I have previously written about the spoliation litigation and sanctions in the DuPont v. Kolon trade secrets dispute, in which Crowell & Moring represents the plaintiff and which resulted in a $920 million jury verdict for our client DuPont. The deletion of ESI by the defendant in that case resulted in an adverse inference jury instruction at trial and even spawned criminal obstruction of justice charges. Now the district court in the civil litigation has awarded DuPont $4.5 million in attorney’s fees and expenses as an additional sanction, which was the full amount sought by DuPont.
The court’s opinion explains why the $4.5 million sanction – one of the largest fee-based spoliation sanctions to date – was fully justified. The level of effort expended by DuPont’s lawyers and vendors was driven in part by what the court described as the defendant’s “overall obfuscatory conduct” which resulted in “a long, and oftentimes tortuous, journey on the part of DuPont to get to the bottom of the alleged deletion of files and email items by key Kolon employees.” The lesson here of course is that one must be careful about waging a pitched battle over discovery into known spoliation given that the client will likely have to foot the bill. That is an entirely foreseeable outcome where the allegations have merit because an award of fees and expenses is a common spoliation sanction.
The court also rejected an argument by the defendant that DuPont’s approach to investigating the spoliation was “recklessly inefficient” because a list of search terms used to cull recovered data was too broad. The court recognized that the list was broad, but “necessarily so” and stated that it had “no difficulty concluding that DuPont acted reasonably in identifying the search terms, taking into account both the need to narrow the scope of the documents that must be reviewed and the risk of omitting relevant evidence.
The court likewise rejected the defendant’s argument that it should have been notified earlier of suspected spoliation, noting that the defendant had ignored DuPont’s initial letter raising the issue. Further, the court recognized that “DuPont was entitled to perform a careful analysis (or due diligence) of the facts before charging Kolon with spoliation, a quite serious allegation[,]” and further stated that “DuPont was obligated to carefully examine the facts before bringing such a charge to the attention of Kolon.” In other words, there is no “immediate notification” requirement on the part of the victim.
Nor did the court accept the defendant’s argument that the effort expended by DuPont was excessive in light of the fact that only one recovered document was used as a trial exhibit. The court rejected that line of attack principally because DuPont had shown that many deleted documents were unrecoverable.
The court ultimately concluded that the spoliation discovery pursued by DuPont was “reasonable [and] sensible,” in contrast to the defendant’s “contentious opposition.”
There is no question that collateral litigation over spoliation can be expensive, as the DuPont award demonstrates. But in the end victims of spoliation may be best served by pursuing “reasonable and sensible” prosecution of such conduct, and those defending credible allegations of spoliation may be better off eschewing a scorched-earth defense.