Monday, August 01, 2016

Sanctions for Spoliation

By Steve Stapleton

In one of the largest sanctions orders on spoliation since implementation of the new Federal Rules of Civil Procedure, the Delaware District Court recently issued a $3 million penalty *1  against the telephone headset company Plantronics in an antitrust case involving Plantronics and GN Netcom.

U.S. District Judge Leonard Stark in Delaware issued his opinion on July 12, 2016 concluding that an officer of the company deleted and advised others to delete as many as 90,000 emails.  The opinion states:

Plantronics high degree of fault, it’s bad faith intent to deprive GN of responsive documents, and the prejudice it has caused to GN’s case – along with the difficulties it has created for GN in ‘getting to the bottom of the deletion story’ and its (at times) unwillingness to acknowledge wrongdoing – further merit punitive monetary sanctions.  

GN filed its lawsuit against Plantronics alleging antitrust violations including monopolization and attempted monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2; restraint of trade in violation of section 1 of the Sherman Act and section 3 of the Clayton Act, 15 U.S.C. § 14; and common law tortious interference with business relations arising out of its program for distribution of its headsets.  During the course of discovery, it was revealed that a senior vice-president of the company not only deleted his emails but advised others to do the same, notwithstanding a litigation hold imposed by the company, training sessions to ensure compliance and quarterly reminders requiring acknowledgement of compliance with the litigation hold.  As the court noted:

[B]etween the date Mr. Houston received the litigation hold, May 25, 2012, and the last date for which Plantronics does not have back-up tapes, November 4, 2013, Mr. Houston deleted between 36,397 and 90,574 unrecoverable emails…2,380 to 5,887 of [which] are likely to have been responsive to one or more of GN’s discovery requests…and…952 to 2,354 of these … to be actually missing.

Despite the large numbers of missing emails, Mr. Houston testified during his deposition that he did not recall having deleted any emails but admitted having asked others to do so.  He also testified that he thought everything had been saved by his IT department, notwithstanding the deletions.  Despite his admission and despite internal confirmation of the deletions, Plantronics outside counsel did not advise either the court nor opposing counsel of the deletions and although Plantronics hired a forensic firm to attempt to recover the missing emails, the company did not pay the relatively modest amount of $2,000 to $5,000 that was needed to “finalize” its analysis and opted to “unrestore” certain back-up tapes that had been previously restored.  Finally, it was during discovery that GN first learned about the employment of the forensic company and upon such discovery Plantronics outside counsel refused to reveal the name citing a work product privilege. Indeed, despite the forensics company having produced a report of the deletions, Plantronics’ outside counsel  represented to the Court that “there is no report….”  Counsel later advised the court when confronted with his billing records belying his knowledge of a report, that he was not aware of any “written” report.

Federal Rule of Civil Procedure 37(e) was amended on December 1, 2015 to “specifically address[] the applicability of sanctions for spoliation of electronically stored information [(“ESI”)].” **2   When faced with a spoliation charge, the court must consider the degree of fault of the party who destroyed or altered the evidence; the degree of prejudice suffered by the opposing party and whether there is a lesser sanction that will avoid substantial unfairness to the opposing party.  Indeed, in extreme cases a court may impose dispositive sanctions for spoliation. Although acknowledging Plantronics “extensive document preservation efforts,” the court nevertheless held that such efforts did not absolve Plantronics of “responsibility for the failure of a member of its senior management to comply with his document preservation obligations.”  The court noted that Plantonics only examined Mr. Houston’s deletions, did not attempt to recover deletions from others and failed to finalize its investigation.  Coupling that failure with its outside counsel’s decision not to reveal the name of the forensic company, with its decision to advise GN’s counsel that it was “incorrect to assume deletion” and Mr. Houston’s repeated statements that he did not recall such deletions despite evidence showing fully 40% of his emails had been deleted, the court concluded that the deletion was intended to deprive GN of discoverable evidence and that Plantronics acted in bad faith.

Although further sanctions may be imposed by the court in this case, there are obvious takeaways here. First, tell the court immediately if a client is deleting emails or destroying evidence.  Do not obfuscate or play coy with the court or opposing counsel.  Do not cover up. Do not lie. Second, as laymen, follow your companies’ archiving and litigation policies.  Do not cut corners.  Do not cover up.  And again, do not lie.  Third, make sure your management personnel and your employees are following those policies.  Do not assume they are.  Do not rely merely on acknowledgements. Fourth, if there have been deletions, restore, to the greatest extent possible, your back-up tapes.  Such costs are nominal compared to the costs associated with non-compliance.  

Finally, follow the rules and the codes of professional conduct.  Federal courts have the ability to issue a default judgment against your client and in favor of the opposing party in extreme cases of intentional spoliation.  But even if the courts did not have this sanction at their disposal, counsel must pay attention to both the letter and the spirit of the federal rules.  Err on the side of ethical behavior.  Remember back when you took your oath.  Although one could argue that the oaths we take are merely words, it is nevertheless both our intent and our actions that can imbue them their meaning or divest them of whatever meaning they have.  

*1.  GN Netcom, Inc v. Plantronics, Inc., Case No. 12-1318 (D. Del., July 12, 2016).  In addition to the $3 million in punitive sanctions, the court also awarded GN monetary sanctions in the form of reasonable attorneys fees and costs incurred, instructions to the jury that it may draw adverse inferences that the emails destroyed would have been favorable to GN’s case or unfavorable to Plantronic’s defense and further reserved the possibility of evidentiary sanctions if requested by GN and found warranted by the court.

*2.  Accurso v. Infra-Red Servs., Inc., 2015 WL 930686, at *3 (E.D.Pa. Mar.11, 2016).

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