Thursday, March 28, 2013

A cautionary tale on what happens when you botch a litigation hold

All the way back in October 2010, I provided 10 tips for issuing an effective litigation hold. What happens, however, if your litigation hold is not effective, or, worse yet, not issued in the first place? EEOC v. JP Morgan Chase Bank (S.D. Ohio 2/28/13) should be required reading for any company on the serious consequences that can occur from a botched litigation hold.

In this Title VII litigation, the EEOC claimed that the bank removed female employees from a mortgage call center queue and instead directed the more lucrative calls to male employees. In support of this claim, the EEOC sought the production of certain records that would show which calls an employee should have received based on their level of skill. According to the EEOC, a statistical analysis of that data would show sex discrimination. When the bank refused to produce the records, the EEOC filed a motion to compel, which the court granted for a limited period. The bank, however, could not produce certain of the records, as it had already destroyed them as the result of its routine purging of electronic records.

The court concluded that the bank’s admitted destruction of evidence was inexcusable:

Plaintiff provided Defendant with notice on numerous occasions of the need to retain the destroyed data…; these notices came immediately prior to the destruction of relevant data from the three years prior. This data likely would inform Plaintiff’s claims and Defendant’s defense….

Defendant’s failure to establish a litigation hold is inexcusable. The multiple notices that should have triggered a hold and Defendant's dubious failure if not outright refusal to recognize or accept the scope of this litigation and that the relevant data reaches beyond the statutory period present exceptional circumstances….

Defendant’s destruction of evidence under the auspices of routine purging has hampered the ease of if not the ability to uncover exactly what if anything impermissible has transpired here.

As a sanction, the court denied the bank’s motion for summary judgment and provided the EEOC with an instruction that the jury could draw an inference adverse against the bank based on its document destruction.

The importance of this lesson cannot be overstated. As soon as you reasonably anticipate litigation, you have an absolute duty to implement a written litigation hold that both instructs employees to preserve paper and electronic records relevant to the case, and suspends any automated processes that otherwise might result in the destruction of such records. If your lawyer is not having this conversation with you, it’s time to find a new lawyer. As JP Morgan Chase illustrates, the penalties for non-compliance can devastate your case.