Landmark Lawsuit in Email Archiving and Internet Recording
Tuesday, June 23, 2009 at 09:01AM The next time, a fiscally responsible corporate executive argues against the importance of email archiving and internet recording, they'll be referred to the million-dollar penalty imposed in the Kipperman v. Onex Corp., 2009 WL 1473708 (N.D. Ga. May 27, 2009) case.
Highlights
- The court penalized defendants over $1 million in monetary sanctions for failure to produce emails demanded by the plaintiffs at the discovery stage
- The plaintiff could produce only 2 tape backups of their server.
- When the court required emails relevant to the case in discovery, the plaintiff claimed the task was too costly and asked for $600,000 to cover the cost of searching the old tapes for required emails
- The judge ruled against their request and characterized the attempt as "blatant misrepresentations about the value of e-mail discovery in this case in an effort to influence the court’s ruling…and for behaving as if they, and not the court, got to decide what…was relevant…and what was not.”
Details of the Case
Many lawsuits "fall apart" at the discovery stage, when plaintiffs and defendants attempt to either deliberately hold back information or refuse to disclose. The court can, and often does penalize such attempts as made clear in this landmark case. In this case, the defendants were required to pay the plaintiff $1,022,700 in monetary sanctions because they were unwilling — or unable — to produce relevant emails and other information. The case involved a fraud case involving a 2003 bankruptcy of Magnatrax Corporation. The plaintiff demanded emails pertinent to the case to prove their case, but were refused at the discovery stage by the defendants who characterized the task of retrieving the emails as "costly." The defendants went as far as to ask for $600,000 to retrieve the files. The Court Not Amused The judge in the case found in favor of the plaintiff and ordered defendants to pay plaintiff $1,022,700 in monetary sanctions. Instead of receiving the $600,000, they were penalized over $1 million. Why? In this case, the judge said, "blatant misrepresentations about the value of e-mail discovery." Putting aside the penalties, the ruling made it clear that companies have a clear and legal obligation to produce email and internet data (such as instant messaging by employees) in litigation scenarios. The Discovery Argument In the motion for sanctions, the plaintiff focused particularly on email discovery, an important area of electronic discovery law, and argued the defendant had a clear obligation to restore and produce responsive information stored on backup tapes. The defendant claimed they could not produce the evidence, then attempted they were "likely" stored on tape backups and wanted to be compensated for recovery. The defense argued that it was the obligation of the corporation to produce the records. The judge clearly agreed that the defense should not bear the burden of recovering the emails. The Defense Argues "Too Expensive" In this case, which should become precedent setting, the plaintiff actually undertook to show how "easy" it was to recover emails. A broad search of the tapes produced 28,000 hits of relevance, even though the email server tape was not used for the demonstration. Before the judge the plaintiff argued that the 28,000 hits, demonstrated the existence of relevant emails. The Defendants argued that restoration and searching would be extremely expensive. Specifically, the Defendants stated, "Plaintiffs don't know and we don't know whether there is a single e-mail on there, a single e-mail in any way related to this case." The arguments found to be misleading by the judge. Plaintiff Compels Defendants Plaintiff filed a motion to compel defendants to comply and this time the defendants argued that searching the tapes cost more than $600,000. The court decided to enforce its order to search the two tapes. Finally, the recovery was completed, although the plaintiff filed a motion for sanctions and outlined the discovery abuses related to electronic discovery. The Judge's Answer The court characterized the plaintiff's behavior as “blatant misrepresentations about the value of e-mail discovery in this case in an effort to influence the court’s ruling… it now appears that defense counsel’s statements were either purposefully misleading or made with a reckless disregard for the truth.” The statement was fairly lengthy and highly critical of the defendant. The court went so far as to use sanctions under Federal Rules (Fed. R. Civ. P. 26 and 37) the court found defendants’ actions a “textbook case of discovery abuse.” Summary Even if one accepts the idea that email archiving is a cost, it is a necessary one. The court has no regard for six figure recovery costs. A robust and cost-effective email archiving solution that is searchable would avoid issues presented in this case. Email archivers can be relatively cost-effective, particularly from specialist providers such as freedom9 with their freeGuard Capture line of products.
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