Attorneys advising a client on litigation-related document retention face risks on both sides. On one hand, failure to promptly implement a litigation hold and suspend document destruction policies when a party reasonably anticipates litigation may result in sanctions. On the other hand, spending too much time implementing a litigation hold may prevent the prevailing party from recovering costs and fees, even where a contract provides for them. Three recent federal district court decisions help illustrate the narrow path that attorneys and their clients must follow.

Last month, a magistrate judge in the US District Court for the Northern District of California imposed monetary sanctions against plaintiff PersonalWeb Technologies for failing to implement a litigation hold until after bringing suit (No. C13-013170-EJD(HRL), (N.D. Cal. Feb. 13, 2014)).

PersonalWeb acquired several patents from another company in July 2011. On December 8, 2011, PersonalWeb filed its complaint in this action, alleging that Google infringes the acquired patents. On December 19, 2011, PersonalWeb implemented a litigation hold, suspending its normal e-mail retention policy and requiring employees to preserve documents relevant to the action.

A former PersonalWeb employee told Google in 2012 that PersonalWeb's president instructed employees to purge their e-mails in October or November 2011. Google took discovery concerning the alleged spoliation and later moved for sanctions.

The court granted the motion in part. It concluded, based on all the evidence, that PersonalWeb had not engaged in mass destruction of evidence in October or November 2011. However, the court found that PersonalWeb reasonably anticipated patent litigation in July 2011. By failing to implement a litigation hold until five months later, and 11 days after filing the complaint, PersonalWeb caused the destruction of potentially relevant evidence. The court therefore imposed monetary sanctions.

A day after the decision in PersonalWeb, another magistrate judge in the Northern District of California granted another sanctions motion arising out of a failure to implement a litigation hold (No. CV-11-5639 (MEJ)(JSC), (N.D. Cal. Feb. 14, 2014)).

In August 2011, Jackson Family Wines sent Diageo North America and its affiliates a cease and desist letter accusing Diageo of trademark infringement. Jackson filed this action in November 2011.

Also in August 2011, a Diageo employee who worked on marketing the allegedly infringing wine left Diageo. Although her computer hard drive was initially copied under Diageo's document retention policy, the copy was destroyed in August 2012, also according to the policy. It was undisputed that Diageo never implemented a litigation hold for the employee's documents and never spoke to her about preserving evidence.

Jackson eventually realized, based on productions from other Diageo employees and subpoenaed non-parties, that Diageo had not produced the e-mails of the employee in question. This motion followed.

The court granted the motion. It held that Diageo failed to implement a litigation hold, and also failed to admit the problem. The court ordered that the jury receive an adverse inference instruction concerning the spoliation of e-mails.

The same week that the Northern District of California was imposing sanctions for insufficient litigation holds, the US District Court for the Northern District of Illinois largely denied a request for attorneys' fees because the prevailing party's attorneys did too much work on a litigation hold (No. 13 C 6210, (N.D. Ill. Feb. 12, 2014)).

Corey Steel sued SA Industries 2 for breach of contract because SA allegedly failed to pay for shipments of steel. The contract provided that Corey could recover attorneys' fees if it successfully sued SA for payment. After settlement talks failed and SA defaulted, Corey moved for a default judgment. As part of its motion, Corey requested over $31,000 in attorneys' fees.

The court awarded a default judgment but granted Corey only $4,000 in fees. It asserted that Corey's counsel had spent too much time on the matter and had used attorneys too senior for the work involved.

Preparation of Corey's litigation hold was one of the items singled out by the court. Two of Corey's attorneys apparently took several hours to prepare the hold. The court deemed this too much, stating that "[i]t should not have taken very long to draft an appropriate notice in regard to this case" (, at *3).

Taken together, these three cases remind attorneys that implementing a litigation hold is vital, but so is economy. Ineffectiveness may result in sanctions. Inefficiency may result in a loss of attorneys' fees, even where the prevailing party is otherwise indisputably entitled to them. Practical Law's Litigation Hold Toolkit has resources that can help counsel walk the line between doing too much and too little, including: