<i>Legal Tech:</i> Peril in Paper: <i>EEOC v. GMRI</i> and the Digital Divide in e-Discovery Sanctions

However, the recent federal district court decision in Florida, EEOC v. GMRI, Inc., No. 15-20561 (S.D. Fla. Nov. 1, 2017), not only illustrates that we shouldn't be too quick to ignore paper discovery, it serves as an excellent tutorial on the different legal standards for paper and electronic data. In addition, the case illustrates the information governance and data security considerations when responding to discovery with both digital and paper components.

At Their Peak

Based in Orlando, FL, Seasons 52 is a chain of 41 restaurants with locations across the nation from New York to California. Billing itself as a “celebration of what's good now,” Seasons 52 markets itself to patrons as restaurants with a “casually sophisticated setting” and seasonably inspired menus featuring ingredients at their peak of freshness with features such as open-fire grilling and an ever-changing selection of global wines.

Operated by GMRI Inc., formerly General Mills Restaurants Inc., the chain is part of Darden Restaurants, a 1,500-restaurant operation including national brands such as The Capital Grille, LongHorn Steakhouse and Olive Garden.

Seasons 52 may market itself as celebrating what's good now with ingredients at their peak, but if a complaint from the U.S. Equal Opportunity Employment Commission (EEOC) is to be believed, something Seasons 52 didn't think was good now and at their peak were older workers.

Older Applicants

Anthony Scornavacca and Hugo Alfaro applied unsuccessfully for server positions in 2010 at Seasons 52's Coral Gables, FL, location. The two later filed independent discrimination complaints against Seasons 52 under the federal Age Discrimination in Employment Act (ADEA). Neither Scornavacca nor Alfaro asserted class-wide allegations or theories that extended beyond their own individual circumstances.

The EEOC notified Seasons 52 of the charges and explained the Commission's record-keeping requirements.

There was a dispute between the EEOC and Seasons 52 about whether Seasons 52 ever received an Aug. 31, 2011 EEOC letter notifying Seasons 52 that it was expanding the investigation to include the chain's hiring practices throughout the nation. But, on Jan. 10, 2012, a Seasons 52 paralegal wrote a letter to the EEOC denying that Seasons 52 maintained a nationwide policy not to hire people over the age of 40.

Paper Policies and Productions

Established in 2010, Seasons 52's own document retention polices required employment applications of unsuccessful applicants be retained a minimum of three years and the applications of those hired to be saved for at least six years. The policy also provided for legal holds on email to be initiated by counsel and implemented by IT staff.

In the EEOC investigation, the Commission requested employment applications to analyze Seasons 52's hiring of older workers. The EEOC alleged the company's collection and production procedures were somewhat lacking.

For locations other than Coral Gables, rather than issue a legal hold, a Seasons 52 “litigation team” merely asked managers to send paper applications to a central office to be scanned. The productions were less than comprehensive, however.

According to restaurant managers, the Tampa location had received approximately 1,800 applications, but it produced only 205. The King of Prussia location produced only 325 of about 1,000; Costa Mesa produced only 322 of its 1,000; Jacksonville produced 126 of 1,000; and the Kansas City restaurant produced only eight applications out of an unknown number.

The Coral Gables restaurant illustrated a disparity between electronic and paper data. Electronic data at that location indicated Seasons 52 actually favored older workers, but paper data showed a statistically significant failure to hire older workers.

In addition to paper applications, Seasons 52 had so-called interview booklets where managers took notes and scored applicants. Some locations used electronic versions while others still used paper. Because Seasons 52 produced such a small percentages of the paper booklets, the EEOC alleged Seasons 52 had destroyed many of them despite its legal obligation to retain and produce them.

Electronic Preservation

From 2010 to 2014, Seasons 52's production of electronically stored information (ESI) wasn't much better. Its NearPoint Mimosa archiving system automatically deleted email after 90 days unless a legal hold was issued. In February 2014, Seasons 52 switched to a ProofPoint archiving system with an automatic thee-year retention for all email.

To complicate matters, although Seasons 52 issued a legal hold for Coral Gables in 2010, it didn't issue a legal hold for the rest of the chain until 2015. In addition, it failed to preserve any hard drives.

Despite the data not produced, Seasons 52 argued it conducted comprehensive e-discovery, collecting all email and workstation documents from over 100 custodians while responding to ever-increasing EEOC demands.

The company noted it collected over 2,300 gigabytes of data, totaling more than 5,500,000 documents. It then applied more than 1,500 negotiated search terms to the collected data. The searches returned approximately 620,000 documents for review and cost hundreds of thousands of dollars to complete. Seasons 52 then produced about 31,000 ESI records, totaling more than 110,000 pages.

Defining and Sanctioning Spoliation

When analyzing potential legal liability for the allegedly destroyed evidence, the court in the Seasons 52 litigation noted courts have not been consistent in defining, “spoliation,” the destruction or alteration of evidence. The question is whether spoliation by its definition is intentional destruction.

Because the 11th Circuit in Green Leaf Nursery v. E.I. DuPont de Nemours & Co., 341 F.3d 1292 (11th Cir. 2003), did not require spoliation to be intentional, the Seasons 52 court didn't require it either.

Claiming Seasons 52 destroyed evidence it knew was responsive to EEOC requests, the Commission sought an adverse inference instruction to jurors as a sanction for the spoliation.
Citing Bashir v. Amtrak, 119 F.3d 929, 931 (11th Cir. 1997), the court held an adverse inference instruction is appropriate only when there is evidence of bad faith. Thus, citing Preferred Care Partners Holding Corp. v. Humana, Inc., 08-20424-CIV (S.D. Fla. Apr. 9, 2009), the court held even grossly negligent conduct did not warrant an adverse inference instruction.

The adverse inference instruction the EEOC sought on the paper documents was an instruction to jurors that the missing paper documents at some locations would have shown more significant under-hiring of older workers than indicated in the electronic data. For other locations, the EEOC sought an instruction that the missing data would have provided anecdotal testimony of age discrimination.

For the electronic documents, the EEOC sought an instruction that the missing emails would have indicated a preference for younger workers.

The court noted that the adverse inference sanctions the EEOC requested required a showing of bad faith, but that lesser sanctions — such as limiting or excluding evidence or allowing a jury to consider evidence of spoliation — required no such showing.

Paper v. Electronic

The court noted there were different legal standards for sanctions with paper and electronic data. It could use its inherent powers to sanction paper spoliation, while sanctions for spoliation of ESI were based on Fed. R. Civ. P. 37, which — for the most severe sanctions, including an adverse inference instruction — required a showing of an “intent to deprive.”

In the end, citing Managed Care Solutions, Inc. v. Essent Healthcare, Inc., 736 F. Supp. 2d 1317 (S.D. Fla. 2010), the court declined to issue the most severe sanctions for the paper documents because it believed the evidence was not crucial for the EEOC to make its case, noting an EEOC expert could analyze the employment information without the missing information.
Thus, on the paper documents, the court allowed the parties to “present competing facts and theories to the jury.”

The court said Seasons 52 would have to “confront thorny and awkward evidence” about EEOC theories on the company's failure to timely and comprehensively respond to notices the case had expanded. On the other hand, the court said the EEOC could have been “clearer in articulating its view” that the case had expanded to a national investigation.

On the ESI, relying on Fed. R. Civ. P 37(e)(2), the court permitted the EEOC to argue to the jury that it may reach an adverse inference about missing ESI if (but only if) it concludes that Seasons 52 acted “with the intent to deprive” the EEOC of the ESI's use in this lawsuit. The court said the EEOC was permitted to establish this theory concerning ESI — not the paper applications and interview booklets — without also obtaining a finding of prejudice to the EEOC.

Why Seasons 52 Matters

The EEOC investigation and litigation over Seasons 52's hiring practices provides a textbook example of the perils of paper and digital preservation — as well as the different legal standards for paper and digital data.

Reasonable Anticipation of Litigation

Although “reasonable anticipation of litigation” is a well-known standard for when data preservation must begin, it isn't particularly helpful here. Litigation didn't commence until 2015, but Seasons 52 was subject to regulatory preservation requirements years before. Although the parties disagree on whether the Aug. 31, 2011, EEOC letter was sent or received, by 2012, an investigation required preservation — whether or not litigation ever ensued.

Self-Collection of Data

This is rarely a good idea for litigation or investigations, and it wasn't a good idea here. Because managers merely collected paper applications and sent them to be scanned, it leaves open the question of why such a small percentage of the applications were produced. Were they lost in transit? Did they ever exist? Employment applications, by their very nature, are full of personally identifiable information (PII). From a data security standpoint, self-collection of this type of information is fraught with peril.

Paper v. ESI — Retention Schedules

Physical factors may degrade, displace, or destroy paper documents, but automatic deletion schedules for email and other ESI can put organizations in legal jeopardy. In the Seasons 52 litigation, the company's initial 90-day automatic deletion schedule for email put the company in non-compliance with both EEOC polices and the company's own retention policy. In addition, with its paper application retention standards of three to six years, the discrepancy between paper and ESI periods helped create havoc.

Paper v. ESI — Legal Standards

The case also illustrates that, as odd as it seems, the legal standards for paper and ESI differ. Much has been made of the 2015 e-discovery amendments to the Federal Rules of Civil Procedure and the changes to Rule 37's sanctions provisions with its “intent to deprive” standard for the most severe sanctions. An important difference in the Seasons 52 litigation was that the EEOC's attempts for sanctions on the paper documents were derailed somewhat by what the court relieved as a lack of prejudice. Although prejudice may be assumed where intent to deprive exists, the EEOC did not have to demonstrate it for the ESI.

Conclusion

Cybersecurity professionals and legal teams have been trained to focus on ESI. It's not surprising. Most data are now electronic, and the systems IT and legal teams use are almost exclusively electronic. However, EEOC v. GMRI shows paper can be vital to a litigations and investigations in 2017. Seasons 52 spent hundreds of thousands of dollars to collect millions of documents, but it still faced the prospect of sanctions in a paper-digital divide.

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David Horrigan is e-discovery counsel and legal content director at Relativity. An attorney, industry analyst, and award-winning journalist, he served formerly as analyst and counsel at 451 Research and reporter and assistant editor at The National Law Journal.