A recent federal court decision, GN Netcom, Inc. v. Plantronics, Inc., No. 12-1318-LPS, 2016 U.S. Dist. Lexis 93299 (D. Del. July 12, 2016), sent a stern warning that issuing a litigation hold upon notice of a claim or commencement of litigation may not satisfy electronically stored information (ESI) preservation rules.
In GN Netcom, upon commencement of the litigation, the defendant, Plantronics, Inc., implemented a litigation hold, conducted training sessions, and sent quarterly reminders to document custodians. However, in spite of these policies, a senior executive deleted relevant emails and asked his subordinates to do the same. Plantronics hired a forensic expert whose preliminary findings revealed that the executive had deleted tens of thousands of emails, several of which were likely discoverable. However, due to budgetary constraints, Plantronics did not further engage the forensic expert to finalize its analysis.
In considering GN Netcom, Inc.'s motion for sanctions, the court contemplated Federal Rule of Civil Procedure 37(e), which was most recently amended in December 2015 to specifically address the applicability of sanctions for spoliation of ESI. Plantronics argued that sanctions were inappropriate because the company initially took reasonable steps to preserve ESI, had no intent to deprive GN of discovery, and GN had not demonstrated prejudice. The court rejected these arguments. In light of all of the evidence presented "including Plantronics' repeated obfuscation and misrepresentations related to [the senior executive's] email deletion and its investigation of it, the [c]ourt [found] that Plantronics did act in bad faith, 'intend[ing] to impair the ability of the other side to effectively litigate its case.'"
The decision sends a strong message: if a company learns that an employee disregarded a litigation hold, the company is responsible for the employee's actions and must take necessary steps to remedy the situation. Effective monitoring of employees' compliance with litigation holds and appropriate follow-up is vital to avoid sanctions.