United States: Ignore E-Discovery Obligations At Your Peril In Pennsylvania

Pennsylvania's Rules of Civil Procedure differ greatly from the Federal Rules in many respects, and in some areas (such as lean Rules relating to e-discovery), Pennsylvania's resistance to adopt the Federal Rules might lead some to believe that Pennsylvania is behind the curve on e-discovery or that its courts don't focus on e-discovery issues as much as their counterparts in the Federal system.

Those arriving at that conclusion may want to read the Pennsylvania Superior Court's recent decision in Solara Ventures IV, LLC v. PNC Bank, PA Superior Court No. 1212 WDA 2013 (August 7, 2014). While non-precedential, the Solara Ventures decision is significant in demonstrating that the Pennsylvania courts – much like the courts in other states and the Federal system – fully expect parties to comply in good faith when responding to e-discovery requests, and will enter harsh sanctions against parties who fail to meet their e-discovery obligations.

In a $2+ million breach of contract case, Defendant PNC requested electronically stored information from Plaintiff Solara Ventures in May 2010. As noted by the court, Solara Ventures responded by providing "a series of inconsistent, seemingly contradictory reasons for its non-compliance with PNC's discovery request," such as suggesting that a computer virus had rendered the requested ESI irretrievable. Although Solara Ventures indicated that the hard drives had been preserved for inspection, it later indicated that the virus-ridden computer had been "fried and trashed," suggesting that the hard drives had not been preserved.

Subsequently, in March 2012, Solara Ventures informed PNC that a virus had not impacted its ability to retrieve emails, and said that it compiled and would produce two discs containing all of its emails extracted from the computer. Two months later, after testifying in a deposition that it did not archive old emails and "double-deleted" its email correspondence, Solara Ventures produced the discs, which contained 740 emails. None of the produced emails predated the litigation, even though historical emails relevant to the earlier project had been attached to the Plaintiff's complaint.

In July 2012, PNC filed a motion for sanctions, alleging Solara Ventures' non-compliance with the discovery obligations and spoliation of evidence. The trial court did not dismiss the case at that time, nor did it preclude evidence or grant an adverse jury instruction at trial, as requested by PNC. Instead, the trial court awarded PNC attorneys' fees for pursuing the motion, and it compelled Solara to make available to PNC approximately 41,000 emails that had been found to exist in Solara's email archives. After Solara failed to comply with the court's order, PNC moved for sanctions again. This time – and despite the fact that Solara's attorney raised a new claim that some of the 41,000 emails were privileged and only 2,100 were "relevant"– the trial court dismissed the Plaintiff's case, and also awarded an additional $70,000 in attorneys' fees to PNC.

The Pennsylvania Superior Court affirmed the sanctions entered by the trial court. Making no mention of any Federal case law, the Court spoke to the trial court's discretion to enter the severe sanction of dismissal only in "extreme circumstances," such as where the court finds that "the violation of the discovery rules is willful and the opposing party has been prejudiced." The Superior Court held that there was ample evidence to support the trial court's determination that Solara Ventures had misled the court and PNC, and "had not acted in good faith throughout the discovery process." For example, the Superior Court held that the evidence established the Plaintiff had "provided contradictory explanations for its repeated failure to comply with its discovery obligations," and had not offered PNC an opportunity to participate in the email retrieval process or to determine which of the 41,000 emails were irrelevant or privileged.

Notably, although the Plaintiff apparently suggested numerous times that ESI in the case had been lost, the sanctions in this case were not entered based purely on the spoliation of evidence. Rather, the courts' primary focus in entering and upholding the sanctions was on the conduct of the responding party and its counsel in proceeding with discovery in good faith and complying with the trial court's order.

One would likely hear little disagreement from Pennsylvania attorneys that the state Rules of Civil Procedure provide less guidance on e-discovery sanctions than the Federal Rules, or that the body of e-discovery case law in Pennsylvania state courts is not as robust as that in the Federal system. However, one message from the Solara Ventures case (even though non-precedential) is that the consequences of failing to respond in good faith to requests for e-discovery can be just as severe in Pennsylvania as in any other court in the United States. Perhaps the more important takeaway from Solara Ventures is that Pennsylvania courts are very much in line with other courts, who continue to trend towards less tolerance for delays in the preservation and production of relevant ESI, for misstatements by parties and counsel as to the availability of ESI, and for lack of transparency and cooperation during the e-discovery process.

Originally published September 15, 2014

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