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Litigation Holds – The Triggers and Consequences For Failing to Preserve Evidence

 

In 2012, when Plantronics received notice of GN Netcom’s antitrust lawsuit against it, the company informed its employees to preserve information that could be relevant to the lawsuit through a litigation hold — an instruction to hold, or stop, their actions involving such potential evidence. The company held training sessions and issued regular reminders regarding proper compliance.

Still, a high-level executive deleted over 40% of his emails and, on several occasions, urged others to do so as well; thousands of emails went missing. When in-house counsel learned about the executive’s actions, the company took steps to recover data, including hiring a forensic expert, whose attempts were unsuccessful.

Despite all of these actions geared toward preserving potential evidence, a Delaware federal judge ruled that the company hadn’t done enough to recover the deleted messages and felt that overall it acted in “bad faith” with the intention “to impair the ability of the other side to effectively litigate its case.” The court imposed $3 million in sanctions on Plantronics to both punish the company and deter others from engaging in this kind of behavior.

The harsh financial penalty for Plantronics shows just how seriously the justice system considers the failure to comply with litigation holds. We’ll get back to other potential penalties later, but first it’s helpful to understand what litigation holds are and what triggers them and when.

After reading this article, if you have questions about prospective or pending litigation or preservation of evidence please contact Jason Denkevitz at 443-927-2118, jdenkevitz@tandlaw.com,

What Is a Litigation Hold?

A “litigation hold” requires a party to take efforts to properly preserve documents and electronically-stored information (ESI) that could be relevant to anticipated litigation. The hold should put a stop on any current internal policies or procedures that could cause the loss of documents or ESI that could be relevant in an upcoming lawsuit.

What Triggers a Litigation Hold?

Oftentimes, the trigger for a litigation hold is a “litigation hold letter” or notice, also called a “stop destruction” or “preservation” letter, which is a written document that informs a party directly of an impending legal action. These letters may also be issued internally, as was the case in the Plantronics example discussed above, to inform employees to preserve potential evidence.

Even without actual notice through a letter, though, a party’s duty to preserve potentially relevant information arises whenever litigation is “reasonably anticipated.” Regarding when reasonable anticipation arises, the Sedona Conference, a nonprofit institute dedicated to the advanced study of law and policy, writes:

A reasonable anticipation of litigation arises when an organization is on notice of a credible possibility that it will become involved in litigation, seriously contemplates initiating litigation, or when it takes specific actions to commence litigation.

Courts determine whether there was a reasonable anticipation of litigation on a case-by-case basis, and a “credible possibility,” also called a “credible threat,” can come in many forms, including an actual threat of a lawsuit or the receipt of Equal Employment Opportunity Commission (EEOC) charges.

Once a trigger for a litigation hold is sprung, a court expects the party to take reasonable actions to comply.

How Does a Court Determine What Actions Are Reasonable?

Generally, once a party reasonably anticipates litigation, a court expects it to, at a minimum, “ensure that documents are preserved, not deleted from an electronically stored information system or otherwise destroyed or made unavailable.”

As with all “reasonable” determinations, conclusions vary widely according to specific facts, but Bagley v. Yale describes some factors a court might consider:

  1. When did a party’s duty to preserve evidence arise?
  2. Did the party issue a litigation hold notice in order to preserve evidence?
  3. When did the party issue a litigation hold notice, in relation to the date its duty to preserve the evidence arose?
  4. What did the litigation hold notice say?
  5. What did recipients of the litigation hold notice do or say, in response to or as result of, the notice?
  6. After receiving recipients’ responses to the litigation hold notice, what further action, if any, did the party giving the notice take to preserve the evidence?

If a party fails to take reasonable precautions to comply with litigation hold, a judge could impose stiff penalties for noncompliance.

What are the costs of failing to comply with a litigation hold?

The Platronics case discussed above is one of the most extreme examples of a court punishing a party for spoliation of evidence connected with the noncompliance with a litigation hold. Penalties can go beyond the financial, however, and reach into the discovery process and trial itself; a court may compel discovery or even enter judgment for the opposing party.

Somewhere between those possibilities, a court may also choose to issue adverse jury instructions as sanctions. Take, for example, O’Berry v. Turner, a 2016 personal injury case concerning a tractor trailer accident in the Middle District of Georgia.

The plaintiffs’ attorney had sought, through a litigation hold letter, the defendant’s driving log and ESI about the tractor trailer as part of discovery. Although defense counsel initially agreed to preserve the evidence, they later acknowledged that the information had been accidentally lost; physical copies of the requested information went missing in an office move and the site that had stored the relevant electronic data had deleted it as a matter of course.

A Georgia federal judge ruled that the procedure of printing out copies was a “minimal” effort to comply with the litigation hold and ordered an adverse inference instruction to the jury through which they were to presume that the missing evidence had been damaging to the defendants’ case.

The purpose of litigation holds is to preserve evidence for potential litigation, and the penalties for noncompliance can be severe, both procedurally and financially. Because of these possibilities and, of course, to ensure a fair judicial process, it is crucial to have procedures in place to handle potentially relevant information when litigation is reasonably anticipated and to make sure that all employees understand the importance of compliance.

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