In my March 2018 column, E-Discovery Ethics: It’s Still-And Always Will Be-About Doing Tech Right, I discussed the opinion in Klipsch Group v. ePRO E-Commerce, No. 16-3637-cvNo. 16-3726-cv (2d Cir. Jan. 25, 2018). In Klipsch, the U.S. Court of Appeals for the Second Circuit affirmed the Southern District of New York’s order that even though “the likely valuation of actual damages” caused by the defendant’s discovery violations was $25,000, the defendant additionally had to pay the plaintiff a total of $5 million as “compensation” for “discovery efforts” the plaintiff had to take solely because of the defendant’s misconduct, as well as for “restraint … appropriate to secure” the plaintiff’s “likely recovery of treble damages and attorney fees at the conclusion of the case.” The plaintiff in Klipsch, a manufacturer of headphones, sued a subsidiary of the defendant on the ground that it was selling counterfeit plaintiff headphones. While the trial court was “initially” persuaded by the defendant that the actual damages in the matter were about “$8,000 worldwide,” the defendant’s “failure to comply with its discovery obligations began to cast doubt on the reliability” of its valuation, causing the court to give weight to the plaintiff’s allegation that the defendant had “sold at least $5 million in counterfeit or otherwise infringing” products. The defendant’s discovery failure was in not putting into place a litigation hold, so that the defendant’s initial production was of a mere 500 documents, including no “original sales documents” but, instead, “spreadsheets created specifically” for the litigation “that purported to list all relevant sales” but did not. An e-discovery vendor eventually retained by the defendant found “an additional 40,000 documents, including 1,236 original sales documents;” some of the documents contradicted the deposition testimony of the defendant’s CEO and suggested that defendant “had misidentified the suppliers of the counterfeit products” and “had artificially limited” its discovery vendor’s “investigation into its electronic records.” In November 2013, i.e., 15 months after the complaint was filed and six months after the court found that the defendant had not imposed a litigation hold, “it became clear that” the defendant “still had not imposed” one.

Many of the same issues in Klipsch arise in Schnider v. Providence Health & Services, Case No. 315:cv-00038SLG (D. Alaska March 9, 2018). In Schnider, Jamie Schnider had a sexual relationship with his mental health therapist, Natalie Warner, presumably employed by the defendant (the opinion does not explicitly state this). Plaintiff Tiana Johnson is plaintiff Schnider’s former spouse and contemplated the lawsuit before Schnider did. Warner, Schnider’s lover, committed suicide in October 2014. Schnider permanently deleted his Facebook account after he retained an attorney and around the time he and Johnson commenced the action. He claimed that he deleted the account simply because he “couldn’t stand to look” at photos of his former lover, not because he intended to deprive the defendant of the information contained within the account. At an evidentiary hearing, he “testified that he was a frequent and consistent user of Facebook” while with Warner, describing himself as “the Facebook kid.” He acknowledged that anyone reading his Facebook account for the period in question would be able to assess his “emotional health on a day-to-day basis” and that, in particular, after “Ms. Warner’s death, whatever his Facebook account would have contained would have shown the state of his mental health at that time.” Notwithstanding this testimony, he testified that he could not recall having called eight law firms prior to Warner’s death, but was certain that they were “not in connection with a possible lawsuit by him against” the defendant. The court found that Schnider deleted his Facebook account, in strong part, to deprive the defendant of the information it contained as that information related to the litigation.