In GenOn Mid-Atlantic, LLC v. Stone & Webster, Inc. [pdf], No. 11 Civ. 1299 (HB) (FM) (S.D.N.Y. Apr. 20, 2012), U.S. Magistrate Judge Frank Maas denied the defendant’s motion for sanctions, holding that although the plaintiffs’ third-party consultant had a duty to preserve evidence, the defendant failed to demonstrate any resulting prejudice.

In this declaratory relief action, the plaintiffs sought a determination that they need not pay the defendant any additional money in connection with a construction contract. The plaintiffs retained a national consulting firm to audit the defendant and also to assist with litigation, if necessary. The defendant subpoenaed records related to the audit from the consulting firm. The plaintiffs moved to quash the subpoenas, or in the alternative for a protective order, claiming the documents were protected work product. The court denied the plaintiffs’ motion and the plaintiffs’ consultant subsequently produced responsive documents, including email. However, the production was incomplete, and the defendant learned through deposition testimony that the consulting firm had failed to halt the automatic deletion of emails.

The court found that the plaintiffs failed to issue a litigation hold to their consultant in the face of a clear duty to do so. However, the court also noted that the consulting firm marketed itself as providing litigation support expertise and should have known of their obligation to preserve evidence. In response to the defendant’s motion to compel, the consultant restored several back-up tapes to recover the deleted emails. The court denied the defendant’s request for sanctions, holding that the defendant failed to demonstrate that it suffered any prejudice from the belated production of emails or from any emails that may have been destroyed. The court also ruled that since the defendant subpoenaed the consultant for records, the plaintiffs could not be sanctioned under Federal Rule of Civil Procedure 37 for problems with the document production.