In re A&M Florida Properties II, 2010 Bankr. LEXIS 1217 (Bankr. S.D.N.Y, Apr. 7, 2010)

Plaintiff’s counsel agreed to have Plaintiff conduct a “company-wide” search without a full understanding of Plaintiff’s email system. Counsel failed to realize that employees had the ability to move emails from their inboxes into archive folders on their local machines and regularly did so. Deleted items were also moved into a deleted items folder on the system.

While preparing for a deposition, Defendants asked for the results of the “company-wide” search, and Plaintiff responded by producing 28 emails. Defendant brought a motion detailing Plaintiffs failure and the parties agreed to hire a forensic expert. The expert searched live inboxes on the server because neither the expert nor Plaintiff’s counsel was aware of the existence of archive folders on individual machines. Defendant located emails within its own corpus of data which should have been produced by Plaintiff and requested a status conference with the court to discuss possible spoliation sanctions, intentional destruction of evidence.

In anticipation of the hearing, Plaintiff’s expert discovered the existence of the archive folders for many of the employees, except the Plaintiff’s president, stated that he had no such archive. Counsel asserted that they only recently learned of the existence of the archives, and produced several missing emails. The parties agreed to have the expert conduct a new search of all the archives. The parties agreed that emails containing metadata of the emails (to, from , cc and bcc fields) listing certain outside parties would be searched and made available for both parties to access. The rationale was that such emails would not be privileged. A second keyword search would search the body of the emails, and would be subject to privilege review.

The expert sent over 9,500 emails to producer’s counsel for review, which contained the results of both searches. Counsel did not turn over the results of the first search immediately as contemplated by the agreement. Nevertheless, after “multiple miscommunications” and two months time, requestor received all of the emails.

Requestor moved for sanctions for intentionally obstructing the discovery process, claiming that “it had incurred needless costs and frustration because of misunderstandings and delays caused by the Plaintiffs and their attorneys.” Id. at *13. It sought dismissal of the action, or alternatively an adverse inference instruction, plus fees and costs.

The court found that both dismissal and an adverse inference instruction would be “overly harsh.” The Court found that Plaintiff had not acted in bad faith, and that counsel “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.” Id. at *19.

However, monetary sanctions were appropriate:

While the delays in discovery were not caused by any intentional behavior, [producer] GFI’s counsel did not fulfill its obligation to find all sources of relevant documents in a timely manner. Counsel has an obligation to not just request documents of his client, but to search for sources of information…. 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.” … Nash failed in his obligation to locate and produce all relevant documents in a timely manner. A diligent effort would have involved some sort of dialogue with Garfinkle and any key figures at GFI to gain a better understanding of GFI’s computer system… Had he posed the proper questions in these dialogues, Nash would have gained a more nuanced understanding of how GFI employees stored emails much earlier in the discovery process. Assuming GFI was operating in good faith, it is almost certain that the archive folders would have been mentioned. Had Nash fulfilled his obligation to familiarize himself with GFI’s policies earlier, the forensic searches and subsequent motions would have been unnecessary.

Id. at *19-*21. The court assessed producer half of the cost of the forensic searches as well as requestor’s costs of the motion to compel and for sanctions, with a hearing to be held to determine the amount of attorney’s fees.

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