Inadequate Legal Hold Process Leads to Sanctions

EPAC Technologies, Inc. v. HarperCollins Christian Publishing

(M.D. Tenn. March 29, 2018)

Why This Case is Important?

The first line of defense against spoliation starts with your legal hold process. If that process has gaps, don't be surprised if data is inadvertently deleted like in this case.

Overview

In this contract dispute case, the plaintiff motioned for spoliation sanctions against the defendant for the spoliation of electronic data including "at least 750,000 messages and attachments."

In 2012, when notice of pending litigation was received, the defendant sent a boilerplate legal hold that did not include any guidance or follow up instructions on how to preserve data to employees. On top of this, the records manager was not notified of this legal hold until three years after the duty to preserve was triggered, meaning thousands of documents were deleted under the corporate document retention policy.

The plaintiff motioned for spoliation sanctions based on the defendant's "willful blindness," arguing it equated to an "intent to deprive."

Ruling

• Minor Sanctions Ordered Under Rule 37(e). Since the court did not find that the defendant had an "intent to deprive" information to the plaintiff and the emails lost could be restored through additional means, the court only granted minor sanctions, including the plaintiff could re-depose witnesses after reviewing the missing emails and the jury would be instructed about the data loss.

• Tongue Lashing By the Court. Even though the defendant was protected from severe sanctions based on Rule 37(e), the court had harsh criticism of the defendant's management of their preservation processes as "arrogance by management, lack of initiative by IT and a pitiable lack of legal leadership."

• Bad Communication. A defensible preservation process starts with communicating the legal hold to all necessary stakeholders including IT. In this case, Legal did not consult IT about implementing the hold and never ensured that data would be preserved at the start of litigation.

Expert Analysis

By Anne Bently McCray

Partner, McGuireWoods LLP

Rarely will the execution of a legal hold, or any e-Discovery project in general for that matter, run perfectly smooth. You often encounter non-compliant custodians, computer malfunctions, or unknown sources of data. What is important is to have a good, solid process that can be followed for all matters, including timely issuance of a hold and alerting IT. If you don't have a process, engage outside counsel with e-discovery expertise to guide you through and defend the process. And don't forget about paper and physical evidence!