Two recent decisions in the same case illustrate that, when it comes to imposing sanctions for spoliation of evidence, what matters is not simply whether you’ve intentionally deleted relevant evidence, but how you go about deleting it, and what the record reflects about your intentions. Although both the plaintiff and the defendant in E.I. du Pont De Nemours and Co. v. Kolon Industries, Inc., Civil Action No. 3:09cv58, demonstrated that the other intentionally destroyed relevant evidence, as is detailed below, the Court sanctioned only defendant Kolon Industries, Inc. (“Kolon”) based on its manifest bad faith (read the decision here). As is discussed in an earlier post on Gibbons’ E-Discovery Law Alert (which you can read here), plaintiff E.I. du Pont de Nemours and Company (“DuPont”) escaped a similar fate based on its demonstrable good faith. In short, this case teaches that the intentional deletion of relevant evidence does not per se lead to sanctions. Rather, the parties’ conduct — or misconduct, as the case may be — must be judged contextually.
Dupont filed a Complaint against Kolon on February 3, 2009, alleging trade secret misappropriation, theft of confidential business information, and conspiracy based on Kolon’s efforts to recruit former DuPont employees and otherwise unlawfully obtain DuPont’s proprietary information. When Kolon produced in discovery screenshots of key employees’ computers taken after they had notice of the Complaint that appeared to show that they marked emails with instructions such as “Delete,” “Need to Delete,” “Remove All” and “Get Rid Of,” DuPont moved for sanctions for spoliation of evidence.
Before deciding DuPont’s spoliation motion, the Court ordered targeted discovery concerning the apparent spoliation, including forensic analysis. In addition to Kolon’s “overall obfuscatory conduct,” the targeted discovery specifically revealed that:
- On February 6, 2009, two days after it learned of the DuPont Complaint, Kolon’s legal department issued its first legal hold to only select upper-level employees, who were advised only that they “might want to provide the order to other personnel,” though nothing in the record demonstrated that the hold order was, in fact, communicated to any other employees at that time.
- On February 10, 2009, Kolon issued its second litigation hold, this time sending it to all employees. However, most of them were South Korean and did not speak English, and the hold was in English. • Shortly after learning of the DuPont Complaint but likely prior to the issuance of the litigation hold, a senior Kolon manager gathered several other employees to discuss “identifying documents on their computers that they may want to consider deleting at a later date.”
- It was not until February 23, 2009 that Kolon issued a third litigation hold to its IT department instructing them to “safeguard documents stored on Kolon’s server by backing up material on tapes and suspending the routine, good faith operation of Kolon’s document retention practices . . . .” Thereafter, Kolon imaged the hard drives of key employees.
- According to DuPont’s forensic analyst, who performed deletion analyses of the computers of thirteen Kolon employees, after February 1, 2009, Kolon’s employees deleted at least 17,811 files and emails (and perhaps hundreds more), many of which were deemed relevant to the case based on keyword searches and a review of recoverable data as well as analyses of file names and metadata (e.g., files with “last written” dates many years before they were deleted).
Based on these facts, the Court found that “key employees . . . intentionally deleted relevant files and email items . . . after Kolon’s duty to preserve had been triggered and with knowledge of the filing of DuPont’s Complaint” — i.e., that Kolon spoliated evidence. Citing “[s]tandard principles of agency law,” the Court rejected Kolon’s argument that its employees’ conduct should not be attributed to it since their actions were “unauthorized,” “outside the scope of their employment,” “not taken . . . to aid Kolon” and “directly contradicted corporate directives.” And although some of the deleted data was recoverable, the Court summarily rejected Kolon’s argument that this mitigated its spoliation, noting that “[t]he fact of deletion has evidentiary significance.”
Notwithstanding the bad faith conduct of its employees, because Kolon attempted to put two litigation holds in place and also implemented a widespread effort to preserve files, and given that many deleted items were recoverable because Kolon preserved certain back-up tapes (thereby minimizing the prejudice to DuPont), the Court declined to enter a default judgment against Kolon. Instead, the Court imposed a “permissive” adverse inference jury instruction and awarded DuPont its attorneys’ fees, expenses and costs related to the motion.
There are several key takeaways from this decision:
- First, written litigation hold notices, which of course should be issued promptly after learning of litigation or when litigation is anticipated, must be issued to all employees who may have documents and information that are reasonably likely to be requested during discovery, and the record should reflect that these key employees received hold notices.
- Second, the litigation hold notice must explain the importance of preserving relevant data and, if any employees do not speak English, the litigation hold notice should be translated.
- Third, in-house IT professionals should be among the first recipients of the hold notice, as they are best positioned to act as guardians of potentially relevant evidence and, as such, they may be able to safeguard data on behalf of the company, insulating the company from any rogue employees who might otherwise spoliate evidence.
- Lastly, both counsel and corporate executives should closely monitor compliance with the litigation hold, particularly if the target of the hold is a foreign company unfamiliar with the preservation obligations imposed by the U.S. legal system.
Taking note of Kolon’s mistakes, and DuPont’s good example (as detailed in this post), will go a long way in insulating your company from spoliation sanctions.
Suzanne Herrmann Brock is an Associate on the Gibbons E-Discovery Task Force.