Sanctions and Adverse Inference Instruction Ordered Against Defendant and Counsel for Severe eDiscovery Abuse

24 Aug 2015

In HM Electronics, Inc. v. R.F. Technologies, Inc. et. al., Case No. 12-2884 (S.D. Ca., August 7, 2015), Plaintiff moved for sanctions, alleging that Defendant and its attorneys committed numerous discovery violations, including intentionally destroying relevant documents, falsely certifying that certain documents existed, and filing false reports with the court, among other things. Plaintiff also alleged that Defendant’s counsel failed to properly supervise contract attorneys and ESI vendors involved in Defendant’s collection and review, and failed to properly communicate with Defendant regarding how to implement a “litigation hold” or how to perform ESI searches (effectively permitting Defendant to conceal thousands of emails by categorizing all documents containing the word “confidential” as privileged without any further review).

In a lengthy and methodological opinion detailing countless discovery abuses, the court agreed with Plaintiff that Defendant and its counsel had committed severe discovery misconduct requiring sanctions.  Citing the goals articulated by the Second Circuit in West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2nd Cir. 1999) that sanctions should i) deter parties from engaging in spoliation; ii) place the risk of an erroneous judgment on the party who wrongfully created the risk; and iii) restore the prejudiced party to the same position he would have been absent the wrongful destruction of evidence, the court ordered monetary sanctions (pursuant to Rule 26 and 37) against both Defendant and its counsel for all attorneys’ fees and costs incurred by Plaintiff in seeking discovery from Defendants since October 2013, which is when the court concluded that Defendant had served its first false discovery response.

The court also granted Plaintiff’s request to impose issue sanctions, thus establishing as a fact that Defendant had fabricated critical information favorable to its case.  The court also ordered that the jury should be read an adverse inference instruction under the test put forth in Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 216 (S.D. N.Y. 2003) decision, which requires that: i) the party with control over the evidence had an obligation to preserve it at the time of destruction; ii) the records were destroyed with a “culpable state of mind”; and iii) the evidence was relevant. Specifically, the court ordered that the jury would be instructed to presume that the evidence Defendant destroyed was both relevant and favorable to Plaintiff, and that the jury could take into account Defendant’s destruction of documents when assessing whether and to what extent Plaintiff suffered damages.

ILS – Plaintiff eDiscovery Experts