted on CIPPIC’s website. Hat tip to Michael Geist.

Case Report – SCJ dismisses spoliation claim on its merits

This might be the first award in which the Ontario Superior Court of justice has considered a tort claim for spoliation since the Ontario Court of Appeal held, in Spasic Estate, that a claim based on the tort of spoliation should not be struck out for failing to disclose a reasonable cause of action.

The case is about a claim to the proceeds of an estate. The plaintiff established that the defendant arranged to have the testator’s computer wiped after the plaintiff threatened litigation and after he had received correspondence from the plaintiff’s counsel. The plaintiff also established that there was at least one e-mail destroyed (which was later produced from a third-party) which supported his claim that the defendant asserted undue influence over the testator.

In very brief treatment the Court seems to accept that a claim for tort damages for spoliation can be made out on mere proof of bad faith destruction of evidence. However, in rejecting the claim it implied that prejudice is also a requirement. It said:

In my opinion, this e-mail is no more unfavourable to William Jr. than other e-mails that he did produce that show his involvement with William Sr.’s dispute with Frank. In light of this and in view of the significant documents that William Sr. did produce, I am unable to conclude that William Jr. intentionally destroyed relevant evidence.

The Court did not consider whether the defendant had a positive duty to take reasonable steps to preserve the testator’s computer or the nature and extent of such a duty.

Tarling v. Tarling, 2008 CanLII 38264 (ON S.C.).

Protect your domain name from rogue departing employees

In quite the coincidence, we’ve recently been retained on back-to-back domain name hijacking files, which compelled me to write a client bulletin that has just been published here. I generally try not to be very strident in these types of communications, but its such an aggressive form of malfeasance that I’m afraid its hard to hide the fact that I’m impassioned in my concern. Hope the bulletin is of interest!

Case Report – ABCA stresses need for courts to protect hard drive contents

On June 11th, the Alberta Court of Appeal held that a judge erred in ordering the production of hard drive images that contained patient files.

The case is about a public health authority’s right to audit files held by one of its former service providers, and in particular, its right of access to files of patients whose treatment the authority only partly funded. These patients also received privately-funded services, but only had one patient record with the service provider, which raised an issue about the authority’s right to look at the files in the course of an audit. This issue was initially litigated up to the Alberta Court of Appeal in 2006. The Court of Appeal held that the authority had no right of access to the “hybrid files” under public law, but did not consider the authority’s contractual right of audit.

The access dispute was revived again when the service provider sued the authority for unlawfully seeking access to the hybrid files and forcing it to defend its clients’ privacy rights through litigation. Several computer hard drives containing hybrid files that were imaged in the original dispute and stored at the court were central to the action. The authority revived its attempt at accessing the hybrid files by filing a counterclaim in which it alleged breach of contract and breach of fiduciary duty. It made a vague allegation in its pleadings that the service provider was double-billing, but did not plead fraud. (It had no evidence of fraud because any such evidence could only be revealed on an examination of the hybrid files themselves.)

A case management judge ordered the hard drives to be produced to the authority in specie (in their actual form) with a direction not to print or take notes of anything irrelevant and in reliance of the no collateral use rule embedded in the implied undertaking. The Court of Appeal held this order was made in error and that the authority’s vague pleadings of fraud did not give it a right to the hybrid files.

The Court of Appeal’s judgement (written by Madam Justice Conrad) contains some very principled statements on e-discovery. She held that a party to litigation will not ordinarily get access to a hard drive, which is simply a receptacle for information. This is not new, but Madam Justice Conrad also suggested that a judge has a duty to protect irrelevant, confidential and private materials in the event of a production dispute. She also stressed that orders to inspect a hard drive will only be made on “strong evidence” that a party is attempting to thwart the discovery process and, further, that a court that orders inspection of a hard drive should still ensure that irrelevant and confidential information is protected. Referring to the order made in 2007 by the Alberta Court of Queen’s Bench in Spar Aerospace (subsequently upheld on appeal), she said:

While I agree with Madam Justice Veit’s decision, I would add a caveat. Even in circumstances where it is clear that a litigant is thwarting the litigation process, and the court deems it appropriate to order production of a hard drive, measures should be taken to protect disclosure of irrelevant and immaterial information which the producing party objects to produce. Although litigation confidentiality exists, many times that will not be sufficient to protect personal, confidential and private material. A judge should always hear representations as to how information that is neither material nor relevant can be protected from exposure, and frame any production order in the least intrusive manner.

Madam Justice Conrad then held that there was no basis justifying an inspection order in the circumstances, that the service provider’s pleading did not put the entire content of the hard drives at issue and that concerns about the cost of separating the records on the hard drive were not established or were at least premature.

The Court also held that the action did not give the authority a right of disclosure that extended to the hybrid files. It held that the dispute was about the scope of a contractual right of audit and not an allegation of fraud despite the vague allegations pleaded in authority’s counter claim. It seemed clear to the Court that the authority was attempting to seek what it ultimately wanted (a look at the hybrid files) by the way in which it pleaded its counterclaim. Madam Justice Conrad said the authority was on a “fishing expedition.”

While an obviously significant e-discovery case, this also says something about records management, the need for third-party access and potential conflicts with personal privacy rights. If the authority’s funding contract demanded that patient records for funded services be separately maintained, this dispute might have been avoided.

Innovative Health Group v. Calgary Health Region, 2008 ABCA 219 (CanLII).

CACEE Conference – The law and ethics of recruting in today’s wired world

I had the honour of presenting today at the Canadian Association of Career Educators and Employers national conference. My topic was called “The law and ethics of recruiting in a wired world,” and we spent most of the session talking about online speech. The discussion ranged and was great throughout, but the time we spent on recruiting and online speech was extremely enlightening thanks to the great attendee input.

I broke the recruiting and online speech issues into privacy issues and employment issues.

On privacy, I suggested that authorization, accuracy and openness are the most relevant fair information practices. I urged the participants to consider what reasonable steps a recruiter should take to ensure the accuracy of personal information collected from online sources and used in making recruiting decisions. I also suggested that the openness requirement demands that candidates know that their publicly available information may be collected in the recruiting process. On further thought, the necessity principle is also highly relevant, and I think recruiters are naturally inclined to respect the rule, “If the information is not needed, don’t ask the question.” Applying the necessity principle to the online search issue, it seems to me that such a recruiting tactic can only be justified where the job raises a reasonable possibility of conflict between an employee’s online presence and his or her job duties.

On employment law, I started with a thought about addressing foreseeable conflicts of interest at the outset of the employment relationship. For employees who have personal blogs, for example, I suggested that employers would benefit by assessing them for potential conflicting interests and resolving potential conflicts as part of contracting for employment. Sensible and fair, but doesn’t this entail looking into candidates’ online presence as part of the recruiting process? In this regard, my suggestion caught the audience slightly off-guard because they were all very wary of the potential for human rights liability associated with using the internet to screen candidates. True enough!

You see, recruiting processes are typically structured to minimize the risk of considering irrelevant and discriminatory factors. They are also purposely staged so that discriminatory factors that are relevant are considered later in the hiring process. Based on anecdotes from members of the audience, it seems to be that the online speech phenomenon is disrupting these processes and causing recruiters to lose control of the information that becomes part of an assessment. We heard stories of recruiters who are being sent information from groups supporting student candidates that use new media very creatively, but contain pictures and all sorts of personal information that a recruiter would never require of candidates. It’s not that this information is necessarily related to one or more of the personal characteristics protected under human rights legislation, but when you don’t know exactly what information you’re going to get there’s certainly a heightened risk of of poisoning your pool of assessment information with irrelevant information that could be used as the basis for a discrimination complaint.

The idea of Google searching candidates also raises difficult records management issues. A defendant in a hiring dispute wants to be able to say, “Everything we considered is in the file.” Add an internet search into the assessment process and, unless there is a rigorously-enforced and forensically sound protocol for recording the search on the formal record, the electronic discovery burden of defending a hiring dispute will be relatively significant.

Despite all the risks, I’m hesitant to take an absolute position against collecting information about candidates’ online presence. If a candidate has an online presence that could conflict with the fulfillment of his or her job duties, doesn’t the diligent employer take reasonable steps to find that out before entering an employment contract? One way to reduce the human rights risk is to conduct the search near the end of the assessment process as a form of background check. There are likely other means of managing the human rights risk, which is not to discount the steps that should also be taken in order to ensure respect fair information practices.

If anyone can work out a model that enables employers to use relevant and available information about candidates in a manner that respects individual privacy and human rights, it has got to be the great group of professionals from CACEE that I was able to join today. Again, it was an honour!

Case Report – Adverse inference drawn based on negligent spoliation

On February 27th, the New Brunswick Court of Queen’s bench dismissed a counterclaim because the plaintiff (by counterclaim) had allowed documents that the defendant required for its defence to be destroyed.

After terminating its franchise agreement with the defendant, the plaintiff transferred a job order file on an over-bid construction project to the new franchisee, who destroyed the file. The defendant (by counterclaim) did not allege bad faith, but alleged that the plaintiff ought to have instructed the new franchisee to safeguard the files, which were essential to its defence. The Court rejected the plaintiff’s claim that the defendant did not call an available witness in favour of raising its spoliation defence. It also held that the plaintiff had a duty to preserve the job order files that was bolstered by its own termination letter, which said it would make the records available to the defendant in the event of litigation.

Elliott v. Trane Canada Inc., 2008 NBQB 79.