How companies facing an investigation can avoid ESI preservation issues and the adverse inference.

Preserve to Protect (Yourself)

Author: Nick Plinio

Case Citation: EEOC v. GMRI, Inc., No. 15-20561 (S.D. Fla. Nov. 1, 2017)

Implicated Personnel: Document custodian, EEOC, National restaurant chain
eLesson Learned: It pays to institute thorough litigation holds early! When documents are lost in connection with a pending investigation, it becomes very difficult to avoid bad faith accusations and worse, a potential adverse inference, when potentially relevant ESI is deleted or lost from a server.
Tweet This: A PSA for large corporations and every one utilizing ESI: Air on the side of over-inclusion when facing an investigation and deciding what to include in a litigation hold, it might just save your case.

Background

EEOC v. GMRI, Inc. stems from an investigation of prominent restaurant chain Seasons 52 (Seasons) for an alleged nationwide practice of intentional age discrimination in hiring procedures.  During the proceedings before the United States District Court for the Southern District of Florida, the EEOC made a motion seeking a series of harsh sanctions under Federal Rule of Civil Procedure 37 against Seasons based on a failure to preserve relevant job applications, interview booklets, and electronically stored information (ESI).  Seasons claimed that these documents were “missing” and unrecoverable, but the EEOC asserted that the information had actually been intentionally destroyed.  With regard to the ESI specifically, the EEOC sought to prevent Seasons from introducing evidence about the content of “lost” emails and other communications/records.  It also sought to introduce evidence that tended to show the intentional destruction of the information, which the EEOC argued, created the presumptive inference that the emails and other documents contained statements that Seasons had a preference for younger applicants.

The real factual dispute here was whether Seasons, before the lawsuit against it was filed, ever knew that the scope of the EEOC’s investigation was “national.”  If so, depending on the circumstances of when and how Seasons obtained that knowledge, it could have been obligated to preserve ESI relevant to hiring practices in all of its restaurants nationwide.  Seasons argued that its obligation extended only to the records of the Coral Gables, Florida restaurant implicated in the original complaints giving rise to the EEOC’s investigation.

On August 31, 2011, the EEOC claimed it issued a letter to Seasons, which notified the restaurant that the investigation against it had been expanded to consider its hiring practices around the country.  The following day, it requested a large amount of information and documents from a host of restaurants nationwide due to “an expansion of the case.”  Seasons disputed receipt of the first letter but not the second. This was ultimately a persuasive factor in the court holding that Seasons knew or should have known to preserve documents from the other restaurants pending the completion of the investigation.  

The EEOC however, could not prevail on its motion for sanctions—and as a result, compel the inference that the missing ESI contained information adverse to Seasons—unless it demonstrated that the information was crucial to the case or that Seasons acted to intentionally deprive the EEOC of the information.  Ultimately, the court determined that the EEOC had not yet clearly established this point.  As such, the EEOC could not prevail on a presumptive inference-type sanction.  It could, however, argue to the jury that it may reach an adverse interest if, after the EEOC presented its evidence, it believed that Seasons intentionally destroyed the relevant ESI and other documents.

E-Discovery Takeaway

The takeaway here is to be smart about preservation!  And that Seasons faces some serious consequences for failing to do so, even if it disposed of the ESI inadvertently. 

Companies today, especially nationwide entities with multiple locations, benefit immensely from the internet and cloud-based storage services.  This allows such companies to remain organized and effectively manage their affairs.  However, when amassing hundreds of documents, including emails, service records and the like, it can become difficult to know what to hold on to, and for how long. 

While companies are certainly not expected to preserve every email or record of every transaction, there are some key steps that can be taken to ensure the right information is retained.  First, IMMEDIATELY upon learning that it has become the subject of an investigation a litigation hold should be initiated to preserve any and all even potentially relevant information to the alleged charge.  As it is the ethical obligation of the in-house attorney and the company to ensure that relevant information is not destroyed, action should be taken as promptly and as thoroughly as possible, even if that means preserving more than is necessary.  The general rule here is to “air on the side of caution,” even if the investigating party does not make clear exactly what needs to be preserved. Perhaps more obviously, a second lesson to take from GMRI is that intentional destruction of documents has severe implications.  As the court notes, a finding of bad faith on the part of the company can and certainly will lead to the inference that the information destroyed was harmful to its case.  As such, companies should be on notice that, simply because ESI can be easily erased and made unrecoverable, doesn’t mean its content won’t still come to light.  All that is necessary is that the opposition makes a showing of bad faith, which can then permit the adverse inference against the document custodian/company.  This should act as an even greater deterrent to carelessness and intentional destruction because, even if the content of ESI was irrelevant to the case, the jury might still be allowed to draw an adverse inference.  In other words, it is sometimes impossible to know for certain what the content of the ESI was, but if a showing of bad faith destruction is made, it won’t matter.  This should also prompt companies, especially those with multiple branches/locations whose operations are not directly supervised by company management, to educate personnel on how to comply with litigation holds and the dangers of destroying information.

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