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New ESI Sanctions Order Offers eDiscovery 101 Course for Lawyers

New ESI Sanctions Order Offers eDiscovery 101 course

Courts have decried for years a general lack of understanding and awareness regarding electronic discovery among lawyers. On January 19, 2021, U.S. District Judge Iain Johnston took his concerns on eDiscovery competence to a whole new level. In DR Distributors, LLC v. 21 Century Smoking, Inc. (2021 WL 185082), Judge Johnston published a 256-page sanctions order that specifically reproved defendants’ counsel for failing to take even the most basic steps to preserve relevant information. In doing so, DR Distributors offers what is tantamount to a 101 course for lawyers on eDiscovery, particularly regarding the need to keep relevant information in litigation and the consequences for counsel who fail to help clients do so.

 Preservation Failures Lead to Severe Sanctions Against Defendants

 The eDiscovery trouble began at the outset of this litigation, which involves infringement claims over confusingly similar trademarks for electronic cigarettes. Defendant Brent Duke (the principal of defendant 21 Century Smoking) revealed to his lead counsel that he used web-based email accounts (Yahoo! and GoDaddy) and chat applications (Yahoo! chats) for communication. Before the conclusion of their meeting, counsel orally instructed Duke to preserve his relevant webmail and chat messages.

Nevertheless, counsel did not follow up with a written hold instruction that memorialized what actions Duke should take to preserve relevant webmail and chat messages. Nor did counsel instruct Duke to disable automated deletion features that would eliminate emails or chats. Equally troubling, counsel did not know that webmail and chat messages are typically stored online and not in company servers. As a result, counsel did not attempt to collect and preserve relevant messages from their online repositories, mistakenly believing they could obtain such information from 21 Century Smoking’s corporate network.

The initial failure of lead counsel to help defendants take practical steps to preserve and then produce relevant communications was replicated by defendants’ other lawyers in the succeeding years. Defendants’ counsel would not address these or other preservation missteps until nearly three years after the close of fact discovery when plaintiff accused defendants of withholding relevant communications relating to its trademark claims. Only then did defendants produce relevant messages including over 15,000 pages of Yahoo! emails. However, defendants were unable to recover relevant Yahoo! chats, all of which had long since been destroyed. Similarly, defendants could not produce many relevant GoDaddy emails since they were eliminated pursuant to a 60-day automated deletion feature.

All of this led the court to impose severe sanctions against defendants. Among them were evidence and issue preclusion sanctions; evidence, argument, and instructions to the jury regarding the nature and extent of the spoliation; and a fee award to plaintiff that “will likely exceed seven figures,” half of which will be borne by two of defendants’ now former lawyers.

Key Lessons from Judge Johnston’s “eDiscovery 101 Class” Sanctions Order

The court was clearly dissatisfied with defendants. They failed to disclose relevant ESI, spoliated key communications, and offered “false testimony.” Nevertheless, Judge Johnston focused much of his opinion on the need for lawyers to understand and follow proper eDiscovery procedures. Had counsel observed “basic eDiscovery principles,” the court believed they could have prevented or ameliorated much of the harm that transpired. In its “eDiscovery 101” curriculum, DR Distributors spotlights several rudimentary steps that all counsel can take in their matters to more effectively address ESI discovery.

  1. Lawyers Should Be Competent to Handle eDiscovery
  2. The court was concerned that counsel did not have the knowledge, training, or skills to properly handle eDiscovery. In particular, Judge Johnston took issue with counsel’s argument that “ESI was unimportant” given that DR Distributors involved trademark claims.

    Because most litigation involves ESI, the court highlighted the importance of eDiscovery competency and awareness among counsel. Competency requires both education and training, which the court repeatedly emphasized could be obtained in many ways. Because the court found defendants’ lawyers lacking in these areas, Judge Johnston ordered them to attend “at least eight hours of continuing legal education . . . on ESI.”

    The court also refuted the specific notion that trademark matters do not involve ESI, highlighting how evidence of customer communications—electronic communications—were highly probative of the key infringement issue of customer confusion between the parties’ competing brands.

    In summary, DR Distributors clarifies that eDiscovery is everywhere and lawyers should be prepared to handle ESI in litigation.

  3. Obtain a Reasonable Understanding of Client Information Systems
  4. The court lamented what it termed to be a “race to the bottom of technical ignorance.” Among other things, Judge Johnston criticized counsel for not understanding that webmail is stored in the cloud and that retention periods for chat application messages may differ from corresponding email applications.

    In an effort to shift the blame, counsel criticized its ESI vendor for failing to properly identify, search for, and produce the relevant webmail and chat communications. The court rejected this position, calling it “a nonstarter,” especially where the vendor performed its ESI duties “under the contract as directed.”

    Rather than blaming others for a lack of technical knowledge, Judge Johnston urged lawyers to obtain “a reasonable understanding of the client's information systems.” A reasonable understanding requires counsel to interview custodians; ascertain how the client generates, stores, and disposes of information; learn about applicable information policies and procedures; and then work with the client to ensure relevant ESI is safely preserved and produced.

    Properly supervising other counsel and vendors to address these issues, while time consuming, is an essential task. Not only can it help counsel fill technical gaps, it can also “create a systematic process and plan for responding to discovery requests.”

  5. Competently Handle Other Aspects of eDiscovery
  6. The court expressed dismay over a variety of counsel’s other eDiscovery missteps. Three of the more exemplary mistakes that all lawyers can learn from and address in their respective matters include the following:

    • No written litigation hold;
    • No understanding that relevant emails may be found both in a custodian’s corporate email accounts and in personal webmail accounts; and
    • Unsupervised self-collection by an interested witness.

While perhaps not always required, written legal holds that delineate preservation instructions in a fulsome and comprehensive manner are a baseline preservation step for safeguarding client and counsel throughout the litigation.

Lawyers should also be cognizant that relevant information may exist in employer and personal repositories like email accounts, messaging apps, and cloud accounts. Using a custodian resource checklist that identifies these and other common data storage and communication locations is a good first step to identifying the universe of relevant information. It can also provide a roadmap for effective custodian interviews, the importance of which DR Distributors repeatedly emphasizes.

Self-collection may be appropriate for certain custodians. But lawyers should generally oversee the collection of information from custodians who are interested in the outcome of a lawsuit. Depending on the matter, a combination of custodian interviews, company IT support, and forensic experts can help counsel control the flow of relevant information for purposes of executing preservation and collection responsibilities.

With its emphasis on practical tips for handling ESI in litigation, DR distributors figures to become an instructive guide for counsel who are seeking to better understand how to properly handle ESI.

Philip Favro
Philip Favro
Philip Favro acts as a trusted advisor to organizations and law firms on issues surrounding discovery and information governance. Phil provides guidance on data preservation practices, litigation holds, data collection strategies, and ESI search methodologies. In addition, he offers direction to organizations on records retention policies and the need to manage dynamic sources of information found on smartphones, cloud applications, and social networks. Phil is available to serve as a special master on issues related to electronic discovery. Phil is a nationally recognized thought leader and legal scholar on issues relating to the discovery process. His articles have been published in leading industry publications and academic journals and he is frequently in demand as a speaker for eDiscovery education programs. Phil is a member of the Utah and California bars. He actively contributes to Working Group 1 of The Sedona Conference where he leads drafting teams and serves as the Steering Committee project manager. Prior to joining Driven, Phil practiced law in Northern California where he advised a variety of clients regarding business disputes and complex discovery issues. He also served as a Judge Pro Tempore for the Santa Clara County Superior Court based in Santa Clara, California.