The Litigator's Guide to E-Discovery Sanctions: Who Pays the Piper When ESI "Disappears"?

As interest in e-Discovery continues to grow, there's no question what's the driving force that grabs the headlines. Sanctions, of course.   It is the water cooler of the ESI world.  Sanctions capture clients' interest, and motivates unwitting attorneys to pay attention to the growing field that is e-discovery. And while it may be known that significant sanctions have recently been imposed for e-discovery violations, what is missing is perspective. How often are sanctions requested? When will they be imposed? How severe will the punishment be? What did the client and/or attorney do wrong?

A recent study by three King & Spalding attorneys that was published in the Duke Law Journal, attempts to provide some of this perspective. A full copy of the article can be found here. They identified 401 e-discovery cases where sanctions were sought dating back to the early 1980's and through January 1, 2010. Of those cases, sanctions were awarded in 230 cases.

How many cases are there today? Likely many more. It should be no surprise that the number of e-discovery sanction cases has been growing in recent years -- and exponentially.  As recently as 2003, there were only seven e-discovery sanction cases. In 2009? That number spiked to 111. To put this in perspective, these 111 cases outnumber the total for all of the years prior to 2005 combined, and accounted for over 25% of the all cases ever reported.

So sanctions are being sought and awarded on average in over fifty percent of the cases (401/230).  But how severe are the penalties?  Courts awarded in excess of $5 million in five of the cases identified, and in excess of $1 million in four of the cases. Courts also terminated the action, either by dismissal or default judgment, in thirty-six of the identified cases.

Note, however, that the above cases involved extreme misconduct. Of the thirty-six cases that courts terminated, thirty-four involved willful misconduct or bad faith behavior. Only two involved gross negligence, and none involved negligence. Moreover, these extreme examples are the minority. They only account for ten percent of the e-discovery sanction cases, and twenty percent of the cases where sanctions were awarded.

The study also revealed that defendants were sanctioned three times more often than plaintiffs. This makes sense because for defendants are more likely to hold ESI relevant to the lawsuit and to face broad discovery demands from plaintiffs. The most common misconduct was failure to preserve ESI followed by failure to produce and failure to produce in a timely fashion.

Judicial sanctions of counse -- whether through money or orders to attend certain legal education classes -- are also increasing, though this is still considered a drastic remedy. The study identified thirty cases where counsel was sanctioned, including seven instances in 2009 alone. The vast majority of these cases involved a pattern of misconduct as opposed to isolated incidents. The predominant sanction was an award of attorneys' fees and costs, which ranged from $500 to $500,000.

The bottom line:  sanctions for e-discovery are on the rise and they can be exorbitant. Clients and practitioners can take some solace, however, in two facts:  (a) the most severe sanctions only result from the most egregious misconduct; and (b) while sanctions may be growing, they still remain relatively small in number and infrequent.

For additional thoughts on this topic and the Duke Law Journal article, please visit the excellent article in the ABA Journal by Debra Cassens Weiss or the report from the Catalyst E-Discovery Blog.