Knickerbocker v. Corinthian Colleges, No. C12-1142JLR (W.D. Wash. Apr. 7, 2014)

In this employment law case, the court found “clear and convincing evidence” that the defendant and its counsel “have refused to participate forthrightly in the discovery process and that this refusal constitutes or is tantamount to bad faith.” Sanctions were necessary to remedy their “discovery tactics,” which “delayed resolution of Plaintiffs’ claims, expended both the court’s and Plaintiffs’ limited resources on matters ancillary to the merits, and threatened to interfere with the rightful decision of this case.”

First, the defendant failed to issue a litigation hold notice, though its standard practice was to do so. Instead, here, the defendant’s lawyer claimed it asked employees the company deemed “key” to preserve evidence. However, several of these witnesses testified and denied searching for relevant documents. The court had “no confidence in the quality of Corinthian’s discovery production” given its “self-selection of a limited pool of discovery materials, combined with doubt as to what searches, if any, were performed of this pool of materials.”

Second, the defendant deleted three plaintiffs’ e-mail accounts; it deleted two after its duty to preserve was triggered by receipt of a notice of discrimination charges from the Equal Employment Opportunity Commission.

Third, defense counsel offered the court “unsubstantiated information” about the defendant’s records retention program for e-mail accounts of terminated employees that contradicted the defendant’s actual policy; the court found the lawyer’s lack of effort to speak with the defendant’s IT department “until the eve of oral argument” on the plaintiffs’ first motion for sanctions to “fall[] below acceptable standards of professional conduct.”

Fourth, the defendant claimed its backup tapes were not reasonably accessible, but then it claimed no spoliation had occurred because it could recover all deleted employee e-mail from these tapes. The court asserted the defendant’s “characterization of the backup tapes has shifted with the winds throughout this litigation, adopting whatever posture is most convenient in the immediate context.” If the tapes were in fact accessible, the defendant “had little basis for refusing to search the backup tapes under the parties’ Stipulated Order, no basis for filing a verification with the court affirming that it had searched ‘all available electronic sources’ . . .  and appears to have assumed a misleading stance with Plaintiffs from the beginning.”

After defense counsel asserted that the e-mails could be recovered, the court ordered the defendant to recover all e-mail accounts and to search them. With the trial date less than a month away, the court set a due date of roughly two weeks for the production. The defendant missed the deadline, and the court attributed the defendant’s “substantial technical difficulties and costs in retrieving the emails from the backup tapes” to its “inadequate discovery search, deletion of evidence, and lack of candor with both Plaintiffs and with the court. Such obstacles do not transform bad faith into good.” Seven weeks later, when the defendant finally produced approximately 3,000 new documents (more than double its prior production), the court extended the trial date to November 2014.

The court ruled that the defendant and its counsel had acted in bad faith, based on its

lackluster search for documents, failure to implement a litigation hold, deletion of evidence, refusal to cooperate with Plaintiffs in the discovery process (particularly as evidenced by its withholding of information regarding both the backup tapes and its interpretation of the parties’ Stipulated Order), reliance on a recklessly false declaration, shifting litigation positions, and inaccurate representations to the court constitute bad faith or conduct tantamount to bad faith.

The court found an adverse inference instruction was not an appropriate sanction because the loss of any documents was purely speculative; the plaintiffs had no evidence that any documents had been destroyed. The court also declined to prevent the defendant from using its documents at trial, since it had extended the trial date. However, attorneys’ fees and costs were appropriate for the cost of the plaintiffs’ motions and the duplicative discovery: the defendant’s “bad faith discovery conduct has delayed the parties’ trial date by almost one year, wasted the court’s and Plaintiffs’ trial preparations, required the court to engage in numerous hearings and status conferences, resulted in more documents being produced after the original scheduled trial date than during discovery itself, and threatened to interfere with the rightful decision of this case.” Accordingly, the court required the defendant to pay a fine of $25,000 and its counsel to pay a fine of $10,000.

Takeaways

Always implement a written litigation hold, with regular follow up to custodians and IT—particularly if it is your company’s custom to do so. Also, follow any retention protocol that halts the automatic deletion of evidence. Keep in mind that any deviation from regular company policies and procedures will cast suspicion on your motives. Also, be sure that IT and counsel cooperate and keep each other in the loop on the status of holds.

Additional Reading