You Needn’t Keep Everything Forever: No Sanctions for Non-Party’s Failure to Produce because of Retention Policies, Technology Changes

United Corp. v. Tutu Park Ltd., No. ST-2001-CV-361, 2015 WL 457853 (V.I. Jan. 28, 2015)

In December 2012, the court in this case issued a subpoena directing Kmart Corporation (“Kmart”) to produce twenty-one categories of documents and later granted Plaintiff’s motion to compel the same.  Accordingly, Kmart produced responsive documentation, but not to Plaintiff’s satisfaction.  Plaintiff thereafter moved for sanctions and for Kmart to be held in contempt.  Concluding that Kmart made a reasonable attempt to provide responsive documentation, and acknowledging Kmart’s explanations for their inability to provide more, including the destruction of documents pursuant to their document retention policy and changes in technology, the court declined to impose sanctions or to hold Kmart in contempt.

Plaintiff sought Kmart’s production of several categories of information covering a long time span.  Specifically, several of the requests sought production of information “for each year from January 1, 1991 through the present date.”  Although Kmart produced some responsive documentation, some was no longer available.  Kmart explained, for example, that it did not maintain records pertaining to merchandise sales by year prior to 2000.  Kmart also cited “software and program changes, file layout changes, and conversions to new databases,” that rendered some additional responsive data “unreadable” and unable to be “recreated with any certainty.”  Plaintiff sought sanctions and a finding of contempt.

Addressing Plaintiff’s motion, the court acknowledged its prior “clear and unambiguous” order for Kmart to produce the documents requested by subpoena, but declined to hold Kmart in contempt where Kmart made a “diligent attempt to comply:”

Kmart has identified a number of reasonable explanations for the scope of its production under the subpoena. Most notably, Kmart claims that its record retention policy does not provide for the retention of records before the year 2005. The year 2005 was over nine years ago, and as a practical matter, a corporation may be justified if it chooses not to retain records that are over nine years old. Kmart has also alleged that internal changes in sales reporting prohibited it from estimating pre-tax income for certain items. Moreover, Kmart emerged from Chapter 11 bankruptcy protection in May of 2003, and merged with Sears, Roebuck and Co. in 2005. It is reasonable to believe that the disruption caused by bankruptcy and the integration of two companies impacted Kmart’s ability to access records. Finally, Kmart has explained that certain data cannot be recreated due to software and database conversions, among other changes in recordkeeping. Having considered these reasons, the Court believes that Kmart has made a diligent attempt to comply in a reasonable manner with the Court’s March 22, 2013 Order.

The court also rejected Plaintiff’s assertion that Kmart’s position was “not credible” because it is a “multi-national corporation” and its records are “necessarily computerized,” reasoning that:

[I]t does not follow that all multinational corporations that store electronic data retain records for such a length of time. Corporations typically employ data retention policies and dispose of records after a period of time. The Court does not find that Kmart’s use of such a method justifies an order of contempt, especially considering the age of the records requested by the Plaintiff.

Finally, the court addressed Plaintiff’s claim that Kmart provided no ESI and Kmart’s explanation that it was precluded from “recreating responsive ESI with any degree of integrity” in light of “changes in technology over time.”  Specifically, the court reasoned that “[g]iven the fact that, in some cases, Plaintiff seeks records dating back to 1991, in combination with the fact that Kmart has undergone internal reorganizations, Kmart’s internal review constitutes sufficient diligence to avoid an order of contempt from this Court.”

A copy of the court’s full opinion is available here.

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