In Bray & Gillespie Management, LLC, et. al. v. Lexington Ins. Co., et. al., 6:07-cv-222-Orl-35KRS (M.D. Fla. Mar. 4, 2009), Judge Karla Spaulding granted defendant Lexington Insurance Company's motion to compel discovery sanctions against plaintiffs.  According to Judge Spaulding, the evidence established that attorneys at plaintiffs' law firm acted in bad faith and "concocted a story" with respect to the events that occurred after Lexington objected to plaintiffs' production of electronically stored information ("ESI") without accompanying metadata. 

This insurance coverage action is related to six resorts owned by defendants that were damaged by hurricanes. The law firm of Anderson, Kill and Olick, P.C. ("AKO") originally represented plaintiffs in connection with the submission of insurance claims to Lexington. In May 2006, plaintiffs downloaded ESI and scanned paper documents related to hurricane damage into a single hard drive ("the Target Hard Drive").  The ESI and scanned documents were processed using a program which also captured the metadata from the downloaded ESI.  The TIFF images and accompanying metadata load files were then loaded into a litigation management database maintained by AKO.

In discovery, Lexington specifically requested ESI in its native format "without deletion or alteration of meta-data."  For a period of more than six months, plaintiffs produced scanned TIFF images and ESI converted to TIFF, but failed to produce native files as requested and ultimately as ordered by the court in response to two motions to compel filed by Lexington.

During the ongoing discovery dispute, plaintiffs discharged AKO as its counsel.  AKO partner John Ellison left AKO for Reed Smith, LLP and became plaintiffs' lead counsel.  Yet, despite the change of law firms, plaintiffs continued to produce documents as static image files.  According to the court, another Reed Smith partner John Berringer "concocted a story about the process that plaintiffs and AKO used to gather discoverable documents."  Berringer stated that plaintiffs printed the documents from their computer system and sent the resulting paper documents to AKO who in turn scanned the documents for production.  The court found that Berringer's explanation ignored numerous facts known or readily available to him about AKO's collection of the native files complete with metadata intact. 

Reed Smith attorneys had access to the [ESI] database before and after AKO transferred it to Reed Smith.  If he would have reviewed the [ESI] database, Berringer would have seen that it contained ESI metadata . . . the false explanation Berringer gave regarding how ESI had been collected was based, at best, on willful blindness which unreasonably prolonged and multiplied the proceedings regarding the ESI dispute.

In response, Lexington filed a motion for sanctions and a third motion to compel production of the native files. Reed Smith countered citing several cases in which the court had previously determined that failure to produce metadata did not violate FRCP 34.  Reed Smith also argued that producing the native files would be unduly burdensome.  However, at the evidentiary hearing on the motion, Reed Smith was forced to concede that the native files were gathered from plaintiffs prior to plaintiffs' filing of the complaint, copied to the Target Hard Drive and then transferred to plaintiffs' ESI database.  The court found that Reed Smith deliberately withheld the metadata from counsel without justification, violating Rule 34 and several of the court's prior orders in the process.

The court granted defendant Lexington's motion for sanctions, but declined to strike plaintiffs' claims as requested by Lexington.  Rather, the court ordered as follows:

• 1) Reopening of discovery as to Lexington only for a period of 60 days during which time Lexington may also file motions related to discovery disputes, including a motion for spoliation sanctions;
• 2) Plaintiffs are required to permit a computer expert retained by Lexington to have direct access to plaintiffs' ESI database;
• 3) Reed Smith and John Ellison must pay $1,200 in court reporting costs;
• 4) Reed Smith and John Ellison must pay Lexington's attorney's fees, costs and expenses incurred in filing the motion for sanctions and the proceedings arising therefrom;
• 5) Parties are to confer in good faith to resolve the amount of attorney's fees, costs, and expenses to be paid by plaintiffs;
• 6) Lexington must advise the court whether the plaintiffs' ESI database contains ESI in addition to that which plaintiffs offered to produce. If so, the court will entertain further sanctions, including a request that the court dismiss the amended complaint; and
• 7) The court will issue an order to show cause why Reed Smith attorney John Berringer should not be subject to sanctions arising from his conduct in the case. The court noted that his misconduct came to light subsequent to giving an order to show cause to Reed Smith and John Ellison.

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