Earlier this month, the telephone headset company Plantronics announced it set aside $5 million in the first quarter — 2.3 percent of its projected quarterly revenue — in connection with a discovery debacle in a Delaware antitrust case.
In the Delaware case, its competitor GN Netcom sued Plantronics in 2012, accusing it of prohibiting its distributors from selling rival headsets to large call centers. For now, those antitrust accusations have taken a backseat to a federal judge’s discovery sanctions.
On July 12, U.S. District Judge Leonard Stark in Delaware sanctioned Plantronics $3 million for spoliation after determining that a senior vice president at the company deleted and told others to delete as many as 90,000 emails. Stark left open the possibility of evidentiary sanctions, and of telling an eventual jury that it may assume the deleted emails contained evidence that would have been unfavorable to Plantronics in the antitrust case.
The judge wrote: "...Plantronics’ high degree of fault, its bad-faith intent to deprive GN of responsive documents, and the prejudice it has caused to GN’s case — along with the difficulties it has created for GN in ‘getting to the bottom of the deletion story’ and its (at times) unwillingness to acknowledge wrongdoing — further merit punitive monetary sanctions.”
The $3 million punitive sanctions are to be paid to GN, along with attorneys fees and costs for legal work related to the discovery, according to the order, available here via Bloomberg Law.
Stark wrote that $3 million was approximately three times the financial penalty that Plantronics imposed on the executive — Don Houston, senior vice president of sales — who admitted to deleting and causing others to delete emails.
In a press release, Plantronics said it believes the order may be appealed and reversed if it wins the underlying antitrust case. Its counsel at Potter Anderson & Caroon forwarded calls to a spokesman who declined to provide further comment.
Given that the discovery may now affect the outcome of the case, Big Law Business spoke to several experts about key takeaways for lawyers.
• Tell the court immediately if a client is deleting emails or destroying evidence.
In making his finding that Plantronics’ conduct went beyond negligence and acted in bad faith to deprive GN of discovery, Stark cites the company’s “repeated obfuscations and misrepresentations” about the deleted emails.
The judge called out Plantronics’ lawyers at Wilson Sonsini, of counsel David Reichenberg, for not coming clean about the problem:
”...despite having internally confirmed by June 24, 2014 the email deletion by Mr. Houston ... Plantronics’ outside counsel, David Reichenberg, emailed GN’s outside counsel on July 18, 2014, stating, '[i]t is incorrect to assume deletion as you suggest,’ because Mr. Houston ‘testified, multiple times, that he did not recall if he deleted email, and did not know if anyone else had deleted emails’.”
Reached by phone on Wednesday, Reichenberg declined to comment.
Jason Wallach, a partner with Blank Rome who has been a panelist at e-discovery conferences, said it is one of, if not the largest monetary sanction he has seen since the new federal rules of civil procedure with regard to discovery changed last year. One of the changes, modified rule 37(e), so that judges must find the opposing party suffered prejudice in order to issue discovery sanctions.
“I think the court was probably troubled by the fact that this was not brought to the court’s attention and the other side’s attention,” said Wallach.
“It may have been different had [Plantronics] said ‘hey we discovered this was going on and we wanted to put a stop to it and let everybody know’,” he added.
•Not all emails are saved somewhere in the cloud.
Although Plantronics hired forensic investigators and recovered some of the deleted emails, it stopped short of recovering all lost information. Experts in the case estimated that between 950 and 15,309 emails were deleted that would have been responsive to GN’s discovery request, according to Stark’s order.
Ignatius Grande, a senior attorney in Hughes Hubbard & Reed’s discovery group, said most companies have a specific archiving policy. While regulations require banks and pharmaceutical companies to save emails, other companies will have specific policies.
The judge wrote that Houston’s conduct was “not excused by his professed belief that he thought IT personnel would nevertheless continue to have access to the deleted emails.”
• Discovery increasingly involves technological as well as legal issues.
The judge wrote he was “not convinced that Plantronics took all reasonable steps” to recover the deleted emails. It could have searched its back-up tapes and paid its forensic investigators an estimated $2,000 to $5,000 for a more complete restoration of the back up tapes, but chose not to do so, Stark wrote.
James Bekier, director of litigation services for BakerHostetler, said that the cost of restoring back-up tapes has declined dramatically in recent years. Previously, restoration involved recreating a whole email network, but thanks to technological advances in the ability to index such tapes, the cost has dropped.
“Every time I see problems where parties are getting into trouble with the courts it’s because they didn’t engage the technical side of the process,” said Bekier.
•It could have been worse for Plantronics.
Wallach, the Blank Rome partner, said there was no doubt that the $3 million punitive monetary sanctions, plus the cost of attorney’s fees and expenses and the jury instruction add up to a “hefty” punishment for Plantronics.
“It is one of the larger monetary sanctions I’ve seen,” he said.
Still, given that the court found there was an intentional destruction of evidence, it could have been far worse for Plantronics: The judge could have found Plantronics’ actions were egregious enough for him to enter a default judgment finding they lost the case.