ROBERT HANDY, Plaintiff, v. DELAWARE RIVER SURGICAL SUITES, LLC d/b/a BUCKS COUNTY SURGICAL SUITES, et al. Defendants CIVIL ACTION No. 2:19-cv-1028-JHS United States District Court, E.D. Pennsylvania Filed May 01, 2025 Counsel Edward T. Kang, Beth A. Hurley, Kandis L. Kovalsky, Kyle Garabedian, Kang Haggerty LLC, Philadelphia, PA, for Plaintiff. Gabriel Montemuro, Patricia Collins, William T. MacMinn, Antheil Maslow & MacMinn, LLP, Doylestown, PA, Samuel W. Cortes, Fox Rothschild LLP, Exton, PA, for Defendant Delaware River Surgical Suites, LLC. Gabriel Montemuro, Patricia Collins, William T. MacMinn, Antheil Maslow & MacMinn, LLP, Doylestown, PA, for Defendants Kieran D. Cody, Charles B. Burrows, Ninad D. Sthalekar, Thomas H. Vikoren, Sean Butler, Jung Park, Douglas A. Boylan. Alicia S. Luke, Ashley L. Beach, Samuel W. Cortes, Jocelyn Mendez, Fox Rothschild LLP, Exton, PA, Lindsey Cook, Fox Rothschild LLP, Blue Bell, PA, for Defendant Thomas E. Mackell, M.D., Ltd. Rohn, James J., Special Master REPORT AND RECOMMENDATION OF SPECIAL MASTER JAMES J. ROHN, ESQ. I. INTRODUCTION Before the Special Master is Nominal Defendant/Counterclaim Plaintiff, Thomas E. Mackell, M.D., Ltd. d/b/a Bucks County Orthopedic Specialists (“BCOS”) Motion for Sanctions for Spoliation of Electronically Stored Information (“ESI”) against Plaintiff/Counterclaim Defendant Robert Handy, M.D. (“Dr. Handy”) (Doc. 414.). BCOS contends that Dr. Handy spoliated evidence and should be subject to sanctions under Rule 37(e). Dr. Handy opposes, contending that he did not spoliate evidence and that sanctions are not warranted. For the reasons reported below, the Special Master recommends that the Court deny BCOS' Motion for Sanctions for Spoliation of ESI. II. BACKGROUND The specific and meaningful context for this Motion is as follows. The parties engaged in extensive discovery in this case. An initial stage involved limited discovery on the Plaintiff's standing. After the motion to dismiss was denied, the parties continued to full merits discovery. This included a Joint ESI Discovery Plan, which the parties filed on June 22, 2023. (Doc. 317.) Among other provisions, the Joint ESI Discovery Plan provided that, “[f]or each cell phone identified as containing potentially responsive ESI, a forensic image of text messages shall be created, and any autodelete function on the phone shall be disabled.” Id. at 2. A dispute over a single document led to most of the litigation over the last year. On February 27, 2024, the Special Master recommended that the Court grant BCOS' Motion to Compel the production of a document identified as “Document 16.” (Doc. 372.) Dr. Handy did not object, the Court entered the order, and Dr. Handy produced the document in April 2024 (Doc. 379.) Document 16 was an email exchange among Dr. Handy, his brother Attorney Kevin Handy, and his sister-in-law and former co-worker Dr. Maria Halluska-Handy. (Doc. 372.) Based on this document, BCOS sought to amend its counterclaims to add breach of contract counterclaims on the premise that Dr. Handy leaked confidential information to Attorney Handy and Dr. Halluska-Handy, who, in turn, used the information to negotiate with BCOS more favorable terms of her separation from employment. (Doc. 406, at 2.) The Court permitted the amendment and a brief discovery period limited to the newly-pled counterclaims. (Doc. 406, at 14.) During the limited discovery period, this preservation issue came to light. As part of its limited discovery, BCOS requested that Dr. Handy produce text messages among himself, and Dr. Halluska-Handy, and Kevin Handy relevant to the newly-pled counterclaims. On November 25, 2024, however, counsel for Dr. Handy disclosed to all counsel and the Special Master that she “recently learned that Dr. Handy's text messages were lost due to damage to his cellular telephone.” (Doc. 414-8 at 17.) They were “working to rectify the issue with a forensic collection specialist.” Id. The parties kept the Special Master updated regarding these issues, particularly because it impacted deposition scheduling during the limited discovery period. As ultimately detailed by Dr. Handy, on September 17, 2024, his cell phone had fallen out of his pocket onto a metal plate, shattering the screen. (Doc. 415-5, at 2.) Although it initially worked after the fall, within about two weeks the cell phone stopped working. Id. at 2-3. He consulted representatives at Verizon and uBreakiFix stores regarding potential options for fixing his phone, but no fix was available. Id. at 3. Ultimately, a Verizon representative informed him that data could not be recovered from his broken phone. Id. Dr. Handy then exchanged his cell phone. Id. As part of the limited discovery on newly-pled counterclaims, BCOS also sought the depositions of and documents from Dr. Maria Halluska-Handy and Attorney Kevin Handy. In support of its opposition, Dr. Handy submits the Declaration of Kevin J. Handy, Esquire. (Doc. 415-3.) As part of obligations under the subpoena, Attorney Handy searched his cell phone for text messages between himself and Dr. Handy and among himself, Dr. Handy, and Dr. Halluska Handy from August 14, 2016 to present. Id. at 3. Although text messages were available from August 14, 2016 forward, Attorney Handy did not find any responsive test message. Id. BCOS ultimately filed this Motion for Sanctions for the Spoliation of Evidence on January 2, 2025. (Doc. 414.) BCOS states that “Special Master Rohn directed BCOS to file this Motion as promptly as possible.” (Doc. 414-4, at 4.) To be clear, the Special Master did not require that a specific motion be filed at a specific time. If a party thought that it had the basis for a discovery motion, however, it would be prudent to promptly seek relief given the length of the case, condensed limited discovery period, dispositive motion deadlines, and trial date. BCOS notes that this motion is directed at “spoliation associated with the discovery related to BCOS's Amended Counterclaim,” i.e., the Limited Discovery period. (Doc. 414-1, at 4.) BCOS reserved “the right to seek additional relief relating to the Lost ESI as it learns more about the spoliation in depositions in both this lawsuit and in the lawsuit pending at No. 2:19-cv-02357-JHS.” (Doc. 414-1, at 4.). BCOS requests that the Court “impose sanctions in the form of an adverse inference” and deem certain facts admitted for all purposes. (Doc. 414-1, at 28-29.) In the alternative, BCOS requests a “permissive inference” that certain facts are “presumed true but subject to rebuttal.” Id. at 29. It also seeks attorneys' fees and costs in either scenario. Id. at 30. III. THE SPECIAL MASTER'S ANALYSIS A. Standards Applicable to Spoliation of ESI Rule 37(e) governs the failure to preserve electronically stored information in discovery. It provides: If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court: (1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or (2) only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation may: (A) presume that the lost information was unfavorable to the party; (B) instruct the jury that it may or must presume the information was unfavorable to the party; or (C) dismiss the action or enter a default judgment. “Courts undertake a two-step process in applying Rule 37(e).” Profit Point Tax Techs., Inc. v. Dpad Grp., LLP, Civil Action No. 2:19-cv-698, 2023 U.S. Dist. LEXIS 244014, at *4 (W.D. Pa. Apr. 26, 2023). First, the court determines “whether spoliation of ESI occurred.” Id. Second, if there is spoliation, “the court must determine the appropriate sanction.” Id. “The burden is on the moving party ‘to show that spoliation occurred and what sanctions are appropriate.’ ” Id. (quoting Fuhs v. McLachlan Drilling Co., No. 16-376, 2018 U.S. Dist. LEXIS 184264, at *39 (W.D. Pa. Oct. 26, 2018)). B. Spoliation The first issue is whether spoliation exists under Rule 37(e). “To establish spoliation under Rule 37(e), the moving party must show that: (i) certain ESI should have been preserved in anticipation or conduct of litigation; (ii) the ESI was lost; (iii) the ESI was lost because the party against which sanctions are sought failed to take reasonable steps to preserve it; and (iv) the ESI cannot be restored or replaced.” Profit Point Tax Techs., Inc., 2023 U.S. Dist. LEXIS 244014, at *4. BCOS can establish first three elements of the spoliation analysis. It is undisputed that Dr. Handy's text messages are lost. See, e.g., Doc. 415-5, at 3 (noting inability to recover data and exchange of cell phone). Additionally, earlier in the litigation, Dr. Handy was required to image the cell phone that was lost under the parties' Joint ESI Discovery Plan. (Doc. 317.) He failed to image the cell phone. (Doc. 415, at 17). Thus, the text messages should have been preserved, and Dr. Handy failed to take reasonable steps to preserve them. The fourth element of the spoliation analysis, however, requires a finding that “the ESI cannot be restored or replaced.” Profit Point Tax Techs., Inc., 2023 U.S. Dist. LEXIS 244014, at *4. Another party to the relevant text messages, Kevin Handy, did have text messages going back to the relevant time period. (Doc. 415-3, at 3). He reviewed his messages for responsiveness to BCOS' request. Id. Thus, the potentially responsive ESI that was lost from Dr. Handy's phone, was still available on Attorney Kevin Handy's phone.[1] In effect, this replaced Dr. Handy's lost ESI. Accordingly, BCOS has failed to establish spoliation under Rule 37(e). C. Sanctions Although the Special Master concludes that no spoliation occurred under the Rule 37(e) analysis, we nevertheless address the sanctions issue. Even assuming that spoliation occurred, no sanction would be appropriate in this case. If spoliation is established, sanctions are appropriate in two circumstances. A court may enter certain severe sanctions, including dismissal of the case, “only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation.” Fed. R. Civ. P. 37(e)(2). Without an intent to deprive, the court must first find “prejudice to another party from loss of the information,” and then it “may order measures no greater than necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(2). BCOS contends that Dr. Handy intentionally spoliated evidence. There is simply no evidence to support intentional spoliation. Dr. Handy stated under oath that his phone fell from his pocket and broke. (Doc. 415-5, at 2-3.) He was told that his data was not recoverable. Id. at 3. To find intentional spoliation, BCOS would have to demonstrate that that Dr. Handy actually destroyed his phone in some other manner “with the intent to deprive” BCOS of the use of texts messages in this litigation. Such evidence does not exist. In the alternative, BCOS contends that it was prejudiced by the spoliation. “Prejudice to opposing parties requires a showing the spoilation ‘materially affect[ed] the substantial rights of the adverse party and is prejudicial to the presentation of his case.’ ” Magnetar Techs. Corp. v. Six Flags Theme Park Inc., 886 F. Supp. 2d 466, 481 (D. Del. 2012) (quoting Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311, 1320 (Fed. Cir. 2011)). “When a party moving for spoliation sanctions cannot offer ‘plausible, concrete suggestions as to what [the lost] evidence might have been,’ there should be no finding of prejudice.” GN Netcom, Inc. v. Plantronics, Inc., 930 F.3d 76, 83 (3d Cir. 2019) (quoting Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994)). BCOS was not prejudiced by the alleged spoliation of Dr. Handy's text messages. BCOS has failed to offer any plausible, concrete suggestion of what the lost evidence would have shown. BCOS speculates that “it is highly probable that the withheld data from the Lost ESI includes communications wherein Dr. Handy improperly shares information that he had a contractual obligation to keep within the exclusive custody and control of BCOS with Dr. Halluska and Kevin Handy, and others.” (Doc. 414-1, at 26.) As discussed above, Attorney Handy looked for text messages and did not find any. The fact that Dr. Handy forwarded one specific email (not a text message) of confidential financial information does not make it plausible that he also sent damning text messages. Additionally, BCOS' motion is addressed to the limited discovery period on its amended counterclaims. (Doc. 414-1, at 4.) In the recently-issued Report and Recommendation on the parties' summary judgment motions, the Special Master recommended that Dr. Handy's Motion for Partial Summary Judgment on those amended counterclaims be granted. (Doc. 447, at 29, 30.) The reason for the recommendation was that “there is no evidence that BCOS suffered any damage as a result of Dr. Handy's email on March 9, 2018 (Document 16).” (Doc. 447, at 28.) Given the lack of actual damages, whatever text messages may have existed (though it appears to be none), their loss did not materially affect BCOS' substantial rights. Therefore, even if Dr. Handy had spoliated evidence under Rule 37(e), no sanction would be appropriate because (a) there is no evidence that he intentionally spoliated evidence and (b) there is no prejudice to BCOS. D. Plaintiff's Request for 28 U.S.C. § 1927 Sanctions In his opposition, the Plaintiff requests that the Court “issue 28 U.S.C. § 1927 sanctions against the Fox Rothschild firm.” (Doc. 415, at 18.) Requesting such serious sanctions in a brief section at the end of a memorandum on another party's motion is not procedurally proper. Nevertheless, the Special Master will address it to complete this Report and Recommendation. Under 28 U.S.C. § 1927, “[a]ny attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct.” A prerequisite for sanctions under 28 U.S.C. § 1927 is “a finding of willful bad faith on the part of the offending lawyer[.]” In re Prudential Ins. Co. America Sales Practice Litig., 278 F.3d 175, 181 (3d Cir. 2002) (quoting Hackman v. Valley Fair, 932 F.2d 239 (3rd Cir. 1991)). Although the Special Master recommends that BCOS' Motion for Sanctions be denied, it was not filed in willful bad faith, particularly where Dr. Handy and his counsel failed to image a cell phone under the parties' Joint ESI Discovery Plan. Therefore, even if Plaintiff's 28 U.S.C. § 1927 request was properly presented, the Special Master recommends that that the Plaintiff's Request for 28 U.S.C. § 1927 sanctions be denied. IV. RECOMMENDATION The Special Master concludes that Dr. Handy did not spoliate evidence because text messages were searchable on another individual's devices. Even if Dr. Handy spoliated evidence, sanctions would not be appropriate because (a) Dr. Handy did not intentionally destroy evidence and (b) any other spoliation did not cause any prejudice to BCOS. Accordingly, the Special Master recommends that the Court deny BCOS' Motion for Sanctions for Spoliation of ESI. Footnotes [1] Although Attorney Handy did not possess text messages that were responsive to the requests during the limited discovery period, there was no guarantee that the relevant individuals communicated by text on the topics at issue. Thus, the significance is that other text messages existed, such that they could be searched for responsiveness.