In August 2011, Debra Hart, a 21-year employee and bookkeeper for a City Market in Colorado, was fired by the Kansas-based company for allegedly giving herself an unauthorized pay raise. What followed were Hart v. Dillon Companies, Inc., impending sanctions for the spoliation of key audio evidence and the case for a sound legal holds system.

According to the Plaintiff, beginning in July 2011, Steve Pollard, one of City Market’s loss prevention officers, interviewed the Plaintiff regarding the alleged payroll adjustment and secretly recorded these interviews. The recordings were later transcribed by Pollard. The resulting “inaccurate and misleading” transcripts eventually led to the termination of the Plaintiff’s employment.

The plot thickened when, during a period when the Defendant was on notice of an imminent lawsuit and a legal hold was finally issued, the audio recordings were destroyed by Pollard.

The Plaintiff’s motion for sanctions for spoliation of evidence in January 2013 contended that the Defendant not only failed to disclose the recordings’ very existence in its discovery responses, it also failed to preserve the critical electronically stored information (ESI), which went beyond corporate carelessness and rose to the level of bad faith.

In July 2013, the Court found that the ESI was relevant to the Plaintiff’s termination, the Plaintiff was prejudiced by its destruction, and the Defendant had the duty to preserve the ESI because it knew that litigation was imminent. Specifically, the Defendant was four months late in issuing the legal hold for the ESI in Pollard’s possession and “highly culpable.” A hearing and oral argument as to what sanctions should be imposed on the Defendant was set for October 2013. This was then stricken following the Defendant’s objections to the order.

While we wait for what will happen next in this notable case of spoliation of evidence, the verdict is already in on the value of a sound legal holds system. Had the Defendant had such a system in place, it could have issued a legal hold in a timely fashion, preserved key ESI and avoided what may be costly sanctions, which could give new meaning to “Can I get a price check …”