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Liars are Losers…in the Court’s Eyes

Created on May 3, 2013

Director of Marketing at Exterro

The preservation duty in e-discovery has been greatly complicated by the added “e." Unlike the paper discovery age that allowed legal teams to collect physical data, the electronic age has made it increasingly difficult for counsel to know if all responsive information has been preserved. But no matter what age it is when employees lie about not having relevant data, court sanctions usually await. Case in point is George Kirgan v. FCA LLC (C.D. Ill. April 10, 2013). In this case, one of the defendant's key custodians repeatedly lied about having responsive data leading to the spoliation of relevant evidence and sanctions that included a spoliation instruction and attorneys' fees.

In this Equal Employment Opportunity Case (EEOC), the plaintiff, Kirgan, was terminated by the defendant, FCA, her former employer. After the termination, the plaintiff's counsel sent a notice to the defendant that she had been retained and if an agreement could not be met an EEOC charge would be filed. When no agreement was reached, the plaintiff filed his claim. Subsequently, in November 2011, the plaintiff requested electronic calendars from two key employees, the CEO and the COO, involved in his termination. On repeated occasions, the plaintiff was told that the two executives “did not keep such calendars."

In stark contrast to earlier statements, the defendant's COO, Craig Borsdorf, testified during a 2013 deposition that “he has always kept a daily electronic calendar." He also knew in 2011 that the plaintiff was seeking these calendars, and he admitted, in spite of this awareness, that he continued to delete his electronic calendar on a routine basis. As a result of this conduct, the court granted the plaintiff's motion to compel the defendant to provide all existing calendars and a log of all lost/destroyed calendars with an explanation for why they had not been preserved. In addition, Borsdorf was ordered to sit for supplemental depositions. Based on these findings, the plaintiff subsequently filed an additional motion for sanctions based on the defendant's destruction of Borsdorf's electronic calendars.

The court again ruled in favor of the plaintiff, granting several spoliation sanctions due to the defendant violating its preservation duty. According to the Illinois court under the 7th Circuit, the preservation duty is triggered “when a party first foresees that litigation is reasonably anticipated" and to fulfill preservation duty the party is required to: (1) “suspend routine policies governing how documents and information are retained or destroyed" and (2) “to put into place a litigation hold."

For spoliation sanctions to be warranted, the 7th circuit must find that:

  • (1) A breach of the duty to preserve information when a party “knew or had reason to know that litigation was forthcoming"
  • (2) Party breached this duty with bad faith, willfulness, or fault
  • (3) Moving party was prejudiced by the breach

The defendant's preservation duty was triggered “at the very least from the date that the EEO charge was filed," and this duty was reinforced by the plaintiff's actions, which included discovery requests, subpoenas and depositions. The court ruled that the defendant breached its preservation duty by failing to take steps to preserve the COO's electronic calendars. In his deposition, the COO acknowledged that he knew that the plaintiff requested his calendars and willfully continued to destroy relevant information.

The court also deemed that the plaintiff had been prejudiced by the defendant's actions. Since the COO was one of the two primary decision makers in regards to the plaintiff's employment, the plaintiff was “deprived of a valuable source of potentially impeaching information" and was now stuck with the COO's testimony “with no documentary means of challenging it or verifying it."

The plaintiff conceded that the COO was an agent for the defendant, which made his conduct directly attributable to the defendant. In addition, the COO could not recall if he had been sent a legal hold notice to preserve his calendars, making the defendant “culpable directly, not simply vicariously as a result of Borsdorf's conduct." Under these circumstances the court granted the plaintiff's motion for sanctions, handing out these “stern measures":

  • Spoliation instruction: The jury was permitted to draw a negative inference from the defendant's failure to preserve and the destruction of relevant information.
  • Limited use of COO's calendars: The defendant could only use evidence contained in the COO's destroyed calendars if the evidence is corroborated by other evidence or testimony independent of the defendant.
  • Attorney's fees: The defendant had to pay double the total attorney's fees in preparing the spoliation motion in order to compensate the plaintiff for its efforts to obtain the calendars.

When courts are lied to, harsher sanctions usually await the offender. It astounds me that the defendant had no way of proving to the court that a legal hold notice was sent or even voiced to the COO. Based on the court's opinion, the defendant offered no evidence that showcased whether a legal hold had been issued and, if it had, whether any follow up actions were taken to ensure compliance.

Beyond that Kirgan provides two primary takeaways:

  • (1) Never forget to document the steps taken in preservation. Automating the legal hold process and leveraging software to record all of the steps (and responses) taken is critical for defending actions if the preservation process is ever questioned in court.
  • (2) Self preservation can be a slippery slope. Leaving it up to custodians to preserve relevant data without monitoring capabilities is risky because you never know if the custodian (a) understands its preservation obligations, (b) knows how to properly adhere to it, or (c) completely disregards it.

The industry in which an organization operates and its litigation volume are key indicators as to what defines a reasonable preservation process. For example, if a company is in a highly regulated industry with lots of litigation, then a more hands-on approach may be necessary. This may include more than sending out and monitoring legal hold notices, such as creating defined workflows for preserving in-place, proactively collecting data from relevant custodians and conducting in-depth custodian interviews to unearth where all responsive data may be held.

If you are unsure about what preservation techniques are needed to meet this reasonableness standard, here are a couple tips to help define what may be reasonable:

  • (1) Conduct a litigation self-assessment and compare your process with another organization in your industry with the same type of litigation or regulatory pressures.
  • (2) Ask your outside counsel for their best-practice advice.
  • (3) Stay abreast of e-discovery case law within your federal circuit and the other regions (local or global) in which your organization operates.

To learn best practices for creating a defensible preservation process, register for Exterro's upcoming webcast, “Building Blocks for a Defensible In-House E-Discovery Process" with Viacom's e-discovery team presenting here.

Mike Hamilton, J.D. is a Sr. E-Discovery Analyst at Exterro, Inc., focusing on educating Exterro customers, prospects and industry experts on how to solve e-discovery issues proactively with technology. His e-discovery knowledge, legal acumen and practical experience give him a valuable perspective on bridging the gap between IT and legal teams. You can find him on Google+, Twitter and Linkedin.