Spoliation Sanctions Can Dwarf What The Case Is Worth

A ruling from the Second Circuit Court earlier this year is a cautionary tale about the importance of implementing sound legal hold and production practices even in smaller cases. The value of this case in terms of the potential damages was in the low five figures – probably around $20,000. The amount of the sanctions imposed by a federal court judge and confirmed on appeal: $2.7 million. The court found that the defendant in this case had twice failed to place an adequate hold on electronic data, had not disclosed 40,000 potentially relevant sales documents, and manually deleted, with data-wiping software, thousands of files and emails. The court made short work of the defendant’s proportionality argument, maintaining the proportionality that matters in this situation is not the amount in dispute, but the cost to the litigant of making its own independent forensic examination. By that standard, the court said, “the amount of the sanctions was plainly proportionate—indeed, it was exactly equivalent…”