Failure to Implement a Proper and Timely Legal Hold Notice Results in Plaintiff Being Sanctioned

April 22, 2015

In an earlier post (SEE reference to my top 10 list), I noted the importance of issuing a timely and proper legal hold notice.  In case you failed to appreciate the critical importance of this step, a reading of the insurance case of Fidelity Nat. Ins. Co. v. Captiva Lake Invs., 2015 WL 94560 (E.D. Mo. Jan. 7, 2015) should drive the point home.

In this case, the defendant alleged that Fidelity failed to implement a legal hold notice and therefore scores of potentially relevant emails were deleted.  The defendant also argued that plaintiff allowed data in its electronic claims database to be overwritten, thus destroying discoverable evidence.  Defendant therefore sought sanctions against plaintiff due to this spoliation of relevant evidence. In response, plaintiff argued that Captiva was not prejudiced by the loss of emails because it received a substantial amount of emails during discovery and the overwriting of the claims database was a routine operation.

In siding with the defendant, the court imposed sanctions on the plaintiff, including an adverse jury instruction and attorneys’ fees. The court held that the plaintiff failed to implement a legal hold, deleted emails, and prejudicially delayed the production of relevant documents as a result. Notably, the court did not impose sanctions upon Fidelity pursuant to Rule 37(e) for overwriting the claims database because the Court found there was no indication that the plaintiff had the ability to prevent the system from overwriting files without incurring an extreme burden to do so.