Lack of Candor with the Court and Opposing Counsel Regarding E-Discovery Leads To Sanctions for Outside Counsel

January 1, 0001


In a lengthy opinion, United States Magistrate Judge Karla R. Spaulding (M.D. Fla.) recently imposed sanctions on outside counsel for Plaintiff Bray & Gillespie Management LLC for a “pattern of withholding and concealing information concerning discoverable material” from both the Court and opposing counsel.[1] The Court ordered outside counsel to pay the reasonable attorney’s fees, costs and expenses that the defendant had incurred in filing the motion for sanctions and in the related hearings. These costs included court reporter and expert witness fees.[2] Although the Court declined at this time to sanction the client or its in-house counsel, it warned them both of their duty to supervise outside counsel in the future.

Background: Failure to Object to the Request for ESI in Native Format and Then Failure to Produce It

Bray and Gillespie Management LLC, et al. (B&G) commenced this action against Lexington Insurance Company (LIC) on February 13, 2007, seeking insurance coverage for damages incurred to its resort properties by Hurricanes Charley, Frances and Jeanne during August-September 2004.[3] This case arose from a dispute about whether the damage to the properties and subsequent claims amounted to one occurrence under the terms of the insurance policy or three occurrences.[4] Anderson, Kill & Olick, P.C. (AKO) submitted the insurance claims to LIC on behalf of B&G.[5] In May 2006, AKO also oversaw the collection of hard copy documents and electronically stored information (ESI) relevant to B&G’s claims. The ESI, together with metadata, and the TIFF images of the hard copy documents were then loaded onto a database for use by AKO.[6] The partner in charge of this case for B&G left AKO in January 2008 and became a partner at Reed Smith.[7] AKO then withdrew as counsel for B&G, subject to the Court’s admonition to turn over all discovery materials relevant to the pending litigation to Reed Smith. AKO transferred the database to Reed Smith in June 2008, although Reed Smith had access to the database before the transfer was made.[8]

On August 17, 2007, LIC served its first request for production of documents on B&G, seeking among other things ESI in its native format with metadata.[9] In its response to this discovery B&G failed to object to LIC’s definition of ESI or otherwise to the production of ESI in its native format.[10] Between January and March of 2008, LIC filed two motions to compel against B&G to obtain the documents requested in its August 2007 pleading. B&G did not even oppose the second motion to compel.[11] The Court therefore ordered B&G to produce the requested documents and data no later than April 30, 2008.

B&G did produce discs of documents by the deadline, but none of them in native format, as LIC had requested.[12] All of the documents were TIFF images with no metadata. Nor had the TIFF images been converted into a searcheable format through optical character recognition (“OCR”) .[13] LIC formally objected to the format of this production on May 19, 2009, complaining that the ESI on the discs was missing metadata and was not in native format as requested. During the negotiations to resolve this ESI dispute, counsel for B&G at Reed Smith “concocted a story about the process that B&G and AKO used to gather the discoverable documents,” according to the Court.[14] After attempts to resolve the ESI dispute failed, counsel for LIC filed a motion for sanctions on May 27, 2008.[15]

Evidentiary Hearings Reveal Deliberate or Reckless Disregard for the Truth

The Court held its first evidentiary hearing on June 25, 2008. At that hearing, LIC presented an expert witness who testified about the deficiencies of the B&G discs produced on April 30.[16] During the hearing, Reed Smith partners representing B&G were forced to concede that the information that they had previously given the Court and LIC regarding the collection of ESI from B&G was erroneous, but they maintained that AKO refused to provide them with correct information.[17] At the conclusion of the hearing, the Court held that “B&G directly or through their agents deliberately manipulated the electronically stored information in such a way as to withhold from the defendants the information that had been requested, specifically metadata.”[18]

Counsel for B&G appealed the magistrate’s ruling, contending that the magistrate erred by failing to reduce her order into writing and abused her discretion by requiring the production of ESI as LIC requested at B&G’s expense. This appeal was denied.[19]

The Court reopened the evidentiary hearing on the motion for sanctions on December 8, 2008.[20] At that hearing, an AKO partner testified that his firm had been fully responsive to all Reed Smith inquiries concerning the B&G database.[21] Reed Smith could not identify a single instance where AKO did not provide what Reed Smith had requested and was forced to concede during this hearing that the asserted problems with AKO had been overstated.[22] At the conclusion of this hearing, the Court found that B&G’s outside counsel had violated Fed. R. Civ. P. 34 by failing to produce the ESI in the form requested by LIC and that violation was not substantially justified to avoid sanctions under Fed. R. Civ. P. 37. In particular, the Court found that “[i]f B&G and its attorneys believed they were substantially justified in the form of production of ESI, they would not have engaged in a pattern and practice of concealing and misrepresenting material information.”[23] The Court further found that outside counsel were responsible for the e-discovery representations to the Court and opposing counsel and therefore outside counsel, and not B&G or its in-house counsel, would be liable for the fees and expenses incurred by LIC.[24]

This case is a veritable study in what not to do concerning ESI. First, it is apparent that outside counsel for B&G failed to do their due diligence concerning ESI at the outset of the case. It appears that they did not understand exactly what had been collected, how it was collected and in what form. They subsequently made representations to the Court and opposing counsel regarding the ESI that were false. They also failed to object timely to the definition of ESI in the Defendant’s First Request for Production of Documents. Nor did they otherwise comply with the requirements of Fed. R. Civ. P. 34(b)(2)(E)(ii) which requires a party, where a request does not specify the form for producing ESI, to “produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms.” Then they wrongly blamed the firm that previously represented B&G in the case.

[1] Bray & Gillespie Management LLC, et al. v. Lexington Insurance Company, et al., No. 6:07-cv-222-Orl-35KRS 2009 LEXIS 21250 *72 (M.D. Fl Mar. 4, 2009).
[2] Id. at 75-76.
[3] Id. at 9.
[4] Id. at 6.
[5] Id.
[6] Id. at 6-7.
[7] Id. at 10
[8] Id. at 21, 26.
[9] Id. at 12.
[10] Id. at 14-15.
[11] Id. at 16-21.
[12] Id. at 22-23.
[13] Id.
[14] Id. at 25.
[15] Id. at 24-28.
[16] Id. at 33.
[17] Id. at 35.
[18] Id. at 36.
[19] Id. at 37-38.
[20] Id. at 39-46.
[21] Id. at 42.
[22] Id.
[23] Id. at 63-64.
[24] Id. at 65-79.