E-Discovery Sanctions Hit Hospital Hard: Failure to Monitor Litigation Hold Compliance

Jul 10, 2014 | Blog

Healthcare organizations had largely dodged most of the ire of judges for egregious failures to preserve data pursuant to a litigation hold.  Until now, Halifax Hospital Center in Daytona Beach, Florida (“Halifax”) learned on May 8, 2014 that judges become very unhappy when told that data that was to be preserved pursuant to a Litigation Hold no longer exists, and grow downright livid when they learn that a party had told its adversary the data exists when it had, in fact, been destroyed.  Finding such conduct “reprehensible,” United States Magistrate Judge Thomas B. Smith in the United States District Court, Middle District of Florida issued a Report and Recommendation (“Report”) that Halifax pay all of its adversary’s legal fees and expenses incurred in an attempt to obtain discovery of certain medical records. As there were four separate discovery demands and an expert had been retained to review each of four document productions, the sum due will likely be well into six figures.  Perhaps more importantly, Halifax destroyed its credibility with the court. The Report by the Magistrate Judge highlights the need for healthcare organizations to plan properly for eDiscovery, comply with their own protocols, and to be transparent with the court and counsel.

In United States v. Halifax Hospital Medical Center, Halifax Hospital was sued under the False Claims Act for allegedly receiving “improper and excessive compensation from the federal government” and submitting false claims to Medicare for procedures that were not medically necessary. Throughout the course of the litigation, the Relator repeatedly requested that Halifax produce certain medical records. After four separate sets of records were produced, none of them completely responsive to the demands, Halifax advised that the subject records had been destroyed – after a litigation hold had been put into effect. Worse, as the Magistrate Judge noted, Halifax gave “the false impression that it had provided records that were not, and could not have been, produced because they had already been destroyed.”

For companies in information-intensive industries like healthcare, a documented Litigation Hold Policy with a process for monitoring compliance may have averted the destruction and sanctions that ensued. In addition, litigants must be transparent about their discovery processes and capabilities with opposing counsel and especially the court. Should you have any questions about this case or Litigation Hold Policies, please contact Kenneth Rashbaum.