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Practical Insight

This case is a cautionary tale for the attorney who may know to say all of the right things when it comes to modern discovery practice but, in fact, lacks the expertise and competence to oversee a defensible discovery effort. This counsel instead subjected the court to a self-described “inner circle of judicial hell” in dealing with discovery ineptitude. As complex discovery has become a specialized field, courts have also grown more sophisticated in their understanding of the hallmarks of competent e-discovery counsel versus those who are merely winging it. Discovery practitioners should have a thorough understanding of their clients’ information systems in order to properly defend or prosecute their cases; otherwise they risk severe consequences.

Case Summary

In a trademark case involving e-cigarettes branded under similar marks, the defendants and their counsel were sanctioned more than $2.5 million for discovery violations that stemmed from the counsel’s lack of competency in e-discovery:

  • Although the defense counsel advised the defendants to preserve all potentially relevant emails from email accounts, the counsel failed to issue a formal litigation hold, inquire thoroughly about all possible data sources or instruct their client to disable automated deletion features, which “any competent counsel should have done.”
  • The counsel mistakenly assumed that all relevant emails could be collected from the defendants’ servers, when in reality, the defendants used web-based emails and messages stored online.
  • The counsel failed to appreciate the difference between email and chat applications, which resulted in the spoliation of relevant chat data.
  • The counsel allowed their clients to self-collect emails and communications relevant to the litigation without monitoring or supervising the searches. Attorneys must recognize “it is not sufficient to notify all employees of a legal hold and expect that the party will then retain and produce all relevant information.”

After it became apparent the defendants neglected to produce certain relevant communications, the defendants reengaged an electronically stored information (ESI) vendor, which found more than 15,000 relevant documents that were never collected or produced. Additionally, the ESI vendor was unable to recover other potentially relevant emails and chats that had been automatically deleted. The court chastised the defense counsel for their lack of the basic knowledge, training and skills to properly handle ESI, stating: “Counsel must be competent in their knowledge and ability to identify, preserve, collect, review, and produce ESI. Competence pervades every aspect of the ESI discovery process . . .  . It is no longer amateur hour. It is way too late in the day for lawyers to expect to catch a break on e-discovery compliance because it is technically complex and resource-demanding.

The court also dismissed the counsel’s attempt to shift blame to the ESI vendor. It is a lawyer’s responsibility to have “a reasonable understanding of the[ir] client’s information systems,” and such “understanding of the client’s information systems allows counsel to create a systematic process and plan for responding to discovery requests. The absence of a process and a plan is strong evidence that counsel did not conduct a reasonable inquiry.” The court granted the plaintiff’s motion for sanctions under Federal Rules 26(g) and 37, which included monetary sanctions and requiring the defense counsel to attend “at least eight hours of continuing legal education (CLE) on ESI.”

The court noted in its subsequent ruling – voicing its frustration with the painstaking saga – that it went through the “inner circle of judicial hell” to assess the appropriate amount of attorneys’ fees to award in sanctions. After an exhaustive review and analysis of the additional costs incurred due to the defense side’s errors, the court ultimately found that approximately $2.5 million in sanctions was warranted –half to be paid by the defendants and the other half by the defendants’ two counsel. It justified the large sum based, in part, on the fact that while the defendants “knew what went wrong . . . the jaws of life were needed to extract these facts from them,” forcing the plaintiff to spend many hours to piece together and “understand the shambolic discovery mess created by defendants.”

DR Distribs., LLC v. 21 Century Smoking, Inc., 513 F. Supp. 3d 839 (N.D. Ill. 2021).

DR Distribs., LLC v. 21 Century Smoking, Inc., No. 12 CV 50324 (N.D. Ill. Oct. 6, 2022).