Volume 1, Number 2
|Table of Contents|
The Duty To Preserve And Collect Electronic Evidence
Recent decisions concerning the preservation and protection of electronically stored information that may be relevant in potential or actual litigation show a clear trend to judicially impose a duty on both in-house and outside litigation counsel to safeguard and preserve potentially relevant evidence. In-house counsel must be aware of this duty and ensure that key personnel within the company are instructed to place a hold on such information so that it is not destroyed or altered under the client's routine document retention policies.
This duty is imposed on counsel as officers of the court. Failure to fulfill this duty can have severe consequences for litigants and may serve as a basis for a claim of legal malpractice against outside counsel who fail to properly advise and oversee the identification and preservation of electronic evidence.
When it can be reasonably anticipated that an action will be filed, all parties have a duty to preserve potentially relevant evidence. The term "evidence" includes all information, including not just hard copy documents, but all electronically stored information on any medium and in any electronic format. A party litigant requesting information has a right to obtain discoverable 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.
The 1970 amendments to Rule 34 of the Federal Rules of Civil Procedure defined the term "document" to include information in any tangible format. The modern Rule states that the term "documents" includes more than mere copies of documents. As explained in the 1970 Advisory Committee Notes "electronic data compilations from which information can be obtained only with the use of detection devices" are included within the definition of "document."
The failure to obtain and preserve evidence or the intentional or inadvertent destruction of evidence may result in serious consequences. Sanctions may be imposed by a court depending upon the degree of wrongdoing. Such sanctions may include the imposition of 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.
In United States v. Philip Morris USA, Inc., 2004 U.S. Dist. LEXIS 13580 (D.D.C., July 21, 2004), an action filed by the U.S. Department of Justice to recover healthcare costs paid by the federal government as a result of tobacco related illnesses, the court entered a preservation of evidence order, which required that the defendant preserve potentially relevant evidence and documents.
The defendant, in complete disregard of the preservation order, implemented a policy of deleting e-mails after a period of 60 days. The court, finding it to be "astounding" that high ranking officers and employees of Philip Morris permitted this to occur, even in violation of certain other document retention policies, imposed monetary sanctions of $2.75 million, which was $250,000 per each of 11 managers and officers who failed to follow an existing "print and retain" policy applicable to e-mail.
In the fifth written opinion in Zubulake v. UBS Warburg, LLC, 2004 U.S. Dist. LEXIS 13574 (S.D.N.Y., July 20, 2004) (Zubulake V), the court determined 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.
As a sanction, the court required UBS to pay the costs associated with the discovery dispute, including counsel fees and further granted a jury instruction that will allow the jury to presume that the missing information would have been detrimental to UBS.
In 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 e-mail 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.
In Residential Funding Corp. v. George Financial Corp. 2002 U.S. App. LEXIS 20422, (2d Cir., Sept. 26, 2002)-the court found 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. Similarly, in Metropolitan Opera Association v. Local 100 Hotel Employee and Restaurant International Union, 212 F.R.D. 178; 2003 U.S. Dist. LEXIS 1077 (S.D. N.Y., Jan. 28, 2003), the court found the misconduct so outrageous that it granted plaintiff's motion for judgment as to liability against the defendants and awarded counsel fees incurred as a result of the discovery misconduct. In doing so, the court explained:
"The discovery process in this case ... transcended the usual clashes between adversaries, sharp elbows, spitballs and even Rambo litigation tactics. This case was qualitatively different. It presented the unfortunate combination of lawyers who completely abdicated their responsibilities under the discovery rules and as officers of the court and clients who lied and, through omission and commission, failed to search for and produce documents and, indeed, destroyed evidence all to the ultimate prejudice of the truth-seeking process." Id. at pp. 3-4.
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. The courts have long imposed a duty to preserve evidence when the parties to litigation know or should know such potential evidence is relevant to reasonably foreseeable issues in litigation. Unquestionably, service of process puts the defendant on notice that it is required to preserve evidence that may be relevant to the claims asserted.
After a complaint is served, a defendant is obligated to preserve what it knows or should know is relevant to the issues presented in the action and/or which is reasonably calculated to lead to the discovery of admissible evidence. Counsel has a duty, as officers of the court, and under the Rules of Professional Conduct to ensure that evidence that one may reasonably anticipate may later become relevant is preserved. 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.
The court in Zubulake V, outlined the duties of counsel to preserve potentially relevant evidence. The court explained those duties as follows:
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.
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.
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.
In emphasizing the duties that the court regards as those of counsel, the court summarized the duties as follows:
"In sum, counsel has a duty to effectively communicate to her client its discovery obligations so that all relevant information is discovered, retained, and produced. In particular, once the duty to preserve attaches, counsel must identify sources of discoverable information. This will entail speaking directly with the key players in the litigation, as well as the client's information technology personnel. In addition, when the duty to preserve attaches, counsel must put in place a litigation hold and make that known to all relevant employees by communicating with them directly. The litigation hold instructions must be reiterated regularly and compliance must be monitored. Counsel must also call for all employees to produce copies of relevant electronic evidence, and must arrange for the segregation and safeguarding of any archival media (e.g., backup tapes) that a party has a duty to preserve."
The court then made it clear that if party fails to follow the instructions of counsel regarding the preservation of evidence, "it acts at its own peril." Id. at p. 60.
Courts have imposed sanctions for a party's failure to ensure that a preservation order is implemented and followed. *15 In one case, a federal district court imposed a $1 million sanction for a corporation's failure to develop and implement a preservation of evidence program. In re: Prudential Ins. Co. of Am. Sales Practices Litig., 169 F.R.D. 598, (D.N.J. 1997) . 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.
Attorneys have a duty to advise their clients of pending litigation and of the requirement to preserve potentially relevant evidence. Counsel also has the duty to respond in good faith to discovery requests. Accordingly, we as litigation counsel are charged with explaining to our clients the types of information that may constitute potentially relevant evidence. Clients should be advised of the negative consequences that may result from the destruction or alteration of potentially relevant information. The failure to render this advice to clients who later are penalized civilly or criminally may subject counsel to claims of legal malpractice.
Counsel should seek early in the litigation to identify the representatives of the client who will be involved in the information identification and preservation process. This is where the client's in-house counsel plays a significant role. In-house counsel should notify the appropriate corporate representatives and provide guidance to officers and employees as to the scope of the duty to retain information. This involves a dissemination of the notice of preservation obligation in a manner that will reach the appropriate employees.
As the law of electronic discovery evolves, the duties of both in-house and outside counsel to identify, preserve and produce potentially relevant information will become more defined. At present the best practice is to take all measures possible to ensure that electronic evidence is safeguarded. The courts have made it clear that, as counsel, we have a duty to preserve such electronic evidence. In most cases, however, neither in-house nor outside counsel know specifically what technically must be done to fulfill this duty. Accordingly, the safest course to follow is to meet directly with the information systems personnel within the client company and to give serious consideration to engaging an outside e-discovery consulting firm at the earliest stages of the litigation.
For The Lawyers Journal
Copyright © 2004 by Allegheny County Bar Association; Mark A. Willard
Copr. (C) 2004 West, a Thomson business. No claim to orig. U.S. govt. works. This article is reprinted with permission from West, a primary sponsor of the General Practice, Solo and Small Firm Division.