New Decision Highlights Uncertainty Regarding Litigation Hold Requirements
By: ANDREW F. JOHNSON
May 2011
Steuben Foods, Inc. v. Country Gourmet Foods, LLC, provides a good example of the uncertainty that surrounds a party’s electronic discovery obligations, including the requirement to issue a litigation hold notice. 2011 WL 1549450 (W.D.N.Y. Apr. 21, 2011). The defendant in Steuben argued that the plaintiff’s decision to issue a litigation hold orally, rather than in writing, resulted in relevant documents not being produced, including three emails the defendant obtained from a co-defendant. Based on this alleged failure and seemingly relevant case law, defendant argued that relevant evidence should be presumed lost and that spoliation sanctions were appropriate.
The court held that to succeed on its spoliation motion the defendant had to demonstrate that: (1) relevant evidence was actually destroyed or lost; (2) plaintiff had an obligation to preserve the destroyed evidence; (3) plaintiff destroyed the evidence with a culpable state of mind; and (4) the destroyed evidence was relevant either party’s claims or defenses.
Applying this standard, the court denied the defendant’s motion for sanctions because there was no evidence that the plaintiff had destroyed or lost evidence, or that the evidence the defendant was seeking was relevant to either party’s claims or defenses. The court also held that even if the plaintiff had negligently lost the electronic records at issue, the defendant was able to obtain the files from a co-defendant and therefore could not demonstrate that it had been prejudiced by the plaintiff’s actions. The most interesting portion of the court’s decision however, was its departure from Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, in which, Judge Scheindlin suggested that the failure to issue a written litigation hold was a ground to presume or infer the loss of relevant documents. 685 F.Supp.2d 456 (S.D.N.Y. 2010). In direct contrast to Pension Committee, the Steuben court “decline[d] to hold that implementation of a written litigation hold notice is required in order to avoid an inference that relevant evidence has been presumptively destroyed.” Rather, the court determined that based on the plaintiff company’s relatively small size, an orally communicated litigation hold could effectively convey the need to preserve relevant documents.
While Steuben suggests that a written litigation hold is not essential to avoid potential sanctions for spoliation, once litigation is anticipated, parties would be well-advised to issue a written litigation hold notice specifically outlining what documents must be preserved, where those documents may be stored, and who is responsible for preserving them.