Independent Agents Subject to Litigation Hold

In Haskins v. First American Title Insurance Co., the United States District Court for the District of New Jersey expanded the reach of a “litigation hold” to include independent agents of a title insurance company. The Court held that once litigation was reasonably anticipated, First American Title Insurance Company (“First American”) had a duty to instruct its independent insurance agents to preserve all potentially relevant documents and to suspend routine destruction of such documents. The ruling in Haskins gives important e-discovery guidance for many companies, as it clarifies that document preservation rules apply to independent agents in addition to a company’s in-house employees.

In Haskins, the plaintiffs sued First American for allegedly overcharging customers for title insurance. Thereafter, the plaintiffs sought discovery of insurance agents’ closing files to determine the extent to which customers may have been overcharged. Faced with a discovery motion, the Court addressed whether First American had a duty to issue a “litigation hold” to its agents to ensure that the potentially relevant documents were preserved. The Court’s resolution of this issue hinged on whether First American had “possession, custody, or control” of the agents’ documents pursuant to Fed. R. Civ. P. 34(a).

The Court explained that physical possession is not a prerequisite of control; rather, control may exist where a party “has the legal right to obtain documents from another source upon demand.” The Court found that First American had the requisite “control” over the agents’ files based on the language of the agency contracts. The Court noted that First American’s agency contracts contained clauses requiring agents to maintain and preserve all documents, and that First American had the authority to inspect and examine these documents upon request. Once the Court determined that First American did have “control,” the duty to preserve the agents’ documents followed. Thus, the Court held that when litigation was instituted or reasonably anticipated, First American had a duty to issue a “litigation hold” to its current and former independent insurance agents.

In holding that First American had a duty to issue a “litigation hold” to its independent agents, the Court placed great emphasis on the language of First American’s agency contracts. This should serve as a reminder to litigants and potential litigants to be aware of contract clauses regarding access to and control of documents. Such clauses may give rise to discovery obligations involving documents maintained or physically possessed by agents or independent contractors. Identifying the extent of discovery obligations and taking action is imperative to avoid potential litigation sanctions, ranging from fees, cost shifting, or adverse jury instructions, to dismissal or judgment.

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