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In Re Hitachi Television Optical Block Cases

August 12, 2011


The opinion of the court was delivered by: Hon. Nita L. Stormes U.S. Magistrate Judge United States District Court


This document relates to all actions )



On August 27, 2010, Plaintiffs filed a Motion alleging spoliation of evidence and seeking forensic investigation of a hard drive from which electronic files had been deleted. [Docket No. 99 (the "Spoliation Motion").]*fn1 The Court found Defendants ("Hitachi") had spoliated documents by intentionally deleting computer files following notice of this lawsuit. [Doc. No. 122, (the "Spoliation Order").] The Court reserved judgment on the appropriate sanction until the extent of any prejudice could be determined through forensic analysis of the pertinent hard drives and the deposition of Hitachi regarding the efforts made to preserve and produce electronic data. On March 16, 2011, Plaintiff filed a Motion for Sanctions as a Result of Defendants' Spoliation . [Docket No. 175, ("Mot." or "Sanctions Motions").] On April 22, 2011, Hitachi filed an Opposition [Docket No. 185 ("Opp.")]. On May 6, 2011, Plaintiffs filed a Reply [Docket No. 192 ("Reply").] On May 11, 2011, Hitachi filed a Motion to Strike or File a Sur-Reply [Docket No 194.]. Having held oral argument on May 13, 2011, and having read all pertinent papers and attachments thereto, the Court GRANTS the Motion to File a Sur-Reply, DENIES the Motion for Sanctions.


This is a putative class action alleging a defect in the optical block of Hitachi's rear projection televisions. Plaintiffs contend that the Hitachi-brand LCD Rear Projection Televisions ("LCD RPTV") failed prematurely. Hitachi assembled the LCD RPTV in Mexico through its subsidiary, Hitachi Consumer Products de Mexico, S.A. de C.V. ("HIMEX "). HIMEX and its engineers were responsible for implementing design changes and reconditioning televisions that malfunctioned. In response to a Rule 30(b)(6) request, Hitachi designated Koji Kato, the former Chief Engineer in Quality Assurance of HIMEX, as its person most knowledgeable regarding the cause of the alleged defect and any measures taken to counter it. Just before his deposition in July 2010, Hitachi "de-designated Mr. Kato" upon learning that Kato had intentionally deleted electronic files relevant to the litigation.

Plaintiffs thereafter took Kato's deposition in his individual capacity. Kato testified in relevant part that between July 2002 and April 2007 he was employed by Hitachi Ltd., but was "loaned out" to Hitachi Home Electronics (America), Inc. ("HHEA") and also worked at HIMEX. (Kato Tr. at 13-16; Kato Decl. ¶ 1.)*fn2 Kato lived in Chula Vista, California, and traveled across the border to HIMEX's factory for most of his work. (Kato Tr. at 13-15.) He took work files home on occasion and saved them on his personal computer. He then transferred the work files to a 200 GB Maxtor External Hard Drive, and eventually transferred the work files to an 80 GB Maxtor External Hard Drive. In doing so, Kato deleted the files off his home computer and the 200 GB hard drive, which no longer functions. (Kato Decl.¶ 15.) Kato copied these files in violation of Hitachi's trade secret policy, which forbids employees to copy or otherwise store company information on home computers or other storage devices. (Kato Decl. ¶ 16.). Kato does not recall telling anyone at Hitachi that he possessed a copy of these files. (Id.). After Hitachi designated him as a 30(b)(6) witness, and just prior to his deposition, Kato deleted the work files off the 80 GB hard drive and ran a defragmentation program.

"Deleting" a document does not typically eliminate information on a hard drive. (Tulo Decl. ¶¶ 22-23.)*fn3 When a file is deleted it becomes unallocated space, space designated as unused and available.

. The deletion of the file is noted in the Master File Table ("MFT"), which is the index system that indicates where files are stored on the hard drive. (Stenhouse Decl. II ¶7)*fn4 The file becomes invisible to the operating system but it exists until it is overwritten with new or other data. (Tulo Decl. ¶¶ 22-23; Stenhouse Tr. at 85-89.) A defragmentation utility reorganizes blocks of data in order to allow the computer program to retrieve files more efficiently. (Tulo Decl. ¶ 29) A defragmentation program is not designed to, and does not, make it impossible to recover the deleted files and is not the equivalent of "wiping" the disk. (Id.) When a defragmentation utility moves blocks of data, it is possible that some blocks of data will be moved into the space where deleted files were stored and, when that happens, the deleted file can no longer be recovered. In contrast, a "wiping" or "file eraser" program actively fills the space where the deleted file was stored with meaningless data in order to make it impossible to recover the deleted data. (Id. at ¶¶ 29-30.) Plaintiff's expert, Mr. Stenhouse, concedes that the defragmenter is not designed to "wipe" and only makes recovery impossible for deleted files that happen to be overwritten in the normal course of optimizing file storage. (Stenhouse II Decl. ¶ 12.)

Upon learning of Kato's deletion of files, Hitachi notified Plaintiffs' counsel about the deletion, took possession of Kato's 80 GB drive, and hired forensic consultant Ji2 to restore as much of the 80 GB drive as could be salvaged. (Pierce Decl. ¶¶ 4-5, 9.)*fn5 On July 2, 2010, the date originally reserved for the 30(b)(6) deposition, Hitachi produced Kato in Japan for a deposition regarding the deletion. (Pierce Decl. ¶7.) Hitachi offered to produce an alternate 30(b)(6) witness on that same date, but Plaintiffs preferred Hitachi's alternative offer to produce (at Hitachi's cost) an alternate 30(b)(6) witness at a future date in the United States. (Id.).

Ji2 used a software program called "Encase", the industry standard and most widely recognized computer forensic software platform, to recover deleted files from the hard drive. Encase examines the space on the hard drive where the deleted files were stored, as recorded on the MFT. (Tulo Decl. ¶ 37.) The program then recovers the deleted files from the drive's unallocated space or, if the files were overwritten, it notes what was previously stored in that location. (Tulo Decl. ¶ 38.) The forensic recovery performed "looked for all deleted files in the unallocated space" of the hard drive. (Snyder Decl. ¶ 9 [Docket No. 106-13].) Plaintiffs' expert, David Stenhouse, monitored the recovery search.

As a result of the search, Hitachi claimed it had recovered 99.69% of the deleted documents and only 64 files/folders remained unrecoverable. (Mot. at 14; Reply at 3.)*fn6 Based on Stenhouse's expert opinion, Plaintiffs argued Hitachi could not possibly ascertain how many documents were recovered because an unknown quantity could have been deleted without a trace. (Mot. at 14.) Stenhouse's opinion was based on his theory that defragmentation likely corrupted the MFT and that Encase only looked for documents in the unallocated space of a hard drive based on what was listed in the MFT. (Stenhouse Tr. at 158-161.) If the MFT is incomplete due to corruption from defragmentation, the Encase program would not know to look for all deleted documents. (Id.) (Stenhouse Tr. at 73-75, 82.)

Stenhouse advocated the use of a data carving protocol that would expand Ji2's search to the entire unallocated space, not just the portions implicated by the MFT. (Stenhouse Tr. at 116-24.) In this way, forensic recovery would capture data or files missing from the MFT. Hitachi opposed the data carving, arguing it would not recover any useful data because defragmentation does not corrupt the MFT. Accordingly, Plaintiffs filed a motion for further forensic examination, and also for a finding of spoliation, and for the production of a Rule 30(b)(6) witness to testify about company policies regarding preservation and production of electronic data. (the Spoliation Motion.)

In an Order dated October 20, 2010, the Court found Hitachi committed spoliation via the actions of Kato. (the Spoliation Order.) Based on the record at the time, the Court could not make an objective determination of the degree of prejudice the deletion of files may have caused. Therefore, the Court granted Plaintiffs' motion to carry out a further forensic search of Kato's hard drive, using Hitachi's consultant Ji2 but under a protocol recommended by Plaintiffs' expert Stenhouse. (Spoliation Order.) The Court also granted Plaintiffs' request for Hitachi to designate a Rule 30(b)(6) witness to testify about what Hitachi did to attempt to preserve its electronic documents. [Id.]

Under Stenhouse's protocol, Ji2 used a method called "data carving" to search Kato's hard drive. The data carving examined all of the unallocated space in the hard drive, as opposed to the prior effort which searched only the unallocated space in which the MFT indicated deleted files had been stored. (Tulo Decl. ¶41(b)(i)(b).) As Hitachi argued, data carving is an unsophisticated search instrument because it does not disclose when the files were deleted or whether the files were deleted automatically or by a user. (Id.) Thus, there is no way to determine if Kato deleted the documents or whether the documents were deleted after the lawsuit was filed. (Opp. at 6.) The Court ordered the data carving based upon expert Stenhouse's view that the MFT was unreliable because "the Master File Table is damaged by the defragmenting process". (Stenhouse Decl. ¶18, see also Stenhouse II Decl. ¶ 7). As described below, Stenhouse's assertion that defragmentation damages the MFT was subsequently shown to be inaccurate.

Ji2 performed the data carving and produced 829 file fragments in addition to the 99.69% of the documents recovered initially. (May 13, 1011 Sanctions Hrg. Tr. at 5-6 [Docket No. 210.]). The issue of prejudice is now fully briefed and the Court has had an opportunity to hear oral argument from counsel.


As an initial matter the Court addresses Hitachi's Motion to Strike or File a Sur-Reply. [Docket No. 194.] Hitachi claims Plaintiffs have improperly raised a new argument in their Reply brief focusing on the loss of the "64 files/folders" that were found to be unrecoverable after Ji2's initial restoration efforts. [Id. at 1.] Hitachi states Plaintiffs' opening brief focused on the additional 829 file fragments uncovered by the second forensic analysis performed by Ji2 using Stenhouse's methodology, not the 64

Id.] At oral argument, Plaintiffs said they did reference the 64 files in the opening paragraph of their opening brief by talking in terms of 99.69 % of documents Hitachi claimed to have initially recovered. (Sanctions Hrg. Tr. at 3.) However, the suggested reference does not appear in the opening brief until page 14, at which point Plaintiffs state:

As explained above, and as expected, full reconstruction and restoration of Kato's files has proven to be impossible--despite Hitachi's previous and unsubstantiated claim to have reproduced 99.69% of the destroyed documents--a claim initially rebutted by Stenhouse and now conclusively disproved through Ji2's data carving. (Mot. at 14.)

Plaintiffs argued that Hitachi could not possibly say how many files were recovered or unrecovered because certain files were deleted without a trace. They punctuated this point by saying Hitachi had previously only conceded to the 64 files being unrecoverable (or recovery of 99.69% of the files) and were proved wrong by the discovery of the additional 829 file fragments. (Id.) Although Plaintiffs do not address the prejudice from the 64 files in the opening brief, it was not unreasonable for Plaintiffs to focus on the allegedly additional prejudice revealed by the 829 file fragments. Moreover, Plaintiffs never conceded a lack of prejudice from the 64 files. Accordingly, the Court will not strike the Reply but GRANTS the Motion to File a Sur-Reply.


Plaintiffs seek an order from this Court imposing the following sanctions:

1. At trial the jury be instructed that Hitachi destroyed relevant documents in this case and to impose an adverse inference with respect to the contents of the destroyed documents;

2. The burden of proof on any dispositive or class certification motions regarding the existence of a common defect should be shifted from Plaintiffs to Hitachi; and

3. Plaintiff's counsel be awarded reasonable attorneys' fees and expenses incurred in connection with Kato's spoliation as set forth in the Compendium of Plaintiffs' Counsel's Declarations Regarding Counsel Fees and Expenses.

Plaintiffs justify the sanctions by claiming Hitachi's spoliation has "forever deprived [them] of [an] unknown number of documents which can never be reconstructed" and which is forcing them to rely on "incomplete and spotty evidence." [Mot. at 10.]; see Anheuser-Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337, 348 (9th Cir. 1995) (prejudice found where party was forced to rely on incomplete and spotty evidence due to spoliation). Apart from documents that Plaintiffs claim have disappeared without a trace, they are specifically referring to the 829 data fragments unearthed by the latest forensic analysis and the 64 files found to be unrecoverable following Hitachi's initial recovery efforts. (Mot. at 3-5; Sur-reply at 1.) Plaintiffs state 310 of the 829 fragments are incomprehensible. (Mot. at 3-5.) They also argue that the fragments will never be capable of complete recovery or reconstitution so as to match exactly the documents that were deleted. (Id.)

Hitachi argues that "every one of the purportedly destroyed source files for these Document Fragments exists and was either produced by Defendants in 2009 or is non-responsive." (Opp. at 1.) Hitachi contends none of the documents were destroyed to the point of being eliminated without a trace. .)

A. Spoliation Previously Decided

At various points in its Opposition, Hitachi contends there was no spoliation in this case. The Court will not revisit the issue of spoliation as this matter has already been decided in the Spoliation Order. In order to prove spoliation, a party must show: 1) the party with control over the evidence had an obligation to preserve it at the time of destruction; (2) the evidence was destroyed with a "culpable state of mind"; and 3) the evidence was relevant to the party's claim or defense. Zubulake v. UBS Warburg, LLC ("Zubulake IV"), 220 F.R.D. 212 , 220 (S.D.N.Y 2003); see also United States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir. 2002) (willful spoliation occurs when a party destroys evidence after being given notice that documents were potentially relevant to the litigation before they were destroyed.) In the Spoliation Order the Court found the following undisputed facts established spoliation:

(1) Kato intentionally deleted his work files from the 80 MB Maxtor External Hard Drive in June 2010 after he learned Hitachi had designated him as a Rule 30(b)(6) "person most knowledgeable" about alleged defects in the optical block of its rear projection TVs.

(2) After he deleted the documents, he ran a disc optimization utility that he knew would make recovery of these files more difficult.

(3) At the time he deleted these documents, Kato knew about the company's "litigation hold" and knew he had specific instructions to preserve them. . at 122.]

Accordingly, the Court will address whether Plaintiffs were prejudiced by Kato's spoliation, the degree of prejudice, and the ...

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