Brown v. Tellermate: Cloud-based Data and E-discovery

Butler Snow LLP

According to PC Magazine, “[i]n the simplest terms, cloud computing means storing and accessing data and programs over the Internet instead of your computer’s hard drive.”[1]  Cloud-based computing has become a very popular tool in day-to-day business operations.  This relatively new technology has presented many challenges in E-discovery.  However, Brown v. Tellermate Holdings, Ltd., 2014 U.S. Dist. LEXIS 90123 (S.D. Ohio July 1, 2014), provides a reminder that businesses using cloud-based computing (and their attorneys) are responsible for understanding the way cloud-based computing works, especially during electronic discovery.

This action stems from a lawsuit filed by Robert and Christine Brown (the “Browns”), in an employment discrimination matter.  The Browns alleged that Tellermate terminated their employment based on their age and that their job performance was comparable or superior to other Tellermate employees.  As part of their effort to prove this, the Browns sought production of documents and reports from the “web-based application” ( used by Tellermate that tracked sales activities of its employees.

Tellermate (and its attorneys) objected to the production of information held in the database stating that, “Tellermate does not possess or control data maintained in the database… [and] information inputted by the Browns ‘resides with’ and that it was ‘’s ESI.’”  Id. at *5.  Despite this objection, the evidence demonstrated that not only did Tellermate employees have access to the information input into, but that the agreement between Tellermate and obligated to make its system available at all times and that acquired “no right, title or interest…in or to [a user’s] Data.”  In its response to the objections of Tellermate and its attorneys, the court held that not only did the ESI maintained on the database belong to Tellermate,

[t]he same would be true, of course, for other web-based applications; just because, for example, emails in a Google or Outlook account might be kept on a server owned or maintained by the email provider, it does not mean that the information in those emails belongs to the provider — just the opposite.

Id. at *8.  Because the evidence demonstrated that Tellermate had access and control over the information input into, the court also raised the question of whether that information was properly preserved.

The evidence demonstrated that the accounts, used by the Browns and other Tellermate employees, would be deactivated or reassigned when an employee left Tellermate.  This meant that once the Browns were terminated, the information on their accounts was accessible and could be changed by the next employee taking over that account.  Tellermate and its attorneys alleged to not know this and failed to properly preserve the information for the requested accounts.  Therefore, it was “impossible for Tellermate to produce information whose reliability can be guaranteed.”  Id. at *9.

Technology, like cloud-based computing, can be a valuable resource, but it is important to understand its intricacies in order to prevent misrepresentations to the court.  As the court in Tellermate noted, both the failure to produce and failure to preserve the information in was “premised on the basic inability to appreciate whose information it was and who controlled it.”  Id. at *18.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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