Has the Water Level in the “Zuba – Lake” Receded?

ESI: LDiscovery
So You Won’t Get Fooled Again

Sanctions: Has the Water Level in the “Zuba – Lake” Receded?
by Leonard Deutchman

“If it bleeds, it leads,” has been the watchword of many publications since there have been printing presses and blood (preferably, murdered in cold blood). For e-discovery, a story “bleeds” when a court finds spoliation and imposes harsh sanctions. Zubalake and Morgan Stanley first drew real attention to e-discovery because they both resulted in the sanctions of adverse inference instructions that led to multi-million dollar verdicts. It did not much matter that Morgan Stanley was reversed on appeal; what was important was that civil litigators got the message to take e-discovery seriously, lest their cases resulted in sanctions leading to harsh results.

Overall, getting the attention of litigators has been a good thing, as it resulted in the December 2006 e-discovery changes to the Federal Rules of Civil Procedure, as well as many other court decisions, the end product being a rise in the quality of e-discovery practice and so a reduction in unnecessary costs and delays in litigation. If what I have written is true, as I believe it is, it might be a good thing to tell e-discovery “ghost stories” to litigators before they fall asleep, to scare them into becoming better and better at discharging their duties regarding e-discovery ever more quickly, carefully and thoughtfully.

One bit of anecdotal evidence of the omnipresence of sanctions in the minds of e-discovery litigators is the number of times the topic comes up by way of complaint. Whether at CLEs or other gatherings or in publications, litigators whose clients are in the business of producing e-discovery (typically, but by no means always, defendants), will complain that the threat of sanctions, no matter how remote or frivolous, causes their clients to spend countless sums of money.

Perhaps it is time, then, for e-discovery litigators to read Yelton v. PHI, Inc., No. 2:09-cv-03144-CJB-KWR, 2012 U.S. Dist. LEXIS 94944 (E.D.La. 2012). In Yelton, the District Court, sustaining the Magistrate Court’s order, held that defendant Sikorsky Aircraft Corp. should not be liable to defendant PHI for monetary sanctions, despite the fact a claim of spoliation against it was sustained, because there was no causal relationship between the spoliation and PHI’s decision to settle the matter. The Court’s nuanced understanding regarding the awarding of sanctions should help to calm litigators who fear that spoliations sanctions are hiding in their bedroom closets, waiting to pounce on them when they fall asleep.

In Yelton, the Court sustained the finding that defendant Sikorsky had failed to preserve the work of one Dr. Kim. As well, defendant Sikorsky had delayed the release of Dr. Kim’s report. The Magistrate had specifically found that defendant Sikorsky had engaged in “misconduct and intentional destruction of the data files,” and the Court sustained that finding. Moreover, the Court found that such finding was more than sufficient to show that defendant Sikorsky had acted in “bad faith,” a predicate to a finding of spoliation.

Despite having found that defendant Sikorsky had acted so badly, however, the Magistrate Court refused to grant defendant PHI’s motion that defendant Sikorsky pay it 80% of what defendant PHI had paid to settle Plaintiffs’ claims against PHI. The Court found that the Magistrate had reasoned that “sanctions were not warranted because ‘PHI’s decision to settle the case for “a larger amount”‘ was not causally related to Sikorsky’s failure to timely supplement its discovery responses.” The Magistrate pointed to the fact that “Sikorsky had not yet fully responded to all of PHI’s outstanding discovery requests at the time PHI agreed to settle the case, despite ongoing disputes over the sufficiency of Sikorsky’s discovery responses.” Based upon these facts, the Magistrate concluded that “PHI’s decision to settle was not based on the fact that it had garnered full access to all relevant information Sikorsky may provide and was instead ‘likely due to the normal risks that are attendant in cases of this magnitude.'” Absent a causal connection between the spoliation and the decision to settle, then, the Magistrate properly concluded that no sanctions should be awarded to defendant PHI and against defendant Sikorsky because PHI had made that decision to settle.

The Court in Yelton performed a nuanced analysis regarding whether sanctions should be imposed, finding at once that spoliation did take place and yet that sanctions should not be awarded. This careful reasoning is worlds away from the caricatured e-discovery court imposing millions in sanctions for minor, or even phantom, infractions. Yelton, and many other recent decisions regarding sanctions, may signal that courts have not only gotten over their pre-Zubulake inability to appreciate the seriousness of conduct warranting a finding of spoliation but have also begun to understand e-discovery well enough to appreciate what sanctions, if any, spoliation merits in the individual case.

Finally, I have made good on my plan to plant in all blogs an obscure reference to The Who, in homage to the song that gave rise to the blog’s name. If you haven’t found it, take another look.

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