Tuesday, May 10, 2011

Now Comes Proportionality in Sanctions: Or Rather Sanctions Based on Proportionality in Process.


Last week a federal District Judge Susan Wigneton in Newark reduced a previously awarded sanction from $246k to $10k.  She found the original to be “extremely unreasonable” given that this “was merely a discovery matter.”   The underlying discovery issue here was one that was born out of a third party action to collect relevant documents and the costs associated with this effort.  On its face it appears to be a rather typical matter – that is a primary party needs documents held by a third-party.  The primary party subpoenas, collects, reviews and analyzes these documents in helping to build their case.  This effort costs money and so they ask the judge to award them these costs.  

What is interesting in this case is what constituted the underlying costs.  To state it simply - it appears there was a severe lack of proportionality in terms of the process and staffing used in this regard.  It was disproportionate in that the true costs were upwards of $800k plus.  The magistrate judge who initially awarded the sanctions found it excessive that a twenty three member team billed over 2100 hours on this project.  She thus awarded the $246k (See the Conclusion in her written opinion for details of costs).  The federal judge found this “clearly erroneous” and reduced the sanction to $10k. There was no reason given for this decision by the federal judge. 

The New Jersey Law Journal has more coverage on this.