When a Defendant Fails to Preserve ESI

When a Defendant Fails to Preserve ESI

Legal consequences abound at every corner in healthcare. Each month this blog discusses examples of what those consequences can be.

I have discussed the importance of preservation of electronically stored information (ESI) in multiple Legal e-Speaking posts, as well as the potential consequences of not doing so. A recent court decision, Small v. University Medical Center, No. 13-cv-0298-APG-PAL (D. Nev. Aug. 9, 2018), offers an example of both.

Small is not about electronic health records. Small arose out of allegations made by employees against the defendant, University Medical Center (UMC), that it had violated wage and hour laws and the subsequent attempts of the employees to secure ESI relevant to those alleged violations. The decision reflects the court’s frustration with the failure of the defendant to preserve ESI and to produce it in a usable form despite promises and orders that the defendant do so. These failures led the court to “appoint a special master at UMC’s expense to solve the ongoing ESI problems to get the ESI in usable format to move the litigation forward.” Eventually, the special master issued a report and made recommendations to the court, which are addressed in the decision. Here is what the court concluded:

“There is no question UMC failed to implement a timely litigation hold, and failed to communicate its legal preservation duties to key custodians of discoverable evidence. There is no question that UMC failed to preserve discoverable ESI. There is no question data was lost or destroyed as a result. There is no question sanctions are warranted. UMC concedes they are. The only question is what sanctions are appropriate and proportional for the violations. The special master found UMC spoliated ESI responsive to plaintiffs’ discovery requests. The court agrees. The special master recommended a wide range of dispositive, evidentiary, and monetary sanctions. Plaintiffs urge the court to adopt his recommendations in their entirety. UMC urges the court to impose lesser sanctions in the form of an adverse inference instruction and monetary sanctions for the increased cost plaintiffs and their consultants incurred before the special master was appointed.

For the reasons explained below, the court finds the sanctions recommended by the special master are too harsh, and inconsistent with evolving federal law on spoliation of ESI. The court finds lesser sanctions are appropriate and proportional for UMC’s multiple violations of its legal duties, and the court’s orders. The court finds UMC should be sanctioned in the form of an instruction to the jury that the court has found UMC failed to comply with its legal duty to preserve discoverable information, failed to comply with its discovery obligations, and failed to comply with a number of the court’s orders. The instruction will provide that these failures resulted in the loss or destruction of some ESI relevant to the parties’ claims and defenses and responsive to plaintiffs’ discovery requests, and that the jury may consider these findings with all other evidence in the case for whatever value it deems appropriate.

The court will also impose substantial monetary sanctions against UMC in the form of reasonable costs and attorneys’ fees unnecessarily incurred by plaintiffs, including costs incurred for plaintiffs’ ESI consultants in connection with (1) filing the May 2013 motion to compel; (2) efforts to obtain compliance with the order compelling UMC to produce information responsive to the discovery requests in dispute; (3) attempts to identify and remedy UMC’s deficient ESI productions; and (4) cost of participating in special master proceedings.”

The evidentiary sanctions are especially worthy of note given that a jury will be told of the ESI-related failures of the defendants and will be allowed to consider those failures in its deliberations.

What lessons might be learned from Small? Among other things, these include the central importance for a healthcare provider to have a procedure in place to anticipate and implement a “litigation hold” when necessary.


**Editor’s Note: The views expressed in this column are those of the author alone and should not be interpreted otherwise or as legal advice.

Ron Hedges, JD, is a former US Magistrate Judge in the District of New Jersey and is a writer, lecturer, and consultant on topics related to, among other things, electronic information. He is a Senior Counsel with Dentons US LLP.
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