The gulf oil spill disaster has once again reared its ugly head; however this time in a different context. In the corporate world, executives may believe that establishing a policy and informing employees of those policies is sufficient action to effectively protect
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the interests of the corporation. U.S. v. Halliburton Energy Servs., Inc. serves as a useful reminder that this is not the case.
Halliburton Energy Services, Inc. (“HESI”) was a construction firm contracted by British Petroleum (BP) to provide cementing services associated with BP’s drilling plan for the Macondo well—the well that ultimately blew out, resulting in the deaths of eleven members of the Deepwater Horizon crew and the release of millions of gallons of oil into the Gulf of Mexico. Following the blast, investigations were launched by the United States Departments of the Interior and Homeland Security, as well as the Department of Justice. These agencies required HESI to preserve and produce information, documents and other materials related to HESI’s work on the Macondo well.
The executives at HESI did exactly as requested by the agencies and put a litigation hold on all the relevant data and documents. However, the Company Technology Director ignored this directive, and ordered two employees to delete the results of two separate models run by HESI, showing the likely outcome of the Macado well ordeal, had BP implemented a different process for installing the casing in the wellbore.
Although HESI disclosed the spoliation as soon as executives learned of it and cooperated
fully in the investigation that followed, they were still hit with criminal penalties—a $200,000 fine, the largest allowable by statute, and three years’ probation, just two years shy of the statutory maximum five years.
So how could HESI have avoided this unfortunate outcome? By taking more proactive measures prior to the spoliation. After the spoliation occurred, HESI implemented remedial measures including making its legal-hold policies and procedures more rigorous and intensive, investing in software to improve the way that legal-hold notices are distributed to employees, transferring to the Law Department certain IT Department duties regarding external delivery of data collection, and hiring several employees for overseeing compliance with its discovery and preservation obligations. Had these policies and procedures been in place at the time of the Macado well incident, the spoliation would not likely have occurred. Other employers should take notice of HESI’s ordeal and protectively implement policies and procedures to prevent similar tribulations.
Adam L. Peterson is a student at Seton Hall University School of Law, Class of 2014. Adam is a member of the Seton Hall Law Review and prior to law school Adam was an Environmental Analyst with the New York State Department of Environmental Conservation.
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April 23, 2014 at 7:44 PM
This case is a great example that you can form the best policies in the world but without employees willing to follow them, they are useless. HESI seemed to have taken all of the right steps but without the proper supervision of the policy’s implementation by the employees they were burned. The extensive sanctions imposed against them serve what we can only hope will be an adequate warning to other employers to do more than just tell the employees the policy but actively make sure they are following them.