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Sanctions Imposed After National Title Company Fails To Institute A Litigation Hold

Posted on January 30th, 2015

In Fidelity National Title Insurance Company v. Captiva Lake Investments, Case No. 4:10-CV-1890 (E.D. Mo. Jan. 7, 2015),  Defendant Captiva Lake Investments (“Captiva”) uncovered two sets of data that Plaintiff Fidelity National Title Insurance Company (Fidelity) – one of the largest title and escrow services companies in the United States – had not produced or included in its privilege log.  After a motion to compel and multiple hearings, the court, troubled by Fidelity’s possible spoliation, appointed a forensic computer specialist to examine Fidelity’s computer systems.

The forensic expert found many problems with Fidelity’s document preservation and production, including the following:  1) Fidelity had failed to institute a litigation hold; 2) Fidelity only conducted a systematic search for relevant emails two years after Captiva’s first discovery request; and 3) a contractor had inadvertently lost approximately 13 million emails while implementing an email retention policy.  Captiva filed a motion for sanctions based on spoliation of evidence.

The court concluded that, based on the forensic computer specialist’s findings, it had sufficient evidence to support a spoliation finding, rejecting Fidelity’s claim that it did not need a litigation hold because of its “document collection procedures” (a contention not supported by its loss of millions of emails).  To determine the appropriate sanction to impose, the court considered whether Captiva suffered prejudice because of Fidelity’s conduct. Although Fidelity had attempted to mitigate the loss by late producing 33,000 additional emails, the court reasoned that this partial production did not make up for the unknown number of emails lost. Through the late production, Captiva demonstrated that discoverable communications, including some favorable to Captiva, had occurred via email.  Thus, the court found that Captiva had been prejudiced by the lost emails (and that the prejudice was compounded because Captiva did not receive the late production until after it had already moved for summary judgment).

As sanction for the lack of litigation hold, lost email, and late production, the court ordered that jurors would receive an adverse inference instruction directing them that they could assume the contents of the deleted emails were adverse to Fidelity.  The court also required Fidelity to pay for half of the computer forensic inspection plus attorney fees and costs for the sanctions motion.

Lesson for the Plaintiff’s bar?  Always make sure that your clients institute a litigation hold, and never underestimate the possible carelessness of your opponent, no matter how renowned and seasoned they may seem.

ILS – Plaintiff Electronic Discovery Experts

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