Obstruction of the Discovery Process: Understanding Email

Email Stopped by Hand


A recent case out of the Southern District of New York has created a bit of buzz on the blogs. In In re A&M Fla. Props. II, LLC, 2010 WL 1418861 (Bankr. S.D.N.Y. Apr. 7, 2010), Chief Bankruptcy Judge Arthur Gonzalez was asked to impose sanctions pursuant to Federal Rule of Civil Procedure 37(d) for intentional obstruction of the discovery process

The facts of the case are pretty simple:

  • Lawsuit between Plaintiff GFI Acquisition, LLC and Defendant American Federated Title Corp for breach of a $41 million purchase and sale agreement.
  • Defendant American Federated sought email communication from GFI related to the purchase and sale agreement.
  • The requested emails were not produced even after a “company wide" search, and even though American Federated had evidence that the emails existed (American Federated was the recipient of some of the emails at issue).
  • American Federated and GFI jointly retained a computer forensic technician to search the GFI computer system, but the emails were still not uncovered.
  • American Federated requested an emergency status conference to discuss the possible spoliation of evidence.
  • Prior to the emergency status conference, GFI’s counsel disclosed that some emails were kept in archive folders and might not have turned up in the “company wide” search.
  • The computer forensic technician performed another search, which uncovered the emails at issue. The emails were reviewed by GFI’s outside counsel for privilege, but were not turned over to the plaintiff for several months and only after a motion to compel had been filed.

The court considered imposing terminating sanctions (dismissal with prejudice), but concluded that the lack of intentional destruction of evidence / failure to obey court orders meant that “dismissal would be unjustly harsh here, especially considering that American Federated eventually acquired the documents it sought all along.” For the same reason, the court declined to impose a severe sanction of an adverse inference.

Nevertheless, the court decided to impose monetary sanctions for the substantial delay and cost in producing the requested emails. The absolutely critical point about this case is the recognition by the court that when responding to a discovery request for ESI , outside counsel must become familiar with the client’s document retention system. Here, outside counsel was perhaps unaware of the difference between emails stored in a “live inbox” versus emails that have been archived. Employees of GFI removed emails from the “live inbox” to archived personal folders. The archived emails apparently did not come up in the “company wide” search performed first by GFI and later by a expert consultant.

The take away lesson from the opinion is that outside counsel has an obligation not just to request documents from his/her client, but to search for sources of information. Even without a finding of spoliation of evidence, a party may face sanctions for obstruction of the discovery process:

“Had Nash fulfilled his obligation to familiarize himself with GFI’s policies earlier, the forensic searches and subsequent motions would have been unnecessary. The Court finds that monetary sanctions are appropriate here and orders GFI and its counsel to reimburse American Federated its half of the cost of the forensic searches. GFI and its counsel are also ordered to reimburse American Federated for the costs associated with bringing the motion for sanctions and the motion to compel.”


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