Those familiar with the tales by the Brothers Grimm -- not the softer, updated tales of our youths, but the dark, original Germanic folktales -- understand the feelings of fear and dread that the stories evoked. Images of these tales are easily surmised when reading Chief Magistrate Judge Paul Grimm's latest opinion in Victor Stanley v. Creative Pipe, U.S. Dist. Lexis 93644 (D. Md. Sep. 9, 2010). Put bluntly, this case is scary.
Among the sanctions imposed, Judge Grimm ordered that the defendant's "acts of spoliation be treated as contempt of...court, and that, as a sanction, he be imprisoned for a period not to exceed two years, unless and until he pays...attorneys fees and costs associated not only with filing this motion, but also with respect to all efforts expended throughout this case to demonstrate the nature and effect of [his] spoliation." Id. at *156.
The facts of the case, as Judge Grimm points out, "are convoluted and cannot be summarized succinctly." Id. at *8. Indeed, like Judge Grimm's other important e-discovery opinions, this one is quite lengthy, spanning nearly 90 pages, not including the 12-page appendix summarizing the law in each federal circuit on the scope of the duty to preserve and culpability and prejudice requirements for spoliation sanctions (arguably the most useful part of the opinion, which appears to be included only in the original opinion and not with the Lexis® version).
To make a long story short, this opinion deals with numerous egregious acts of actual and attempted spoliation by the defendant, including (but not limited to):
Failure to implement a legal hold;
- Intentional deletion of electronically stored information (ESI) shortly after the suit was filed;
- Intentional deletion of ESI shortly before a court-ordered forensic image of a computer was to be taken;
- Use of several software programs that eliminate deleted and fragmented files;
- Instructing third parties to delete relevant information;
- Disposing of an external hard drive containing relevant information during the course of litigation; and
- Intentional deletion of ESI after issuance of a court order specifically requiring that it be preserved.
The extraordinary lengths to which the defendant apparently went to destroy data and delay discovery is reflected by the fact that he ultimately acknowledged that default judgment on a copyright claim was an appropriate sanction.
The most important parts of this case, as with other seminal opinions by Judge Grimm, are not those related to the specific facts of the case, but rather to the dicta provided to educate the bar on difficult questions of e-discovery law, which in this case is the duty to preserve evidence and the standards governing imposition of sanctions. Recognizing that inconsistent case law on these issues "causes...concern and anxiety, particularly to institutional clients such as corporations, businesses or governments, because their activities – and vulnerability to being sued – often extends to multiple jurisdictions," Judge Grimm very helpfully canvasses the law in each federal circuit, even appending a useful table of his results to the opinion. Id. at *91.
As Judge Grimm acknowledges, a "national corporation cannot have a different preservation policy for each federal circuit and state in which it operates." Id. Thus, it is important for companies to understand the different standards that are applied and ensure that the preservation policies and procedures that are in place comply with the most rigorous standards to which the company might be subject.