These sanctions can include monetary fines, adverse inference instructions, dismissal of the suit or default judgment or, sometimes, a combination of penalties. For example, in Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497 (D. Md. 2010), a federal court in Maryland found that the defendant had engaged in a willful bad faith discovery violation, including the failure to implement a litigation hold, attempted and actual deletion of ESI and misrepresentations regarding the completeness of discovery. The court recommended a default judgment and a permanent injunction as to plaintiff’s copyright claim. It also ordered monetary sanctions and that the president of Creative Pipe be jailed for not more than two years unless and until the award of attorneys’ fees and costs was paid.
To protect themselves, companies need systematic, reasonable and defensible electronic discovery and records management programs designed to comply with discovery obligations. These programs can reduce the need to conduct costly or inefficient fact-gathering in response to discovery requests and provide defenses to claims of improper destruction, or spoliation, of evidence. Further, having an effective and updated records management policy, program and retention schedule will enhance a company’s efforts to achieve proper data management—a key factor in minimizing discovery costs and mitigating the risk of sanctions.