Litigation Holds Can Be "Tire"some, But Hang In There!

"It ain't over 'till it's over."  Yogi Berra was talking about baseball, but the quote applies just as well to lawsuits.  It is no secret that litigation can be a very protracted process, and, when a party is subject to a litigation hold, it seems that much longer. 

One question that lawyers get with some frequency is "how long do we have to maintain this hold?"  The answer is that it depends.  One touchstone, though, is that the hold should remain in effect until all deadlines for appeal or further review have expired.

In a recent Louisiana case, Pipes v. UPS, UPS was hit with a motion for sanctions due to alleged spoliation of evidence.  One of its drivers was involved in an accident.  After the accident, UPS fired the driver and he filed a grievance protesting his termination.  He argued that the accident was not his fault, but rather was caused by a faulty tire on his delivery van.  His grievance was denied at all stages, and his firing was upheld.  Following the end of the grievance process, van maintenance records were destroyed, and the allegedly faulty tire was released to a vendor.

However, the fired driver then sued both UPS (for firing him) and his union (for inadequate representation) in federal court.  When he discovered that the maintenance records and tire were gone, he brought a motion for sanctions.  UPS's managers testified that they thought they could put the matter behind them when the grievance was decided, and so had gotten rid of the evidence.  The court ultimately declined to sanction UPS because the driver's claim lacked merit, and the tire and maintenance records were ultimately only slightly relevant to his claims.

As demonstrated by this case, it is imperative that litigation holds remain in place until appeal or review opportunities have passed.  This is a tricky issue where, as here, the avenue for appeal may be novel (one of UPS's managers testified that he had never seen a grievance decision appealed).  It is important that the person managing the hold make sure that all key players are on the same page about when the hold may be released, and that attorneys keep their clients informed about the possible avenues and timelines for appeal.

Use Caution When Doing Your Spring Cleaning!

 

Although we're in the middle of winter, and the Midwest had -40 degree wind chills last week, this is the time for you to think about spring cleaning. I don't mean scrubbing floors or washing windows. Now is the time to develop a record retention policy and a litigation hold policy and then begin appropriately "cleaning house."  Micron Technology, Inc. v. Rambus, Inc., 2009 WL 54887 (D. Del. Jan. 9, 2009) shows us why it is so very important to have a litigation hold policy in place before starting that spring cleaning.

Rambus was a microchip technology company that became concerned about possible patent infringements by microchip manufacturers. It sought counsel regarding possible litigation, and counsel developed a litigation strategy. During this time, Rambus also designed and implemented a record retention policy, then held a series of "Shred Days" where many expired records were destroyed.

Micron sought a declaratory judgment from the court that its designs did not infringe on Rambus' patent.  The court held a separate trial on whether Rambus' wholesale destruction of documents pursuant to its document retention policy constituted spoliation of evidence and the appropriate sanction to be imposed on Rambus if in fact spoliation had occurred.  

In analyzing the spoliation issue, the court found that Rambus had a duty to preserve its documents once litigation became reasonably foreseeable.  According to the court,

Rambus knew or should have known, that a general implementation of the policy was inappropriate because the documents destroyed would become material at some point in the future.  Therefore, a duty to preserve potentially relevant information arose in December 1998 and any documents purged from that time forward are deemed to have been intentionally destroyed, i.e. destroyed in bad faith. 

Because Rambus' bad faith was so clear and convincing and because Rambus destroyed innumerable documents relating to all aspects of Rambus' business, the court determined that the very integrity of the litigation process had been impugned.  The court found that neither adverse jury instructions nor the preclusion of evidence nor the imposition of fees and costs on Rambus could cure the damage done by the massive document destruction.  Instead, the court delivered the ultimate sanction of all, it declared Rambus' patents involved in the lawsuit unenforceable. 

The moral of the story?  Companies must exercise extreme caution in implementing document retention policies and must strongly consider whether a "litigation hold" needs to be placed on some documents, even in cases where litigation has not been officially commenced yet.  Consequently, when you get that itch to do some spring cleaning, plan ahead so that you can protect your intellectual property and your business.

New Year's Resolution: Discovery Hold Policy

So you are in tip top physical condition, you give regularly to charity, you call your mom every other day, and you don't miss the sauce a bit.  Sounds like you're in the market for a New Year's resolution! 

How about this: does your company have a litigation hold policy that covers electronically stored information?  According to a recent Deloitte survey, 30 percent of U.S. companies do not have a formalized process in place regarding legal holds, which are policies that guard against the destruction of relevant evidence when legal action is threatened. 

As has been chronicled on this blawg and elsewhere, the potential pitfalls of poorly executed or nonexistent litigation hold policies are serious, and certainly outweigh the relatively small cost of implementing such a policy.

One thing is certain--electronic information will continue to play a larger and larger role in discovery.  Therefore, if your company has not yet implemented a policy to deal with it, shake the confetti out of your hair on New Year's Day, and pledge to tackle the problem early in the year.

Cheers!