Severe Sanctions Await Those Who Play Games With Discovery

07.25.2014

Discovery is one of the most critical – and most expensive – aspects in litigation.  It is the stage of the case where each party gets the opportunity to request virtually any relevant information (subject to certain privileges).  While parties may object to such discovery requests on various grounds, including relevance, over-breadth, and privilege, the Court imposes a high level of diligence and good-faith to be included in the discovery process.  Such good-faith and diligence is especially true when parties engage in “e-discovery” – i.e., requests for electronically stored information.  “E-Discovery” has been a hot-topic in litigation for nearly a decade as attorneys who had spent their entire careers relegated to paper files are now forced to learn the highly-nuanced and tech-savvy process of electronic discovery.

Whether the case involves all paper documents, all electronic data, or a combination of both, attorneys and litigants are held to this high degree of good-faith and diligence.  This topic was highlighted in Brown v. Tellermate Holdings LTD., 2014 WL 2987051 (S.D.Ohio 2014).  In Tellermate, the Browns were terminated from their employment purportedly for performance-related issues.  The Browns, however, asserted they were being discriminated against because of their age.  After suit was brought, the Browns served several rounds of discovery, seeking electronically stored data, information relating to other allegations of age discrimination by their employer, employee evaluations, and other topics.  Instead of fulfilling their good-faith and diligent search into culling together the information requested by the Browns, Tellermate – and its counsel – either failed to investigate what, if any, documents were responsive; and simply lied to the Browns, stating that the information did not exist, or that it was unable to be produced.  The Browns – former employees of Tellermate who previously had access to this information – knew this to be false and brought it before the Court.  The Court, believing the Browns, ordered Tellermate to produce the responsive documents.  Thereafter, Tellermate dumped over 50,000 pages of information on the Browns, and classified virtually all of it as “attorneys-eyes-only.”

Because of its continued bad-faith discovery tactics, the Browns again brought these issues to the Court.  The Court, taking these violations very seriously, sought to fashion an appropriate sanction against Tellermate.  The Court, deciding not to simply hold Tellermate in default of the entire litigation, held that Tellermate was not able to argue at trial that the Browns were terminated for performance-based reasons, thereby effectively precluding Tellermate’s entire defense.  In addition, the Court granted the Browns all attorneys’ fees and costs, which were to be paid jointly by Tellermate and its counsel.

This case highlights the seriousness in which the Court treats discovery.  Once on notice of a filed case, or even reasonably certain of a pending litigation, parties have an obligation to preserve relevant, discoverable evidence.  Failure to do so comes with significant risk, including monetary fines, and other sanctions – which can be so drastic that the Court simply declares the recalcitrant litigant the “loser” and either dismissing the case if the bad actor was the plaintiff, or finding liability if the defendant.  Such risks should come as a significant warning that these matters are not to be taken lightly, and to remind litigants that, while discovery may be one of the most expensive aspects of litigation, cutting corners and failing to adhere to the high-standards imposed by the Courts could have drastic consequences far more expensive than the discovery itself.

Frank Cragle is a trial lawyer and a member of Hirschler Fleischer’s Insurance Recovery Team. He handles a variety of commercial business disputes, including insurance recovery and policyholder claims. Frank also devotes a substantial portion of his time to business tort litigation and intellectual property claims. For more information, contact Frank at 804.771.9515 or fcragle@hf-law.com.