Sanctions For E-Discovery Violations: By The Numbers

Dan H. Willoughby & Rose Hunter Jones & Gregory R. Antine

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E-discovery sanctions are at an all-time high.  We identified 230 sanction awards in 401 cases involving motions for sanctions relating to the discovery of electronically stored information (ESI) in federal courts prior to January 1, 2010.  We analyzed these cases for a variety of factors, including sanctioning court, sanctioning authority, sanctioned party, sanction type, and sanctioned misconduct.1 Our analysis indicates that although the annual number of e-discovery sanction cases is generally increasing, there has been a significant increase in both motions and awards since 2004.2 Motions for sanctions have been filed in all types of cases and all types of courts. The sanctions imposed against parties in many cases are severe, including dismissals, adverse jury instructions, and significant monetary awards. Sanctions against counsel, although uncommon, are on the rise. All the while, the safe harbor provisions of Rule 37(e) of the Federal Rules of Civil Procedure have provided little protection to parties or counsel.

As ESI has played a more predominant role in pretrial discovery, producing parties have struggled to comply with ever-expanding and increasingly complex responsibilities. The liberal scope of discovery in federal courts, when coupled with ESI’s defining characteristics—high volume, broad dispersal, and dynamic nature—also confounds efforts to conduct discovery effectively and economically. Governing rules have been amended and supplemented to provide a procedural framework “to secure the just, speedy, and inexpensive determination” of discovery disputes involving ESI.3 Most notably, substantial amendments were made to the Federal Rules of Civil Procedure in 2006 to address discovery of ESI in federal courts. Yet lawyers agree that discovery in the postamendment world is more expensive, more complicated, and more contentious than ever. The highest number of filed motions and awards relating to e-discovery sanctions in any single year prior to 2010 occurred in 2009, three years after the effective date of the 2006 amendments.

Performing complicated tasks on a deadline creates the opportunity for incorrect or incomplete production, whether resulting from innocent inadvertence or intentional malfeasance. When e-discovery efforts fall short, producing parties may be penalized — and prejudiced parties may be made whole — through the award of sanctions. Marquee e‑discovery disaster cases, Qualcomm Inc. v. Broadcom Corp.4 and Metropolitan Opera Association v. Local 100, Hotel Employees & Restaurant Employees International Union,5 are towering reminders of the most severe sanctions—dismissals, multimillion dollar awards, and bar association referrals—that can be imposed for the most egregious misconduct. Of greater concern to the average practitioner is the increasing frequency of sanction decisions, an issue most recently illustrated by Pension Committee of University of Montreal Pension Plan v. Banc of America Securities,6 in which all thirteen plaintiffs were sanctioned for e‑discovery failings not rising to the level of intentional or willful conduct. In many cases, more attention is focused on e-discovery than on the merits, with a motion for sanctions an increasingly common filing. As a result, leading practitioners and judges agree that more uniform standards and guidelines are needed to guide counsel through the complex tasks of discovery.

Although discovery relating to ESI appeared as early as the 1970s, only recently has the threat of sanctions relating to discovery of ESI been a prevalent concern of counsel. Sanctions for e-discovery violations began to appear in the early 1980s. For the next decade, cases involving motions for sanction relating to e-discovery violations were sporadic. After 1996, the number of cases slowly increased until 2004. The number of e-discovery sanction cases and the number of e-discovery sanction awards more than tripled between 2003 and 2004, from nine to twenty-nine sanction cases, and from six to twenty-one sanction awards. The numbers continue to rise. There were more e-discovery sanction cases (ninety‑seven) and more e-discovery sanction awards (forty-six) in 2009 than in any prior year. In fact, there were more e-discovery sanction cases in 2009 than in all years prior to 2005 combined.

Sanctions relating to e-discovery violations have reached courts everywhere and have appeared in all types of cases. The most common case types are employment (17 percent), contract (16 percent), and intellectual property (15.5 percent). Sanctions for e-discovery violations were also discussed in tort cases (11 percent) and a variety of other types of cases, including civil rights (8.5 percent) and bankruptcy (3 percent).

One hundred and eighty-three district court judges and one hundred and eleven magistrate judges from seventy-five federal districts in forty-four states, as well as the Virgin Islands, the District of Columbia, and Puerto Rico, have issued written opinions regarding e-discovery  sanctions. All eleven of the federal appellate circuit courts, as well as the Federal and D.C. Circuits, have issued opinions involving e-discovery sanctions. The vast majority of the 485 written opinions are from the district court level, with 251 written district court rulings and 189 magistrate rulings. Appellate review of e-discovery sanction cases has been limited, perhaps because many cases settle or are otherwise not appealed. We identified only thirty-two cases at the appellate level.

Courts have used a variety of different rules, statutes, and powers to sanction parties for e-discovery violations. Their array of authority appears to provide ample and flexible bases for addressing the various e-discovery sanction scenarios. We identified no case in which a court inclined to impose a sanction was unable to do so because particular rules or statutory requirements were not met. The sanctioning authorities include Rule 26(g) and Rules 37(b), 37(c), and 37(d). Section 1927 of 28 U.S.C., titled “Counsel’s liability for excessive costs,” also provides authority to sanction any attorney “who so multiplies the proceedings in any case unreasonably and vexatiously.” Importantly, even when the requirements of the rules or statute are not met, federal courts still have sanctioned parties for e‑discovery violations, deriving their sanctioning authority from the inherent authority of the court. This inherent power arises from courts’ authority to manage their own affairs.

Defendants are sanctioned for e-discovery violations nearly three times more often than plaintiffs. In our survey, defendants were sanctioned 175 times, plaintiffs were sanctioned fifty-three times, and third parties were sanctioned twice. The three-to-one ratio of defendant sanctions to plaintiff sanctions has generally held steady over the last ten years, even as the number of sanction cases and sanction awards has greatly increased.

The misconduct underlying a particular sanction award is sometimes a single type of misconduct, such as failure to preserve ESI or failure to produce ESI. More often it is a combination of multiple types of misconduct. In the 230 cases in which sanctions were awarded, the most common misconduct was failure to preserve, which was the sole basis for sanctions in ninety cases. It was also cited as one of the types of misconduct in forty-six cases involving multiple misconduct. Failure to produce was the sole basis for sanctions in thirty-five cases and was mentioned in another sixty-seven cases involving multiple types of misconduct. Delay in production was the sole basis for sanctions in sixteen cases and was mentioned in forty-five other cases involving multiple types of misconduct.

Sanctions for e-discovery violations have varied greatly in type and severity depending on the circumstances of the case. For the most serious violations, courts have imposed the most draconian of sanctions: dismissal of all claims or defenses. Courts have also given adverse jury instructions and imposed monetary awards for serious e-discovery lapses. In cases of lesser violations, courts have used a continuum of penalties, including evidence preclusion, witness preclusion, disallowance of certain defenses, reduced burden of proof, removal of jury challenges, limiting closing statements, supplemental discovery, and additional access to computer systems. In some instances, more-creative courts have imposed nontraditional sanctions, such as payments to bar associations to fund educational programs, participation in court-created ethics programs, and referrals to the state bar.

We identified thirty-six cases in which a terminating sanction of dismissal or default judgment was entered for e-discovery violations. Twenty of these thirty-six dismissed cases involved failure to preserve evidence, seven involved failure to produce, and nine involved both failure to preserve and failure to produce. In sixteen cases, the court noted that the client, counsel, or both made misrepresentations to the court. In imposing the most severe sanction of dismissal, twenty of thirty-six courts considered the prejudice to the opposing party resulting from the loss or failure to produce evidence, with eight courts describing the resulting prejudice as serious or substantial. No cases resulted in dismissal when the court characterized the misconduct as mere negligence. In two of the thirty-six dismissal cases, the court characterized the conduct as gross negligence. The remaining thirty-four cases involved some sort of willful conduct, with twenty involving bad faith.

In fifty-two cases, courts sanctioned parties for e-discovery violations by issuing adverse jury instructions. Courts deferred judgment on this issue in another ten cases. Forty of the fifty-two cases in which adverse jury instructions were awarded occurred between 2006 and 2009. The cases in which adverse jury instructions were issued included forty-three cases involving failure to preserve, four cases involving failure to produce, and five cases involving both. The level of misconduct justifying the adverse jury instructions varied across the fifty-two cases. Four cases involved negligence; ten cases involved gross negligence; three cases involved reckless disregard; and thirty-four cases involved intentional conduct, bad faith, or both. One case did not provide information concerning the level of misconduct.

We identified seventy-seven e-discovery sanction cases providing for specific monetary awards, including awards for default judgments, monetary sanctions, and attorneys’ fees and costs. The awards ranged from $250.00 to $8,830,983.69. There are five cases with monetary awards over $5 million, an additional four cases with monetary awards at or above $1 million, and six additional cases with monetary awards over $250,000. We identified twenty-seven cases with monetary awards exceeding $100,000.

Sanctioning counsel for e-discovery violations is an extraordinary remedy. Out of 401 e-discovery sanction cases, we identified only thirty instances of counsel being sanctioned, with sanctions specifically awarded in twenty-five cases and indicated but deferred in five cases. We also identified seven cases in which sanctions were considered but not awarded. Consistent with the overall increase in sanction cases, counsel sanctions for e-discovery have steadily increased since 2004. Prior to 2010, courts had only sanctioned in-house counsel for e-discovery violations three times, and in all three cases the client was also sanctioned. Similarly, courts rarely sanction outside counsel for e-discovery violations without also sanctioning the client. Moreover, in only four cases was outside counsel sanctioned as the result of a single instance of misconduct. The cases identified various levels of misconduct as the basis for counsel sanctions. Four cases involved negligence, seven cases involved gross negligence, nine cases involved reckless disregard, and ten cases involved intentional conduct or bad faith.

Federal Rule of Civil Procedure 37(e), adopted on December 1, 2006, contains a safe harbor for certain conduct relating to the preservation and production of ESI. The drafters intended the rule to provide only “limited protection against sanctions.” Its purpose was to protect against sanctions arising solely from the loss of ESI through the routine operation of electronic systems that automatically discard information. The rule was never intended to provide protection for all manner of missteps in the broad range of e-discovery activities performed by parties and their counsel—such as failure to search and failure to produce on schedule.

From Rule 37(e)’s promulgation on December 1, 2006, until January 1, 2010, we identified only thirty federal court decisions citing the safe harbor provision. Three of these cases did not relate to discovery of ESI in civil cases, as two involved paper documents and one was a criminal case. Of the remaining twenty-seven cases, we identified, at most, seven and one-half cases that invoked Rule 37(e) to protect a party from sanctions. In five of those cases, the court invoked Rule 37(e) to deny requested sanctions. In two cases, the court mentioned Rule 37(e) and denied sanctions, but it is unclear whether the court relied on the rule in making its decision. The half case is a decision in which the court held that Rule 37(e)’s safe harbor would protect a party from potential sanctions for some conduct prior to notice of litigation, but that it would not protect the party from potential sanctions for other conduct after notice.

Sanction motions and sanction awards for e-discovery violations have been trending ever-upward for the last ten years and have now reached historic highs. At the same time, the frequency of sanctions against counsel for e-discovery violations, though small in number, is also increasing. Although serious e-discovery misconduct by parties and counsel should continue to be the subject of sanctions, appropriate consideration should be given to the complexity of e-discovery in ruling upon the increasingly frequent e-discovery sanction motion.


Overall Statistics:

Figure 1

Figure 2

Acknowledgments:

Copyright © 2010 Duke Law Journal.

Dan H. Willoughby, Jr. is a Partner in the Atlanta office of King & Spalding and heads the firm’s Discovery Center. The authors wish to thank the attorneys at the King & Spalding Discovery Center who assisted in the research and preparation of this Article, particularly Jennifer Mencken, Edward Logan, Andrew Walcoff, Stephanie Johnson, Arlisa Brown, Clifford Post, and John Tucker.

Rose Hunter Jones is a senior attorney at King & Spalding’s Discovery Center and focuses her practice on e-discovery.

Gregory R. Antine is a senior attorney at King & Spalding’s Discovery Center and focuses his practice on e-discovery.

This article is a preview of the 2010 Civil Litigation Review Conference Issue of the Duke Law Journal, forthcoming, December 2010.

  1. See infra Figure 1.
  2. See infra Figure 2.
  3. Fed.R.Civ.P. 1.
  4. Qualcomm Inc. v. Broadcom Corp., No. 05cv1958-B (BLM), 2008 WL 66932 (S.D. Cal. Jan. 7), vacated in part, 2008 WL 638108 (S.D. Cal.Mar. 5, 2008).
  5. Metro. Opera Ass’n v. Local 100, Hotel Emps. & Rest. Emps. Int’l Union, 212 F.R.D. 178 (S.D.N.Y. 2003), adhered to on reconsideration by No. 00 Civ. 3613(LAP), 2004 WL 1943099 (S.D.N.Y. Aug. 27, 2004).
  6. Pension Comm. v. Banc of Am. Sec. LLC, 685 F. Supp. 2d 456, 496–97 (S.D.N.Y. 2010).

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