A recent trip to London offered new perspective on e-discovery practices and culture here at home. To give just three examples, American courts place greater emphasis on ethics and sanctions than our English counterparts, as well as a slightly differing concept of proportionality. While the visit created a laundry list of e-disclosure topics to compare and contrast to our own e-discovery world, it also acted as an invitation to revisit some American practices and recent developments with a fresh eye.
Today I (re)focus on the American culture of sanctions – something I rarely viewed as “culture” until stepping outside our borders – in hopes that a review and summary of the past year’s most notable comments, cases, and a few reflections along the way will likewise benefit others.
American courts derive their power to sanction in e-discovery disputes from Federal Rule of Civil Procedure 37, the state law equivalent, or a court’s inherent powers. Three recent cases frame the boundaries of this sanctioning power: Judge Shira Scheindlin’s Pension Committee1 in the 2nd Circuit (“Zubulake Revisited”), Judge Lee Rosenthal’s Rimkus2 in the 5th, and Judge Paul Grimm’s Victor Stanley II (supporting and relying heavily on the Rimkus opinion) in the 4th.
Judge Scheindlin sparked the debate with the assertion that the failure to issue a written legal hold constitutes gross negligence per se, providing the required culpability to impose the harshest of sanctions. Judge Rosenthal responded with a more cautious approach to the court’s inherent power to sanction, even in cases of bad faith, instead introducing the concept of “preservation proportionality.” Rimkus’s nuanced approach to sanctions and proportionality seems reminiscent of UK practice (a.k.a., restraint), though the “proportionate spirit” of the UK, warns Chris Dale of The e-Disclosure Information Project, can be taken to the extreme “when parties in big UK cases can still assert that the disclosure of electronic documents is ipso facto disproportionate.”3
Despite ambiguity between Circuits and across the globe as to the proper use of sanctions to forward and improve the disclosure process, American courts continue to impose sanctions and at times even amuse us with their creativity. Just this month, a court in the Eastern District of Texas ordered defendant to pay a quarter of a million dollars in sanctions and to provide a copy of the court’s order in every lawsuit involving the defendant for the past two years and arising in the next five years4. Faced with exposing one’s worst e-discovery weaknesses to any litigant who sues, perhaps a terminating sanction would have been less painful.
I likewise appreciated Judge Grimm’s ability to sanction with a sense of humor in Victor Stanley II. In ordering up to two year’s jail time for defendant Mark Pappas of Creative Pipe Inc. (CPI) if plaintiff’s attorney’s fees and costs went unpaid, Judge Grimm quipped:
CPI named one of its product lines the “Fuvista” line. Pappas admitted during discovery that “Fuvista” stood for “F–k you Victor Stanley,”… No doubt Pappas regarded this as hilarious at the time. It is less likely that he still does.5
Apart from occasional wit or creativity, these decisions grab headlines due to a marked increase in the issuance of sanctions over time – that is, until recently. A Duke Law Journal study tracking e-discovery sanctions in federal courts from 1981 through 2009 found a sharp increase in the number of sanction motions and awards, particularly after 2004. More recent studies published by Gibson Dunn and Williams Mullen found a decrease in the number of sanctions imposed in 2010 but disagreed as to how much the numbers actually dropped. Gibson Dunn reported a decrease in the granting of sanctions from 70% in 2009 to 55% in 2010, whereas Williams Mullen places the 2010 number closer to 62%. Despite statistical differences, both studies verified 2009 as a pinnacle year of parties seeking sanctions, suggesting that the 2010 barrage of opinions may mark a turning point in litigant behavior…or more importantly, a turning point in America’s culture of sanctions.
- Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities, et al., 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) (Amended Order). [↩]
- Rimkus v. Cammarata, 07-cv-00405 (S.D. Tex. Feb. 19, 2010). [↩]
- Chris Dale, “International Discovery, Sanctions, Ethics and US-UK Comparisons at Georgetown,” http://chrisdale.wordpress.com/2010/12/08/international-discovery-sanctions-ethics-and-us-uk-comparisons-at-georgetown, citing Nichia Corp v Argos Ltd  EWCA Civ 741 (19 July 2007) at paragraph 50 as quoted approvingly at paragraph 46 in Digicel (St. Lucia) Ltd & Ors v Cable & Wireless Plc & Ors  EWHC 2522 (Ch) (23 October 2008) (“the judicial authority for the UK idea that you do not look under every stone”). [↩]
- Green v. Blitz U.S.A., No. 2:07-CV-372 (TJW), 2011 WL 806011 (E.D. Tex. Mar. 1, 2011). [↩]
- Victor Stanley, Inc. v. Creative Pipe, Inc., “Victor Stanley II”, 2010 U.S. Dist. LEXIS 93644 (D. Md. Sept. 9, 2010), footnote 19. [↩]