Negligence in Preserving ESI Earns Sanctions

N.M. Oncology & Hematology Consultants v. Presbyterian Healthcare Servs., No. 1:12-cv-00526 (D.N.M. Aug. 16, 2017).

Because the defendant was merely negligent in producing discoverable information, the magistrate judge recommended only that it pay 75% of the costs of the plaintiff’s motion for sanctions.

This antitrust case began when the plaintiff, New Mexico Oncology and Hematology Consultants, Ltd. (“NMOHC”), filed its complaint on May 16, 2012. Six days later, the defendant, Presbyterian Healthcare Services (“PHS”), issued its first legal hold. That hold went to 35 employees, directing them to “make diligent and reasonable efforts to preserve responsive documents” that related to “an expansive list” of subjects. Through referrals, PHS added several individuals to the original hold. In March 2013, PHS sent an “updated litigation hold” to 174 more individuals.

In this motion, NMOHC asked the court to sanction PHS for failing to implement a “proper” legal hold and for intentionally deleting emails.

Under Federal Rule of Civil Procedure 37, courts may sanction a party that failed to take reasonable steps to preserve — and consequently lost — electronically stored information (ESI). Courts may enter severe spoliation sanctions only if a party intentionally destroyed ESI to prevent another party from using it.

As to the litigation hold, the magistrate noted that litigants need not preserve all ESI or “every shred of paper.” NMOHC argued that PHS gave its employees too much discretion in determining what might be relevant. However, PHS’s legal hold directed employees “unsure” of documents’ relevancy to “be cautious and preserve” them. The magistrate found this “limited discretion” permissible.

NMOHC also argued that PHS continued, despite the legal hold, to enforce its “email jail.” The “email jail” required employees to delete or archive emails when their inboxes grew too large. However, no PHS employees testified that they deleted relevant emails because of the email jail. Nor did they believe that the email jail superseded the legal hold.

NMOHC next pointed to PHS’s late addition of “important witnesses” to the hold. Here, the magistrate was “unpersuaded that either [of the named omitted witnesses] was a ‘key player.’” Notably, NMOHC “chose not to depose either witness even after learning that they had been excluded” from the initial hold.

In all, the magistrate agreed that PHS’s legal hold was imperfect. However, he concluded that NMOHC had not demonstrated that PHS implemented it in bad faith or that it caused any spoliation.

NMOHC further alleged that PHS “intentionally deleted discoverable emails” that Dr. Dava Gerard sent or received. NMOHC claimed data errors in Gerard’s PST file and in the unallocated space of the backup hard drive indicated corruption or deletion.

In a surprise twist, PHS’s sloppy procedures in backing up its data were its saving grace. PHS failed to follow accepted best practices, such as documenting its collection process or using a forensically sound copy process. The magistrate concluded that PHS might also not have used a clean hard drive for the Gerard PST export. According to the log, there was “a massive error” in that export that could explain the irregular data.

Therefore, NMOHC did not establish by a preponderance of evidence that PHS intentionally deleted Gerard’s emails. Rather, the magistrate found that “while the errors in collection were either avoidable or immediately rectifiable, they were unintentional.”

The magistrate concluded that, despite PHS’s “many mistakes,” the company “did not act in bad faith.” Therefore, the rules permitted neither a default judgment or an adverse inference jury instruction.

But PHS was negligent in producing ESI. That “negligence resulted in many of the errors in producing ESI, which caused [NMOHC] to believe the instant motion to be necessary.” Accordingly, the magistrate recommended that PHS be ordered to pay 75% of NMOHC’s costs in bringing this motion for sanctions.

Takeaways on preserving relevant data

The rules mandate a reasonable attempt to preserve evidence; they don’t require perfection. The judge here shared an instructive message for all ediscovery counsel: “Given the relative cheapness of digital storage, parties will have less and less justification to permit key employees to utilize discretion in the retention of ESI. Certainly, the best approach is to implement a server-side hold on all digital data utilized by key employees and to later use search algorithms to parse relevance…. [B]usinesses that utilize email jail to conserve server space should shut down such features for employees subject to a litigation hold.”

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