The first Delaware opinion that has been issued that addresses either sanctions or proportionality under the new Federal Rules is GN Netcom, Inc. v. Plantronics, Inc. Plaintiff GN Netcom, Inc. (“GN”) filed a motion for sanctions against defendant Plantronics, Inc. (“Plantronics”) after a long discovery dispute that centered around the “intentional and admitted deletion of emails” by one of Plantronics’s senior executives and his directives to other members of his team to delete emails.
While the United States District Court for the District of Delaware applied Federal Rule of Civil Procedure 37(e), it started its analysis by noting that amended Rule 37(e) “substantially reflects pre-existing Third Circuit law regarding sanctions for spoliation.” Before the adoption of the amended Rules, the Circuits were split and applied different standards in analyzing spoliation. While some Circuits applied a negligence standard, others (including the Third Circuit) required a finding of bad faith or wrongful intent. This latter standard is more in line with the new Rule, which requires a finding of bad faith intent before a court can impose the more severe and case-dispositive sanctions.
Although it was decided in 1994, the Schmid v. Milwaukee Elec. Tool Corp. case’s three key considerations for determining appropriate sanctions for spoliation tracked the new Rule quite closely. These included “(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.”
In GN Netcom, it was undisputed that thousands of emails which should have been preserved were lost and could not be restored. Therefore, the Court focused its analysis on the remaining three requirements of Rule 37(e): (1) that the producing party took reasonable steps to preserve the information, (2) that there was a bad-faith intent to deprive the requesting party of discovery, and (3) that there was prejudice to the requesting party.
Although Plantronics issued multiple litigation hold letters, conducted training sessions with their employees relating to document preservation to ensure compliance with the litigation holds, and responded promptly when it learned of the deletions, the Court was not convinced that Plantronics had taken all reasonable steps to attempt to recover the lost emails. While Plantronics did engage a vendor and a forensic expert to assist in analyzing the potential loss and in collecting and restoring back-up tapes, they then chose to not retain the expert for a minor fee to complete his analysis and they later had the back-up tapes “unrestored.”
Next the Court found that Plantronics’s senior executive had acted in bad faith with an intent to deprive GN of discovery and that his actions could be properly attributed to the company, given his high position in the company. It was clear that he had not deleted the emails for personal reasons, but rather had done so in an attempt to “protect the business” and, at least in part, out of concern for how the communications would be used during the litigation. In addition, his repeated “obfuscation[s] and misrepresentations” relating to the deletions further persuaded the Court that his actions had been done in bad faith.
The Court held that regardless of which party’s forensic expert was relied upon, the scale of the deletions was substantial and GN had shown, through the use of deleted emails that were recovered from other custodians, what the deleted evidence could have reasonably contained. Therefore, Plantronics was unable to meet its heavy burden of showing that GN was not prejudiced by the deletion of responsive materials and that those deletions could not have plausibly affected the outcome of the trial.
Given the Court’s determination that Plantronics had “a high degree of fault and that GN…suffer[ed] a considerable amount of prejudice,” Judge Stark next had to determine what the appropriate sanctions were under Rule 37(e). He found that in this case, to start with, monetary sanctions were warranted and he awarded fees and costs for the discovery required to deal with the deletion issue. He further felt that punitive monetary sanctions were appropriate and imposed a fine of $3,000,000 on Plantronics. In addition, the Court stated that as the case went to trial, GN could propose other evidentiary sanctions that it believed were warranted.
However, the Court felt that these “lesser sanctions” were not sufficient to fully redress the substantial prejudice to GN. Therefore, in addition to these monetary sanctions, the Court held that an instruction to the jury that it may, though would not be required to, presume that the deleted information would have been favorable to GN was also warranted. The Court found that the harsher dispositive sanctions permitted by Rule 37(e) were not appropriate because they should only be used as a “last resort” when no alternate remedies are available. In this case, the combination of monetary and punitive sanctions, potential evidentiary sanctions, and adverse inference instructions to the jury were an adequate alternative remedy.