New Jersey State Courts Enter the E-Discovery Arena in Earnest; Award Sanctions for Email Spoliation

On June 18, 2012, an Appellate Court in New Jersey issued Goldmark v. Mellina, which held that asserting the attorney-client privilege does not excuse counsel and parties from their obligation to preserve relevant e-mails or other documents. There, the Court upheld the trial judge’s award of $5,502.50 in sanctions against a prominent New Jersey law firm because it had failed to timely produce electronic documents, which had temporarily disappeared, even though the lapse was not knowing. Because there were virtually no prior opinions (published or unpublished) addressing e-discovery in this jurisdiction, Goldmark is an important first-step towards providing e-discovery guidance to New Jersey practitioners.

At issue in this real estate construction litigation was whether the underlying construction dispute was settled as the purchasers contended or whether the purchasers breached the contract, which was the basis of the sellers’ claim. Although the Trial Court determined that no settlement agreement had been consummated, it also held that the sellers had both repudiated and breached the contract. In reaching that determination, the judge “relied upon and quoted extensively two [March 2008] emails” between the sellers and their attorney.

Where the sellers and their subsequent attorneys, who were ultimately sanctioned erred, was in thwarting the purchasers’ efforts to obtain those emails during discovery. Although the sellers’ attorneys properly produced a privilege log that listed those two e-mails, they failed to provide them to the judge for an in camera inspection in the context of a discovery motion. As a result, the trial judge allowed discovery to be re-opened, and the sellers testified that the e-mails had long been deleted.

After the purchasers hired a forensic specialist to inspect the hard drive of the sellers’ former attorney and the network of his former firm (as he passed away while the litigation was pending), the e-mails were found on that firm’s server back-up tapes. The e-mails were turned over to the judge, examined in camera and ordered to be turned over to the sellers. The judge awarded sanctions against the sellers and their counsel “because their failure to preserve the e-mails resulted in additional and unnecessary efforts by purchasers.” The judge split the sanctions evenly between the sellers and their attorneys. As noted by the Appellate Division, “[i]t would make a mockery of our discovery rules to allow a party or its counsel — after identifying privileged information — to destroy or carelessly lose or misplace the materials in question.”

While the court’s opinion in Goldmark does not give the level of practical guidance that numerous federal cases have offered such as the seminal case in e-discovery, Zubulake v. UBS Warburg, LLC, it does represent a first step by the Appellate Division towards accepting some of the general ESI preservation principles outlined in Zubulake and its progeny. Hopefully, New Jersey case law and court rules will soon take the next step and specifically adopt these principles without reservation so that e-discovery obligations are clear. As we discussed in a prior post, New York state courts appear to be moving in that direction as evidenced by the decision in U.S. Bank N.A. v GreenPoint Mtge. Funding, Inc. As the U.S. Bank court held, “We are now persuaded that the courts adopting the Zubulake standard are moving discovery, in all contexts, in the proper direction.”

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