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Court Orders Monetary Sanction of $250,000, that Defendant Provide the Court’s Order to Plaintiffs in All Cases, and that Defendant File the Order in Every Case for 5 Years

Posted in CASE SUMMARIES

Green v. Blitz U.S.A., No. 2:07-CV-372 (TJW), 2011 WL 806011 (E.D. Tex. Mar. 1, 2011)

Plaintiff sought to re-open her lawsuit or for the court to sanction defendant, despite prior settlement, upon learning that defendant had failed to produce highly relevant documents.  Finding that defendant had committed discovery abuses, including failing to disclose relevant evidence and failing to issue a litigation hold, the court ordered defendant to pay plaintiff $250,000, to provide a copy of the court’s order to plaintiffs “in every lawsuit proceeding against it” for the past two years and to file the court’s order in every case that defendant is involved in for the next 5 years.

Plaintiff brought suit alleging that a gas can manufactured by the defendant resulted in the death of Brody Green.  One of her major theories of liability was that the gas can had no flame arrester.  The defense asserted that no flame arrester was included on the gas can because flame arresters are ineffective.  Prior to conclusion of trial, the parties entered into a high-low settlement agreement.  Thereafter, the jury returned a verdict in plaintiff’s favor which resulted in a settlement figure at the low end of the high-low range.

Counsel for plaintiff was involved in related litigation.  In the course of discovery in that case (and after the present case had closed), counsel learned of “extremely relevant and material” documents that were not produced to plaintiff and filed a motion to re-open the case and for sanctions.  Specifically, plaintiff argued that the Court’s Discovery Order required production of all relevant evidence and that defendant’s failure to do so violated the order.  Plaintiff further alleged that the defendant’s discovery violations were in bad faith and that had the documents been disclosed, the outcome of her trial would have been different.

Regarding defendant’s efforts to respond to discovery, it was revealed that the employee “solely responsible for searching for and collecting documents relevant to litigation” between 2004 and 2007 (and who also “headed up the research and investigation around flame arresters”) issued no litigation hold, conducted no electronic word searches for emails, and made no effort to speak with defendant’s IT department regarding how to search for electronic documents.  In fact, the employee stated that he was “about as computer literate – illiterate as they get.” Making matters worse, some of the information discovered after the close of plaintiff’s case would have easily been identified with a simple word search for “flame arrester”, for example, as those words were in the subject line of one of the undisclosed emails specifically discussed by the court.  Also of note as to the specific email discussed by the court was the fact that the employee tasked with discovery was a recipient of the email and still failed to disclose it in discovery.  Despite failing to produce relevant material, defendant made the certification that “full and complete disclosure ha[d] been made in accordance with the Federal Rule’s of Civil Procedure and the Court’s orders.”

“[G]iven the context and type of documents not disclosed,” the court found that defendant’s conduct was a willful violation of the Court’s Discovery Order and that plaintiff had been prejudiced as a result.  The court also found that defendant had failed to properly include several documents on its privilege log, including documents which defendant had objected to plaintiff presenting at the Show Cause Hearing on grounds of privilege.  Such conduct, according to the court “show[ed] a further violation of the Court’s Discovery Order” and provided “additional proof of [defendant’s] blatant disregard” for that Order.

Regarding defendant’s failure to preserve, the court first focused on evidence that defendant’s IT department head requested, on at least ten occasions, that employees delete their emails during “the precise time period” that defendant “was actively defending multiple products liability suits relating to its gas cans and had a duty to preserve evidence.”  The court also discussed defendant’s failure to issue a litigation hold to its employees and its failure to cease rotation of its backup tapes.  Accordingly, the court concluded that “it will never be known how much prejudice against the plaintiff was actually caused by Blitz’s failure to preserve documents” and found that sanctions were warranted.

Following its analysis of the legal standard for civil contempt sanctions, the court ordered that defendant pay plaintiff $250,000 in civil contempt sanctions upon finding that “the settlement would have been not less than $250,000 higher if plaintiff would have had the documents discussed in this Memorandum Opinion and Order.”  The court further ordered that defendant had thirty days to furnish a copy of the court’s Memorandum Opinion and Order “to every Plaintiff in every lawsuit it has had proceeding against it, or is currently proceeding against it, for the past two years” and issued and additional $500,000 sanction to be “extinguished” upon a showing of compliance.  Finally, the court ordered that “for the next five years from the date of this Memorandum Opinion and Order, Blitz is ordered that in every new lawsuit it participates in as a party . . .  it must file a copy of this Memorandum Opinion and Order with its first pleading or filing in that particular court.”