Good Company

The Fox Guarding the Hen House: Who Should Implement Litigation Holds

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There is a trend emerging from courts sanctioning parties who fail to preserve evidence, particularly electronically stored information ("ESI"). Several courts have indicated that companies should not allow employees directly implicated in the dispute to preserve their own files or determine what is, and what is not, relevant to the case. In other words, some courts now suggest that someone not directly implicated by the litigation should preserve the ESI and review it for relevance, because employees involved in the litigation should not be trusted to preserve and turn over potentially harmful evidence. If this trend takes hold, companies should adjust their information and records management policies and litigation hold practices accordingly.

Two recent cases present fact patterns that can be applied easily to most litigation matters. In Northington v. H&M Intl., a federal district court in Illinois sanctioned a defendant in a harassment suit.[1] An employee, Northington, filed a charge of discrimination with the EEOC. This filing triggered H&M's obligation to preserve evidence. H&M did not have a written record retention plan, and the court found that it engaged in retention and destruction on an ad hoc, case-by-case basis. The company had a practice of deleting an employee's emails from its server when the employee separated from the company. H&M deleted some email accounts belonging to employees who were directly implicated by Northington's harassment claim, even after the company was served with her complaint. H&M did not implement a litigation hold until one year after Northington's claim was filed in federal court. There were significant gaps in H&M's responses to discovery requests propounded by Northington. In determining whether to sanction H&M, the court considered the fact that H&M allowed employees who were allegedly responsible for the harassment to preserve their own files and search those files to find relevant information. The court wrote:

It is unreasonable to allow a party's interested employees to make the decision about relevance of such documents, especially when those same employees have the ability to permanently delete unfavorable email from a party's system…. Most non-lawyer employees, whether marketing consultants or high school deans, do not have enough knowledge of the applicable law to correctly recognize which documents are relevant to a lawsuit and which are not. Furthermore, employees are often reluctant to reveal their mistakes and misdeeds.

In the end, the court found that H&M did not willfully delete evidence, but it sanctioned H&M nonetheless. The court ordered H&M's attorneys to conduct a search of H&M's records, held that the jury should be instructed that H&M had a duty to preserve information and that it failed to do so, and awarded Northington costs and attorneys' fees.

The Northington case is not the only one in which a court has sanctioned a party in part because it allowed interested employees to make decisions about preservation and production. The case of Jones v. Bremen High School District 228, also involved a claim of discrimination.[2] After Jones filed her charge of discrimination, the school district informed only three employees of the case and the need to preserve evidence. Those employees searched their own email accounts for emails relating to the claims. It was not until eighteen months after the charge of discrimination was filed that the school district's counsel implemented a district-wide litigation hold. Predictably, the school district's responses to Jones' discovery requests were plagued by large gaps. Jones moved for sanctions, but the school district was able to "re-create" some email accounts and fill in most of the gaps. The court first criticized the school district for failing to implement a sufficiently wide litigation hold when it reasonably anticipated litigation. The court continued, however, to chastise the school district for allowing those alleged to have discriminated against Jones to conduct their own review for evidence relating to her claims. Despite the finding that the school district had filled in most of the gaps in its production, the court still sanctioned the school district, determining that it was reckless and grossly negligent in its handling of the litigation hold. The court ordered that the school district was precluded from arguing to the jury that there was an absence of discriminatory statements, that the school district pay Jones' costs and attorneys' fees, and that the school district pay the costs if Jones decided to conduct further depositions to determine the school district's failures to preserve evidence.

Another example is the case of Cache La Pourde Feeds, LLC v. Land O'Lakes, Inc., a trademark infringement case.[3] When faced with motions for sanctions, the court criticized counsel for merely relying on their client's representations that all relevant material had been produced, particularly when those involved in the alleged wrongdoing spearheaded the gathering of evidence. The court wrote, "Land O'Lakes directed employees to produce all relevant information, and then relied upon those same employees to exercise their discretion in determining what specific information to save. As Mr. Janzen said repeatedly, he and outside counsel simply accepted whatever documents or information might be produced by Land O'Lakes employees." The mantra, "trust, but verify" apparently applies even to one's own employees.

This trend, if it continues, will impact companies of all sizes. Smaller companies may lack any managers who are truly uninvolved in the acts or transactions that form the basis of the lawsuit. In that case, no one in-house can supervise the preservation and production. For larger companies, there is a greater chance that information will need to be collected from many custodians. This means that a company manager will have to devote a significant amount of time preserving and reviewing information from all of those possessing potentially relevant information. It also seems most efficient for companies to issue detailed instructions to all custodians of potentially relevant information and have the several employees promptly take steps to preserve information. Having just one person undertake all of the preservation obligations seems slow and dangerously inefficient.

For all companies, written record retention plans containing detailed litigation hold procedures are a necessity. Those procedures should appoint, either by name or by title, the person who will be ultimately responsible to implement the hold and collect relevant information. The plan should, however, allow for the substitution of the point-person if that person is implicated in the acts or transactions upon which the claims are based. While all those possibly possessing information should be issued litigation hold instructions, employees who are "disinterested" in the case should handle the actual preservation and review. If employees involved in the case undertake to implement the hold, their conduct should be examined and tested to ensure compliance.