‘Lackadaisical’ Preservation Spurs Monetary Sanctions

by Zapproved LLC
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Hefter Impact Techs., LLC v. Sport Maska, Inc., No. 15-13290-FDS (D. Mass. Aug. 3, 2017).


In this contract dispute, the court partially granted the plaintiff’s motion for sanctions, ordering the defendant to pay the costs and fees associated with the motion. However, because the spoliation was negligent and caused no more than slight prejudice, severe sanctions were inappropriate.

In 2005, the plaintiff, Hefter Impact Technologies, LLC (“HIT”), sold its ice-hockey helmet design to the defendant, Sport Maska, Inc., d/b/a Reebok — CCM Hockey (“CCM”). CCM agreed to pay HIT royalties on its helmets based on the original HIT design.

In September 2014, “HIT sent a letter to CCM demanding royalties” for a line of helmets and threatening to sue. This breach of contract lawsuit ensued, alleging that CCM failed to pay the requisite royalties.

CCM issued a legal hold but “refused to produce” it, claiming it was privileged. CCM’s in-house counsel testified that “he spoke with some of the people” who received the legal hold. However, he could not remember the names of those custodians or the content of their conversations. Counsel also testified that he “did not take any other measures to ensure compliance” with the legal hold.

After CCM’s deficient document production, HIT filed the motion for sanctions. It argued that CCM destroyed three types of evidence: emails deleted “due to routine management,” electronic documents on one employee’s laptop and hard-copy notebooks.

CCM’s email-retention policy required employees to delete emails when they run out of storage space. The company retained backup copies for three months before destroying them. CCM did not pause either policy in response to the legal hold. Later, when CCM tried to collect email backups, the IT department advised that its email repository spanned only three months. CCM could not confirm whether employees had deleted emails. However, at the outset of the initial legal hold (later renewed), CCM’s IT department did “take a ‘snapshot’” of the email accounts of the initially identified custodians.

Laura Gibson, CCM’s product manager for the helmets based on the HIT design, kept hard-copy notebooks that she threw away as she filled them, despite the legal hold. Gibson’s laptop was also “wiped” when she took maternity leave during the litigation. Before the leave, Gibson had provided what she believed to be responsive information. Unfortunately, no one from legal ever reviewed her laptop.

Eventually, in response to HIT’s concern with limited discovery, CCM reviewed its email snapshots “to ensure that they had not missed any” responsive emails. CCM later provided two supplemental productions, including “a significant number of [new] documents.”

As a preliminary matter, the court found it “just and practicable” to apply amended Federal Rule of Civil Procedure 37(e), although the case began well before the amendments.

Regarding the deleted emails, the court concluded somewhat reluctantly that HIT had not shown that CCM destroyed any relevant evidence. Although CCM’s document production “was very far from ideal,” the court could not find that CCM had lost any evidence.

As to Gibson’s laptop, the court similarly found that CCM produced relevant evidence from Gibson’s laptop before it was wiped. But the court agreed that “CCM’s review of information on Gibson’s laptop was less than exhaustive.” Despite this deficiency, the court found neither bad faith on the part of CCM nor prejudice to HIT, due to the limited information on the laptop.

The court faulted CCM for its “failure to preserve the notebooks, its somewhat lackadaisical approach to document production, and its aggressive document destruction policies.” However, the court refused to award “severe sanctions” because CCM lacked the requisite intent and HIT made only a “weak showing” of prejudice. Instead, it ordered CCM to pay HIT’s costs and fees associated with the motion.

Takeaways on defensible preservation

Document everything. CCM’s counsel utterly failed to make notes of his efforts to ensure custodians adhered to the company’s legal hold. Not only did this tone from the top create uncertainty for the company in this case, but it might also have contributed to CCM’s overall tepid discovery response.

[View source.]

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