"We Missed the Deadline": True Stories of Litigation Hold Failures (And How to Avoid Them)

Litigation hold failures come in several shapes and sizes, including data spoliation and poor enforcement. Avoiding these costly mistakes requires quality record-keeping and well-constructed hold notices that outline custodian responsibilities.

Here, we'll discuss some common mistakes in eDiscovery investigations by looking at real-life cases where things went wrong. Read on for a comprehensive overview of what pitfalls litigation discovery software can help you avoid and some data preservation methods that aid in avoiding legal pitfalls.

What Happens If You Fail to Comply With a Legal Hold Notice?

Litigation holds, also called legal holds, aim to preserve information that may be needed in litigation or court cases. This information may include:

• Documents stored in on-premise networks
• Files stored on cloud servers
• Images, including those with embedded text
• Video and audio files

Since the data is essential for upcoming legal matters, your company can't alter or delete it. Doing so would constitute spoliation, also known as the intentional or negligent destruction of evidence. This can result in:

• Fines
• Enforced payment of legal fees
• Instructions to the jury to assume that the destroyed evidence would have illustrated your client or company in a negative light
• Case dismissal

In extreme cases, there may also be criminal penalties like:

• Obstruction of Justice charges
• Prison sentences

What Is a Silent Litigation Hold?

Most legal holds require a company to send out a litigation hold notice to those who hold onto the necessary data. This notice informs the custodians to ensure that the documents are secure. It ensures they know that the evidence cannot be altered.

However, issuing a notice makes no sense in some situations like sensitive internal investigations. In these instances, the corporate legal team might issue a 'silent litigation hold' where they automatically place a hold on the custodian's data. They don't notify them.

In these instances, it's just as important to avoid litigation hold failures as it is during traditional legal hold processes.

Knickerbocker et al v. Corinthian Colleges, Inc

This 2014 case was opened by former Corinthian Colleges employees who alleged that the work environment was racially hostile.

They claimed that they faced both harassment and discrimination. Additionally, they stated that the school retaliated against them for filing complaints and unjustly terminated them in 2012.

During this case, Corinthian Colleges committed spoliation of evidence. They did not implement a legal hold in a timely manner, which led to relevant employee email spoliation.

The court found this spoliation of evidence to be in bad faith. As a result, Corinthian Colleges were forced to pay for the plaintiff's costs as they tried to recover evidence. They also had to pay $25,000 in spoliation fees and $10,000 in penalties to attorneys.

DuPont v. Kolon Industries

In this 2009 intellectual property lawsuit, an American chemical company (DuPont) sued a South Korean company (Kolon) for stealing trade secrets. These secrets pertained to their marketing campaigns for synthetic fiber materials.

Kolon procured screenshots of some employees' email accounts that suggested that they planned to delete email files after litigation processes began.procured screenshots of some employees' email accounts that suggested that they planned to delete email files after litigation processes began. This was one of the most detrimental real-life business errors ever made. Dupont hired a digital forensics company to see whether Kolon had spoliated evidence.

Kolon eventually admitted that the employees did, in fact, identify what documents they wanted to delete after the legal hold was triggered. They also deleted 17,811 files.

As a result, Dupont received:

• $4.5 million in sanction-related fees for their lawyers
• Obstruction of Justice charges
• Criminal fines and restitution of $360 million

KCH Services v. Vanaire, Inc

This court case spanned 2005-2009. Vanaire, the defendant, was instructed to hold evidence because KCH's president believed him to be using KCH's software without appropriate licensing. After the call, the president of Vanaire told employees to delete all software that the company didn't own.

This means that Vanaire's management actively subverted a legal hold and destroyed evidence. It ultimately led to adverse interference charges.

These charges ensured that the jury presumed that the spoliated evidence involved unlicensed usage of software. This lost the case for Vanaire, who lost the lawsuit.

EEOC v. Formel D USA, Inc.

Not all litigation hold failures are purposeful. Sometimes, a company simply needs better litigation hold strategies.

In this 2023 lawsuit, Formal D was accused of sexual harassment and gender-based discrimination. They were instructed to hold data, but they had no formal process for doing so. This led to accidental spoliation and $80,000 in fines and damages.

Investing in compliance improvement tactics is critical to avoiding these penalties.

Reveal Hold is a technology that aims to make legal holds a simple, streamlined process. Our AI-driven tool ensures that businesses can:

• Instantly preserve data from multiple sources with a single click
• Integrate all data into an all-in-one dashboard for easy access
• Tag data by source, file type, or subject
• Search for litigation-relevant data with keywords and OCR text
• Normalize unstructured data within seconds
• Use GenAI to create summaries of complex information
• Visual datasets with heatmaps and clusters

This ensures that you have a well-defined, predetermined procedure for legal holds. The platform is also made for maximum security and confidentiality to ensure data integrity at all points of litigation and trial processes.

You won't need to worry about facing the same sanctions as Formal D because of poorly developed procedures.

Streamline Your eDiscovery Investigations Today

Now that you know some true stories of litigation hold failures, it's time to streamline your early case assessment eDiscovery processes. Reveal's technology is committed to streamlining all steps of eDiscovery investigations with user-friendly legal document analysis software. Whether you're looking to eliminate human error or save time and money on review, we've got your back.

Our AI-powered tools are made with cutting-edge machine learning technologies. This ensures accuracy when cutting case times and streamlining review. We have the most user-friendly integrated dashboard available to make searching for and culling data easy.

We're excited to show you our capabilities, so contact us today to schedule a demo of our litigation discovery software!