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Document Retention Policy Is No Excuse for Discovery Noncompliance

By Angela Foster, Litigation News Associate Editor – September 25, 2015

 

Vaguely worded document retention policies are no defense against “death penalty” sanctions for repeated disobedience of discovery orders. The court in Crews v. Avco upheld a death penalty sanctions order that deemed all of the plaintiffs’ claims admitted and struck all of the defendant’s affirmative defenses. The court emphasized that lesser sanctions were insufficient to cure the prejudice to the plaintiffs resulting from the defendant’s noncompliance with discovery orders. The case serves as a reminder that retention policies provide a safe harbor in only limited circumstances where documents have been destroyed prior to a duty to preserve.


The Discovery Dispute
Several people were killed in a plane crash in the Cascade Mountains in Washington. The decedents’ heirs filed a wrongful death suit against multiple defendants, including Avco Corporation, which manufactured and sold the engine. The plane crash allegedly resulted from Precision Automotive Corporation’s installation of a new defective carburetor float. The plaintiffs alleged that Avco failed to warn of defects in the carburetor float in the engine that caused the crash.


The plaintiffs sought documents from Avco about the float, and Avco objected. The plaintiffs moved to compel, based on emails produced by Precision reflecting its discussions with Avco about leaks in the carburetors. The trial court ordered Avco to identify responsive documents to each request by Bates number. Avco did not do so.


The plaintiffs then moved to hold Avco in contempt, and asked the court to strike Avco’s affirmative defenses, order non-opposition to punitive damages, and find a duty to warn about defects. The court granted the motion, finding Avco’s violation was willful, and prejudiced the plaintiffs’ ability to prosecute. The court ordered Avco to submit an affidavit detailing its efforts to comply.


In response, Avco submitted the affidavit of its attorney, who testified that under company policy, “certain categories of documents (such as engineering documents and regulatory correspondence) are kept into perpetuity whereas other categories of documents are not required to be retained on a permanent basis but are retained only for fixed periods of time, depending upon the category of document.” Avco’s attorney indicated that many requested documents were not retained. Avco did not submit the retention policy. The court denied Avco’s motion to vacate the contempt order.


The plaintiffs issued a second round of discovery and filed a second motion to compel, which was granted in part. The plaintiffs next moved for default judgment due to Avco’s failure to comply with discovery and contempt orders. In response, Avco produced an unauthenticated copy of its retention policy. The court held that the policy did not apply to the requested documents and that Avco willfully disobeyed discovery orders, severely prejudicing the plaintiffs. The court deemed all allegations against Avco admitted and struck all of Avco’s affirmative defenses. The jury returned a verdict in favor of the plaintiffs of over $17 million.


“Death Penalty” Sanctions Upheld on Appeal
The Washington Court of Appeals affirmed the sanctions order, finding the “death penalty” sanctions to be appropriate. The appellate court observed the length of time between denial of Avco’s motion to vacate the contempt order and entry of default judgment reflected intentional noncompliance. The appellate court also cited Avco’s “pattern” of misconduct, including its removal of boxes of documents pertaining to an Avco witness during opposing counsel’s inspection.


The appellate court observed that Avco’s document retention policy did not excuse its nonproduction. Though the policy was not part of the appellate record, the appeals court noted Avco failed to submit any evidence explaining how the policy applied to the requested documents and their destruction. Because the withheld documents went “straight to the heart of plaintiff’s theory of liability,” the appellate court reasoned that lesser sanctions would not have cured the prejudice to the plaintiffs nor sufficiently punished, deterred, or educated Avco.


Were “Death Penalty” Sanctions Warranted?      
Some leaders of the ABA Section of Litigation agree that the conduct was proportionate to the penalty. “It would have been grossly unfair to permit Avco to introduce evidence of the pilot’s alleged negligence, where due to Avco’s misbehavior, the plaintiffs could not fully present their case against Avco,” according to John Kenneth Felter, Boston, MA, cochair of the Section of Litigation’s Trial Evidence Committee. “While severe, the death penalty discovery sanction was appropriate,” agrees Ian H. Fisher, Chicago, IL, cochair of the Section’s Trial Evidence Committee. “Once Avco found itself facing potential contempt of court, it should have gone to great lengths to comply with the court’s orders,” says Fisher.


Other leaders take a different view. “Although the court found a pattern of misconduct in discovery, this was not the kind of misconduct that deserves the death penalty [sanctions],” asserts Jeffrey G. Close, Chicago, IL, cochair of the Section’s Pretrial Practice & Discovery Committee. “While there were apparently documents indicating that Avco was aware of leaking defects with the carburetors, there was no indication that Avco believed the defects were dangerous or caused the crash at issue. Avco should have been entitled to evidence that the defect caused the crash,” states Close.


Section leaders believe that the retention policy was not central to the court’s decision. “This document retention policy only came in as an attempted explanation of why the documents were not produced, not that they did not exist. It does not appear that Avco ever represented plainly that the documents ceased to exist prior to any duty to preserve,” says Close. “If the documents were destroyed without any duty to preserve, the document retention policy should not matter. The question should have been ‘Did the documents exist, and if not, as of when,’” he adds.


Lessons Learned
Practitioners would be well advised not to rely on conclusory or vague statements from the client, according to Close. Further, attorneys should “take discovery orders very seriously” and “provide factual details to support [their] arguments,” recommends Fisher.


Keywords: discovery, civil death penalty, contempt, compel, sanctions


 
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