How well do you understand your email system? Litigation is not the time to find out.

“Had [outside counsel] fulfilled his obligation to familiarize himself with GFI’s policies earlier, the forensic searches and subsequent motions would have been unnecessary.”

In re A & M Fla. Props.[i]

1.1     What happened?

Two companies agreed to a $41 million real estate transaction. However, before the transaction closed, the sellers refinanced the properties in such a way that the buyer would have to assume the seller’s loans. Litigation ensued, with the buyer claiming this maneuver violated the terms of the deal, and the seller claiming that the buyer knew about this upcoming change all along. As such, email messages between the parties during the transaction became critical.  However, in the course of discovery, the buyer and their lawyer repeatedly failed to fully search and produce email evidence, and failed to do so in a timely manner. As such, the court fined the buyer – and its lawyers.[ii]

1.2     What went wrong?

The failure to promptly and comprehensively produce required email evidence in this case appeared to come down to a failure on the part of the buyer’s lawyer to fully understand how his client’s email system worked, i.e., where, how and for long email messages were stored. The lawyer also appeared to have little knowledge about the contents of his client’s email policies. Although responsive messages were eventually produced, final production took over 22 months, and was ultimately the basis for the court’s sanctions. In the court’s view, “while the delays in discovery were not caused by any intentional behavior, [the buyer and their lawyer’s] did not fulfill [their] obligation to find all sources of relevant documents in a timely manner,” and thus sanctions were warranted. In this case, it appears that the delays were exacerbated by a series of issues, including:

  • Messages that employees moved to archive and deleted items folders were not initially searched, although such messages remained on the email system.
  • The sellers questioned the efficacy of the buyer’s email production efforts, as the sellers had several messages in their possession from the buyer’s employees that the buyers had not produced.
  • Even when a forensics expert was hired to conduct further investigation into responsive email, he was not told about the archive folders, and thus did not search them. Subsequent searches of the archive folders revealed thousands of additional responsive messages.

1.3     What can we learn?

The time to learn about the intricacies of your email system is not during litigation. The buyers in this case dodged a bullet of even more severe sanctions including the complete dismissal of the case. Their lack of knowledge about their own email system caused them to inadvertently flirt without outright spoliation, which would not have helped their cause in the face of a judge already tired of the frequent production delays.

We can draw an important lesson from this case. In this example, the sellers produced messages sent to them by the buyer, yet according to the court, the buyer failed to produce those same messages. This understandably raised serious questions about 1) the efficacy of the buyer’s information governance program, and 2) whether or not they were intentionally hiding these messages, as the seller claimed. This teaches us that even small failures in one area of our information governance program can cast all of our efforts in a bad light and reduce the persuasiveness of our case.

Other lessons from this case include:

  • Formalize and document. Ensure that the operation of your email system is fully and accurately documented. This includes practices related to the retention, preservation, and deletion of email from the system and related systems including those responsible for backup, archiving, and records management.
  • Work with your email experts. Ensure that email administrators provide the information that senior IT management needs to understand the email system, and that this information is understood by counsel.


[i] In re A & M Fla. Props. II, LLC, 2010 WL 1418861 (Bankr. S.D.N.Y. Apr. 7, 2010)

[ii] At time of original writing, the amount of the fine had not been agreed upon nor published, but it would be based upon the cost of forensic search, costs for bringing various motions, etc.


  1. Juerg Meier

    While 22 months are obviously an unacceptable period to produce the responsive emails, let me ask this perhaps naive question (and sorry for my more than limited knowledge of US laws and procedures): why were they referring to emails at all?

    I mean, how a real estate is financed, loans, mortgages et al., are such fundamental parameters of any transaction that they usually make a good part of the contract. So, in my (as mentioned outside US) view, if it’s not written in the contract between seller and buyer, or the seller has not formally informed the buyer (e.g. by letter asking for a modification of the contract) about the change in financing, I would clearly say that the seller is to be found guilty.

    Prioritizing the contract may have avoided *any* effort regarding collecting emails.

    • Barclay

      Yes, good question. I believe the issue is that there was a disagreement about what was disclosed prior to the contract being signed, and which was thus the basis for the contract, i.e., “The Defendant was especially interested in obtaining email communications evidencing the fact that GFI had received copies of the promissory notes which contained the lock-out features. Although the Defendant was certain Plaintiffs should be in possession of such emails, they were not produced. . . . When GFI did not produce this email or many others that American Federated sent to GFI regarding the transaction, American Federated became suspicious of GFI’s willingness to fulfill its discovery obligations in good faith.”

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