Law Tips: e-Discovery in Business Litigation

We all learn early in life the possible consequences of not playing by the rules.  The risks are there in  electronic discovery also. In this Law Tip, Electronic Discovery in Business Litigation, I am pleased to continue sharing advice from Joshua Fleming, Frost Brown Todd law firm, Indianapolis. He paints the following picture in his recent ICLEF faculty presentation:

The Cost Of Failing To Play By The Rules.
Generally, companies are permitted to abide by and comply with their record retention policies for the destruction of documents. However, there are some particular risks with regard to civil proceedings that could expose a company to criminal proceedings or potential costs associated with failure to maintain documents that would otherwise be discoverable and should have been preserved. For example, 18 U.S.C. § 1519 imposes criminal penalties on any party who “knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or mistakes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States, or any case filed under Title 11, or in relation to or contemplation of any such matter or case, and shall be fined under this Title, or imprisoned not more than 20 years or both.” And it has long been settled that the “destruction, suppression, or fabrication of evidence undoubtedly gives rise to a strong presumption of guilt to be dealt with by the jury.” Tamme v. Commonwealth, 973 S.W.2d 13, 30 (Ky. 1998) (quoting Wilson v. US., 162 U.S. 613, 621 (1891)).

But it’s not only criminal penalties that potentially exist with regard to failing to preserve and produce relevant data, comis have routinely imposed monetary sanctions against parties and their attorneys for failing to comply with the requirements and duties to preserve. See e.g., Qualcomm Inc. v. Broadcom Corp., No. 05CV1958-B (BLM), 2008 WL 66932 (S.D. Cal. Jan. 7, 2008) (sanctioned $8.5m in attorneys’ fees and costs for failing to produce 46,000 emails; attorney fees reversed after significant discovery); S. New England Tel. Co. v. Global NAPs, Inc., 251 F.R.D. 82 (D. Conn. 2008)(sanctioned $5.8m for repeated discovery violations including lying to the comt regarding a computer “crash”); Wachtel v. Health Net, Inc., 239 F.R.D. 81 (D.N.J. 2006)(sanctioned $6.7m for failure to search e-mails for thousands of employees that were impossible to search after 90 days or destroyed due to email retention policies). In addition to costs and fees being imposed, sanctions can include terminating sanctions and/or dismissal of your case. Grange Mut. Cas. Co. v. Mack, 270 F. App’x 372 (6th Cir. 2008); Arista Records, L.L.C. v. Tschirhart, 241 F.R.D. 462 (W.D. Tex. 2006); Gutman v. Klein, No. 03 CV 1570(BMC)(RML), 2008 WL 4682208 (E.D.N.Y. Oct. 15, 2008). More and more, courts have found that not only the client or party can be sanctioned, but courts have taken to imposing sanctions against the attorneys for failing to comply with court orders requiring production of electronic documents. See 1100 W., LLC v. Red Spot Paint & Varnish Co., Inc., No. 1:05-CV- 299-B, 2009 WL 1605118 (S.D. Ind. June 5, 2009); Ajaxo, Inc. v. Bank of Am. Tech. Operations, Inc., No. CIV-S-07-0945 GEB GGH, 2008 WL 5101451 (E.D. Cal. Dec. 2, 2008); & R Sails Inc. v. Ins. Co. of State of Pa., 251 F.R.D. 520 (S.D. Cal. 2008); Bd. of Regents of Univ. of Nebraska v. BASF Corp., No. 4:04CV3356, 2007 WL 3342423 (D. Neb. Nov. 5, 2007); Edelen v. Campbell Soup Co., 265 F.R.D. 676 (N.D. Ga. 2010).

Finally, while Rule 37(e) provides for a so-called safe harbor, few Courts have actually granted a patiy passage and safety via the safe harbor. Indeed, Rule 37(e) itself states that it requires “exceptional circumstances” to avoid imposition of sanctions under these rules. See F.R.C.P. 37(e).

Josh concludes his advice on e-discovery in a business litigation case as follows:
It has become essential in commercial litigation to adequately consider upon first indication of litigation the appropriate ESI collection plan and take steps to ensure compliance with the applicable rules. These steps include developing a responsible plan that takes into account all possible ESI, identifying a resourceful and responsible custodian for the search and collection and then issuing appropriate litigation hold notices and ultimately terminating such notice upon the conclusion of litigation. Failure to do so could result in not only extraordinary costs, but also could result in fees and fines against the company or the party involved.

About our Law Tips faculty member:
Joshua Fleming, Frost Brown Todd LLC, Indianapolis, concentrates his practice in product liability, premises liability and general commercial litigation. He has defended clients around the country in litigation involving product liability and premises liability claims, complex and mass toxic tort claims, as well as prosecuting and defending a variety of commercial claims. He has represented clients in both state and federal courts, and at the appellate level.

We greatly appreciate Mr. Fleming’s contributions to Law Tips.   You can hear his entire presentation as well as his accompanying distinguished panel of experts during the ICLEF Video Replay or Online/On Demand Video of Business Litigation.


Nancy Hurley, Law Tips blogger, has long-standing connections with Indiana lawyers.  She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We plan to utilize her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs.  When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook page, Twittering and other places her legal experience lends itself.

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ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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