September 30, 2019 Practice Points

Failure to Implement Litigation Hold May Lead to Sanctions or Forensic Examination of Your Client’s Computers

Parties should act swiftly to implement a litigation hold as soon as litigation or a subpoena is reasonably anticipated.

By Ashley J. Heilprin

In Marsulex Envt’l. Tech v. Selip S.P.A., Civ. A. No. 15:CV-00269, 2019 WL 2184873 (M.D. Pa. May 21, 2019), the plaintiff sued the defendant over allegedly defective piping supplied to a Polish fertilizer manufacturing plant. The plaintiff then served the defendant with various interrogatories and requests for production of documents relating to the piping and the defendant’s investigation of its failure, as well as information related to the defendant’s policies, processes, and procedures for the particular piping. The defendant resisted producing certain categories of documents.

Ultimately, the plaintiff moved for sanctions for the defendant’s failure to produce certain discovery. The plaintiff argued that the defendant did not implement a formal litigation hold, failed to preserve relevant evidence, and that certain evidence was either lost or destroyed. In response, the defendant argued that there was a lack of evidence to support an adverse presumption of spoliation and argued that it did indeed seek to preserve relevant evidence. However, when deposed, the defendant’s CEO admitted that the company did not implement a formal litigation hold. The CEO also alleged that he communicated the company’s obligation to preserve documents to two employees. Unfortunately, those two employees’ deposition testimony contradicted the CEO’s statements.

On those facts, the court granted the plaintiffs’ motion for sanctions, holding that the defendant did not implement a discovery hold and had failed to preserve relevant evidence. The court also found that the defendant’s purported lack of documents was implausible and ordered a forensic investigation of the defendant’s computers. And though the court declined to hold that the defendant actually destroyed or suppressed evidence on the record before it, the court noted that the plaintiff could renew the motion at a later date and with additional evidence.

Following the court’s decision in Marsulex, to avoid the potential for inadvertent destruction of data and the corresponding sanctions, it is clearer now more than ever that a litigation hold should be implemented as soon as litigation (or a subpoena) can be reasonably anticipated. Failure to do so may lead to spoliation issues and sanctions, which can undermine a litigant’s claims and defenses. In some instances, these sanctions can take the form of adverse presumptions or the dismissal of certain claims or defenses. In other instances, sanctions can take the form of financial penalties, such as an award of the opposing party’s attorney fees incurred in connection with bringing the motion. However, when litigants act in good faith by implementing a legal hold, they may be protected from sanctions—even when information is inadvertently lost. For those reasons, parties should act swiftly to implement a litigation hold as soon as litigation or a subpoena is reasonably anticipated.

Ashley J. Heilprin is an associate with Phelps Dunbar, LLP, in New Orleans, Louisiana.


Copyright © 2019, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).