The Obligation to Preserve Electronic Evidence

By David Zachary Kaufman

Introduction:

Under the Fed. R. Civ. P. whenever it can be “reasonably anticipated” that an action will be filed, all parties have a duty to preserve potentially relevant evidence. And "evidence" includes all information, including not just hard copy documents, but all electronically stored information. If you fail in this obligation, the sanctions can be devastating.

What information are we talking about?

Under the Federal R. Civ. P. you have a right to obtain information from all sources, whether maintained in hard copy or stored electronically. The party responding to the discovery request must diligently take measures to identify all sources of responsive information. Fed. R. Civ. Pro. 34 defines "document" to include information in any tangible format. “Documents” includes more than mere copies of documents. The definition also includes data compilations from which information can be obtained only with the use of detection devices". 1970 Advisory Committee Notes to Fed. R. Civ. Pro. 34. This means that the key computer and data control personnel within the company should be told in no uncertain terms to be sure that no information is destroyed or altered under the client's routine document retention policies. In other words, once litigation starts, the routine destruction of documents must be put on hold.

When does this duty start?

The duty to preserve evidence arises upon the reasonable anticipation of litigation and expands accordingly on receipt of pre-litigation correspondence, service of process and/or subsequently served requests for information. After litigation is commenced, the duty to preserve information may prohibit not only routine document destruction, but also the continued use of files and databases stored in electronic media. If the continued use of one's computers, files, and/or databases will alter the information that may be relevant to the litigation, a party may seek a preservation order barring further use until the information can be retrieved or copied.

What must counsel do to preserve the documents?

The court in Zubulake v. UBS Warburg LLC, 2004 U.S. Dist. LEXIS 13574, (S.D.N.Y. 2004) ( Zubulake V), outlined the duties of counsel to preserve potentially relevant evidence. The court explained those duties as follows:

1. First, when litigation is reasonably anticipated or at the commencement of litigation, counsel must issue a "litigation hold" which should be periodically re-issued to keep it fresh in the minds of employees and to make new employees aware of it.
2. Second, counsel should identify the persons who are "likely to have relevant information" and communicate directly with these "key players" to ensure that they are aware of their duty to preserve relevant information. These "key players" are the persons identified in a party's initial disclosures and any supplementation thereof.
3. Third, the court found that counsel have a duty to instruct all employees of their client to produce electronic copies of their relevant active files and to identify, segregate and safely store relevant backup tapes. The court went so far as to suggest that, in an appropriate case, counsel take physical custody of relevant backup tapes to safeguard the information.

Courts are imposing increasingly harsh punishments on corporations that fail to comply with orders to produce e-mail documents. Where judges once were more likely to accept that incompetence or computer problems might be to blame, they are now apt to rule that noncompliance is an indication a company has something to hide.

What are the Sanctions for failure to Preserve evidence?

Courts have imposed various and severe sanctions for a party's failure to ensure that a preservation order is implemented and followed. In re: Prudential Ins. Co. of Am. Sales Practices Litig., 169 F.R.D. 598, (D.N.J. 1997) ) ($1 million sanction for failure to develop and implement an evidence preservation program). See also Illinois Tool Works, Inc. v. Metro Mark Prods., Ltd. 43 F. Supp. 2d, 951 (N.D. Ill.).

In another case, the court went so far as to strike the defendant's answer, based on its failure to obey a court order requiring the preservation of certain records maintained in the ordinary course of business. See Wm. T. Thompson Co. v. General Nutrition Corp. 593 F. Supp. 1443 (C.D. Cal. 1984) . In that case, the defendant's counsel did not instruct the appropriate officers and employees of the defendant to preserve records and actually instructed personnel not to deviate from the company's standard document retention policies. The court found that such conduct resulted in a bad faith destruction of critical evidence.

In Mosaid Techs., Inc. v. Samsung Elecs. Co., et al., Case 07-7-7779 U.S. Dist.Ct. (Hedges, U.S.M.J. Sept. 2004) the Court crafted a special jury instruction not proposed by either side which was designed to punish the spoliator, deter future misconduct, and restore the movant to a position in which it would have been had its adversary faithfully observed its discovery duties.

The sanctions imposed by a court frequently depend upon the Court’s view of the degree of wrongdoing. These sanctions may include attorneys' fees and costs, the exclusion of withheld evidence, jury instructions concerning adverse inference and, in cases involving outrageous and/or intentional conduct, actual dismissal of the action. See, e.g., United States v. Philip Morris USA, Inc., 2004 U.S. Dist. LEXIS 13580 (D.D.C.,July 21, 2004) (Defendant, disregarding preservation order, implemented policy of deleting e-mails after a period of 60 days received monetary sanctions of $2.75 million); Zubulake v. UBS Warburg, LLC, 2004 U.S. Dist. LEXIS13574 (S.D.N.Y., July 20, 2004) ( Zubulake V) (after determining that UBS Warburg (UBS) failed to preserve discoverable e-mail and engaged in willful spoliation based on evidence that employees had deleted relevant e-mail from their computers, even though they had been instructed not to do so by both in-house and outside counsel. sanctioned UBS by making it pay all costs associated with the discovery dispute, including counsel fees and further granted a jury instruction that allowed the jury to presume that the missing information would have been detrimental to UBS.) or Mastercard International, Inc. v. Moulton, 2004 WL 1393992 (S.D.N.Y. June 22,2004) (the court imposed sanctions on defendants for failing to preserve e-mails that were automatically destroyed by a computer server in the ordinary course of business. The court found that the failure to cease the customary destruction of email practices in effect prior to the litigation was a breach of the duty to preserve evidence and sanctioned the defendants by granting an adverse influence jury instruction.) Or Residential Funding Corp. v. George Financial Corp. 2002 U.S. App. LEXIS20422, (2d Cir., Sept. 26, 2002)-(finding that the "culpable state of mind"requisite for the imposition of discovery sanctions exists where the responding party has breached a discovery obligation, not only in bad faith or with gross negligence, but also though ordinary inadvertent negligence), Metropolitan Opera Association v. Local 100 Hotel Employee and Restaurant International Union, 212F.R.D. 178; 2003 U.S. Dist. LEXIS 1077 (S.D. N.Y., Jan. 28, 2003),(finding the misconduct so outrageous that it granted plaintiff's motion for judgment as to liability and awarded counsel fees incurred as a result of the discovery misconduct).

Conclusion:

If, as counsel, you have a reasonable indication that litigation is coming, or if litigation has already started, you must take steps to protect and preserve all the evidence, even electronic evidence. And you must do so at once. If you fail in this duty, both you and your client, could suffer serious consequences.