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Residential Funding Corp. v. DeGeorge Home Alliance, Inc., 2002 U.S. App. LEXIS 20422 (2nd Cir. Sept. 2002).

The Second Circuit in this case clarifies that ordinary negligence in failing to produce documents is enough to invite sanctions. The message: parties will be held accountable for their decisions in dealing with providers of electronic discovery services.

The plaintiff, RFC, was unable to produce requested emails in time for trial. The defendant, DeGeorge, requested an “adverse inference” instruction—that is, an instruction that jurors could infer that the evidence plaintiff failed to produce would have damaged its case. The district court declined the instruction, and DeGeorge appealed only on that issue.

Considering whether sanctions should have been imposed, the Second Circuit took a close look at the plaintiff’s retention of and work with its electronic discovery service provider.

Besides applying an incorrect legal standard, the district court had found no evidence that the emails would have been damaging to RFC. The appeals court admonished that a requesting party should not be held to a too stringent standard in proving the nature of missing evidence. It cited the following indications that the emails would have damaged RFC’s case:
  • RFC told the court that the emails would be produced, but left out that its vendor had been unable to retrieve emails from the critical time period.
  • When defendants eventually retained their own vendor to examine the tapes, RFC exacerbated the delay by missing a deadline to ship the tapes to defendants’ vendor.
  • RFC refused to provide information to assist defendants’ vendor in analyzing the tapes.
Although the court acknowledged that the ultimate cause of non-production was that RFC’s vendor could not retrieve the emails, it authorized sanctions against RFC for its own actions hindering production.

The court also detailed “overlooked” evidence indicating bad faith or gross negligence. It questioned RFC’s “continued reliance on [the vendor] throughout months of apparently fruitless attempts to retrieve the critical emails” and pointed out the “discrepancy in competence” between the parties’ vendors: defendants’ vendor was able to identify and begin retrieving the emails in four days. (The court found “thoroughly unconvincing” the argument that the second vendor had a “head start.”) RFC also made inconsistent representations about how quickly it had retained help upon learning that it could not retrieve the emails “in-house.” RFC produced emails dated before and after the time critical to the dispute, but not emails from the critical time period. Finally, considering the circumstances – trial was imminent and RFC had delayed production—RFC’s “purposeful sluggishness” might have been sanctionable misconduct in its own right.

How did RFC run into trouble, and how can parties avoid such a result?
  • Hire a competent service provider whose expertise is electronic data. Many “electronic discovery” vendors are traditional litigation support vendors whose experience is copying, scanning, and coding paper—not dealing with electronic data.
  • Consult a service provider early in the case. Remember that Rule 34 “documents” include information stored electronically. Don’t wait for a specific request for or motion to compel production of electronic information. The closer the time of trial, the more serious any delay.
  • Request a realistic estimate of turnaround times.
  • Monitor progress on your project. If the service provider is having difficulty retrieving information, request a detailed explanation of any delays.
  • Understand any problems the service provider confronts with the media you provide. Should any difficulties arise, address them with the court in a timely fashion. Be able to accurately describe any obstacles to production. Particularly if there are discrepancies—documents that can and cannot be produced—be prepared to explain.
  • If your service provider is struggling, consider a second opinion. The court specifically questioned RFC’s continued reliance on its vendor after months of unsuccessful efforts. If you must represent to a court that information cannot be produced, be sure that you have consulted electronic discovery experts before reaching that conclusion. As in this case, the problem may be the service provider’s abilities with regard to the given project, not the media.
RFC spotlights the problems a party can encounter with vendors who lack the expertise to properly handle electronic information. The days when parties could defeat requests for electronic information by claiming production was too complicated, too time-consuming, or simply not possible are over. Courts are wise to today’s discovery issues: electronic discovery shouldn’t be that hard.
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The information contained herein is not intended to provide legal or other professional advice. Applied Discovery encourages you to conduct thorough research on the subject of electronic discovery.