Guidance on eDiscovery Company Sanctioned More Than $600K For Deletion of Files Relevant To Pending Case

Chad McManamy In a recent ruling in Eon-Net LP v. Flagstar Bancorp, 2011 WL 3211512 (C.A.Fed. (Wash. July 29, 2011)), a copy of which is here [PDF], the Federal Circuit Court of Appeals upheld a $631,134.00 award for attorney fees, costs, and sanctions against Eon-Net and its counsel. Citing numerous instances of litigation misconduct, the Court ruled against appellant in part, for the destruction of documents prior to the initiation of its lawsuit against Flagstar as well as the intentional failure to implement a document retention plan. Ultimately, the Court found Eon-Net and its officers had violated their independent duty to preserve evidence during ongoing lawsuits.

Appellant’s approach to data preservation left a lot to be desired and likely curried little favor from the court. Eon-Net’s principal, Mitchell Medina stated, “I don’t save anything so I don’t have to look” and further stated, “[his companies have] ‘adopted a document retention policy which is that we don’t retain any documents’ because those companies have ‘evolved into patent enforcement companies which are involved in the business of litigation.’” Eon-Net v. Flagstar Bancorp at 18. With that approach towards preservation, appellants took the extraordinary step of destroying documents from a settled case that were potentially relevant to pending litigation.

Eon-Net v. Flagstar Bancorp at 18. With that approach towards preservation, appellants took the extraordinary step of destroying documents from a settled case that were potentially relevant to pending litigation.

Described by the district court as a having a “cavalier approach” towards patent litigation, appellants were cited for numerous other transgressions including filing objectively baseless litigation. It seems that thumbing your nose at the federal court has become a very expensive pastime.