Ignorance of Email Archives Results in Discovery Dispute

John M. Blumenschein Despite a finding of sanctionable conduct on the part of the Plaintiff, Chief Bankruptcy Judge Arthur J. Gonzalez of the Southern District of New York refused to impose sanctions such as dismissal or an adverse inference instruction for the discovery delays caused by the Plaintiff in GFI Acquisition, LLC v. American Federated Title Corp. (In re A&M Florida Properties II, LLC), 2010 WL 1418861 (Bkrtcy.S.D.N.Y. April 7, 2010) [click here to view decision - PDF]. Judge Gonzalez did acknowledge the delay and cost associated with bringing these motions, however, and ordered the Plaintiff to reimburse the Defendant for its half of the costs associated with brining the computer forensics expert.

When those and a number of other emails were not produced, the parties agreed to jointly retain a certified computer forensic technician who would conduct a search of the Plaintiff’s email system including the archive, which is where deleted emails by GFI employees were stored. The computer forensic technician decided to search the archive after concluding that the only possible explanation for the missing emails was that they had been stored in the archive. Counsel for the Plaintiff was unaware of the difference between the archives and live inboxes. This search resulted in the recovery of 9,500-plus emails, which had not been previously produced. Defendant brought a motion for sanctions under Federal Rule of Civil Procedure 37(d), seeking a dismissal or an adverse inference instruction, as well as fees associated with the extra discovery work and forensic efforts.

Addressing the issue of dismissal, Judge Gonzalez noted that terminating sanctions are “harsh and rare,” and that the type of behavior warranting a terminating sanction “is far more egregious than anything GFI or its attorneys may have done here.” And while the Court acknowledged that the Plaintiff and its Counsel could have handled the discovery process much better, the motion to dismiss was denied because there was no intentional destruction of evidence or failure to obey court orders.

Judge Gonzalez also pointed out that the granting of an adverse inference instruction is a “severe sanction.” Noting that arguably all of the requisite elements were present for the granting of an adverse inference instruction (i.e., (i) Plaintiff had an obligation to timely produce; (ii) Plaintiff failed to timely produce with a “culpable state of mind”; and (iii) the evidence was “relevant”), the Court declined to impose such a penalty as it “would be overly harsh for what has occurred here.” Judge Gonzalez went on to explain his rationale by stating: “In the end the Defendant was able to obtain the desired emails and there was no evidence of bad faith on the part of GFI's counsel. [Counsel for Plaintiff] simply did not understand the technical depths to which electronic discovery can sometimes go. The Court does not find any intent to block American Federated from gaining possession of the recently discovered messages.”

Although the Court found no intentional conduct on the part of the Plaintiff in its delay, the Court did find that monetary sanctions were appropriate for costs associated with brining the computer forensics expert. The exact amount was to be determined at hearing on a later date. In imposing sanctions, Judge Gonzalez quoted language from Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 432 (S.D.N.Y.2004) and stated, “Counsel must communicate with the client, identify all sources of relevant information, and ‘become fully familiar with [the] client's document retention policies, as well as [the] client's data retention architecture.’”