Noting, however, that the $8.5 million sanction had not been appealed, Judge Taylor concluded:
It is undisputed that Qualcomm improperly withheld
from Broadcom tens of thousand of documents that con- tradicted one of its key legal arguments. However, . . . there is insufficient evidence to prove that any of the Re- sponding Attorneys engaged in the requisite “bad faith” or that (attorney) Leung failed to make a reasonable inqui- ry before certifying Qualcomm’s discovery responses.
As the Qualcomm case indicates, monetary sanc-
tions are often coupled with other penalties. Besides awarding monetary sanctions and reporting offend- ing attorneys for discipline, a court might also or- der additional searches, e.g., of servers and a CEO’s personal laptop, at the non-moving party’s expense.
Or, as is sometimes the case when par-
ties are having discovery disputes, a court might appoint a “special master.”
Terminating Sanctions
The courts have hit both sides of a lawsuit with terminating sanctions because of willful failures to comply with ESI preservation and discovery obliga- tions. When such case-ending sanctions are ordered, two key factors are present: (1) evidence has been de- stroyed intentionally and cannot be recovered and (2) without that evidence, the other side is so prejudiced that a terminating sanction is the only fair remedy. When a defendant is found to have engaged in such misconduct, the remedy is a default judgment.
For example, in Magana v. Hyundai Motor Am.,
Hyundai’s in-house counsel, in response to discovery requests, searched for responsive documents but only in its own legal department. As a result, the trial court found that (1) the parties did not agree to limit discov- ery, (2) the defendant falsely responded to plaintiff’s requests for production and interrogatories, (3) the plaintiff was substantially prejudiced in preparing for trial, and (4) the potentially relevant evidence was lost forever. The trial court considered lesser sanctions, but concluded that the only just remedy was the entry of a default judgment – for $8 million.
Now that is a terminating sanction with real
bite. The appellate court reversed, but the Wash- ington State Supreme Court reinstated the trial court’s ruling and awarded attorney fees per- taining to the trial and appellate proceedings.
E-Discovery mishaps can impale either side
of a case, and Plaintiffs and their counsel can also suffer “terminating sanctions” nightmares. In an- other e-Discovery case, a magistrate judge recom- mended dismissal of plaintiff’s claims because of willful statutory violations and disobedience of court orders to produce documents. Although the district court concluded that total dismissal of all claims would be excessive, plaintiff’s claims for damages arising from an alleged interruption of business were dismissed. In addition, plain- tiff was ordered to pay $75,000 to defendant for
its costs in bringing the sanctions motion.xxvi
Shifting the Burden of Proof Here’s what happened in Morgan Stanley:
Sunbeam Corporation retained Morgan Stanley to advise it on the merger with Coleman. After the deal closed, Sunbeam declared bankruptcy. Coleman’s parent holding company sued Morgan Stanley alleging that it had intentionally misrep- resented Sunbeam’s true financial condition, so that the deal would close and Morgan Stanley could collect its commission. During the lawsuit, Coleman sought documents that Morgan Stanley was required to keep under the federal securities laws. But Morgan Stanley, the court found, not only did not produce a large amount of relevant records or search the attachments of many emails it did in fact produce, Morgan Stanley contin- ued the practice of overwriting email messages for more than 12 months after it had instructed its own employees to preserve paper documents. Worse still, perhaps, was this: Morgan Stanley’s litigation counsel certified that the company had complied with the court’s discovery orders even though it was later discovered that the company
“Here’s what happened in Morgan Stanley.....” 53
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