E-Discovery Sanctions Reach an All-Time High, Survey Finds

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Court-ordered sanctions for e-discovery abuses have reached an all-time high and are increasingly severe. Sanctions against counsel, while still uncommon, are also on the rise.

These are among the findings of a survey of e-discovery cases published in the December 2010 issue of the Duke Law Journal. The survey analyzes all 401 federal cases prior to Jan. 1, 2010, in which e-discovery sanctions were requested. Of those, it identifies 230 sanction awards.

“There has been a significant increase in both motions and awards since 2004,” the authors conclude. They were found in all types of cases and all types of courts.

The survey, Sanctions for E-Discovery Violations: By the Numbers, was conducted by three attorneys in the e-discovery practice at the law firm King & SpaldingDan H. Willoughby Jr., the partner who heads the firm’s Discovery Center; Rose Hunter Jones, a senior attorney working at the Discovery Center; and Gregory R. Antine, also a senior attorney at the Discovery Center.

Amendments made in 2006 to the Federal Rules of Civil Procedure to explicitly address e-discovery appear to have done nothing to staunch discovery disputes involving electronically stored information, the authors suggest.

Lawyers agree that discovery in the postamendment world is more expensive, more complicated, and more contentious than ever. The highest number of filed motions and awards relating to e-discovery sanctions in any single year prior to 2010 occurred in 2009, three years after the effective date of the 2006 amendments.

Part of the problem is that e-discovery isn’t easy. “Performing complicated tasks on a deadline creates the opportunity for incorrect or incomplete production, whether resulting from innocent inadvertence or intetntional malfeasance,” the report says. And when e-discovery falls short, that can mean penalties for the producing party.

While some of the most severe cases involving sanctions are well-known, the authors say that the greater concern for the average practitioner is the increasing willingness of courts to award sanctions “for e-discovery failings not rising to the level of intentional or willful conduct.”

Sanctions Are on the Rise

Three decades have passed since the first case in which sanctions were sought for e-discovery violations. But it was not until 2004 that the number of sanction cases began a more rapid rise.

The number of e-discovery sanction cases and the number of e-discovery sanction awards more than tripled between 2003 and 2004, from nine to twenty-nine sanction cases, and from six to twenty-one sanction awards. The numbers continue to rise. Our analysis of pre-2010 cases indicates that there were more e-discovery sanction cases (ninety-seven) and more e-discovery sanction awards (forty-six) in 2009 than in any prior year. In fact, there were more e-discovery sanction cases in 2009 than in all years prior to 2005 combined.

E-discovery sanctions cases have now appeared in most federal jurisdictions. All 11 of the federal appellate courts, as well as the Federal and D.C. Circuit courts, have issued opinions involving e-discovery sanctions. Motions for sanctions most commonly arise in employment, contract, intellectual property and tort cases.

Grounds for Sanctions

The most common reason courts imposed sanctions was for a party’s failure to preserve ESI. Of the 230 cases the authors analyzed, this was the sole basis for sanctions in 90. In anther 46 cases, it was one of several contributing reasons for sanctions.

The next most common reason for imposing sanctions was the failure to produce evidence. This was the sole basis for sanctions in 35 cases and a contributing basis in another 67 cases.

Types of Sanctions

Sanctions for e-discovery violations vary widely in type and severity, the authors find. Dismissal, which the authors describe as “the most draconian of sanctions,” was ordered in 36 cases. In 19 of the 36, the court found that the party had engaged in a pattern of misconduct that often included the failure to preserve ESI, spoliation of ESI and misrepresentations about ESI.

Other sanctions commonly imposed included adverse jury instructions and monetary awards of anywhere from $250 to $8.8 million. Five cases involved awards of over $5 million and another four cases had awards of over $1 million.

While sanctions imposed on counsel remain rare, the authors identified 30 cases in which counsel were sanctioned. As with the general trend in sanctions, the frequency of counsel sanctions rose over time, with seven such cases in 2009.

The authors conclude their analysis with a two-part recommendation. Courts should continue to impose sanctions for serious e-discovery misconduct, they say. But in ruling on motions for sanctions, judges should give due consideration to the complexity of the process.

The full article, complete with appendices and charts, can be downloaded in PDF: Sanctions for E-Discovery Violations: By the Numbers. The article appears in a special symposium issue on civil litigation which can be viewed in its entirety  at the Duke Law Journal website.