The Theory of Nelson’s Negligence: How to Avoid Sanctions and Punishments when ESI is not Properly Preserved

What Happens When an Effort to Expedite ESI Discovery Turns into a Quagmire of Adversarialism?

Author: Kiersten A. Fowler

Case Citation: EPAC Technologies, Inc. v. HarperCollins Christian Publishing, 2018 U.S. Dist. LEXIS 53360 (M.D. Tenn., March 29, 2018).

Employee/Personnel/Employer Implicated: Thomas Nelson: the owner of one of the two publishing houses that the HarperCollins Christian Publishing comprises of.

eLesson Learned: Courts will show no mercy when a party displays gross inattention in the preservation of ESI, so know when the duty to preserve evidence sticks.

Tweet This: Pay attention! Overlooking ESI preservation can do more damage than you think.

When one party is able to produce 18,360 pages of email communications between it and an opposing party during e-discovery, but the opposing party is only “able” to produce one-tenth of that volume, it doesn’t take a world-class mathematician to realize that something isn’t quite adding up. . . That was exactly the case in EPAC Technologies, Inc. v. HarperCollins Christian Publishing, where publisher Thomas Nelson had to learn the hard way how a failure to simply preserve documents can result in severe sanctions and other punishments that will leave any party in his position at a severe disadvantage before the case even reaches trial.

In EPAC Technologies, Nelson’s negligent conduct should serve as the prime example of what NOT to do. You name it, Nelson (probably) did it, or in this case, didn’t do it. After the first motion to compel and exchange of discovery documents, Nelson had not produced a vast amount of extremely relevant documents, including any single instance of a misprinted or damaged book out of the tens of thousands of books supplied by EPAC, data from Nelson’s Red Prairie Warehouse Management System that would have tracked vital information about each order Nelson placed, and emails retained in Thomas Nelson’s Google Postini email archive. Through investigation and Nelson’s delayed, reluctant admission the Court discovered that over 750,000 messages and attachments of greatest relevance to the litigation were completely purged and more than 48,000 allegedly defective EPAC books were lost, destroyed, sold, or discarded by Nelson.

Clearly, this conduct was outrageous, and the loss was massive, leaving EPAC at an extreme prejudice. So how does someone like Nelson get punished? What are the consequences of such ludicrous actions? The answer may surprise you.

The Court looked to the Federal Rule of Civil Procedure 37(e), as amended, for guidance, and ultimately determined sanctions regarding the electronically stored information (ESI) were inappropriate under the language of the rule, but that sanctions for the physical evidence were permissible as recommended by the Special Master. When analyzing Nelson’s lack of preservation of such documents, what the Special Master described as “willful blindness” the Court instead determined to be mere negligence, solely for lack of intent. Put simply, without intent, not preserving ESI does not rise to sanctions under Rule 37(e)(2). However, that didn’t mean Nelson got off “Scot-Free.”

In its analysis, the court read Rule 37(e)(2) to allow remedial measures for the ESI and sanctions for the physical evidence. Below is a short list of the Court’s findings in regard to the three types of evidence and the corresponding curative punishments for each one:

  • Nelson negligently disposed of the books in violation of his preservation duty resulting in a sanction that the jury would be instructed to infer that that had Nelson preserved the books would support EPSAC’s claims and be adverse to Nelson’s arguments.
  • Nelson did not make reasonable efforts to preserve ESI such as warehouse data, leading to the curative measure of a jury instruction explaining Nelson’s failed duty to preserve and all that the books would have been able to prove. Additionally, Nelson would be precluded from offering evidence regarding any customer complaints about EPAC’s books.
  • Nelson negligently allowed relevant emails to be purged from its Postini email archive, but the purged emails were effectively replaced and restored through additional discovery. However, since this caused a prejudicial delay for EPAC in receiving the information, EPAC could re-depose witnesses on issues related to said emails.

There was one more punishment Nelson’s negligence cost him: Nelson was ordered to pay 75% of the Special Master’s fees and costs, and 50% of EPACS’s reasonable costs and attorney’s fees that incurred during the Special Master Proceedings.

So how does an attorney avoid a “Nelson’s Negligence” situation. First and foremost, make sure you know when the duty to preserve evidence sticks, because according to EPAC Technologies, the Special Master and Court both determined that a preservation demand letter after the contract was terminated was an “unequivocal statement that ‘the matter might be heading to court.’” Essentially, the rule if litigation is anticipated just preserve the documents. Save yourself the sanctions, disadvantages, punishments, and costs: don’t be a Nelson.

Kiersten Fowler earned a B.S. in Biochemistry and a B.A. in Classical Studies from Seton Hall University in the highly regarded Honors Program. She is currently pursuing her J.D. at Seton Hall University School of Law (Class of 2019). After law school, Kiersten will be working for Haug Partners, LLP, a mid-sized Intellectual Property firm in Manhattan. She is hoping to specialize in both patent litigation and patent procurement, but is open to exploring other areas of IP Law during her career.

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