As 2018 comes to a close, we decided to look through the cases in Exterro's Simplified E-Discovery Case Law Library to see which rulings resonated the most with our readers. While most observers of the courts recognize that sanctions, especially punitive ones, are less common than they have been in years past, they continue to pique the interest of legal professionals. Whether this interest is driven by schadenfreude or the desire to improve legal outcomes, e-discovery case law from 2018 included several notable cases in which the courts issued sanctions for e-discovery misconduct—and in some cases the sanctions were quite substantial.

What lessons should organizations take from these rulings? These three e-discovery best practices may appear to be common sense, but in fact may not be as common as they should.

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1. Implement and follow defensible legal hold policies and procedures.

EPAC Technologies, Inc. v. HarperCollins Christian Publishing (M.D. Tenn., March 29, 2018) centered on a contract dispute. In 2012, when notice of pending litigation was received, the defendant sent employees a boilerplate legal hold that did not include any guidance or follow-up instructions. They also failed to notify the records manager of the legal hold for three years. Consequently, thousands of documents were deleted under their document retention policy. While the court did not find “intent to deprive” and the “at least 750,000” emails were ultimately restored, nonetheless minor sanctions were ordered and the court excoriated the defendant for their “arrogance by management, lack of initiative by IT, and a pitiable lack of legal leadership.”

It's the process, though, not the number of messages, that matters to the courts, as demonstrated by Schmalz v. Village of North Riverside, et al (N.D. Ill., March 23, 2018). In this case, the defendant admitted to the loss of “at least 50” text messages which could not be produced because the cell phones from which they were sent were out of his possession despite receiving a legal hold. Again, while the court did not find intent to deprive, they found sufficient grounds to order sanctions permitting the plaintiff to present evidence and argue that the texts would be contrary to defense testimony, as well as awarding attorneys' fees and costs.

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2. Provide good faith, accurate, and detailed responses to discovery requests.

In Nunes v. Rushton (D. Utah, May 14, 2018), a copyright infringement case between authors, the plaintiff filed for sanctions based on the defendant's deletion of a fake Google account used to post negative reviews and comments about the plaintiff's books. While the defendant claimed to have lost the passwords to multiple fake accounts, further investigation revealed that she had deleted them. While most of the accounts could be recovered, a single Google account deleted a year after litigation was filed could not. Since the damage could not be remedied, and the deletion demonstrated bad faith, the court ordered an adverse jury instruction in its sanction judgment.

In Michael E. Davis, et al. v. Electronic Arts, Inc. (N.D. Cal, April 3, 2018), the defendant, Electronic Arts, moved for discovery sanctions based on the NFL Players' deficient discovery responses, including:

  • Late responses to motions;
  • Contradictory statements; and
  • Boilerplate responses “that the court previously had rejected.”

These repeated failures resulted in sanctions including waivers of specific testimony and a $25,000 monetary sanction to cover the defendant's attorneys' fees.

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3. Proportionality is not a “get out of jail free” card for e-discovery misconduct.

Klipsch Group, Inc. v. ePRO E-Commerce (2d Cir., Jan 25, 2018) was far and away the most popular case ruling in our case law library, and in terms of sanctions, at $2.7 million it was also the largest of the year. In this counterfeiting case, the plaintiff (Klipsch) moved for e-discovery sanctions based on the alleged spoliation of discoverable information.

The actual spoliation fit into the categories discussed above, with both non-compliant processes and bad faith efforts. Namely, the defendant:

  • Failed to place adequate legal holds on electronic data including emails;
  • Did not disclose 40,000 relevant sales documents; and
  • Manually deleted thousands of files and emails.

The defendants appealed the sanctions on the grounds that they were disproportionate, given the $2.7 million sanction dwarfed the amount of damages at stake, which were likely to be around $20,000.

The appellate court, however, unanimously upheld the district court's sanction order, explaining that the $2.7 million judgment was justified because “ePRO (defendant) caused Klipsch (plaintiff) to accrue those costs by failing to comply with its discovery obligations.” It further explained that “the proportionality that matters here is that the amount of the sanctions was plainly proportionate—indeed, it was exactly equivalent—to the costs ePRO inflicted on Klipsch in its reasonable efforts to remedy ePRO's misconduct.”

A further quote from the Klipsch ruling summarizes the lessons of 2018 far better than this author can, so I'll end the article quoting further from the Second Circuit. “Compliance is not optional or negotiable. Rather, the integrity of our civil litigation process requires that the parties before us, although adversarial to one another, carry out their duties to maintain and disclose the relevant information in their position in good faith.”

Mike Hamilton, JD is the Director of E-Discovery Programs at Exterro and has been involved in e-discovery for over 5 years. With a legal and business background, Mike is experienced and passionate about creating thoughtful, out-of-the-box educational resources that help keep legal teams interested and on top of emerging need to know e-discovery issues. He frequently writes and speaks on e-discovery issues and best practices around the country. Mike graduated from the University of Oregon School of Law.