Court Awards Sanctions After Party Voluntarily Dismisses Case Due To ESI Discovery Deficiencies
In Transystems Corp. v. Hughes Associates, Inc., Case No. 14-1541 (M.D.P.A., June 30, 2016), Plaintiff settled with one party in a contract and indemnification action arising from a construction project, and later sued Defendant regarding the same project. Between the time of the settlement and the initiation of the instant matter, Plaintiff closed one of its offices and terminated all the office’s staff.
As part of the office closure, Plaintiff wiped all the individual hard drives clean, believing that the files would remain on its main server; Plaintiff later discovered, though, that many of employees had saved files directly to their hard drives rather than the server, and many files were permanently lost. Plaintiff then failed to timely produce a witness to testify regarding document retention policies. Ultimately, Plaintiff filed a motion to voluntarily dismiss the lawsuit based upon the “cascading discovery deficiencies.” Defendant objected to the motion and sought sanctions.
The court granted the motion to voluntarily dismiss, but it also awarded Defendant $1,000 in sanctions. The court noted that, at a certain point in the litigation, Plaintiff did not have “an untrammeled right to abandon the lawsuit” but instead required a court order. The court also noted that a court can appropriately order sanctions against a party who fails to preserve ESI, and that although negligence is not a defense, it can reduce the level of sanctions awarded. The court determined that the lost information would have been discoverable and that Plaintiff had a duty to preserve it, but that Plaintiff’s failure to preserve was negligent and inadvertent. The court also found that the issue was exacerbated by Plaintiff’s delays. The court found that a nominal sanction was appropriate under the circumstances.