In Peter Kiewit Sons’, Inc. v. Wall Street Equity Group, Inc., 2012 U.S. Dist. LEXIS 69577 (D. Neb. May 18, 2012) (Kiewit II), one of the first cases of its kind, the Court allowed the Plaintiff to subpoena the Defendants’ third-party provider of IT outsourcing services because of the “uncertain (and perhaps non-existent) parameters of Defendants’ document retention policy or practice and the degree to which it is actually followed.”  Peter Kiewit Sons’, Inc. v. Wall Street Equity Group, Inc., 2011 U.S. Dist. LEXIS 123810 at *17-18 (D. Neb. Oct. 25, 2011) (Kiewit I).

In this service mark infringement case, Plaintiff sought discovery from Defendants concerning the use of its service mark in correspondence with potential clients.  Defendants claimed that, consistent with their standard practice, they did not retain (and were not legally required to retain) correspondence with a client unless it resulted in a sale.  The court agreed that the Defendants were not legally required to maintain client correspondence, and that claims of spoliation are usually unsuccessful “if relevant documents were destroyed in accordance with a company’s reasonable document retention policies and/or practices….” Kiewit I at 16.

However, the court also noted that “by failing to retain any documentation, a defendant may lose its ability to credibly defend claims asserted against it, and it may open avenues of third party discovery which would have been closed had the defendant retained documents consistent with standard business practices, and thereby be considered a reliable source of the relevant discovery.”  Id. at 17 (emphasis added).  Because the Defendants allegedly did not retain the client correspondence, the court allowed the issuance of a subpoena to the third party that possessed and maintained the Defendants’ servers. 

Before the subpoena was received by Defendants’ IT outsourcer, the Defendants instructed it to copy its data to external hard drives and deliver them to Defendants, and to move Defendants’ servers into Defendants’ offices (one of the servers was then discarded), thus rendering them no longer in the possession of the IT outsourcer, who then claimed it had no documents responsive to the subpoena.  Kiewit II at 13-14.   The court ordered Defendants to turn over the external hard drives, which Plaintiff then had forensically examined.  While Defendants claimed that they had no client correspondence containing the Plaintiff’s service mark, and allegedly had conducted their own electronic search that resulted in the identification of only two documents, Plaintiff’s examination identified almost 4,000. Id. at *20.

Plaintiff sought sanctions for the cost and fees associated with bringing several motions, for the cost of the forensic examination, and for spoliation for the server that was discarded.  The court granted the motion, awarding the associated costs and fees, as well as ordering an adverse inference for spoliation of the discarded server. Id. at *68-70.  The court emphasized that the Defendants’ repeated claims about their document retention policy, and how it was enforced, were inaccurate and belied by the facts of the case.  Id.

One of the key takeaways of this case is that having reasonable and defensible Information Governance policies and practices (including those relating to document retention and disposition) is critically important in protecting a company in litigation and regulatory investigations.