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E-Discovery Sanctions Awarded after Case Is Closed

By M. Derek Harris, Litigation News Associate Editor – June 2, 2011

A party’s e-discovery violations may have consequences long after a case is closed. A district judge for the U.S. District Court for the Eastern District of Texas recently granted a motion for sanctions that was filed almost a year after the case settled. Green v. Blitz, U.S.A., Inc. [PDF].The sanctions were entered due to defendant’s failure to institute a litigation hold, suspend its “systematic destruction of potentially relevant documents,” conduct electronic word searches for relevant emails, or consult its IT department regarding performing searches for electronic documents.


The plaintiff, as the heir of the decedent, filed suit against Blitz claiming that a gas can Blitz manufactured caused the decedent’s death. It was one of several similar cases filed against Blitz. Blitz’s failure to include a flame arrester was one of the plaintiff’s “major theories for liability.” One of Blitz’s “major defense theories” was that it did not include a flame arrester because flame arresters are “ineffective.” While the jury was deliberating, the parties entered into a high-low settlement agreement. Because the jury returned a unanimous verdict against the plaintiff, the case settled at the low end of the high-low range.


Nearly a year later, the plaintiff’s counsel sought sanctions after learning, through discovery in a related case against Blitz, that Blitz had failed to produce certain documents and failed to preserve other documents. The documents that were not produced related to “Blitz’s interest in potentially using a flame arrester in its gas cans.” The district judge found that Blitz “made little, if any effort to discharge its electronic discovery obligations.” According to the court, beyond the “discovery abuses,” what was most “alarming” was Blitz’s “lack of appreciation for the discovery process in general.”


The district court held Blitz’s conduct was sanctionable, and ordered Blitz to: pay $250,000 in civil contempt sanctions; file a copy of the order “in every lawsuit” it has had or currently has proceeding against it, for the past 2 years, within 30 days; and file a copy of the order in “every new lawsuit” Blitz participates in as a party for the next 5 years. The court also issued an additional $500,000 “purging” sanction to be tolled for 30 days, and which would be extinguished upon Blitz certifying to the district court that it complied with the order. The district judge stated that the civil contempt award was necessary to “compensate the plaintiff for additional recovery she could and would have received if Blitz had met its discovery obligations.” The other more elaborate sanctions were necessary “to ensure that Blitz complies with future discovery obligations.”


The Court’s Order Sends a Warning to All Litigants
The sanctions imposed resonate beyond Blitz. “It seems to me that the court is making an example of Blitz as a warning to future litigants about the perils of not conducting reasonable litigation holds and document searches,” observes Elizabeth T. Timkovich, Charlotte, NC, cochair of the ABA Section of Litigation’s Commercial and Business Litigation Committee. “All litigants would do well to heed this warning, especially in the Eastern District of Texas,” she says.


Prompt Action and Early Communication Are Vital E-Discovery Practices
Acting quickly to preserve documents and reach agreement regarding the scope of discovery will aid parties in meeting their e-discovery obligations. As a standard practice, “we put a litigation hold in place first,” explains Lori B. Leskin, New York City, cochair of the Section of Litigation’s Products Liability Committee. “That’s the very first conversation I have with my clients. Then, we have a very frank discussion with the plaintiff and the court to reach an agreement about what we are going to do and about what the searches are going to look like,” she adds.


Awarding Sanctions after a Case Is Closed?
This case illustrates that the threat of possible discovery sanctions does not necessarily end when a case is settled. “We have long lived under the premise that while res judicata might be harsh at times, there should be an end; otherwise, civil litigation could go on forever, ” maintains Betsy P. Collins, Mobile, cochair of the Section’s Pretrial Practice and Discovery Committee. “When my clients are looking to resolve something, they are looking for it to be over. The finality is worth a lot to them. If they thought they were going to have loose ends hanging out there, we might try a lot more cases,” she says.


To date, Blitz has not filed a certification stating that it has complied with the district court’s sanctions order. Instead, 30 days after the order was entered, Blitz filed a notice of appeal seeking to have the U.S. Court of Appeals for the Fifth Circuit overturn the order. Proceedings at the district court were stayed pending appeal.


Keywords: litigation, e-discovery sanctions, Green v. Blitz, U.S.A., Inc.


 
Related Resources

  • » Green v. Blitz U.S.A., Inc., Case No: 2:07-CV-372, 2011 U.S. Dist. LEXIS 20353 (E.D. Tex. Mar. 1, 2011).

 

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