As a frequent ERISA litigator, I am embarrassed to report the latest e-discovery nightmare comes from that field. Wachtel v. Health Net, Inc.,2006 WL 3538935, LEXIS 88563, (D.N.J. Dec. 6, 2006). This class action alleges breach of fiduciary duty by improper handling of health claims. But at this point, after five years of litigation, the merits of the case have been completely over shadowed by the improper defense tactics. The District Court Judge begins her 44-page opinion by observing that the case “gives new meaning to the term ‘scorched earth’ litigation tactics.”
The opinion details just about every e-discovery violation possible, including multiple misrepresentations to the court, and reads like a handbook on what not to do, including my two personal favorites:
(7) failing to disclose to this court or to the Magistrate Judge during three years of discovery that e-mails older than 90 days were never searched . . . .
10) keeping even their own outside counsel (other than the Epstein Becker firm) unaware of their e-mail procedures that resulted in widespread dereliction of their discovery obligations.
At page thirty-three of the opinion, the Judge returns to the scorched earth analogy:
Defendants’ strategy has been a concerted war to waste huge time and resources of Plaintiffs in pursuing this litigation. It gives “scorched earth litigation” a new standard of brashness. Defendants have also forced the Court to devote years to police discovery abuses over and over again. Defendants continue to ignore the Court’s rulings over and over again. Defendants’
persistent pattern of delay, defiance of Court Orders, evasive responses to Plaintiffs’ discovery requests, and lack of candor have resulted in crushing prejudice to Plaintiffs in the form of forgetful witnesses and extraordinary expenditures of time, effort, and money. The wanton waste of judicial resources caused by Health Net, as exemplified herein, is equally staggering
Not surprisingly, the opinion concluded by imposing severe sanctions: deeming various facts as established, striking “surprise” trial exhibits, barring defendants’ use of late-designated witnesses, ordering reimbursement of plaintiffs’ attorney fees and costs, appointing a discovery master to be paid for by defendants, and imposing a fine in an amount to be determined. The court did not enter the ultimate sanction of a default judgment against all defendants, but reserved ruling on that pending resolution of all class action issues. The Court also reserved ruling on whether sanctions should also be imposed on defendants’ latest outside legal counsel, the fourth in a series of attorneys and firms to represent them.
POSTSCRIPT: On June 19, 2007 the Court determined the amount of the attorney fee and costs to be paid by defendants to Plaintiffs’ attorneys. Wachtel v. Healthnet, Inc., 2007 WL 1791553 (D.N.J., June 19, 2007). Here is the concluding paragraph of the opinion:
“Defendants shall by July 3, 2007 pay Jonathan Alpert $32,165.00 for attorney’s fees; Pomerantz Haudek $1,760,364.00 in attorneys’ fees and $18,605.85 in expenses; and Sills Cummis $4,754,649.00 in attorneys’ fees and $158,099.37 in expenses.”