Court Orders Jail Contempt For E-mail Discovery Abuse

WHAT WE HAVE HERE IS FAILURE TO COMMUNICATE: RECENT CASE ADDS PRISON TIME TO THE LIST OF SANCTIONS FOR THE DESTRUCTION OF ELECTRONICALLY STORED INFORMATION

Looking for even harsher sanctions for failing to preserve electronically stored information (ESI)? How about prison? A recent case again underscores the duty to preserve ESI that has any potential for relevance to pending or likely litigation, as well as the need to avoid game-playing in discovery of ESI.

Doing Hard Time

Courts have warned for years about the perils of playing games with e-mails and other ESI while suit is pending or anticipated. Mark Pappas may learn his lesson the hard way-- behind bars. A federal Magistrate Judge in Maryland recently filed an 88-page opinion that chronicles Pappas's evasions and orders a variety of sanctions, the strongest of which is a two-year prison term for contempt of court if he does not pay money sanctions to the opposing party within 30 days of the fixing of that sum. The court has not yet heard or ruled on the fees and costs, but has promised the total sum will be significant given the long history of discovery abuse¹.

The Pappas contempt arises from a federal copyright infringement suit filed by Victor Stanley, Inc. (VSI) , against Pappas and his company, Creative Pipe, Inc. (CPI). The very allegations implicate Pappas's talent for accessing electronic data: he is alleged to have downloaded designs and drawings from VSI's website in violation of copyright and unfair competition laws. Despite his capabilities in taking things from online sources, he is evidently not adept covering his tracks (let's face it, when it comes to ESI no one is). As Judge Grimm commented: "At the end of the day, this is the case of the 'gang that couldn't spoliate straight.'"²

The Court sets out the numbing detail of Pappas's multiple transgressions, but summarizes the eight main violations as:

1. Pappas's failure to implement a litigation hold;
2. Pappas's deletions of ESI soon after VSI filed suit;
3. Pappas's failure to preserve his external hard drive after Plaintiff demanded preservation of ESI;
4. Pappas's failure to preserve files and emails after Plaintiff demanded their preservation;
5. Pappas's deletion of ESI after the Court issued its first preservation order;
6. Pappas's continued deletion of ESI and use of programs to permanently remove files after the Court admonished the parties of their duty to preserve evidence and issued its second preservation order;
7. Pappas's failure to preserve ESI when he replaced the CPI server; and
8. Pappas's further use of programs to permanently delete ESI after the Court issued numerous production orders.

Just a cursory read shows how flagrant the violations are—especially given the avalanche of ESI discovery opinions that have issued in the past decade.

Judge Grimm took several opportunities to describe Pappas's gamesmanship, calling it a "cat and mouse game" that resulted in successful deletion of ESI that was presumptively harmful, although the prejudice to the Plaintiff was mitigated by the harmful nature of what CPI and Pappas eventually did produce. The court said the expense and delays caused by this pattern of hiding evidence merited strong sanctions, lamenting that the court could not order payment of sanctions to the court clerk as it would require criminal proceedings and not mere civil discovery sanctions. Judge Grimm described the hundreds of hours the discovery issues required of him and his staff and commented that the case would be a "poster child for the appropriateness of such a sanction" were it available.

Preserve, Protect and Defend

Litigation holds and preservation upon demand for it are now a clear-cut rule. It has been well known for many years that a party has the duty to preserve evidence when it is "potentially relevant" to pending or "probable" future litigation.³ Sanctions, even harsh ones, do not require evidence of bad intent to destroy known evidence. "Willful" destruction merely requires that the evidence was purposely erased or deleted (including failure to suspend regular recycling programs) after notice of a likely claim to which the evidence was potentially relevant.⁴ And mere negligence satisfies the culpability requirements for many sanctions, such as giving the jury an adverse inference instruction.⁵ Those who fail to instruct employees and IT departments to place holds on deletion/destruction schedules to ensure preservation run serious risks in litigation. Apparently many still have not gotten the message, as the sanctions orders continue to proliferate.

Victor Stanley also counsels that evasion and game-playing in discovery that make simple requests for ESI a Herculean task will incur the sanctions wrath of the courts as well. Spoliation was present in that case but in part the sanctionable actions consisted of running up the costs and efforts of discovery by making information inaccessible or requiring court intervention before turning it over. In either case Mr. Pappas may have a long stay in the slammer to think about it.

Footnotes

1 Victor Stanley Inc. v. Creative Pipe, Inc., et al., 2010 U.S. Dist. LEXIS 93644 (D. Md. Sept. 9, 2010). The decision is subject to review by the District Judge. As of November 15, 2010, there was no indication on LEXIS of any modifying filings.

2 Victor Stanley Inc. v. Creative Pipe, Inc., et al., 2010 U.S. Dist. LEXIS 93644 (D. Md. Sept. 9, 2010). The Court's reference is to Jimmy Breslin's comic mob novel THE GANG THAT COULDN'T SHOOT STRAIGHT (1969).

3 Leon v. IDX Systems Corp., 464 F.3d 951, 959 (9th Cir. 2006); In re Napster, Inc., 462 F.Supp.2d 1060, 1067-68 (N.D.Cal. 2006); Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003). Conversely, "[a] party does not engage in spoliation when, without notice of the evidence's potential relevance, it destroys the evidence according to its policy or in the normal course of its business." United States v. $ 40,955.00 in U.S. Currency, 554 F.3d 752, 758 (9th Cir. 2009); Otsuka v. Polo Ralph Lauren, 2010 U.S. Dist. LEXIS 1867, at *8 (N.D. Cal. 2010).

4 See Leon v. IDX Systems Corp., 464 F.3d 951, 959 (9th Cir. 2006) ("A party's destruction of evidence qualifies as willful spoliation if the party has 'some notice that the documents were potentially relevant to the litigation before they were destroyed.'") (original emphasis); Uribe v. McKesson, 2010 U.S. Dist. LEXIS 115311, at *5 (E.D. Cal. Oct. 21, 2010); In re Napster, Inc., supra, 462 F.Supp.2d at 1070 (duty to preserve means to suspend all existing policies related to deleting or destroying files and preserve all relevant documents related to the litigation).

5Uribe, supra, 2010 U.S. Dist. LEXIS 115311, at *8. And the failure to suspend deletion policies after the duty to preserve arises is negligent, at minimum. In re Napster, supra, 462 F.Supp.2d at 1070; Zubulake, supra, 220 F.R.D. at 220. An adverse inference instruction informs the jury that evidence was destroyed by a party and the jury is free to conclude destroyed evidence was harmful to that party. See In re Napster, supra, 462 F.Supp.2d at 1066.

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