ESI Discovery Best Practices, Part 6 – Now Comes The Bad News Potential Consequences For Inadequate Preservation Of ESI

ESI Discovery Best Practices, Part 6 - Now comes the bad news ... potential consequences for inadequate preservation of ESI.

Over the past year, I have blogged about ESI rules and best practices for identification, preservation and collection of ESI. In this blog I want to focus on the potential consequences for inadequate efforts in any of these areas.

There are numerous cases addressing failure to preserve ESI, and I highlight here but a few examples. One significant case is Peerless Industries v. Crimson AV.[1] I mention this case because in a prior blog I wrote that using a third-party vendor for collection efforts is the preferred approach. Well, the court in Peerless stated that a defendant's "hands-off" approach to allowing a vendor to collect documents from a third party over which the defendant had control was insufficient, and ordered sanctions including payment of attorney's fees. So, the take away here is that you can use a vendor, but you can't just say "go get the relevant documents." Counsel for the party must stay involved in the process.

In Day v. LSI Corp.,[2] the issue was whether the defendant had failed to preserve relevant documents, including those belonging to a particularly relevant custodian. In the course of discovery surrounding the issue of spoliation, it became clear that the defendant's preservation and search efforts were neither timely nor comprehensive. In addition, testimony from the general counsel and another employee contradicted each other as to the data being sought. Because certain lost evidence was particularly relevant to one of plaintiff's claims, the court found the risk of substantial prejudice was great, and awarded partial default judgment as to that claim. The court also found that an adverse instruction at trial would be appropriate and ordered the defendant to pay $10,000 in sanctions.

In Multi-Feeder Tech,[3] an interesting case where the magistrate judge ordered sanctions, the defendant appealed to the district court, and the district judge increased the sanctions. The case involved a computer forensic expert who was hired to examine the defendant's computers. The forensic examination identified several occurrences of spoliation by the defendant, including commercial wiping software found on one custodian's computer with 6 deletions occurring after the commencement of the lawsuit and the issuance of the ESI protocol order. The original order was a $500,000 sanction ($475,000 to the...