Announcing My Top e-Discovery Case of 2013

2013_Winners_CourtThe year 2013 has been a relatively lackluster one for e-discovery case law. Then, on November 12, 2013, the Fifth Circuit Court of Appeals rendered a rare appellate order on sanctions and e-discovery abuse. Although there has not yet been much press on this opinion, this is my choice for e-discovery case of the year.  Moore v. CITGO Refining & Chemicals Co., LP., Case No. 12-41175 (5th Cir., 12/12/13). Also found here on Google Scholar.

The Fifth Circuit affirmed the lower court’s dismissal of a class action as a sanction for the plaintiffs’ failure to properly preserve ESI and other e-discovery abuses. The suit arises out of the United States District Court, S.D. Texas, Corpus Christi Division. The case shows the defense potential for the proactive use of e-discovery and the continued importance to all parties of proper preservation. This opinion is important because it was written by a federal appeals court, albeit a conservative one, the Fifth Circuit, and because it affirmed the broad powers of lower courts to sanction and dismiss cases because of preservation and discovery abuses. It also touched on sanctions law, focusing in on how the plaintiffs’ actions were willful, not just negligent, but did not examine the subtleties of sanctions law, nor even mention the conflict in the circuits on the issue.

Moore was a FLSA class-action alleging misclassification and seeking overtime pay. The Fifth Circuit upheld the trial court’s order dismissing the claims of 21 of the 24 plaintiffs for failure to preserve emails. A separate order granting summary judgment against the three remaining plaintiffs was also upheld. The SJ was in turn based on another order precluding the remaining plaintiffs from offering any evidence of damages. Therefore, the entire class action was won, not on the merits per se, but on proof that plaintiffs did not properly preserve evidence that Citgo needed for its defense and other discovery irregularities by the plaintiffs.

The Fifth Circuit did, however, reverse the amount of the trial court’s award of taxable costs against the plaintiffs. The court increased the amount of the award, rejecting the trial court’s “relative wealth” rationale, that Citgo’s “enormous wealth,” and plaintiffs “limited resources” should be considered in the cost award. There was a dissent on this part of the opinion written by Circuit Judge Dennis, who concurred in the dismissal.

In the past there have been many examples of defendants losing cases for failure to properly preserve evidence and related discovery abuses. Moore v Citgo shows that the tables can be turned, and the defense can win cases when the plaintiffs fail to preserve and properly respond to discovery. The defendant here was able to pursue this aggressive litigation strategy because its own e-discovery preservation house was in order. These are important lessons for all attorneys, but especially defense counsel.

Moore v Citgo provides a good example of how e-discovery can be used in a proactive manner, not just to avoid risk and discovery quagmires, but to win cases outright. This is the new normal for big-ticket defense litigation.

It is interesting to note that there were two full evidentiary hearings in connection with defendant’s motion for sanctions. The hearings included live testimony from 18 plaintiffs. Sanctions based on spoliation are always intensely factual, and, when done properly, as we see in this case, becomes a trial within a trial, following discovery about discovery. In this case the testimony of the plaintiffs convinced the judge that plaintiffs’ destruction of email was not “grounded in confusion or sincere misunderstanding” as they alleged, but instead constituted “willful and contumacious conduct.”

The Fifth Circuit on appeal conceded that the plaintiff’s construction of the evidence was plausible, but affirmed on the basis that the trial court’s view of the evidence was “not implausible,” and thus a proper exercise of discretion, and not a “clearly erroneous” decision. Again, the power of the trial courts over discovery and litigant misconduct has been reaffirmed.

Judge_Jerry_Smith-Fifth-CircuitHere are a few interesting excerpts from the opinion written for the majority by Jerry E. Smith, Circuit Judge, that underline these points:

Plaintiffs assert that their failure to preserve handwritten notes and personal emails did not substantially prejudice CITGO. Plaintiffs testified that their work notes contained information that was not available in electronic records or elsewhere. It was therefore not clear error for the district court to conclude that “the notes Plaintiffs routinely destroyed or failed to preserve would have been the best evidence of their daily tasks.” (January Sanction.)

Although conceding it possessed information regarding the duration of plaintiffs’ internet use, CITGO asserts those records are not accurate proxy for how much time was spent on personal email while on the clock. The district court specifically found, however, that “emails go directly to two of Defendant’s defenses” (January Sanction), and CITGO’s prospective trial exhibits included more than twenty emails from the one then-remaining plaintiff who used per- sonal email at work. The prejudice finding was not clearly erroneous.

The district court dismissed the seventeen plaintiffs only after issuing two discovery orders, one of which specifically warned that dismissal would be the penalty for noncompliance. The court, moreover, entered specific factual find- ings regarding each plaintiff—and, notably, did not dismiss one plaintiff whom it found to be in compliance. (January Sanction.) On this record, we find no abuse of discretion, notwithstanding the severity of the sanction.4 Discovery rulings—especially those taken after live testimony—are peculiarly within the competence of the district court, and the factual findings at issue here are no exception.

To the extent plaintiffs have preserved a claim that their noncompliance did not prejudice CITGO, the court did not abuse its discretion by finding that “[t]he discovery that was destroyed by plaintiffs may have been essential to CITGO’s defense, and without it, CITGO is certainly disadvantaged. Moreover, CITGO has expended considerable funds in pursuing discovery that has led nowhere.”

Moore v. CITGO Refining & Chemicals Co., LP., is my 2013 case of the year.

One Response to Announcing My Top e-Discovery Case of 2013

  1. […] 1. More plaintiffs will lose cases as a result of sanctions for ESI spoliation and other e-discovery wrongdoing. The decision of the Fifth Circuit Court of Appeals, Moore v. CITGO Refining & Chemicals Co., LP, is a herald of things to come. There will be many more like this in 2014 by lower courts all over the country. Moore v Citgo shows the defense potential for the proactive use of e-discovery and the importance of proper preservation. Also see: Announcing My Top e-Discovery Case of 2013. […]

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