30 Aug 2012

E-Discovery Sanctions: When to Hand Out the Ultimate Punishment, Default Judgment

Posted in: Thursday E-Discovery Case Law No Comments

By Mike Hamilton, J.D.

District courts are vested with the inherent power to impose sanctions against parties for e-discovery violations.  In most cases, this means handing out monetary sanctions but in some, more severe cases adverse jury instructions may be awarded against the faulty party.  But what happens when a party’s conduct is so egregious that it warrants a case dispositive sanction, a default judgment? Rare as they may be, courts do not consider default judgments off the table as evidenced in Equal Employment Opportunity Commission (EEOC) v. Fry’s Electronics, Inc. (W.D. Wash. July 3, 2012).

In this sexual harassment case, Judge Lasnik described defendant’s, Fry’s, conduct within discovery as “unfair, unwarranted, unprincipled, and unacceptable” based on defendant intentionally withholding responsive information from discovery ” by raising unfounded objections and ‘negotiating’ a narrowing of the discovery requests.” On top of this the court found that the defendant spoliated evidence through various other illegal discovery tactics including the intentional redaction of responsive information.

Due to defendant’s egregious behavior the court discussed and analyzed whether a dispositive sanction was warranted under FRCP 37(b)’s five factor test: (1) the public’s interest in the expeditious resolution of litigation (2) the Court’s need to manage its docket efficiently and effectively; (3) the risk of prejudice to the party seeking sanctions; (4) public policy in favor of considering cases on the merits; and (5) the availability of less drastic sanctions. The court found that the first three factors supported entry of dispositive sanctions, stating in its ruling that “resolution of this case will have to be delayed in light of defendant’s conduct” resulting in “additional months of discovery.”

However, the court decided that the final two factors supported otherwise, reasoning that the “public has an interest in a determination of those issues based on the facts, rather than by judicial fiat,” and that “a number of less drastic sanctions” were available. Rather than hand out the “harsh punishment” of default judgment, the court instead ordered multiple lesser discovery sanctions, including $100,000 in monetary fines and an adverse inference instruction.

THE E-DISCOVERY BEAT’S TAKE

While the defendant’s behavior is not atypical of a party within discovery proceedings, it does still serve as a reminder that courts will consider and in severe cases impose a default judgment sanction. As the court stated, “Rule 37 sanctions must be applied diligently both to penalize those whose conduct may be deemed to warrant such a sanction, [and] to deter those who might be tempted to such conduct in the absence of such a deterrent.” Like punitive damages, rule 37 sanctions are ordered to punish and deter subsequent conduct that fails to fall in line with FRCP 1, that the FRCP should “be construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding.”

Within meet & confer proceedings, attorneys must remember to fight diligently for discovery parameters that properly protect your client.  In this case, plaintiffs only learned of new, highly relevant case information during the late rounds of depositions, so it’s still imperative even with all the search technology available during review to be diligent within traditional discovery proceedings (e.g. robust interrogatories and thorough witness depositions) to properly investigate matters beyond searching / reviewing produced information from the opposition.  Utilizing a coordinated and transparent discovery process will enable legal teams to efficiently identify and manage fact finding endeavors through the many discovery hurdles that are presented.

 

Mike Hamilton, J.D. is a Sr. E-Discovery Analyst at Exterro, Inc., focusing on educating Exterro customers, prospects and industry experts on how  to solve e-discovery issues proactively with technology. His e-discovery knowledge, legal acumen and practical experience give him a valuable perspective on bridging the gap between IT and legal teams. You can find him on Google+, Twitter and Linkedin.


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