Overreach for Rule 37(e) sanctions and you might be facing sanctions for Rule 11(b) violations yourself…

In Packrite, LLC v. Graphic Packaging Int’l, LLC, No. 1:17CV1019 (M.D.N.C. Dec. 4, 2020), North Carolina Magistrate Judge Patrick L. Auld recommended that the plaintiff’s instant Motion for Sanctions for Spoliation of Evidence should be denied, noting that “The instant Motion does not identify the ESI that allegedly meets Rule 37(e)’s four predicate elements”.  In addition, Judge Auld stated that “the record does indicate that portions of the plaintiff’s Memorandum in Support of the instant Motion may run afoul of Federal Rule of Civil Procedure 11, thus warranting entry of a show-cause order directed to Plaintiff and its counsel.”

Case Background

In this carton manufacturing dispute between companies, the plaintiff filed this motion against the defendant, requesting a default judgment, claiming two “[d]ue to the … failure of Defendant to timely institute a litigation hold, the email folders of [its] former employees Chris Berndt and Rich Richkowski have been entirely lost.”

As to the alleged loss of Richkowski’s e-mail folders, the defendant countered that, contrary to the plaintiff’s assertions, “[i]n discovery, [Defendant] produced 1,227 emails to or from Richkowski and [its] production identified Richkowski as the custodian…. [Defendant] still has Richkowski’s emails in its possession.”  As for Berndt, when he left the defendant’s company, “[c]onsistent with its corporate email policy, on July 12, 2017, five days after Berndt’s employment with [Defendant] ended, [its] information technology department disabled Berndt’s custodian files on its servers, which deleted his custodian email files”.  The defendant didn’t receive notice from the plaintiff to preserve documents related to the matter until September 22, 2017.  The defendant also indicated that any emails sent by Berndt about the plaintiff would have been to one or more people on the litigation hold list.

Judge’s Ruling

With regard to Berndt, Judge Auld stated: “Plaintiff’s Reply offers no evidence to contest the foregoing showing that: (A) Berndt left his job with Defendant for reasons unrelated to Plaintiff; (B) Defendant deleted Berndt’s e-mail folders pursuant to its policy for departing employees; (C) shortly after receiving a (non-specific) preservation letter, Defendant began placing litigation holds on the e-mail folders of employees it perceived as possessing potentially relevant information; (D) when Plaintiff’s counsel advised Defendant’s in-house counsel about the scope of Plaintiff’s claims, Defendant extended the litigation hold to more employees; (E) Berndt’s e-mails about Plaintiff with other of Defendant’s employees likely would have included at least one of the employees subject to a litigation hold; and (F) Defendant served Plaintiff in discovery with 632 of Berndt’s e-mails located in e-mail folders of other employees of Defendant…Instead, the Reply simply speculates that some of Berndt’s e-mails about Plaintiff could have gone unrecovered if ‘(1) [they] were [not] shared with the same custodians that would eventually be placed on a litigation hold by [Defendant or] (2) [they were so shared but] were [ ] otherwise lost or destroyed prior to such custodians being placed on a litigation hold’.

That approach dooms the instant Motion, because ‘[a] successful claim for spoliation of [ESI] cannot be premised on mere speculation on the existence of such [unrecovered ESI].’”

Judge Auld also stated: “Notably, to the extent it discusses prejudice associated with particular lost ESI in the context of arguing for sanctions under Rule 37(e), the Memorandum in Support concentrates not on the deletion of Berndt’s e-mail folders, but instead on the disproved allegation that Defendant ‘deleted the entirety of [ ] Richkowski’s email folders after the date upon which it admits to … anticipati[ng] litigation’…Regarding Berndt, the Memorandum in Support merely voices a generic concern that Plaintiff lacks access to ‘untold numbers of documents deleted by Defendant from [Berndt’s] email folders’…, and proffers an ‘inference that these lost documents were favorable to [Plaintiff]’…, grounded on the faulty premise – mislabeled as a ‘fact’ – that ‘Defendant destroyed [ESI] from [ ] Richkowski’s email folders [that] expressly contradict[ed] the bases for Defendant’s counterclaims’.”

As a result, Judge Auld recommended that the plaintiff’s motion for sanctions be denied.  He also recommended that “Plaintiff and its counsel be made to show cause why the Court (1) should not ‘determine[ ] that [Federal] Rule [of Civil Procedure] 11(b) has been violated’” – regarding 1) Richkowski, “when the record reflects Plaintiff (and its counsel) then possessed proof that conclusively contradicted…assertions” that his data was deleted and 2) Berndt, where “uncontested record evidence that Berndt previously ‘specifically told [Plaintiff’s counsel] that [Berndt] resigned from [Defendant] on good terms and that [he] left [its] employment due to [a] family medical issue with [his] daughter,”, refuting the plaintiff’s claims that the termination of Berndt’s employment with the defendant was related to the case.

So, what do you think?  Are you surprised that Judge Auld not only denied the plaintiff’s motion, but turned it around on the plaintiff in the form of potential sanctions for Rule 11(b) violations?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant, an Affinity partner of eDiscovery Today.

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