In some of our recent articles, we have noted the fundamental importance of having data and document retention policies in place and consistently applying those policies. Doing so reduces the overall volume of data or electronic documents that need to be preserved, collected, processed, analyzed and reviewed for potential production when litigation arises. A recent case out of the U.S. District Court for the District of Idaho—Scentsy, Inc. v. B.R. Chase LLC—gives in-house counsel some guidelines for whether their company’s data or document retention policies are acceptable, and if not, what the courts might order.
In Scentsy, a defendant accused the plaintiff of spoliating and failing to produce key documents because of an insufficient litigation hold. Instead of issuing a written litigation hold to any of its custodians, the plaintiff’s general counsel spoke to the custodians that had information regarding the subject of the lawsuit. The plaintiff issued this oral litigation hold around the time it filed the complaint in May 2011. The defendant argued that the plaintiff had first anticipated the litigation in May 2010. Meanwhile, the plaintiff admitted that it anticipated the litigation no later than March 2011, roughly two months prior to the oral litigation hold.
The plaintiff’s document retention policy was curious in that it provided for the routine deletion of emails but not other documents that are more than six months old.
Other facts complicated the plaintiff’s odd document retention policy and the oral litigation hold. Specifically, the hard drive used by the plaintiff’s lead designer for the products at issue in the case crashed in early 2010. The plaintiff sent the drive to a forensic computer specialist in an attempt to recover any data on it, but those efforts were unsuccessful. As a result, the plaintiff contended that even if it contemplated the litigation in May 2010, any relevant documents not produced were destroyed either under its general retention policy or when its lead designer’s computer hard drive failed.
The court was not troubled by the failure of the lead designer’s hard drive in early 2010. It reasoned that even if the plaintiff anticipated the litigation in May 2010, as asserted by the defendant, the hard drive had crashed before that. The defendant provided no evidence to the contrary.
The court was, however, troubled by the plaintiff’s document retention policy and the oral litigation hold issued by its general counsel:
“The Court has serious concerns with [plaintiff’s] retention policy and litigation hold process. Generally not deleting documents, and orally requesting certain employees to preserve relevant documents concurrently with filing a lawsuit, is completely inadequate.”
The court even described this conduct as “very risky” and bordering on “recklessness.”