The Destruction of a “Startling Amount of Discovery”: District Court Imposes Severe, Case-Ending Sanctions Pursuant to Rule 37(e)(2)
The United States District Court for the Eastern District of Washington recently entered a default judgment order of terminating sanctions against defendants pursuant to Rule 37(e)(2), as a result of defendants’ wholesale destruction of a “startling amount of discovery” as part of defendants’ adoption of a document disposition program during the course of the litigation. The district court found that the defendants “purposefully destroyed” relevant electronically stored information (ESI) “to avoid their litigation obligations.” This decision highlights the importance of extreme caution in the adoption of a document disposition or information governance program, which necessarily eliminates typically large quantities of ESI, during the time period when the duty to preserve relevant ESI has been triggered.
In Moreno v. Correctional Healthcare Companies, Inc., plaintiffs filed constitutional claims against defendants–providers of healthcare services to inmates–after plaintiffs’ eighteen-year-old son died while in defendants’ custody. In January 2018, prior to filing the lawsuit, plaintiffs sent a letter to defendants notifying defendants of their plan to file a lawsuit and advising defendants to “preserve all paper and electronic records that may be relevant to our clients’ claims” including “all e-mails and other electronic and paper records regardless of where they are maintained.” Plaintiffs filed the lawsuit in October 2018 and, in December 2018, served discovery requests on defendants, seeking certain categories of ESI, including emails relevant to plaintiffs’ son and defendants’ policies and practices at the jail in which plaintiffs’ son was in custody.
Plaintiffs were forced to file several motions to compel after defendants failed to provide sufficient ESI in response to discovery requests, and while plaintiffs’ third motion to compel discovery was pending, defendants admitted that they “purged emails” and “deleted the email accounts of relevant former employees after receiving Plaintiffs’ discovery requests.” Through additional limited discovery and the deposition of defendants’ Chief Information Officer (CIO), “Plaintiffs confirmed that Defendants destroyed responsive ESI” through defendants’ newly implemented nationwide document retention policy governing email preservation.
The new policy was implemented during the litigation, beginning in February 2019, and the policy archived deleted emails for six months and undeleted emails for one year, and then automatically destroyed them. Defendants’ CIO testified that, “nationwide, defendants erased millions of emails permanently when they implemented their new policy.” The new retention policy also permanently deleted the account of any employee that had not worked for defendants for over one year, but defendants could prevent the deletion of any email or account by placing an account on a litigation hold.
Defendants asserted that, before implementing the new policy, they sent a letter to their former outside counsel asking counsel to identify each “open case” and the names of individuals whose accounts and documents should not be deleted. Counsel identified the name of only one nurse, a named defendant, and defendants’ in-house counsel put a litigation hold on that nurse’s account. Thereafter, the new policy was implemented, and the same litigation group that was responsible for responding to plaintiffs’ discovery requests executed the new policy, permanently deleting emails and accounts, including emails of 56 employees who worked at the jail during the relevant time period.
Upon learning of defendants’ new policy and the deletion of emails and employees’ accounts, plaintiffs sought dispositive sanctions, i.e., a default judgment, pursuant to Rule 37(e)(2). Defendants did not dispute that sanctions were warranted, but rather argued that dispositive sanctions were inappropriate because the evidence did not show that they “permanently destroyed the emails with the intent to deprive these specific Plaintiffs of their use in this litigation.” Defendants asserted that their correspondence with their former counsel negated a finding of intent because it revealed that they intended to preserve responsive ESI, not destroy it. Defendants also argued that, because the new document retention policy was nationwide, it was not implemented to deprive these specific plaintiffs of responsive emails.
The court rejected defendants’ arguments, noting that nowhere in the email to former counsel did defendants explain the details of the new policy or mention the sweeping nature of the policy. The court further noted that the correspondence with former counsel was “overshadowed” by the testimony of defendants’ CIO, who agreed during a deposition that one of the motivating factors for adopting the new policy was to “destroy bad emails that could be produced in discovery.” Moreover, the court refused to “allow Defendants to rely on the widespread nature of their document destruction to avoid sanctions in this case.” The court emphasized the significance of the fact that defendants’ litigation group that applied the new nationwide retention policy was the same group that was responsible for responding to plaintiffs’ discovery requests. The court concluded that defendants “acted with intent” to destroy evidence and, thus, dispositive sanctions were appropriate pursuant to Rule 37(e)(2).
The Moreno decision highlights the extreme importance of careful consideration of active litigation holds before companies implement new document disposition or information governance programs in the normal course of business. There is no question that “over-preservation” of ESI can be costly and cumbersome, but in considering the logistics of implementing disposition programs, companies must balance the risk of being faced with extreme litigation sanctions when the implementation of such programs may result in the spoliation of ESI. All active litigation holds must always be considered carefully, and documents that require preservation under those holds must be preserved as exceptions to the new policy. This decision also highlights the strategic benefit of gradually developing a strong discovery record of an adversary’s discovery abuses. Plaintiffs were able to develop a record of the destruction of a “startling amount of discovery” over the course of numerous motions to compel, and their persistence in the process ultimately resulted in the court entering an order in their favor without consideration of the underlying merits of the case.