Court Grants Several Significant Sanctions for Defendants’ Discovery Failures, Part Two: eDiscovery Case Law

In DR Distribs. v. 21 Century Smoking, No. 12 CV 50324 (N.D. Ill. Jan. 19, 2021), Illinois District Judge Iain D. Johnston, in a ruling so long it needed a table of contents (104 pages printed out in PDF form), assessed several significant sanctions to the defendants for their discovery failures, but did not grant the “nuclear option[s]” sanctions requested by the plaintiffs to default the defendants and dismiss their counterclaims.

Yesterday, I covered some of the discovery failures of the defendants (and their former counsel) associated with this case.  Today, I’ll cover the sanctions against them for those failures.

Actually, Judge Johnston made that part relatively easy (if not lengthy), as he identified the sanctions imposed within the Introduction section as follows:

“In the exercise of its discretion—to the extent certain rules allow for discretion—the Court imposes the following sanctions to cure the harm Defendants and the former defense counsel have inflicted on Plaintiff:

  • At their own expense, within 30 days of this order, Defendants must conduct a reasonable search for all responsive ESI and produce the responsive material to Plaintiff, which Plaintiff can use if it chooses. Fed. R. Civ. P. 37.
  • Defendants are barred from using any information not disclosed to Plaintiff by June 1, 2015, which is the date discovery supplements were due, Dkt. 116; Fed. R. Civ. P. 37(c), and are barred from using any documents not produced under this Court’s June 11, 2015, order, Dkt. 132; Fed. R. Civ. P. 37(b)(2). This bar also precludes Defendants’ expert witnesses from testifying that their opinions would not change had they considered the documents and information not disclosed before June 1, 2015. Fed. Rs. Civ. P. 37(b)(2), 37(c).
  • Defendants are barred from contesting that Kirti Saraswat and Webrecsol {person and company hired to perform SEO on the defendant’s website} were performing work for Defendants through the date the metatag was removed from Defendants’ website, including work related to Defendants’ search engine optimization. Fed. Rs. Civ. P. 37(b)(2)(A), 37(e)(1).
  • The jury hearing any of Defendants’ counterclaims will be informed of Defendants’ failure to provide the Counterdefendants with the documents they requested. Fed. R. Civ. P. 37(c)(1)(B).
  • Evidence relating to Defendants’ failure to preserve ESI may be presented to the jury hearing Defendants’ counterclaims and the jury will be instructed that “it may consider that evidence, along with all the other evidence in the case, in making its decision.”…The jury will also be instructed that Defendants had a duty to preserve the spoliated Yahoo! chats and GoDaddy emails, that the spoliated Yahoo! chats and GoDaddy emails were relevant to the claims in the case, that Defendants failed to take reasonable steps to preserve the spoliated Yahoo! chats and GoDaddy emails, and that the spoliated Yahoo! chats and GoDaddy emails cannot be recovered. Fed. R. Civ. P. 37(e)(1).
  • The trial judge hearing Plaintiff’s Lanham Act claims can consider Defendants’ failure to preserve ESI in reaching the judgment on those claims. Fed. R. Civ. P. 37(e).
  • Defendants and the former defense counsel must pay Plaintiff’s reasonable attorneys’ fees and costs incurred in creating and litigating docket entries 209, 216, 227, 232, 238, 239, 241, 244, 246, 247, 270, 294, 343, 370, 381, 384, and 388—all filings related to Plaintiff’s motion for sanctions and summary judgment motion that was derailed because of Defendants’ and the former defense counsel’s discovery failures. Defendants and the former defense counsel must also pay Plaintiff’s reasonable attorneys’ fees and costs for time reasonably spent preparing for and participating in the evidentiary hearing and the pre-hearing and post-hearing briefs. The fees and costs will be paid in the following proportions: Duke to pay 50% and the former defense counsel to pay 50%, with former defense counsel Thomas Leavens paying 80% and former defense counsel Peter Stamatis paying 20% of that 50%. Fed. Rs. Civ. P. 26(e)(1)(B), 26(g)(3), 37(a)(5), 37(b)(2), 37(c)(1)(A).
  • The former defense counsel, except for Steven Shonder {because, as Judge Johnston wrote, “There is no evidence that he was tasked with the identification, preservation, and collection of discovery materials, including ESI. Indeed, Shonder was not involved in discovery.”}, must complete by December 31, 2021 at least eight hours of continuing legal education (CLE) on ESI, and by March 3, 2021, certify they have read this entire order. Fed. R. Civ. P. 37(b)(2).

These sanctions are designed to make Plaintiff whole for the injury Defendants and the former defense counsel caused and are proportionally tailored to Defendants’ and the former defense counsel’s actions and inactions. The sanctions are likewise designed to deter the type of misconduct found in this order…In imposing these sanctions, the Court is fully aware that Plaintiff’s request for attorneys’ fees and costs will likely exceed seven figures as Plaintiff has already paid its counsel for this work.” 

As noted in the Footnotes, the plaintiff presented information “that even before the evidentiary hearing, it had paid its counsel over $800,000 relating to these issues.” 

So, the defendants didn’t receive terminating sanctions here.  But how do they feel about their case now?  And have you ever seen a case ruling which included an order for counsel to complete CLE hours on ESI?  You have now.

Speaking of covering the case in two parts, yesterday, Kelly Twigger of eDiscovery Assistant and Briordy Meyers of Boehringer Ingelheim discussed some of the issues in the case in Kelly’s #caseoftheweek video broadcast on the ACEDS LinkedIn channel (represented here on the eDiscovery Assistant blog).  Next week, Kelly and I will analyze the bases for imposing sanctions in this case under Federal Rules of Civil Procedure 26 and 37 at 11:30am here.  Come join us!

So, what do you think?  Was counsel at fault here or should the fact that the defendant made false statements let counsel off the hook?  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.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by my employer, my partners or my clients. eDiscovery Today is made available solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Today should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

4 comments

  1. […] Fourth, Defendant appears to have been obstructionist with regard to her production of text messages and iMessages during the discovery process. Based on the facts and arguments presented to the Court, it seems that Defendant agreed to produce certain text messages and iMessages at one time and then failed to do so. At this point, she has produced none of the text messages or iMessages sought by Plaintiff. The Court wants to ensure that all relevant and proportional discovery is produced in this case. All parties and their counsel in this case, including Defendant, must ensure that all relevant and proportional e-discovery sought has been appropriately preserved, searched for, and produced. Serious sanctions can issue if e-discovery preservation, search, or production is inadequate. See, e.g., DR Distributors, LLC, No. 12 CV 50324, 2021 WL 185082, at (N.D. Ill. Jan. 19, 2021). […]

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