Discovery Negligence Can Result in Both Punitive and Compensatory Damages

ORP Surgical, LLP v. Howmedica Osteonics Corp.

D. Colo. May 10, 2022

Why This Case Is Important

While the failure to preserve relevant ESI is not in its own right grounds for sanctions, the court requires that parties to a case make good faith efforts to fulfill their obligations. Even though a party’s behavior may not demonstrate “intent to deprive,” negligence during the discovery process may lead to compensatory sanctions—in this case, requiring the defendant to pay for the plaintiff’s portion of the special master’s bill.

Overview

In this highly contentious case about the termination of a business relationship between a medical implant manufacturer, Howmedica (the defendant), and a contracted organization that sold its devices to surgeons (ORP Surgical), the court found it necessary to appoint a special master because of “vigorous advocacy… [and] the volume and antagonistic nature of discovery disputes.”

The special master helped manage the discovery process and found that the defendant did not preserve a variety of key data points, including messages between the defendant and a sales representative who worked for the plaintiff. Due to this misrepresentation, among others, the special master recommended sanctions, including a negative inference of the missing information, “but he also recommended that the sanction be reduced if the relevant text messages were recovered from other phones.”

Ruling

The defendant was sanctioned by the court because it failed to preserve certain text messages that had been inadequately preserved would be produced.

• Sanctions Granted in Favor of Plaintiff. The court ordered that the defendant and defendant’s counsel pay for the entirety of the plaintiff's share of the special master’s fees. The defendant paid half of the plaintiff’s share for failing to preserve the messages and the counsel paid the other half for poor discovery practices.
• Special Master Appointed. The large number of documents and bad-faith practices that occurred during the discovery process, a special master was hired to help guide the discovery process in a timely and efficient manner.
• “Messages” are more than Texts. A component of the plaintiff’s claim included the allegation that defendant removed key components of the “messages”, including images and attachments, among other omissions.

Legal Analysis

By, Hon. Andrew Peck (Ret.), Sr. Counsel, DLA Piper

The fact that the Special Master issued at least 15 decisions is proof that discovery was out of control. As the Court stated, “zealous advocacy does not justify abusive conduct or hiding the ball.” This decision is proof that counsel not only violated various discovery rules, but also what I call unwritten Rule 1.1: Do not aggravate the judge. It will cost you, and your client, in monetary sanctions as it did here.