Extra Effort by Defendant to Recover Deleted ESI After Failure to Issue Litigation Hold Avoids Harshest Sanctions

Extra Effort by Defendant to Recover Deleted ESI After Failure to Issue Litigation Hold Avoids Harshest Sanctions

• August 5, 2009
• John Jablonski
• Cases - Legal Holds,Cases - Recent Decisions
• 0

While the trend in many jurisdictions is to issue harsh sanctions for failing to issue litigation holds, defendant Manpower, Inc. was able to use extra effort to avoid the harsh sanctions of having its answer stricken or an adverse inference jury instruction. Pinstripe, Inc. d/b/a Acctknowledge v. Manpower, Inc., 2009 U.S. Dist. LEXIS 66422 (ND Okla. Jul. 28, 2009) is instructive for a number of reasons and is a straightforward read. For a copy of the opinion and order click here: Download Pinstripe dba AcctKnowledge v Manpower ND Okla 07-28-09

The case is a contract dispute between two temporary staffing agencies supplying workers to IBM. Suit was filed in state court and a temporary restraining order was issued preventing the transition of employees of Acctknowledge (“AK”) to Manpower on October 25, 2007. A few days later attorneys for Manpower drafted a litigation hold and provided it to Manpower for implementation. It turns out that Manpower never issued the litigation hold. The case was removed to federal court where the TRO was dissolved and an application for a preliminary injunction was denied. The district court set out key dates as follows:

• Feb. 27, 2008 – AK serves discovery requests on Manpower.
• April 18, 2008 – Manpower responds to discovery.
• July 15, 2008 – Manpower produces responsive documents.
• Aug./Sept. – discussion between AK and Manpower regarding sufficiency of Manpower’s responses. Manpower is asked to certify the completeness of its responses and does.
• Oct. 6, 2008 – AK realizes Manpower’s document production is incomplete.
• Jan. 13, 2009 – AK requests information from Manpower regarding preservation of documents. Manpower realizes not all e-mails have been produced.
• Jan. 15, 2009 – Kathleen O’Toole, in-house counsel, realizes Manpower has not issued a litigation hold. She issues the hold immediately.
• March 2, 2009 – Manpower reveals that two employees may have deleted discoverable e-mails

After learning that e-mail had been deleted Manpower attempted to recover the missing e-mail internally and then using an outside vendor for a cost of $30,000.00. These efforts were unsuccessful. Manpower then assembled copies of the missing e-mail from recipients and claimed that all attachments were stored on a separate server.

Plaintiff was not impressed by the extra effort to recover missing e-mails and moved for sanctions, including striking Manpower’s answer, an adverse inference charge and sanctions against the lawyers for Manpower (both local counsel and national counsel).

The court set forth a succinct analysis of applicable law. The court held that a party must suspend its usual document retention/destruction policy and put in place a “litigation hold” ensuring the preservation of relevant documents when a party reasonably anticipates litigation, citing Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, (S.D.N.Y. 2003). The court added that litigation hold responsibilities do not end with the issuance of the litigation hold. “The party must see that the litigation hold is complied with, ‘monitoring the party’s efforts to retain and produce the relevant documents.’” Pinstripe,quoting Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 432 (S.D.N.Y. 2004). The court also held:

A party, therefore, must make sure that “all sources of potentially relevant information are identified and placed ‘on hold’.” This necessaraily involves communication with all of the “key players” in the litigation.

Pinstripe, quoting Zubulake, 229 F.R.D. 422, 432 (citations omitted).

The court held that there was no dispute – Manpower had deleted e-mail. The court went on to decide whether sanctions are appropriate. Sanctions for destruction of evidence (also called spoliation) serve three remedial purposes: punishment, accuracy and compensation. Plaintiff wanted an adverse inference jury instruction. Plaintiff, therefore, had the burden of proving: "(1) that the party controlling evidence had an obligation to preserve it at the time it was destroyed; (2) that the destruction occurred “with a culpable state of mind”, and (3) that the evidence destroyed was relevant." Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 107 (2d Cir. 2002). The court held that “bad faith” is required in the 10th Circuit to award an adverse inference instruction, although acknowledging that other courts have held that mere negligence is sufficient to establish a culpable state of mind.

The court held that the actions of Manpower did not amount to bad faith and therefore the harsh sanction of an adverse inference or default judgment is not warranted. In addition to the remedial efforts of Manpower to reconstruct allegedly missing e-mails, the court noted that plaintiff was unable to prove that any specific e-mails were destroyed and not recovered or that any allegedly missing e-mails are relevant. The court acknowledged that proving that which does not exist is difficult, but often such documents are referenced in other documents or testimony from witnesses. Here there was no such circumstantial evidence.

Although refusing harsh sanctions, nevertheless the court issued sanctions. The payment of $30,000.00 to recover e-mails was acknowledged as a cost – sort of like time served. The court went on to award:

1. If AK must re-open any deposition to address late produced evidence, it will be allowed to do so. Deposition costs will be borne by Manpower.
2. If AK wishes to depose Manpower’s IT person or a representative of Forensicon, the forensic consultant Manpower hired in an effort to recover lost e-mail, it may do so at Manpower’s expense. Any costs imposed do not include attorney fees. Each side will bear its own fees in connection with the depositions discussed above.
3. If AK learns of a specific, relevant e-mail that has not been recovered or otherwise produced, it may petition the Court for further relief.
4. Manpower shall contribute the sum of $2,500 to the Tulsa County Bar Association to support a seminar program on litigation hold orders, and preservation of electronic data.

The court also refused to grant sanctions against the two defense law firms involved in the case. In short, the court held that law firms should not be held responsible for relying upon the representations of their clients as to sufficiency of preservation efforts, implementation of litigation holds or responses to discovery.

Of course our favorite sanction is number 4. Although the extra effort of the defendant and its lawyers appears to have avoided disaster, the door is still open for plaintiff to seek harsher sanctions. The key takeaway from this case is the need to communicate, communicate and do some more communication when implementing a litigation / legal hold. A quick phone call confirming the steps being taken to implement the litigation hold would have saved over $30,000.00 in this case.