Defendants’ “Retention Policy” Deemed Ineffective After ESI and Emails Deleted

27 Dec 2013

In an Order dated November 25, 2013 in Zest IP Holdings, LLC v. Implant Direct Mfg., LLC et al., Civil No. 10-0541-GPC(WVG)(S.D.Cal.), the Magistrate Judge considered Plaintiff’s Motion for Sanctions based on defendants’ alleged spoliation and discovery abuses. In this patent infringement case, Plaintiffs informed Defendants in August 2008 that it considered Defendants’ product to be an infringement, and sent a formal letter in October 2008. The lawsuit was filed in March 2010.

Plaintiff electronic discovery requests included ESI and email from certain custodians. Defendants admitted they did nothing proactive to implement a litigation hold either in 2008 or when the lawsuit was filed in 2010. Defendants claimed that because they had a company policy that “no documents are to be deleted” in general, a litigation hold was unnecessary.

Belying this assertion, however, was the fact that the Director of Design Engineering admitted that she deleted all her emails because “no one told her not to delete them.” Further, the Defendant CEO admitted to having six email accounts, but only produced a small number of emails.  From third party productions, Plaintiffs were able to uncover emails from the CEO relevant to the litigation, which the CEO himself failed to produce.

The Magistrate Judge ruled that the duty to preserve evidence in this case arose in October 2008 when the letter was sent notifying Defendants of the potential lawsuit.  The Magistrate Judge also concluded that the Director engaged in spoliation when she admittedly deleted her emails.  The CEO was also found to have engaged in spoliation for at least two emails that were later uncovered by a third-party production.

“It is obvious that Defendants’ document retention policy did not prevent documents from being destroyed.” In this case, Defendants had control of the email accounts and a duty to preserve the ESI, but destroyed the electronic data with a culpable state of mind.  As a result of the prejudice to Plaintiffs, sanctions were awarded in the form of an adverse inference instruction and attorney fees.

ILS – Plaintiff eDiscovery Experts