Litigation Hold Impacts All Relevant Employees, Not Just CEO Or Executives

Posted by Gregg Mayer on Wednesday, March 12th, 2008   

A company’s failure to implement a legal hold for its employees’ email was likened by a Minnesota court to a game of “blind man’s bluff.” The court, of course, will win that game every time.

In 3M Innovative Properties Co. v. Tomar Electronics, Inc., a patent infringement lawsuit, problems arose during discovery – the initial phase of litigation where parties exchange evidence. Here is how the court summarized the issues:

3M makes three basic assertions: (1) Tomar gave false discovery responses; (2) Tomar failed to retain, collect, and produce court-ordered documents [including email]; and (3) Tomar engaged in deposition misconduct.

The court concluded Tomar’s president lied during his deposition. The president also interrupted other employees’ depositions. Moreover, the president failed to have his company implement a legal hold on email once the company was under a duty to preserve evidence for the litigation. The court wrote:

Discovery requests served on a company solicits information known to the company, not solely information known by the president, CEO, or other person directed to respond to the discovery requests. Accordingly, a reasonable investigation by a company would include an inquiry of a company’s employees for relevant information. A company need not question all employees, but must question those that would reasonably have relevant information.
…
Testimony indicates that [the president] never contacted any company employees to inquire about responsive information or documents. Tomar has presented no evidence or argument to this court that it has conducted a reasonable investigation for responsive information or documents, other than to assert that [the president] was in possession of all relevant documents and therefore an inquiry of other employees for relevant information was not necessary. Evidence indicates, however, that this position is not reasonable nor supported by evidence before this court.

In a last ditch effort to avoid a spoliation sanction, Tomar told the court it retrieved some 6,000 email messages from Tomar employees. The email messages had not been destroyed, as Tomar had earlier said.

By that time, however, it was too late. The court rejected Tomar’s effort to produce the email at that late stage, noting : “this discovery has all the earmarks of a game of blind man’s bluff.”

The court said an adverse instruction should be given against Tomar at trial, which will make it difficult for Tomar to win.

Several other sanctions were also imposed by the court, including not allowing the Tomar president to appear at any future depositions.

As Tomar learned the hard way, litigation holds impact an entire company.  Any employee with relevant evidence pertaining to the litigation will be under a duty to preserve that evidence, email and all.

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