Legal Update

May 20, 2005

E-Discovery Sanctions Keep Getting Harsher: Now to the Tune of $1.4 Billion

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Over the past year, we have seen an increasing willingness by courts to impose extraordinary and costly sanctions for e-discovery violations. In July 2004, the federal court in Washington D.C. sanctioned Philip Morris $2.75 Million Dollars for the deletion of emails by senior executives. This sanction was issued despite a finding that there was no bad faith on the part of Philip Morris. In April 2005, a verdict was rendered in the much discussed Zubulake case in an amount of $29.3 Million Dollars. The e-discovery issues were plentiful in that case, but the one that was most important to the jury was likely the adverse inference instruction related to the failure to properly preserve email. The recent Perelman/Morgan Stanley decision identified below is yet another case in this disturbing trend.