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E-Discovery

Sanctions Issued Despite Failure to Establish Intent to Deprive

Why This Alert Is Important

In this case, the court sanctioned a defendant for not including relevant custodians in a legal hold in a timely manner, leading to ESI deletion. Although intent to deprive wasn't proven, the case highlights the importance of prompt ESI preservation and serves as a reminder of the consequences of inadequate management.

Overview 

In Kosher Ski Tours Inc. v. Okemo Limited Liability Co., Plaintiff claimed that Defendant breached a lodging agreement and threatened legal action in a "demand letter" sent on October 7, 2020. Plaintiff filed its lawsuit on October 19, 2020, and Defendant stated that it knew of the litigation "on or about October 23, 2020" and issued a legal hold on October 30. 
Plaintiff learned during discovery that Defendant had failed to preserve ESI for key employees Wendy Ackerman and Amy Morgan, who were only added to the legal hold on January 20, 2021, 93 days after the lawsuit commenced. Due to a 90-day email retention policy, their pre-litigation emails were deleted before the hold was instituted on their accounts. This led Plaintiff to move for spoliation sanctions against Defendant. 
 

Ruling Summary

  • Rubric for Analysis under FRCP 37(e). 
    The ruling outlined a "three-part inquiry" required by Rule 37(e) to determine if sanctions are appropriate: First, determining if the party failed to take reasonable steps to preserve ESI for anticipated or ongoing litigation; second, assessing if another party was prejudiced by the loss, potentially leading to measures to cure the prejudice under Rule 37(e)(1); and third, evaluating if the party acted with "intent to deprive" another party of the information’s use in litigation, possibly warranting more severe sanctions under Rule 37(e)(2). 
  • Failure to Take Reasonable Steps 
    The court found that Defendant failed to take reasonable steps to preserve ESI, as the duty to preserve evidence arose when it received Plaintiff’s October 7, 2020 demand letter. The court highlighted that Defendant should have recognized the relevance of emails from Ackerman and Morgan, because they "attended weekly management meetings in the months leading up to the termination of the Lodging Agreement.” As a result, Plaintiff suffered prejudice from the loss of these emails, which could have elucidated the reasons behind the lodging agreement's termination. 
  • "Intent to Deprive" Not Established 
    Judge Briccetti determined that Plaintiff did not prove, "by clear and convincing evidence," that Defendant acted with the intent to deprive Plaintiff of emails from Ackerman and Morgan. While one could interpret the 93-day delay in issuing a legal hold to these custodians as a means to let the 90-day email retention period lapse intentionally, this evidence was not clear and convincing. Despite this, the court found the failure to preserve these emails sanctionable under Rule 37(e)(1) and decided to allow “the parties to present evidence to the jury concerning the loss and likely relevance of information and instructing the jury that it may consider that evidence, along with all the other evidence in the case, in making its decision.” 

     

Plaintiff filed its motion well after the close of discovery and fashioned it as a motion in limine for spoliation sanctions. In finding the motion was not untimely, the Court highlighted that the sanctions sought related directly to the presentation of spoliation evidence at trial and that plaintiff stated its intentions to bring a spoliation sanctions motion at the pretrial conference. This opinion serves as a reminder that, depending on the circumstances, a motion for spoliation sanctions may be brought late in the game.  

Patricia Antezana, Counsel, Reed Smith

Case Law Tip

Unsure about the Uniform Spoliation Standard? Exterro has produced an infographic that can help you determine if sanctions might apply. Download it today! 
 

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