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Ensuring Discovery Compliance: Sanctions Relating to Past, Present, and Future Adverse Parties

First published on September 22, 2011 at e-Discovery Law Review
Monetary sanctions, attorneys fees, and adverse inference jury instructions are the more common type of sanctions imposed on litigants for the spoliation of evidence, or not producing relevant documents. Recently, however, a court has increased the severity and impact of sanctions by applying them not only to current litigation, but also to a party’s future litigation, with the effects lingering for years to come.

The Underlying Suit

“Any competent electronic discovery effort would have located this email.” These words were written in an opinion by a United States District Judge in the Eastern District of Texas in Green v. Blitz U.S.A., Inc., No. 2:07-CV-372 (E.D. Tex., Mar. 1, 2011) Green involved a product liability suit in which the requirement of a flame arrester was in dispute. The jury returned a defense verdict, and the plaintiff collected a low settlement amount as part of a high-low settlement agreement. During discovery in a subsequent case with the same defendant and plaintiff’s counsel, counsel learned of documents that were not produced in Green. The plaintiff then filed a motion for sanctions against the defendant in Green and a motion to re-open the Green case. While the court denied the motion to re-open because the statute of limitations had expired, the court did impose sanctions for the discovery abuse.

The Defendant’s Failure to Conduct Adequate Discovery in Green

After 2004, the defendant had just one employee, Mr. Chrisco, who was responsible for searching for, and collecting, documents relevant to the litigation. Mr. Chrisco would meet with the defendant’s national counsel, go through the claims, and develop an understanding of what he would be searching for. He would then go to various departments, explain what he was looking for, and ask the departments to look for, and collect, documents. As the litigation was about flame arresters, any documents pertaining to that subject were relevant.

This is where Mr. Chrisco’s preservation and collection efforts ended and where his employer’s e-discovery troubles began. The defendant did not “institute a litigation-hold of documents, do any electronic word searches for emails, or talk with the IT department regarding how to search for electronic documents.” As a result an email entitled “FW: Flame Arrester,” of which Mr. Chrisco was a recipient, was never produced. Not disclosing this email showed “the gravity of [the defendant’s] discovery violations for failing to produce relevant documents.”

The court found it even “more shocking” that this email could have been discovered by a simple word search for the “obvious term,” flame arrester. Even worse was that the individual tasked with the defendant’s e-discovery efforts, Mr. Chrisco, admitted to being “about as computer . . . illiterate as they get.” The court concluded that one did not have to look any further than not searching for the phrase, “flame arrester,” to determine that the defendant did not make a reasonable effort to produce relevant documents.

The court also found that the defendant did not properly preserve documents. Instead of issuing a litigation hold, the defendant asked employees to delete electronic documents at least ten times during the two year period that the defendant was in litigation. Moreover, the defendant rotated its backup tapes every two weeks, causing any deleted emails to be permanently deleted.

Imposition of Sanctions

The court imposed three sets of sanctions against the defendant, each seemingly more severe than the previous. First, the court fined the defendant $250,000 to be paid to the plaintiff, the amount by which the court estimated the plaintiff was damaged by not seeing the documents during settlement discussions. Second, the court sanctioned the defendant an additional $500,000, which was to be tolled for thirty days. The court agreed to lift this fine if, in those thirty days, the defendant was able to prove that it issued a copy of the court’s memorandum and opinion to any plaintiff in each lawsuit in which it was involved for the past two years, or in which it is currently involved. Third, the court ordered the defendant to file a copy of the court’s memorandum and order with its “first pleading or filing” in any case in which the defendant was involved, “whether plaintiff, defendant, or in another official capacity,” for the next five years.

No litigant would want an e-discovery violation to be a recurring nightmare, as it was for the defendant in Green. The following are some ways that a party may fulfill its e-discovery obligations and avoid the result in Green.

• Put the Right Employees in Charge. Strategically choose the individual or individuals that are in charge of collection efforts in house (for example, do not choose an individual who is not familiar with the company’s technology).

• Take Advantage of Counsel’s Expertise. Engage in communications with counsel who has experience and expertise in e-discovery issues. This will ensure that obligations at each stage of the process are complied with and can be defended later.

• Issue Litigation Holds. Make sure that a plan is developed to identify triggering events that would give rise to the obligation to issue a litigation hold to your employees and ensure that the litigation holds are promptly issued and include a specific instruction not to delete documents.

The court’s sanctions are becoming increasingly harsh. The sanctions in Green had the same effect as publishing the defendant’s e-discovery violations in a newspaper. The above guidelines can help you avoid becoming the next headline.

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