Intentional Email Deletion Leads to Multi-Million Dollar Sanctions Order
A Delaware Court entered a massive punitive damages award based upon findings of intentional, bad faith spoliation of email threads by a corporate defendant in an antitrust case brought under the Sherman Act and common law. The extensive facts in GN Netcom, Inc. v. Plantronics, Inc., Civil Action No. 12-1318-LPS (D.Del July 6, 2016) are summarized below, followed by highlights of the court’s opinion regarding spoliation and the sanctions award.
Facts of the Case (AKA Houston, We Have a Problem)
At issue: Claim of spoliation based upon the deletion of emails by Defendant company’s VP of Sales and executive committee member, Don Houston.
Timeline of circumstances surrounding spoliation claim:
- May 2012: Litigation hold letter sent.
- October 2012: Lawsuit filed.
- November 2012: Sales team (Defendant company) began using code names for competitors, including Plaintiff company, in email.
- November 2012: Don Houston replied to an email chain saying to be careful about talking about the competition [Plaintiff], and “I would suggest everyone immediately delete this message, thanks.”
- October 2013: Defendant loses its motion to dismiss.
- October 2013: Houston sent another email that ended “please delete this entire string of emails for everyone that has been copied ASAP.”
- November 2013-Februrary 2014: Houston double-deleted over 40% of his emails from both his legal folder and his deleted file folder.
- February/March 2014: Defendant’s internal counsel noticed the email deletions. In response, she put Houston and his assistant on a new litigation hold backed up by anti-email deletion software. She also ordered email back-up tapes from November 2013.
- April 2014: Houston sent another email instructing the team to delete any email discussing the situation.
- June 2014: Defendant had its eDiscovery vendor restore some of the back-up tapes and image Houston’s iPhone and Tablet. It also hired a forensics expert to try to recover as many deleted emails as possible. The forensics expert, in his report, admitted he could not recover all the deleted emails and estimated that 952 – 2,354 of responsive emails were missing completely.
- July 2014: In two separate depositions, Houston testified he did not believe he deleted any emails having to do with the legal issue. He claimed to have told people to delete emails about the competition because he didn’t like the tone of the emails. Defendant agreed to 21 additional custodians who corresponded with Houston to try to regain some of the lost emails.
- August 2014: Defendant did not further engage its forensics expert to finish the project and “unrestored” the previously-restored back-up tapes.
- February 2015: At the CEO’s deposition, Plaintiff was finally told that Defendant had hired the forensics expert but refused to provide his name or report, citing work product privilege.
- June 2015: Plaintiff got the forensics expert report through court order.
- October 2015: Plaintiff got its own forensics expert, who agreed with the methodology of the Defendant expert, but said the estimate of 952 – 2,354 was on the low side. The Plaintiff forensic expert estimated there were between 2,380 to 15,309 deleted, unrecoverable emails would have been responsive to Plaintiff ESI requests.
What is the Legal Standard for Bad Faith Spoliation Under FRCP 37(e)?
The court looked to FRCP 37(e) to rule on Plaintiff’s Motion for Sanctions. It was undisputed that the emails should have been preserved, and that they were lost and could not be restored.
However, Defendant argued that three additional requirements of FRCP 37(e) were not fulfilled:
- Defendant said there was no spoliation because it took reasonable steps to preserve ESI, and that once it learned of the problem with Houston, it took a number of steps to prevent further loss of data and recover what it could. Although the court agreed that these actions took place after the fact, to rely on these actions to excuse Houston’s behavior would require a “perverse interpretation” of FRCP 37(e).
- Defendant argued it did not act in bad faith to deprive Plaintiff of discovery. It claimed Houston’s actions were “contrary to company directives.” The court again found the Defendant’s argument unpersuasive. Noting that Houston acted not out of personal gain but to protect Defendant, his bad faith could be appropriately attributed to Defendant itself.
- Finally, Defendant claimed there was ultimately no prejudice to Plaintiff. It argued the 21 additional custodians and some of the data from the back-up tapes mitigated any potential prejudice. Again, the court disagreed, citing that only 5% of Houston’s emails were duplicated by other custodians and the company “unrestored” some of the previously restored back-up tapes after it released its forensics expert. Both sides’ experts noted that potentially thousands of unrecoverable, relevant emails were still missing.
What Spoliation Sanctions Are Appropriate for Bad Faith Destruction of Email?
The court weighed its findings that Defendant acted with a high degree of fault and that Plaintiff suffered a considerable amount of prejudice. Further, the court wished to deter future spoliation while avoiding substantial unfairness to Defendant.
The court did not think re-opening discovery would be useful, as the attempts to mitigate the loss had only produced a minimal amount of information so far. The court decided that monetary sanctions, while not being able to completely restore the losses to Plaintiff, were appropriate. The court ordered Defendant to pay Plaintiff’s attorney fees and costs for all efforts over the previous 18 months to uncover the spoliation.
Next, due to the high degree of fault, bad faith intent and prejudice, the court found a $3 million punitive damage award to be warranted.
Finally, the court ordered an adverse inference jury instruction that it may (not must) presume the missing ESI would be unfavorable to Defendant.
The eDiscovery experts at ILS work closely with the plaintiff’s bar to even out the playing field in electronic data discovery. Defendant companies traditionally have massive resources and remote places where electronic evidence can be hidden—or even destroyed. Let us help you uncover the hidden truths.