Defendants deleted evidence before and after legal hold, then misrepresented its availability

Silhouetted image of three defendants who deleted evidence before and after legal hold, then misrepresented its availability, resulting in spoliation sanctions.

In this employment case, the magistrate imposed monetary sanctions and recommended an adverse inference jury instruction for the defendants’ spoliation of electronically stored information (ESI).

Although the defendants were on notice of the plaintiff’s claims and had a clear obligation to preserve relevant information, they intentionally deleted her email and work data, causing prejudice.

The plaintiff, Christine Hazel S. Cruz, an Asian female, previously worked for the defendants, G-Star USA LLC and G-Star Inc. (collectively “G-Star”). Cruz stated that although she consistently worked more than 40 hours a week, she never received overtime pay. She repeatedly sought promotions, but despite her positive performance, she was passed over in favor of “Caucasian men who were … less qualified.” Cruz also complained of persistent “inappropriate sexual conduct,” including an email about her “ass” that was “mistakenly cop[ied]” to her.

Before filing this lawsuit, Cruz sought an internal solution. In September 2016, she filed a formal complaint with G-Star’s human resources (HR) department. The head of HR consulted with outside counsel before responding to Cruz’s complaint. G-Star’s leadership “simultaneously discussed terminating her employment” and compiled an “email listing examples of [her] ‘behavior and performance-related issues’” over the last year.

In January 2017, soon after Cruz filed a second internal complaint, G-Star terminated her employment. They offered her a severance package, which included a release of claims; Cruz refused.

In July 2017, Cruz sent G-Star a letter outlining her claims and “stating her intention to file a formal legal action.” Only then did G-Star implement a legal hold. However, no one at G-Star noticed that Cruz’s email account had been deleted in March 2017.

Cruz filed this lawsuit in September 2017.

In December 2017, despite the pending lawsuit and the legal hold, G-Star deleted Cruz’s account on SAP, an internal program for sales tracking and reports.

G-Star “attempted to reconstruct” Cruz’s emails and SAP data but had little success. Yet they “did not disclose these deletions in their written response” in April 2018. Instead, they repeatedly objected to Cruz’s requests for discovery. Over the ensuing months, the parties had three meet-and-confers, a status conference with the district court, two pre-settlement conferences with the magistrate, and a private mediation. G-Star did not disclose the loss of emails and SAP data at any of these meetings. Only at the end of July 2018 did G-Star advise Cruz that they had deleted ESI.

Cruz filed a motion seeking sanctions under Federal Rule of Civil Procedure 37(e) for G-Star’s spoliation of ESI. She requested default judgment, preclusion of G-Star’s affirmative defenses, or an adverse inference jury instruction, in addition to monetary sanctions.

The magistrate first determined that G-Star’s duty to preserve ESI arose in October 2016, when their HR department sought advice from outside counsel, spoke with senior management about Cruz’s complaint, and assembled “careful documentation” about her potential termination. G-Star was aware that Cruz “was actively consulting with an attorney” about the issues in her complaint and clearly “anticipated litigation” at that time. Additionally, the magistrate determined that Cruz’s email and SAP account were relevant and should have been preserved.

Nonetheless, G-Star did not impose a legal hold until “nearly a year later,” long after they had deleted Cruz’s email, and never took “‘reasonable steps’ to preserve [her] SAP account.” The magistrate concluded that the efforts of both in-house and external counsel to monitor G-Star’s compliance with their preservation obligations were “simply insufficient.” Nor could the lost ESI be restored or replaced through additional discovery.

In considering sanctions under Rule 37(e)(2), the magistrate concluded that G-Star “failed at every opportunity” to preserve ESI for litigation, prejudicing Cruz. This “repeated failure … evidences an intent to deprive” Cruz of evidence for use in litigation. That finding was further “buttressed by [G-Star’s] conduct in connection with litigating” discovery, as they “misrepresented to [Cruz] and the court (by omission) their ability to produce” ESI.

Despite all this, the magistrate recommended that the district court deny Cruz’s request to strike G-Star’s answer or their affirmative defenses. Instead, it recommended that an adverse inference jury instruction would “appropriately address[]” the loss of evidence. The magistrate did, however, grant Cruz monetary sanctions.

Takeaways on Preserving ESI

This case highlights several potential points of failure for preservation efforts — points at which G-Star could have ensured the preservation of relevant ESI. Those include:

  • formal complaints by an employee,
  • consultations with in-house or outside counsel,
  • documentation of potential litigation issues,
  • termination of an employee, and
  • deletion of email and other internal software accounts.

Examine your own processes for these events and others that may arise. Do you have failsafes built in to guarantee that you’ll identify and preserve the right ESI?

Are your legal holds effective? We’re here to help. If you have questions, please contact us.

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