Foreign Companies Investigated by Foreign Government under No Duty to Preserve ESI for Potential U.S. Lawsuits, Court Says
In Rockman Company (USA), Inc. et. al. v. Nong Shim Company, LTD, et. al., Case No. 13-04115 (N.D. Cali., Jan. 19, 2017), Plaintiffs, direct and indirect purchasers of Korean noodles, filed suit against four companies and their U.S. distributors, accusing them of conspiracy to fix the price of Korean noodles in the United States. During the case, Plaintiffs filed a Motion for Sanctions, alleging spoliation of evidence after a 2008 investigation regarding price fixing in the Korean marketplace; Defendants argued that they had no obligation to preserve ESI until the 2013 filing of a U.S. antitrust case.
The court looked at whether the Korean FTC-equivalent 2013 investigation should have put Defendants on notice that litigation in the States was foreseeable. Defendant Nong Shim’s routine business practice included routine destruction of ESI, including email, and keeping hard copies of documents for only a few years. While Nong Shim issued litigation holds in 2013 and preserved ESI after that date, Defendant had deleted much of the 2008 – 2013 ESI by that time. Similarly, Defendant Ottogi’s document retention policy only required maintaining hard copies for three years, and Ottogi preserved no documents until after September 2013. Ottagi did not automatically preserve data from old computers when replacing them but relied upon employees to choose which information to transfer. Emails were set to auto-delete if older than three months.
The court held that Plaintiffs had provided no legal basis for their contention that Defendants’ duty to preserve arose in 2008. The court found no authority to create an enforceable duty to preserve documents in anticipation of U.S. litigation based upon investigations by a foreign government agency regarding a foreign marketplace (especially given that no party had filed claims or suits in the U.S.). Plaintiffs also provided no support for the idea that a U.S. court could sanction a foreign defendant for violating foreign law with respect to document preservation. Therefore, the court denied the Motion for Sanctions.