Court Imposes Sanctions and Allows Re-deposition of Witnesses Due to Belated Production of Email

Tracy v. Financial Insurance Management Corp., 2005 WL 2100261 (S.D.Ind. Aug. 22, 2005)

Justin Tracy (“Tracy”) filed a Motion for Sanctions under Rule 37 and Other Relief in a case involving allegations of Americans with Disabilities Act and Employee Retirement Income Security Act violations. Tracy claimed that Financial Insurance Management Corporation (“FIMC”) had interfered with the discovery process by producing email at the eleventh hour after the deposition of key witnesses had commenced. The motion, which also sought relief for other alleged discovery violations, was granted in part and denied in part.

Tracy served his first request for production on November 8, 2004 seeking all email written by or about Tracy and information relating to the compensation of FIMC’s Regional Managers. FIMC responded on or about December 14, 2004, and an ongoing dialog regarding the completeness of this production commenced which led to supplemental responses.

On the last day of Tracy’s depositions of FIMC’s witnesses in Florida, FIMC issued a supplemental production of email despite its representation in February 2004 that it had produced all responsive email. FIMC conceded that a hardware upgrade after Tracy’s termination in 2003 had delayed its discovery of email and electronic data until April 2004. Parties agreed to hold open depositions which had not yet commenced, re-depose two witnesses who had been deposed prior to the supplemental production, and make reasonable extensions to discovery deadlines as necessary.

Tracy argued that the belated production of email “hindered and prejudiced” the discovery process. FIMC responded that the delay was “an inadvertent and unforeseen consequence” of hardware upgrades, production was timely supplemented, and witnesses have no knowledge of evidence destruction or the existence of additional responsive information.

Tracy sought sanctions, relying on Zubulake v. UBS Warburg, 2004 WL 1620866 (S.D.N.Y. 2004). Tracy claimed that he suffered prejudice when deposing witnesses in reliance on FIMC’s representation that discovery was complete, FIMC failed to preserve and produce discoverable evidence as required under Rule 26, and there was a lack of substantial justification for its late production of email. FIMC responded, arguing that Zubulake is distinguishable because FIMC did preserve and retain relevant evidence. Furthermore, FIMC did comply with Rule 26 by timely supplementing its responses upon discovery of additional information.

The court agreed that Zubulake is not applicable since there is no evidence that responsive information was discarded or destroyed. However, it found no substantial justification for the belated production and imposed sanctions under Rule 37.

Presumably, the Defendant was aware of the physical upgrades to its own computer system and was in a position to know, or should have known, that responsive electronic data may have been stored elsewhere than in the new system. Additionally, the Court finds that Defendant’s last-minute production during intrastate depositions of its witnesses in Florida harmed Plaintiff.

In choosing sanctions, the Court noted that this dispute had not been prolonged, FIMC supplemented its responses, and the harm can be mitigated. FIMC is to remain diligent in connection with its production responsibilities, but need not conduct further investigation for missing electronic data. Tracy may re-depose FIMC’s key witnesses concerning the newly produced documents, and FIMC shall be responsible for certain costs associated with such re-depositions. Monetary sanctions were denied without prejudice.