Discovery Resources

By Evan Harris

Treppel v. Biovail Corp., No. 03 Civ. 3002 (PKL)(JCF), 2008 WL 866594 (S.D.N.Y. Apr. 2, 2008).

Employee/Employer implicated: In-House Council

eLesson Learned:  A corporation has an obligation to preserve any information that is potentially relevant to a litigation as soon as that litigation becomes known or can reasonably be anticipated.  Once the threat of a pending litigation becomes real, a corporation must issue a clear litigation hold to all employees and then taken the necessary steps to ensure that everyone actually complies with that hold.  Failure to comply with these obligations can result in sanctions ranging from having to foot the bill for additional discovery to an adverse inference instruction to a jury.

Shortly after being made aware of a lawsuit against his company, Biovail’s General Counsel orally instructed two company executives to preserve any relevant information to the lawsuit.  However, the General Counsel never issued any written instructions regarding this litigation hold, nor did he conduct any follow up to ensure actual compliance.  While Biovail did in fact preserve and backup much of the necessary information, it failed to take the steps necessary to preserve several key items of ESI, including a high level executive’s e-mails.  As a result, the plaintiff asked the court to compel Biovail to produce additional ESI and to have Biovail sanctioned for failing to preserve evidence relevant to the case.

Additional Discovery Will Be Ordered Only When it Will Reveal New Information

When seeking to have additional discovery compelled, the court noted that a party must prove that the additional discovery would lead to “documents relevant to the litigation not already recovered.”  Accordingly, the court denied the majority of the plaintiff’s request for additional discovery stating that such an order would place a burden on the defendant that would likely outweigh the benefit of the production.  However, the court went onto note that it was possible that several relevant e-mails were excluded from the initial discovery production.  Thus, Biovail was ordered to restore and search the backup tapes for the e-mail server in question.  Biovail was also ordered to restore and search a server it failed to search at all.

A Litigation Hold Becomes Necessary as Soon as a Lawsuit Becomes a Reality

As a result of these oversights and other allegations of inadequate preservation, the plaintiff also moved for sanctions against the defendant, including an adverse inference instruction.  The court noted that Biovail’s efforts in preserving ESI were clearly inadequate.  First, it failed to honor its obligation to preserve evidence as soon as it became aware of, or could have reasonable anticipated that certain evidence would be relevant to a lawsuit.  The General Counsel was under an obligation to order a litigation hold and suspend routine document retention and destruction as soon as a litigation was foreseeable.

Second, the court noted that the General Counsel failed to honor his obligation to take affirmative steps to monitor compliance with the litigation hold in order to ensure that all discoverable ESI was identified and searched.  Here, the General Counsel only took steps to ensure that two employees would preserve evidence relevant to the litigation.  He also failed to follow-up with these two men to ensure that they were actually complying with the hold. 

Mere Negligence Can Still Result in Sanctions

The court declined to sanction Biovail with an adverse inference instruction even in light of its failure to comply with its discovery obligations.  A party may be subject to sanctions, including an adverse inference instruction, if it is liable for spoliation (the destruction, alternation, or failure to preserve evidence in a pending or reasonable foreseeable litigation).  The party seeking an adverse inference instruction for spoliation must prove that “(1) the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed ‘with a culpable state of mind’; and (3) that the destroyed evidence was ‘relevant’ to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.”

The court found Biovail to be grossly negligent or reckless for failing to backup its email servers after being expressly told in writing by plaintiff’s counsel to preserve them.  However, the court failed to find that Biovail’s failure to comply with its discovery obligations was willful.  Therefore, the plaintiff was required to show that the missing evidence would support its claims.  The court found that the plaintiff failed to carry this burden even though it was able to show that Biovail did in fact fail to produce several e-mails and other documents.  Accordingly, the court denied plaintiff’s request for an adverse inference instruction.

However, the court did not let Biovail get off scot-free.  The court ordered Biovail to produce, at its own expense, the necessary servers and laptops in order to allow the plaintiff to engage in a “thorough forensic examination” for relevant information.  The court also stated that the plaintiff could make an application for cost if the search prompted the need for additional discovery.

Evan Harris is a third-year law student at Seton Hall University School of Law.

e-Lessons Learned Disclaimer:
The opinions expressed by bloggers and those providing comments are theirs alone, are provided solely for informational purposes, and do not necessarily reflect the opinions of e-Lessons Learned. We are not responsible for the accuracy of any of the information supplied herein and are not liable for any errors or omissions in this information, or any losses, injuries, or damages arising from its display or use. By using this blog site you understand that there is no attorney client relationship and it should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Filed under e-Lessons Learned.

 Email This…   Print This…