Relaxed Retention and Hold Policy Are Deemed "Reckless"

Jim Shook

The evidence just keeps piling up on why in-house lawyers must be involved with their organization’s retention policies and e-discovery processes.  We have already discussed the benefits to legal as well as the idea of a “shield” in litigation.  But now there’s even more evidence.

The latest comes from Scentsy v. Chase et. al., 2012 WL 4523112 (10/12/12 D. Idaho), a case that included claims of spoliation by defendant Harmony against Scentsy for allegedly deleting email and files relevant to the dispute.  Scentsy’s corporate policy was to delete email messages after 60 days but permitted documents stored on laptops, desktops and fileshares to be retained indefinitely — until deleted by the employee.  Further, a relaxed litigation hold process consisted of the general counsel speaking with employees that might have relevant information, merely “request[ing] that those documents not be deleted.”

The Court had “serious concerns” with these policies and process, calling them “completely inadequate” and “very risky – to such an extent that it borders on recklessness.”  Fortunately for Scentsy, the Court had no facts in the record upon which it could rule that improper deletion of evidence had occurred.  In fact, it appeared that any lost evidence was deleted well before legal preservation began, meaning that Scentsy had not acted improperly.

And yet, the Court was uncomfortable, stating that “Scentsy’s document retention and litigation hold policies are clearly unacceptable”.  So, even in the absence of evidence establishing that relevant information had been improperly deleted, the Court issued a modest sanction:  ordering Scentsy to pay all costs for Harmony to take depositions determining whether relevant documents had been improperly destroyed.  The Court also noted ominously:  “if there is evidence that spoliation occurred, future consequences will be harsh.”

Through its relaxed policies and hold process, risky for their heavy reliance on individual employees, Scentsy is now in the uncomfortable position of having little or no room for mistakes that often occur in these situations.  For example, many corporate 60-day email deletion policies are executed only on the server, and employees are free to retain whatever they desire in local PST files. Also, with a user-enforced retention on laptops, desktops and fileshares and no real hold policy, it may prove difficult for Scentsy to establish that files were not lost after the preservation began.  While this burden is generally not on the producing party in most cases, it appears that the Court’s doubts generated by  “clearly unacceptable” document retention and litigation hold policies may place Scentsy in a difficult defensive position.

How can this situation be avoided?

- Legal, IT and “the business” must create reasonable retention policies that meet their needs. Think of this process under the umbrella of “Information Governance” and not just records management, eDiscovery or archiving;

- Review your litigation hold policies for best practices.  Over reliance on individual custodians to preserve or collect data is risky; in-house legal must provide oversight and knowing the people, partners and tools that you will use to push data through the eDiscovery workflow is invaluable;

- Consider technologies such as email, fileshare and Sharepoint archiving to enable and enforce reasonable policies, as well as eDiscovery tools where needed.

- Make sure that IT and Legal are communicating consistently and well.

Getting started is the key — don’t wait for litigation to start before you review your information governance structure.

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