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DuPont v. Kolon: DuPont Avoids Sanctions by Maintaining Legal Hold Practices

8/16 UPDATE: See subsequent blog post: The Other Shoe Drops in DuPont v. Kolon: Sanctions for Defendant for Spoliation After Issuing Weak Legal Hold (8/16/2011)

E.I. du Pont De Nemours and Co. v. Kolon Industries, Inc., Civil Action No. 3:09cv58, 2011 U.S. Dist. LEXIS 45888 (E.D. Va. Apr. 27, 2011)

In an opinion from late April, Sr. District Judge Robert E. Payne from the Eastern District of Virginia denied the defendant’s motion for sanctions for spoliation on the basis that the plaintiff DuPont maintained a strong litigation hold process and was committed to e-discovery.  We first read about this case at Gibbons P.C.’s E-Discovery Law Alert blog where Jennifer Marino Thibodeau covered it.

The case involves appropriation of trade secrets when a DuPont employee left and went to work for a Korean competitor, namely Kolon Industries.  Once DuPont became aware of the situation, they involved the FBI and Dept. of Commerce since it involved an overseas company which came to light in May 2007 when it was discovered that the former employee was consulting with Kolon.

In reviewing the defendant’s assertions following discovery that documents from four employees were destroyed, Judge Payne did a thorough analysis in evaluating the timing of the duty to preserve (“trigger event”), relevance and culpability.  The court reviewed case law and relied on several recent cases, including Zubulake, Samsung v. Rambus, Jones v. Bremen H.S. and Victor Stanley, but somewhat notably made no reference to Pension Committee.

As the plaintiff, records showed that DuPont issued three litigation holds.  The first hold order in June 2007 was to a small group who had direct knowledge of the former employee’s work. The second and third were in quick succession in April 2009 once the company became aware that Kolon was filing a counterclaim and were issued to more than 2,500 employees in the pertinent division.  During discovery, Kolon learned that records from four employees were lost when their accounts were deleted according to the company’s document retention policy during the interim period.

The opinion is worth reading since it validates the need to have a strong preservation plan in place – one that includes a detailed audit trail.  As was pointed out by Jennifer Marino Thibodeau in her post, some key factors that helped keep DuPont out of hot water included that it refreshed the legal hold promptly, the company alerted foreign affiliates to the hold and educated them about it, and the institution of a document retention policy.  As Ms. Thibodeau points out:

 “Overall, DuPont demonstrated to the Court that its reasonable, professional attempts to preserve electronically-stored information were appropriate — and that its duty to preserve was satisfied — consequently, there was no spoliation to sanction.”

A copy of Judge Payne’s April 27^th opinion is available here.

Further Reading:

• Marino Thibodaux, Jennifer, “Motion for Sanctions Denied Due to DuPont’s Reasonable, Professional Efforts to Implement and Update Litigation Hold Notices,” E-Discovery Law Alert, Gibbons P.C., July 5, 2011

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