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April 19, 2018 Articles

Best Practices in Dealing with Spoliation, Preservation, and Privilege

The importance of having a preservation plan in place, a litigation hold letter ready to go, and the Rules of Professional Conduct always in mind

by Jeanne Schubert Barnum

When a construction client is faced with an investigation under the False Claims Act (FCA) or the Foreign Corrupt Practices Act (FCPA) or with any threatened or actual litigation, the client will be prepared if in-house counsel and outside counsel already have in place a preservation policy that is followed by the client’s employees. Counsel should also be prepared by understanding who the “client” is and how to preserve attorney-client privilege when investigating a claim. No attorney wants to be faced with a spoliation claim or an attack on attorney-client privilege. Preparation is key to avoid both.

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Spoliation is the destruction or significant alteration of evidence or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation. We are not just talking about shredding or trashing; we are also talking about the use of correction fluid or other means to alter documents; computer manipulation to accomplish the same thing; or allowing physical evidence to deteriorate by doing nothing.

Originally, the right to impose sanctions for spoliation was held to be part of a court’s inherent power to control the judicial process. Now spoliation may be covered by rule and, in some cases, by statute, where it can actually be pled as a separate cause of action. For example, in New Jersey, there is no cause of action for “spoliation,” but there is one for fraudulent concealment, which could certainly encompass the destruction of relevant evidence.

The grounds for finding actionable spoliation are fairly straight forward: (1) The party accused of spoliation must have had an obligation to preserve the evidence; (2) the document or property was knowingly destroyed, altered, or abandoned; and (3) the destroyed evidence was relevant to the other party’s claim or defense. In some jurisdictions, spoliation can still be found even if it was unintended. However, the sanction for negligent destruction is usually less severe.

For example, Federal Rule of Civil Procedure 37(e) deals with destruction of electronically stored information. If electronically stored information is lost because a party “failed to take reasonable steps to preserve it” and if the information cannot be recovered and its loss is prejudicial to the other party, then the court may order a measure “no greater than necessary” to cure the prejudice. Fed. R. Civ. P. 37(e)(1). However, if the party acted with intent, then the court may (1) presume that the lost information was unfavorable, (2) instruct the jury that it “may or must” presume the information was unfavorable, or (3) dismiss the action or enter a default judgment. Fed. R. Civ. P. 37(e)(2). Note that there is still some room for the court to consider how egregious the action was when deciding whether to instruct the jury that it “must” presume unfavorability.

Attorneys should personally be concerned about preservation of evidence because the Rules of Professional Conduct may also require it. Reference is made here to the ABA Model Rules, but they have been adopted in most jurisdictions in one form or another. Model Rule 8.4 is very broad. It provides that an attorney is guilty of misconduct if the attorney is involved in dishonesty, fraud, deceit, or misrepresentation (Model Rule 8.4(c)) and that any conduct “prejudicial to the administration of justice” is misconduct (Model Rule 8.4(d)). One could certainly argue that an attorney’s failure to take reasonable steps to preserve evidence is “prejudicial to the administration of justice.”


There are two ways that the client and attorney can prevent claims of spoliation. First, have a system in place for the preservation of all documents; and, second, have a litigation hold letter ready to issue when it is reasonable to believe that an investigation, claim, or suit is imminent.

The sophistication of the record-keeping system will depend on the size and complexity of a client’s operation. For a mom-and-pop operation, a requirement that the bookkeeper scan and preserve on the company’s computer every piece of paper that comes into or goes out of the business and every email sent and received for a reasonable period of time should be sufficient. For any larger operation, there should be a system in place with written guidelines that all employees are required to follow. A point person should be designated to serve as a compliance officer to perform spot checks and generally serve as a watchdog of the compliance program. The better the program is (and if it is followed), the greater the likelihood that it will pass muster when an investigation is initiated. Even if a document is lost, the odds are that you will avoid a viable spoliation claim if it can be documented that there is a good plan in place that was followed in good faith.

Litigation Hold Letter

The second step to avoid sanctions for spoliation is to have a litigation hold letter prepared and ready to issue when a complaint is filed, when an investigation is initiated, or when there is good reason to believe that a claim is going to be made. If a client is the manager on a high-rise construction site and a huge crane collapses in a wind storm causing property damage or personal injury, the best time to send the litigation hold letter is as soon as your client has notice of the accident. Do not wait until the inevitable complaint is filed. Perhaps no action will be brought, but even if only an investigation by the Occupational Safety and Health Administration is begun, preservation of documents is still critical. While there is always concern that a “smoking gun” may be among the documents to incriminate your client, it is also true that there may be a “loaded gun” that will exonerate it.

Make sure that the litigation hold letter has a plain-language definition of what a “document” is so that every potential piece of evidence is preserved. Blueprints, as-built plans, diaries, notes, audio and video recordings, and much more, in addition to contracts, emails, and written correspondence, should be set out in the definition so that there is no question about what should be preserved. And, of course, a caveat should be included, that when in doubt, preserve the document.

As in dealing with preservation, someone should be assigned to ensure that the litigation hold letter is being followed—perhaps the same compliance officer who oversees the preservation plan. A method should be in place to “tag” the documents so that none are inadvertently destroyed. It may take years for the first notice to produce or subpoena to be served, and the compliance officer in charge at the time the litigation hold letter was issued may have been reassigned or moved on. Having a tagging system in place will ensure that the relevant documents can be retrieved no matter who is in charge when the demand is made.

Protecting the Privilege

OK, the client knows what spoliation is, it has a preservation plan in place, and in-house and outside counsel have agreed on the form of a litigation hold letter and when it will be issued. In-house counsel is advised that an officer of a foreign subsidiary may have made a payment to a local government official. Now what do you do?

The first step, of course, is for in-house counsel to start an investigation. In the example above, this may require in-house counsel to interview not only corporate officers and management personnel at the foreign subsidiary but also employees of the company who may have crucial knowledge. The attorney-client privilege protects communications between the client and the client’s attorney, but when the client is a company, a question may arise as to how far the privilege may extend.

The U.S. Supreme Court answered that question in Upjohn Co. v. United States, 449 U.S. 383 (1981). When Upjohn’s in-house counsel received information that an officer in one of its foreign subsidiaries may have paid a local government official, he sent a questionnaire to all personnel who might have knowledge. Based on the answers he received, he then interviewed employees who had answered the questionnaire as well as others who might have information. As a result of his investigation, in-house counsel reported the potentially unauthorized payment to the Internal Revenue Service (IRS). The IRS began its own investigation and issued a subpoena to Upjohn for the questionnaires and in-house counsel’s interview notes. Upjohn refused, asserting attorney-client privilege and work-product protection. The trial court sided with the IRS, and the circuit court permitted limited assertion of the attorney-client privilege but no work-product protection. The Supreme Court reversed and found that both the questionnaires and notes were protected from disclosure, finding that it is often a junior employee who may have critical information needed by counsel.

So attorney work product that is the result of communications with company employees with relevant information is privileged. However, counsel representing a company must always be aware that the client is the company—confidential information relayed to counsel who is not the speaker’s attorney may not be privileged. When a corporate officer, or even an employee, begins to implicate himself or herself personally, the privilege ceases. Attorneys must be aware of the professional rules that govern this situation: Under ABA Model Rule of Professional Conduct 1.13(f), when it becomes clear that an officer’s, director’s, or employee’s interests are adverse to those of the company, the attorney must remind the individual that the attorney represents the company. Under Model Rule 1.7, an attorney cannot represent an individual if there is a significant risk that the individual’s interests will conflict with those of the company. And under Model Rule 4.3, an attorney has an obligation to clarify his or her role when dealing with an unrepresented individual.

Therefore, if an attorney becomes aware that an individual is implicating himself or herself during a company interview, the attorney must stop the interview and advise the individual to seek separate counsel. Sometimes the lines can become blurred, especially when not just the culpability of the company but also of the officers is alleged. See In re Bevill, Bresler & Schulman Asset Mgmt. Corp., 805 F.2d 120 (3d Cir. 1986). To avoid running afoul of the Rules of Professional Conduct, counsel should always preface every conversation with three disclosures: (1) The company is the client; (2) no legal advice can be given to an individual (except to seek separate counsel); and (3) if the individual continues the conversation and makes any personal confidential disclosures, the communications may not be privileged.


As stated above, preparation is key. If a company and its counsel have a document preservation plan in place that is followed, a litigation hold letter ready to go and to be enforced, and the Rules of Professional Conduct always in mind, they will be equipped to face an FCA, FCPA, or any other government or private investigation or claim with confidence.

Jeanne Schubert Barnum is with Schnader Harrison Segal & Lewis LLP.

Copyright © 2018, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).