New Sanctions Case Offers Lessons on ESI Protocols and Information Governance Policies

Philip Favro, Consultant, Information Governance & eDiscovery, Innovative Driven

ESI protocols have become an increasingly contentious issue in eDiscovery. While ideally setting the framework for basic issues such as form of production, metadata fields, and load file specifications, ESI protocols have become bogged down in negotiations over search procedures and family productions of hyperlinked documents. Worse, some parties memorialize preservation procedures in ESI Protocols. As reflected in the recent In re Keurig Green Mountain Single-Serve Coffee Antitrust Litigation case, noncompliance with preservation provisions in an ESI protocol can expose parties to severe sanctions under Federal Rule of Civil Procedure (“Rule”) 37(b)(2)(A). Keurig also offers other lessons on key ESI issues including that courts may defer to an organization’s reasonable information-related policies in connection with discovery-based decisions.[1]

Rule 37(b)(2)(A) Sanctions vs. Rule 37(e) Sanctions

Courts may impose sanctions under Rule 37(b)(2)(A) when a party or witness fails to obey a discovery order. To determine whether sanctions are appropriate, courts look to the express language of a discovery order to ascertain whether a party has or has not complied with its provisions. If noncompliance is established, the court may issue a further order that remedies the harm in a “just” manner, including severe measures such as an adverse inference, evidence preclusion, or default judgment.

Unlike the Rule 37(e) sanctions regime, courts under Rule 37(b)(2)(A) are not bound by considerations of reasonableness or prejudice. To be sure, courts have set conditions under which they may issue severe sanctions pursuant to Rule 37(b)(2)(A). Those conditions range from bad faith violations of the order all the way down to infractions that resulted from ordinary negligence. Thus, a court could impose severe sanctions on a party whose negligence resulted in violations of a court-ordered ESI protocol’s preservation provisions that would otherwise be unavailable under Rule 37(e).

Court Sanctions Defendant for Failing to Comply with ESI Protocol’s Preservation Provisions

In Keurig, the parties executed a stipulated ESI protocol that the court subsequently entered as an order. Pursuant to the ESI protocol, the parties agreed to take various steps toward preserving relevant, responsive ESI. Among other things, the parties confirmed: (1) they would “take reasonable steps in good faith to prevent the loss [or] destruction” of ESI; (2) “they had ‘implemented a data preservation plan [and] issued preservation memoranda to relevant employees;’” and (3) they would ask their custodians if they kept relevant information “at the custodian’s office, home, or online.”

Despite these representations, defendant issued legal holds to 48 of the agreed-upon list of 54 custodians while conducting interviews with 43 of the 54 custodians on a “timely” basis. The court found that such shortcomings—while statistically minor compared to defendant’s overall conduct—constituted violations of the court-ordered ESI protocol and merited sanctions under Federal Rule of Civil Procedure 37(b)(2)(A). The court also held that defendant’s deficiencies constituted a failure to take reasonable steps within the meaning of Rule 37(e) since they eventually led to the spoliation of relevant ESI from 25 laptop computers belonging to 23 custodians.

As a result, plaintiffs sought relief under Rule 37(b)(2)(A), arguing that defendant’s conduct merited severe measures. While signaling its willingness to authorize harsh sanctions under 37(b)(2)(A) for defendant’s violation of the ESI order—including “preclusion and adverse inference” measures, the court ultimately declined to do so given the limited prejudice plaintiffs suffered. In an extensive, custodian-by-custodian analysis, the court found that prejudice was limited to defendant’s failure to produce relevant ESI from only three of the 23 custodians. In addition, plaintiffs were harmed by having to expend effort investigating defendant’s preservation and production deficiencies and working with defendant to recover lost data from two other Keurig custodians. To address such harm, the court imposed monetary sanctions against defendant and also permitted plaintiffs to offer certain evidence and argument to the jury regarding Keurig’s spoliation of hard drive data.

Reliance on Information Policy Insulates Defendant from Severe Sanctions

The court also decided against issuing severe sanctions under Rule 37(e)(2). Plaintiffs had asserted that defendant’s failure to undertake an exhaustive search of employee hard drives was both unreasonable and evidence of an intent to deprive them of relevant information found on the drives.

That defendant had not performed an exhaustive search of custodian drives was not in dispute. Prior to the litigation, defendant adopted a policy that directed its employees to save documents on “network or ‘share’ drives” rather than on local hard drives. The purpose of the policy was to provide a repository that would back up employee documents. In reliance on that policy, defendant did not search individual employee drives and relied instead on the assumption that its employees followed the policy and saved their documents on the corporate network.

In rejecting plaintiffs’ assertion, the court found defendant’s reliance on its information policy was “not unreasonable.” Citing La Belle v. Barclays Cap. Inc., 340 F.R.D. 74 (S.D.N.Y. 2022), the court opined that even though the “better practice” would have been for defendant to undertake a “searching inquiry” of all custodian hard drives, defendant “did not act ‘unreasonably in assuming the policy was followed and limiting its document search . . . until the issue was brought to its attention.’”

Lessons from Keurig on ESI Protocols and Information Governance

Keurig exemplifies the need for counsel to be wary of preservation-related provisions in ESI protocols as noncompliance could expose parties to severe sanctions under Rule 37(b) that would otherwise be unavailable under Rule 37(e). While the court refused to impose harsh sanctions against defendant in Keurig, the fact remains that such sanctions could issue in certain jurisdictions based on a finding of negligence. This is a low bar, one which the framers of Rule 37(e) specifically eliminated in 2015 when they rejected authorities that would permit the issuance of an adverse inference instruction on the basis of negligence. With Rule 37(e) offering safeguards against severe sanctions in the absence of a finding of a specific intent to deprive, individuals and organizations should carefully consider the potential impact of stipulating to an ESI protocol with aspirational preservation provisions that they may not be able to satisfy.

Keurig also spotlights the value of information governance in litigation. It’s generally recognized that upstream, proactive IG policies lead to better downstream, reactive practices in discovery. However, Keurig takes this point one step further. By deferring to defendant’s information policy, Keurig demonstrates that courts may very well credit parties whose reasonable information policies advance legitimate business objectives. For defendant, its IG policy objective was to provide a reliable repository for its business records. In deferring to that reasonable policy objective, the court found it was of no moment that certain employees may not have observed the policy.


[1] Legaltech News originally published this post as an article on its website on July 25, 2022.

Previous PostNext Post