U.S. Magistrate Finds No Substantial Justification For Not Producing Materials As Called For in Defense Discovery Requests.
In our post of July 30, 2008, we reported on the Qualcomm decision, where substantial discovery sanctions were imposed upon attorneys for e-discovery disputes that were not discovered until during the course of trial. The next case involves sanctions imposed against attorneys, albeit at pretrial stages before the occurrence of a trial. Once again, discovery bytes back.
U.S. Magistrate Judge Karla R. Spaulding, in Bray & Gillespie Mgt. LLC v. Lexington Ins. Co., 2009 U.S. Dist. LEXIS 21250, 2009 WL 546429 (M.D. Fla. Mar. 4, 2009), found that a plaintiffs’ outside law firm and one partner had to jointly and severally pay the reasonable attorney’s fees, costs, and expenses for motions for sanctions relating to the defense’s successful efforts in obtaining a previously unproduced database in native format, as well as the expenses of the defense forensic computer expert and the costs to examine/convert the information into usable form—likely hundreds of thousands of dollars.
The dispute arose out of plaintiffs’ claims against defendant insurer to recover for hurricane losses to certain resorts arising from damages wrought by Hurricanes Charley, Frances, and Jeanne. Early on, the defense requested production of electronically stored information (ESI) in native format, without deletion or alteration of metadata. However, plaintiffs—after not objecting to the defense request to produce ESI in native format with associated metadata—produced TIFF files without metadata, which all but eliminated search capabilities for the defense. The magistrate found that outside counsel had concocted a story about what transpired and tried to blame predecessor counsel, even though prior counsel testified that it was cooperative with the native formatted information (with one of the outside partners having to concede the asserted problems with prior counsel communication were “overstated”). There was a database available in native format, which was ordered produced. Although the defense’s motion for sanctions was only targeted at plaintiffs, the magistrate gave notice to both outside and in-house counsel that it needed to respond to the magistrate’s intent to consider imposition of sanctions against certain of plaintiffs’ attorneys (both outside and in-house).
That then turned attention to the sanctions that followed from the defense efforts to rectify the e-discovery abuses.
The magistrate found two predicates for imposition of sanctions: (a) Fed.R.Civ. P. 37(b), not requiring any finding of willfulness or bad faith unless the sanction is dismissal of the complaint or entry of default judgment; and (b) the inherent power of the court to prevent abuses of the judicial process, with a finding of bad faith required to impose sanctions under this inherent power.
The defense tried to argue native formatted ESI did not have to be produced, but the magistrate found each cited case to be distinguishable. (See, e.g., Kentucky Speedway, LLC v. NASCAR, Inc., 2006 WL 5097354 (E.D. Ky. Dec. 18, 2006) [metadata production not warranted because the moving party failed to specify the manner in which ESI should be produced, unlike the defense which did specify native format without metadata deletion/alteration]; Michigan First Credit Union v. Cumis Ins. Soc’y, Inc., 2007 WL 4098213 (E.D. Mich. Nov. 16, 2007) [defendant not sanctioned because prior discovery order did not address its objection to the ESI specified manner of production by plaintiff, again in contrast to the failure to object by the defense in the case before the magistrate]; In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., 2007 WL 121426 (E.D.N.Y. Jan. 12, 2007) [court did apply 2006 federal e-discovery amendments and admonished plaintiffs that they would have to reproduce in the future any ESI produced in a form that was not reasonably usable; no sanctions because the defense waited to bring problem to the court’s attention].)
Here are the specific sanctions that the magistrate did impose:
- Plaintiffs’ claims were not stricken because any prejudice to the defense could be ameliorated by less onerous sanctions, although plaintiffs were ordered to produced the unproduced database and monitor its counsel’s compliance with the order (also not assessing any fees or expenses against plaintiffs at this juncture);
- Recently joining local counsel for plaintiffs was not sanctioned because he was not involved in the earlier ESI production, but the magistrate did remind him “that blindly relying on outside counsel falls short of the duty he has as an officer of the court, as counsel of record, and as an advocate for his client”;
- One of the main outside individual attorneys was ordered to pay the reasonable attorney’s fees, costs, and expenses incurred by defense in obtaining sanctions, including the expenses of the defense forensic expert and the costs of getting the native formatted ESI in usable form to the defense; and
- The outside law firm was also hit with the same sanctions as the main outside individual attorney, who left plaintiffs’ prior counsel and became a partner at the lead outside law firm during most of the discovery dispute. (See Pesaplastic, C.A. v. Cincinnati Milacron Co., 799 F.2d 1510, 1522-1523 (11th Cir. 1986) [post-judgment Rule 37 sanctions award proper against a law firm].)
This case shows that e-discovery must be taken seriously, even though it has exponentially increased the cost of litigation (especially at the federal level). Even as we write, there are proposals in the California Legislature to address e-discovery obligations at the state level. (See March 27, 2009 post on The Complex Litigator blog.)
BLOG UNDERVIEW—Bray & Gillespie has good definitions and instructions on ESI and how it should be produced. Practitioners may want to peruse it alone for this purpose, although the end result in the case is sobering and worthy of note.