EEOC Discrimination Cases Lead to Serious Sanctions for Failures to Issue Litigation Holds

If you believe in coincidences, there was a significant one that occurred in February. Two Federal discrimination cases, EEOC v. JP Morgan Chase in the Southern District of Ohio (Sixth Circuit) and EEOC v. Ventura Corp. from the District of Puerto Rico (First Circuit), had rulings against defendants which were sanctioned for failing to preserve employment records that were responsive to their respective cases. The parallels between the cases show a pattern of how companies faced with EEOC claims inadequately responded to repeated preservation requests.

EEOC v. JP Morgan Chase Bank

In the first case E.E.O.C. v. JP Morgan Chase Bank N.A., No. 2:09-cv-00864 (S.D. Ohio Feb. 28, 2013), U.S. District Judge Gregory L. Frost handed down an opinion in an alleged discrimination by employees at the bank. The action was filed by the EEOC on behalf of female employees that were not given the opportunity to work with the most lucrative clients at the mortgage consulting group. Porter Wright’s Employer Law Alert brought the opinion to our attention.

When the bank was investigated, the Commission staff requested records showing the qualifications of the employees so that it would be possible to assess the alleged discrimination. As the case evolved, the bank was asked to produce data covering a three-year period. During the time when the scope of production was being debated, 10 months of data was destroyed per routine document deletion policies. Despite the fact that a formal document request had not been made before the data was deleted, it was established that a number notices sent about the anticipated action constituted a clear “trigger event” and commenced the obligation to preserve – including suspending automatic culling of data.

As Judge Frost made clear in the opinion, “Defendant’s failure to establish a litigation hold is inexcusable. The multiple notices that should have triggered a hold and Defendant’s dubious failure if not outright refusal to recognize or accept the scope of this litigation and that the relevant data reaches beyond the statutory period present exceptional circumstances that remove the conduct here from the protections provided by Rule 37(e).” (p.13)

The court based its sanctions because the failure to preserve inhibited “the integrity of the judicial process in order to retain confidence that the process works to uncover the truth.” The opinion goes into great detail on the legal foundation for sanctions and their severity based on standards set forth in the Sixth Circuit, including a three-part test for control, culpability and relevance. (p.17)

While denying the Defendant’s request for summary judgment, the court ordered a permissive adverse inference instruction to the jury as the “most reasonable and pragmatic course.” (p.17)

EEOC v. Ventura Corp.

Turning to the second opinion of Equal Employment Opportunity Commission v. Ventura Corp., Civ. No. 11-1700 (PG), 2013 U.S. Dist. LEXIS 19662 (D.P.R. Feb. 12, 2013) that was issued only two weeks prior. The Commission was investigating a Title VII complaint on behalf of male employees who claimed they were not offered managerial positions at the company.

Despite numerous warnings by the EEOC to preserve information relevant to the case, key evidence was lost including resumes from job applicants and critical emails among managers. The Commission sought sanctions for destruction of relevant records that hindered the ability to prosecute the claim. Ventura explained that the resumes were shredded at a warehouse and emails and other files fell victim to a company-wide “software migration.”

The Court was not able to determine bad faith on the part of the Defendant, but it found that sanctions were indeed warranted under First Circuit precedent that bad faith was not necessary and noted that sanctions can be imposed “if such evidence is mishandled through carelessness.” Key documents were spoliated by Ventura once a duty to preserve had attached following a “trigger event” – and the Court noted that it was likely prejudicial since the complainant had a copy of a similar email. The sanction consisted of exclusion of testimony showing hiring practices and an adverse jury instruction suggesting that the jury can infer that the lost emails were damaging to the defense’s case.

Corroborating Evidence – Four Conclusions from the EEOC Cases

Is it possible to connect these two cases even though it was happenstance that the opinions were issued only two weeks apart? While not directly related, the similarities are many, as follows:

  1. Sanctions Despite Absence of Bad Faith – Neither sanction was the result of bad faith spoliation, rather the defendants lost key information due inadequate preservation processes and, perhaps, a lack of careful oversight by the responsible attorneys .
  2. Pay Attention When the Other Party (especially the EEOC) Reminds of Obligation to Preserve – The EEOC was clear in its intentions in both complaints and notified both defendants about what was coming and what needed to be preserved, yet neither company adequately heeded the warnings.
  3. Failure to Suspend Routine Destruction of Records – Interestingly (and perhaps coincidentally) both matters involved the parties losing evidence because they didn’t keep it from being destroyed.
  4. Failure to Act in a Timely Manner to the Trigger – Particularly in the JP Morgan Chase Bank case, the legal team’s haggling over what to produce caused them to lose the plot entirely. The trigger to preserve had passed and they didn’t put controls in place to ensure that key data was not destroyed through a routine data management process.

Two cases don’t make a trend, but the similarities are eerie. The defendants clearly did not take the cases as seriously as they should, possibly due to them underestimating the implications of an EEOC complaint or the lack of training of Human Resources staff and the attorneys handling these employment matters. Whatever the reason, the sanctions serve as a cautionary tale for other organizations to step up their efforts to improve records management efforts and to better train and instill a “culture of compliance” among staff and attorneys overseeing employment matters.

Further Reading