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“Cataclysmic” Discovery Failures Result in Monetary Sanctions Imposed on Both Counsel and Defendant
Tuesday, February 28, 2023

For anyone with a few hours to spare, I highly recommend reading the various decisions authored by District Court Judge Iain Johnston of the Northern District of Illinois relating to discovery failures in the DR Distributors case.  DR Distributors, LLC v. Century 21 Smoking, Inc., 513 F. Supp.3d 839 (ND Ill., 2021).  Indeed, the case is a treatise on how not to conduct discovery.  And yet in a series of decisions that granted Plaintiff’s motion for sanctions, including attorneys’ fees, Judge Johnston articulates —with humor, reference to various American novels, and precision—a road map of best practices when dealing with ESI and electronic discovery.  This thoughtful “how to” is likely intended to prevent similar failures of counsel, which resulted in a tremendous burden on the Court and a discovery mess with “cataclysmic” consequences.

Before the Court was Plaintiffs’ motion for sanctions attributable to defendant’s discovery failures.  Plaintiff also sought its legal fees to the extent incurred by litigating its motion for sanctions and its summary judgment efforts, which were derailed by defendant’s discovery failures.  If there is nothing else readers take away from this post understand this:  the Court awarded a total monetary sanction in the amount of $2,525,744.76 to be paid in equal amounts (i.e., 50/50) by defendant and defense counsel.

In what the Court styles as “Ominous Foreshadowing,” Judge Johnston details at the beginning of his Opinion how he was “snakebit” by a series of “missteps, misdeeds, and misrepresentations” made by Defendant and former defense counsel regarding ESI.  The failures are too voluminous to list exhaustively but include:

  • The failure of Defendant (a Stanford University graduate who majored in computer science) advise counsel that his GoDaddy and Yahoo! email addresses were web-based rather than hosted on an email client platform, resulting in a failure to collect in a timely fashion these emails;

  • Defendant misleading counsel to believe that all relevant email would be on one of four computer hard drives (i.e., not in the cloud);

  • Counsel’s failure to issue written litigation holds, which resulted in spoliation;

  • Counsel’s failure to appreciate a difference between an email client platform and web-based email platform;

  • Counsel’s failure to learn from the client that there were highly relevant emails residing in the cloud;

  • Counsel’s failure to direct client to suspend autodelete functionality, which resulted in spoliated emails;

  • Counsel’s failure to appreciate Yahoo! Chat was a repository for relevant information;

  • Counsel’s failure to timely disclose to the Court that relevant information had been destroyed;

  • Counsel’s acceptance at face value client’s representation that client never used his “personal” email for purposes relevant to the lawsuit;

  • Counsel’s use of relevant documents not previously produced in support of a motion for summary judgment;

  • Defendant’s failure to identify in the 26(a) disclosure all relevant locations and sources for ESI; and

  • Counsel allowing Defendant to “self-collect” ESI.

The Court observed that the foregoing allowed for a “reasonable inference” that defense counsel was “too obtuse, uninterested, or careless to ask the question, and Duke [the client]…too coy, veiled, or duplicitous to volunteer the information.”  The Court also noted that “[t]he Rules of Professional Conduct require counsel to be reasonably competent in ESI and in electronic information” and so, the Court was “baffled” by how these failures occurred.

Against this backdrop, the Court needed to determine what sanction, if any, should be imposed, against whom, and under what authority.  In reaching its conclusion the Court held five days of evidentiary hearings, admitted into evidence countless documents, and carefully listened to witness testimony.  The Court offered that the imposition of sanctions was a serious matter to be approached with circumspection and that an attorney’s reputation is his/her stock in trade and Courts are reluctant to sanction counsel.  And so, the Court did not take lightly the need to impose significant sanctions upon defense counsel.  However, in addition to imposing sanctions, the Court provided a wonderful road map detailing best practices and obligations for counsel when dealing with ESI.

Observing that while “at times, ESI discovery can be complex,” the “same basic discovery principles that worked for the Flintstones still work for the Jetsons.” See Brown v. Tellermate Holdings Ltd., No. 2:11-cv-1122, 2014 WL 2987051, at *2, 2014 U.S. Dist. LEXIS 90123, at *4 (S.D. Ohio July 1, 2014) (“[T]he underlying principles of discovery do not change just because ESI is involved.”). Indeed, the Court noted that just like in the good old days, “ESI document disclosure and discovery involve five fundamental steps: (1) identification, (2) preservation, (3) collection, (4) review, and (5) production.   Please see upcoming blogs for an elaboration on each step.

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