Court Upholds $3.2 Million in Sanctions for Intentional Deletion of Unallocated Space
Genger v. TR Investors, LLC, 2011 WL 2802832 (Del. Supr. July 18, 2011). In this shareholder litigation, the defendant (an “international man of mystery”) sought review of the Court of Chancery’s judgment including, its award of $3.2 million in attorney fees and costs for the spoliation of ESI in violation of a preservation order. On appeal, the defendant argued the sanctions were disproportionate and excessive as he merely erased unallocated free space, which was not specifically prohibited by the order and did not did not result in the spoliation of material evidence. The defendant further argued that because normal computer use causes similar overwriting to occur, sanctioning this behavior would require the suspension of all computer activities every time a court issued a preservation order. Rejecting both arguments, the court determined the trial court’s finding was based on narrow grounds related to evidence spoliation – not rewriting in general – and that the parties previously compromised, agreeing to the specified fee amount. In order to avoid future confusion, the court recommended that parties address the issue of unallocated free space in their preservation orders and document retention policies.
The trial court’s decision issued in December 2009 highlighted the ever-growing need to bridge the proverbial gap between IT and legal. The independent technology consultants in the case were brought in by the supervising counsel. Whether the technology consultant’s failure to image unallocated space was the result of counsel’s failure to explain the legal implications of the data collection process, or the legal technology’s company’s inability to perform such operations is not clear. What is clear is the need to open the lines of communication between the IT and legal professionals and make sure everyone is on the same page. To do this, companies should form an ediscovery response team tasked with the responsibility of formulating document retention and litigation response policies. The response team should maintain knowledge of information regarding: Where company data resides, who has expert knowledge of the data, how it is maintained, how it can be accessed and when it is destroyed. Further, the ediscovery response team should develop and maintain a data map and ensure retention practices match the policies.
Want to learn more about the underlying litigation and the trial court’s ruling? Download a previous edition of the ESI Report where we discuss the discovery order issued in TR Investors, LLC v. Genger.