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Court Imposes Sanctions for Failure to Conduct Reasonable Inquiry and Late Production

Posted in CASE SUMMARIES

In re Delta/AirTran Baggage Fee Antitrust Litig., —F. Supp. 2d—, 2012 WL 360509 (N.D. Ga. Feb. 3, 2012)

After repeated representations that all responsive documents had been produced, a defendant belatedly discovered and produced an additional 60,000 pages.  Upon plaintiffs’ motion for sanctions, the court found that the defendant “did not conduct a reasonable inquiry” to ensure production of all responsive documents and had run “afoul” of Rule 26(e).  Accordingly, the court ordered discovery re-opened and that the defendant pay plaintiffs’ reasonable expenses and attorneys’ fees caused by the defendant’s failure, including the cost of the necessary motions and the extended discovery period.

Throughout the discovery process a defendant made approximately 20 representations that all responsive documents had been produced.  Despite this, approximately 60,000 additional pages were belatedly discovered and eventually produced after the close of discovery.  The late-produced documents were of two types: documents discovered on individual hard drives and documents discovered on backup tapes.  According to the defendant, the late-discovered documents from individual hard drives were originally overlooked as the result of a misunderstanding with its IT personnel.  In short, the defendant believed that the contents of all collected hard drives had been uploaded to its e-discovery software to be searched and ultimately produced. Unfortunately, defendant failed to specifically confirm this belief, and learned later than some hard drives had been inadvertently overlooked.  Similarly, as to the late discovered backup tapes, the defendant explained that they had been belatedly and unexpectedly discovered in an evidence locker and that no one was certain who put them there.

Plaintiffs moved for discovery to be re-opened and for sanctions (as well as other relief not relevant to the discussion in this summary).  The defendant conceded that re-opening discovery was appropriate.  Regarding sanctions, the court acknowledged plaintiffs’ claims related to alleged document destruction, but noted they offered “nothing more than speculation” in support of that theory.  Thus, the court focused on the question of whether sanctions should be imposed for the defendant’s late discovery and production of responsive documents, particularly in light of its repeated representations that all responsive discovery had been produced and its failure to correct its misstatements until after the court had denied plaintiffs’ then-pending motion for spoliation sanctions.  Indeed, even after learning of the incompleteness of its production, the defendant continued to proactively oppose plaintiffs’ motion for spoliation sanctions but made no mention of the incompleteness of its discovery until after a ruling was issued.

The court’s analysis was broken into two discussions: first, whether sanctions were appropriate under Rule 26(g) and second, whether sanctions were appropriate under Rule 37.  Pursuant to its analysis of a party’s discovery obligations under Rule 26(g)—which the court determined requires counsel to make a reasonable inquiry under the circumstances—the court found that the defendant “did not conduct a reasonable inquiry.”  Specifically, the court faulted the defendant for failing to confirm with its IT personnel that each hard drive collected had actually been run through the e-discovery software, characterizing the failure to do so as “a huge hole” in the defendant’s electronic discovery process.  Similarly, the court took issue with the defendant’s failure to timely identify the existence of responsive backup tapes which were stored in an evidence locker controlled by the IT personnel.  Although the defendant alleged that the tapes were not expected to be stored there, thus resulting in their delayed discovery, the court noted that the defendant had also indicated that the locker was used to store tapes collected for litigation and investigation, making it a somewhat obvious place to look in the course of defendant’s efforts to identify responsive information.  These discovery failures, compounded by the defendant’s repeated representations that it had produced all responsive documents and its delay in correcting its misstatements upon discovering the truth (which the defendant waited to do until after the court denied plaintiffs’ prior spoliation motion), resulted in the court’s finding that sanctions were appropriate and an order for the defendant to pay reasonable expenses, including attorneys’ fees, caused by its violation.  The defendant’s generally cooperative behavior following its discovery of the unproduced information and the lack of any late-discovered “smoking gun” evidence resulted in the court’s imposition of these “lesser sanctions” and refusal to preclude the defendant’s use of the evidence in future proceedings.

Turning to its analysis pursuant to Rule 37, the court likewise determined that sanctions were appropriate under Rule 37(c)(1).  Rule 37 incorporates obligations imposed under Rule 26(e), which requires timely supplementation of a party’s document production when it learns that its prior production was incomplete or when ordered by the court.  In the present case, the court determined that because the late-produced responsive documents had always been in the defendant’s possession and because it was defendant’s lack of diligence and dilatory behavior that resulted in the late discovery of those documents, the defendant’s behavior ran “afoul” of Rule 26(e).  In so finding, the court noted that 26(e) does not provide a “safe harbor” for a “lack of diligence.”  Once again, the court noted the particularly egregious nature of the discovery failures in light of the defendant’s repeated misrepresentations regarding the completeness of its production and the defendant’s delay in correcting its misstatements until after plaintiffs’ pending motion for spoliation was denied.  Accordingly, the court found that an appropriate sanction would be to require the defendant to pay plaintiffs’ “reasonable expenses and attorneys’ fees caused by [Defendant’s] failure, which includes Plaintiffs’ request for fees and expenses related to this motion, the extended discovery period, and its motion for spoliation sanctions.”

  • http://www.legalfunding.com/ Lulaine

    For the legal system to work properly there has to be an ethical and real trust between the opposing parties. If that trust is not honored or established then the entire justice system can be corrupted. That is why discovery is done, so both sides know where each other stand. If one side hides evidence that affects the entire trial. So the court’s sanctions were right not only in principle but for the sanctity of the justice system.