Sanctions for lack of preservation in discovery (or other discovery abuse) are not the norm but the case law is increasing fast. Courts impose sanctions, for example, when deletion of electronically stored information is coupled with prejudice to the other side and with some form of bad faith. For example in GN Netcom, Inc. v. Plantronics, Inc., 2016 U.S. Dist. LEXIS 93299 * (D. Del. July 12, 2016), 3 millions sanctions were imposed upon the defendant due to “its high degree of fault” in deletion and its “unwillingness to acknowledge wrongdoing”. In Fulton v. Livingston Fin. LLC, 2016 U.S. Dist. LEXIS 96825 * (W.D. Wash. July 25, 2016), the court awarded Plaintiff attorney’s fees and in costs, using its inherent power to sanction because it found that in bad faith Defendant kept misstating the law by citing case law under the old F.R.Civ.P. 26(b)(1). Cat3, LLC v. Black Lineage, Inc., 164 F. Supp. 3d 488 *, 2016 U.S. Dist. LEXIS 3618, 2016 WL 154116 (S.D.N.Y. 2016), sands for the proposition that manipulation of emails is sanctionable under F.R.Civ.P. 37(e), even if the manipulation did not delete the original emails (however, ultimately the sanctions were lifted after the party demonstrated that the emails were not manipulated). In InternMatch, Inc. v. Nxtbigthing, LLC, 2016 U.S. Dist. LEXIS 15831 * (N.D. Cal. Feb. 8, 2016), sanctions for spoliation were awarded to a party consciously disregards its obligations to preserve relevant evidence and lied to the court regarding the destruction of ESI in a power surge. In Callahan v Unified Government of Wyandotte County, et al., U.S.D.C. Kan 6/6/2016, sanctions consisting in adverse jury instruction were issued to a party that intentionally failed (‘”in reckless disregard of its duty to preserve”) to preserve recordings which were “relevant to imminent or reasonable foreseeable litigation”.
While a court can levy a sanction sua sponte, in most of the cases sanctions derive from a motion by the affected party. A motion for sanction is the ultimate consequence of a lack of cooperation in discovery, i.e., one of the parties feels that the other side has not been cooperative with her and has hindered her ability to gather evidence. It has been suggested that the best way to avoid sanctions is cooperation between the parties, or better an agreement. It is best practice, at the inception of discovery, to send the other side a preservation letter. The party who receives such a letter must at that moment – if she had not that duty already – actively preserve evidence. I have written in a paper that an attorney’s failure to institute a litigation hold, is an ethical violation (Nathan M Crystal, Ethical Responsibility and Legal Liability of Lawyers For Failure to Institute Or Monitor Litigation Holds). But instead of simply advising your client to preserve evidence, you should do more. You should advise simply to enter into a well-drafted preservation agreement. In another paper, I have advocated for the opportunity to enter into claw back agreement (Nathan M. Crystal, Inadvertent Production of Privileged Information in Discovery in Federal Court: The Need for Well-Drafted Clawback Agreements). In that paper, basically I was making the point that, while there is protection in case of inadvertent disclosure of information in discovery (see FRE 502), it is a good idea for the parties not to simply rely on default protection, but to proactively negotiated an agreement between themselves to take care of possible production mistakes. Very similarly, here I am advocating the opportunity for the parties to enter into a preservation agreement. A notable example of this type of agreements has been made available by the Ontario Bar Association. Agreements of this type are an appropriate evolution of the preservation letter (and an indirect way to avoid sanctions) but are also an intelligent vehicle to reduce the cost of discovery.
For more information, Nathan M. Crystal & Francesca Giannoni-Crystal