Grimm Sanction for E-Discovery Spoliation: Jail Time
Magistrate Judge Paul Grimm recently issued a new must-read e-discovery decision in Victor Stanley, Inc. v. Creative Pipe, wherein he issued severe sanctions upon the defendant for spoliation of evidence. Judge Grimm summarized the Defendant's collective failures to preserve—and ITS affirmative efforts to destroy--electronically stored information (ESI) as "the single most egregious example of spoliation that I have encountered in any case that I have handled or in any case described in the legion of spoliation cases I have read in nearly fourteen years on the bench." Accordingly, Judge Grimm ordered that Mark Pappas, the individual in control of Creative Pipe who was also found to have destroyed ESI related to the case, be imprisoned for a period of up to two years for civil contempt "unless and until" he pays Plaintiff for all attorneys' fees and costs associated with filing the motion for sanctions - including fees and costs of hiring a computer forensics expert. Judge Grimm also granted default judgment on the Plaintiff's copyright claim as a sanction for these e-discovery abuses.
In addition to illustrating the substantive impact that e-discovery failures and spoliation findings can have on a case, the 89-page opinion provides a useful analysis of the varying standards used by circuits to address spoliation sanctions - complete with a chart for guidance. A copy of the opinion and chart are attached.
Although sanctions for intentionally destroying relevant evidence should come as no surprise in 2010, the specific facts leading to a finding of spoliation and sanctions are always helpful to provide context to the ruling. A common mistake which was committed by the Defendant in this matter was to "repeatedly misstate the completeness of their discovery production to opposing counsel and the court." Other specific failures leading to sanctions included Creative Pipe's failure to issue a litigation hold; Pappas' failure to preserve an external hard drive after the preservation obligation was triggered; Pappas' failure to preserve emails and other electronic files after the Court issued preservation orders; Pappas' use of programs to wipe files from his computer after a second preservation order; and Creative Pipe's failure to preserve certain data from an old server that was replaced just after the filing of the lawsuit.
Among many other findings, the Plaintiff's ESI expert was able to determine that Pappas deleted thousands of files and emails right before his laptop was to be imaged; that Pappas used wiping software and a disk defragmentation program to permanently remove certain files; and that he instructed a relevant business contact to destroy relevant emails. These acts, as well as other instances of deletion, occurred at suspicious times - such as one deletion that occurred on the eve of scheduled discovery and days before the imaging of Pappas' computer was scheduled to occur. The opinion gives a detailed analysis of how these failures were identified and provides examples of various types of damaging information that computer forensic experts can ascertain - such as the last time an external hard drive was connected to a particular machine and what was saved to it that day - among other tidbits.
But this opinion is not strictly limited to egregious misconduct. Other conduct for which sanctions were imposed--which may have been less egregious if taken alone and not in the context of the facts of this case--should provide guidance for other cases. For example, in discussing the lack of an effective legal hold, Judge Grimm noted that "Defendants did not implement a system to prevent users from deleting files from the server or to stop the backup system from being overwritten." Such language calls into question whether merely instructing custodians not to delete relevant data is sufficient to implement an effective litigation hold in all cases. Must all deletion, including routine deletion of irrelevant ESI, be stopped to effectuate a hold? Similarly, the data collection done by Defendant failed to capture deleted items. Under the facts of this case, such a failure was key because deletion of relevant ESI occurred after the preservation obligation was in place. The court further held that, in the context of this case, where the Defendants were accused of accessing the Plaintiff's website and stealing design drawings, certain data that is routinely deleted by companies, such as internet histories and temporary internet files, should have been preserved.
The case illustrates the need to understand relevant data sources and to develop reasonable preservation plans in light of the specific claims at issue. Here, the Defendants not only failed to preserve, but actively destroyed relevant data after the preservation obligation was triggered. The sanctions issued reflected the severity of the misconduct. However, the court also recognized that there is a "lack of a national standard, or even a consensus among courts in different jurisdictions about what standards should govern preservation/spoliation issues" and the decision went on to provide a detailed analysis of the state of the law in this area. Significantly, Judge Grimm also provided support for the doctrine of applying proportionality in the preservation phase of discovery.
Please take the time to read the full decision - it is worth the effort and full of Judge Grimm's wit and insights.