In one of the clearest examples to cross my desk in some time regarding the proactive measures that a company can take to protect itself against sanctions in eDiscovery, DuPont successfully fought back against a spoliation charge. On April 27, the US District Court denied defendant Kolon Industries, Inc’s motion for sanctions against E.I. DuPont for alleged spoliation of the email accounts and documents pertaining to trade secret misappropriation and theft of confidential information of four employees, E.I. du Pont De Nemours and Co. v. Kolon Industries, Inc., Civil Action No. 3:09cv58, 2011 U.S. Dist. LEXIS 45888, (E.D. Va. Apr. 27, 2011). In summary, the Court concluded that DuPont had not spoliated any evidence because of their “reasonable” efforts to properly implement and update litigation hold measures, in addition to the company’s commitment to enforcing electronic discovery obligations.
Essentially, the litigation was based upon the alleged actions of a former DuPont employee, who had signed a nondisclosure agreement when he was hired and an employee termination statement upon his separation from DuPont in which he affirmed that he had returned all documents and would not divulge any trade secret or confidential information. Subsequently, he became a consultant for Kolon and it was determined that he had in fact retained some computer files that contained secret and confidential information.
DuPont became aware of these conditions in April or May of 2007 and issued its first Hold Order in June 2007, which identified 18 “key individuals” in the related business unit. Subsequently they issued a second Hold Order to 2,500 employees when it filed the litigation in February 2009 and a third Litigation Hold in April 2009, shortly after Kolon filed its Answer and Counterclaim. In addition, consistent with its e-mail deletion policy, DuPont had deleted the former employee’s emails and documents.
What did Kolon allege?
Kolon alleged the following:
• that DuPont issued its first Litigation Hold Order over a year to late;
• that the first Hold should have been more widely circulated to a larger group of employees; and
• that the deletion of one former employee’s e-mail account occurred under “ rather suspicious circumstances".
What did the Court Conclude?
The Court ruled that DuPont did not violate its duty to preserve documents. The Court stated that DuPont had no reason to know that the documents and information allegedly within the possession of its former employees would be relevant to the litigation against the former employee or Kolon. The first Hold Order satisfied DuPont’s duty to preserve because it reasonably represented the universe of their knowledge of the litigation at that point in time and it had no reason to identify the four former employee’s as “key”. The Court further concluded that DuPont did not have a duty to preserver the former employee’s e-mails or documents and that it was following a written document management plan.
What is the Take Away?
While there is not a defined set of rules on exactly how to protect a corporation against spoliation, there are some fairly strong guidelines that have emerged from recent rulings that help define what is considered “reasonable” by the courts. Having a set of written guidelines on document preservation and litigation hold procedures will go a long way towards insuring that spoliation sanctions will be denied. The courts do not expect perfection at all times, they recognize that documents may sometimes be lost or destroyed that would have been useful in a litigation. What the courts do not like to see are random, inconsistent and therefore unexplainable actions by a company or counsel. The key concept to remember is “reasonable and professional” actions and procedures.
• At the first sign of litigation, hire counsel to assess litigation hold obligations and draw up a plan of action.
• Litigation hold plans should be viewed as an iterative process. Revisit your litigation hold actions periodically to make sure that the original actions were sufficient. If needed, immediately implement an expanded litigation hold procedure whenever new information indicates that it is needed.
• Given today’s global economy, make sure that any foreign affiliates are aware of the litigation hold and of any local obligations they have in regards to US law.
• Make sure your company has a formal email and document destruction policy in place for former employees, that the policy appears reasonable on its face and that the policy is implemented universally and consistently.
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