Client and Lawyer Fined $2.5 million for “Amateur Hour” Discovery 2023
This case serves as a warning lesson for attorneys who may know all the right things to say about current discovery practice but lack the knowledge and skills necessary to lead a credible discovery effort. In dealing with discovery incompetence, this attorney instead put the court in an “inner circle of judicial hell,” as characterized by herself. Since complicated discovery has become a specialized profession, the court’s awareness of the distinguishing characteristics between competent and incompetent e-discovery counsel has likewise increased in sophistication. To effectively defend or prosecute their cases, discovery practitioners must have a comprehensive grasp of their client’s information systems; otherwise, they risk serious repercussions.
In a trademark lawsuit involving e-cigarettes with identical brand names, the defendants and their counsel were fined over $2.5 million for discovery breaches stemming from the counsel’s lack of e-discovery expertise:
- Although the defense counsel advised the defendants to preserve all potentially relevant emails from their email accounts, they failed to issue a formal litigation hold, thoroughly investigate all potential data sources, or instruct their client to disable automated deletion features, as “any competent counsel should have done.”
- The defense counsel erroneously believed that all pertinent emails could be retrieved from the defendants’ servers, whereas in fact, the defendants used web-based email and online-stored communications.
- The attorney failed to recognize the distinction between email and chat programs, resulting in the loss of relevant conversation data.The attorneys let their clients gather pertinent emails and communications without monitoring or overseeing the searches. Lawyers must know that “notifying all workers of a legal hold and expecting the party to keep and deliver all relevant material is insufficient.”
As it became evident that the defendants had failed to deliver some crucial communications, they rehired an ESI vendor who discovered more than 15,000 documents that had never been gathered or produced. In addition, the ESI provider was unable to recover possibly relevant emails and conversations that had been destroyed automatically. The court reprimanded defense counsel for lacking the fundamental knowledge, training, and abilities necessary to properly handle electronically stored information (ESI), noting, “Counsel must be competent in their understanding and capacity to identify, maintain, collect, evaluate, and generate ESI. Competency permeates all facets of the ESI discovery procedure. No longer is it an amateur hour. Because e-discovery compliance is technically difficult and resource-intensive, it is much too late for attorneys to hope for a reprieve.”
Moreover, the court rejected the attorney’s attempt to transfer culpability to the ESI vendor. It is the role of the attorney to have “a reasonable grasp of the client’s information systems,” and this “understanding enables counsel to design a systematic approach and plan for responding to discovery requests. The lack of a procedure and a strategy is a significant indication that counsel did not undertake an adequate investigation.” The court approved the plaintiff’s petition for sanctions under Federal Rules 26(g) and 37, which included monetary fines and a requirement that the defense attorney attends “at least eight hours of continuing legal education (CLE) on ESI.”
In its following judgment, the court expressed its exasperation with the drawn-out drama by stating that it had to traverse the “inner circle of judicial hell” to determine the right amount of attorneys’ fees to award as penalties. Following an intensive study and analysis of the additional expenditures spent as a result of the defense’s mistakes, the court determined that nearly $2.5 million in sanctions were appropriate, with half to be paid by the defendants and the other half by their two attorneys. Court justified the substantial amount based in part on the fact that, although the defendants “understood what went wrong,” it took several hours for the plaintiff to “understand the shambolic discovery mess they produced.”