Sanctions Imposed for Inadequate Implementation of Litigation Hold

In re Pradaxa (Dabigatran Etexilate) Prods. Liab. Litig., MDL No. 2385, 2013 WL 6486921 (S.D. Ill. Dec. 9, 2013)

In this case, the court addressed the adequacy of Defendants’ preservation efforts, including the implementation of their litigation hold(s) and determined that sanctions were warranted for Defendants’ violation of the court’s case management orders in bad faith.  Accordingly, the court ordered production of relevant documents or an explanation regarding why they could not be produced, payment of the Plaintiffs’ Steering Committee’s (PSC) costs and fees “in pursuing the issue of the defendants’ violations” and that the defendants produce their employees for depositions in the United States.  The court also imposed a fine of $931,500 jointly and severally against both defendants ($500 per case).

The PSC sought sanctions for alleged discovery violations that fell into four categories, as will be discussed.  Taking up the PSC’s motion, the court first discussed the ongoing nature of the defendants’ discovery violations and indicated that it would be taking into account their cumulative effect.   The court also noted that it had been led to believe that Defendants had implemented a “company-wide” litigation hold and were “preserving all relevant documents of every description”—which turned out not to be the case. 

Summarizing broadly, the four categories of discovery violations were:

1.    The failure to timely identify as a custodian a “high-level scientist that worked on Pradaxa and published articles on Pradaxa as a lead author”  and the resulting failure to preserve much of his relevant information (although the scientist left Defendant’s employ before the time of this opinion, the duty to preserve had been triggered before his departure);

2.    Inadequate and untimely implementation of a litigation hold for Pradaxa sales representatives, including “specialized sales representatives” known as Clinical Science Consultants and Medical Science Liaisons (the litigation holds were imposed in a gradually expanding fashion, and were not imposed on all sales representatives until after August 2013, more than a year after the duty to preserve was triggered);

3.    The failure to provide the vendor assisting in the collection of relevant materials with the proper passwords, resulting in the delayed identification and production of relevant data; and

4.    The failure to properly preserve text messages, including by failing to specify the need for such preservation in the litigation hold(s) and failing to disengage the auto delete feature of employee cell phones, allowing “countless records to be destroyed.”

The court found that each failure constituted a violation of the court’s case management orders and was in bad faith.

With regard to category #2, regarding the preservation of relevant materials in the custody of sales representatives, the court specifically addressed Defendants’ argument that the initial implementation of an “extremely narrow litigation hold” (as opposed to imposing a comprehensive litigation hold all at once) was allowed pursuant to the “proportionality requirement of Rule 26.”  The court disagreed, particularly to the extent that Defendants became aware of the imminence of nation-wide litigation as early as June 2012, but failed to implement a comprehensive litigation hold on all sales representatives until sometime after August 2013.  The court reasoned that there was nothing in any case management order nor any statement of the court “that [could] be interpreted as suggesting such a tailored litigation hold was acceptable” and further reasoned that Defendants “did not receive from the Court a protection order tailoring the litigation hold or managing in increments classes of employees on some timeline or on some case specific landmark when the litigation hold would kick in.”  The court concluded that “defendants’ efforts to suggest they and they alone decided to implement such a proportionality test to the litigation hold smacks of a post-debacle argument in desperation to salvage a failed strategy regarding production evasion.”  The court also labeled as “ridiculous” the argument that the PSC did not need the materials in the individual sales representatives’ custodial files because “the only material sales representatives used” could be found in the production from a particular database.  In support of its conclusion, the court offered the following hypothetical:

An example leaps to the fore, what if a sales representative has in his notes that he made some fraudulent representation about Pradaxa to a physician. Further, what if the rep said “as directed by so and so, I told Dr. X this and that” which is known by all to be patently false? Obviously, the training materials alone are not relevant and clearly the Court does not suggest that its hypothetical is accurate. However, if it were to prove true, the defendants’ [sic] cannot deny such material is both relevant and discoverable.

Regarding category #4, the court noted the “egregious” nature of the defendants’ failure to intervene in the automatic deletion of text messages, particularly where “their sales force” was instructed to utilize text messaging “to communicate with their supervisors, district managers, and others.”  The court instructed that “defendants cannot simply make a unilateral decision regarding the burden of a particular discovery request and then allow the information that is the subject of the discovery request to be destroyed.”  Notably, in response to Defendants’ argument that some employees utilized their personal phone for business but “balk at the request of litigation lawyers to examine these personal phones,” the court stated that any employee who refused to allow the auto delete feature to be turned off or to turn over his or her phone for examination would be subject to a show cause order to appear and explain why they should not be held in contempt.

Concluding that the “actions and omissions” of the defendants were in bad faith, the court ordered the production of certain relevant files and text messages, or an explanation for why that could not be accomplished.  If such an explanation were required, the court indicated it would then “issue an order allowing more time with possible conditions, or an order assessing sanctions pursuant to Rule 37 or the Court’s inherent authority, if appropriate.”

The court also imposed financial sanctions, including an order requiring reimbursement of the PSC’s fees and costs “in pursuing the issue of the defendants’ violations,” an order that the defendants be required to “produce all employees for deposition in the United States,” and an order imposing a $931,500  fine ($500.00 per case) against both defendants jointly and severally.  Plaintiffs had requested a fine “in the nature of $20 million.”  The court also warned that additional sanctions remained available in the event of further violations. 

A copy of the court’s opinion is available here.


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