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E-discovery: Lessons learned from Scentsy, Inc. v. B.R. Chase LLC

Insufficient document retention and litigation hold policies spell trouble for plaintiffs

In some of our recent articles, we have noted the fundamental importance of having data and document retention policies in place and consistently applying those policies. Doing so reduces the overall volume of data or electronic documents that need to be preserved, collected, processed, analyzed and reviewed for potential production when litigation arises. A recent case out of the U.S. District Court for the District of Idaho—Scentsy, Inc. v. B.R. Chase LLC—gives in-house counsel some guidelines for whether their company’s data or document retention policies are acceptable, and if not, what the courts might order.

In Scentsy, a defendant accused the plaintiff of spoliating and failing to produce key documents because of an insufficient litigation hold. Instead of issuing a written litigation hold to any of its custodians, the plaintiff’s general counsel spoke to the custodians that had information regarding the subject of the lawsuit. The plaintiff issued this oral litigation hold around the time it filed the complaint in May 2011. The defendant argued that the plaintiff had first anticipated the litigation in May 2010. Meanwhile, the plaintiff admitted that it anticipated the litigation no later than March 2011, roughly two months prior to the oral litigation hold.

The court focused specifically on the fact that the plaintiff’s vice president of IT testified that all non-email documents saved to an employee’s personal computer hard drive or the plaintiff’s server are preserved indefinitely. Besides this testimony, the plaintiff’s GC suggested that there was no document retention policy for files other than emails and that those files were “’stored in accordance with the creator’s intent.’”

The court quickly combined this lack of a document retention policy for files other than emails with the admitted two-month gap between the plaintiff’s anticipation of litigation and the issuance of the oral litigation hold. It described this two-month gap as a “window where these [non-email] documents could have been destroyed by a user after [plaintiff] anticipated litigation.” And if you accepted the defendant’s argument as to when the plaintiff anticipated the litigation, the window grew to 12 months.

Contributing Author

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Todd Ohlms

Todd J. Ohlms is a Partner at Freeborn & Peters and co-leads the Litigation Practice Group.  His practice involves advising and representing clients with respect...

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Contributing Author

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Joseph Fogel

Joseph L. Fogel is a Partner at Freeborn & Peters and co-leads the Litigation Practice Group. His areas of focus include multiple areas of business...

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