July 01, 2014

Scruples: The Scope of the Duty to Preserve

A party has a duty to preserve only evidence the litigant should know is relevant to litigation.

Michael Downey

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“I need help,” Paradox said, interrupting Ethox mid-thought. “Nemesis is seeking sanctions in that employment discrimination case I am handling, claiming we committed spoliation.”

“That can be dangerous,” Ethox responded. “What happened?”

“We put a litigation hold in place when we first learned of the discrimination charge,” Paradox answered. “The plaintiff complained about being passed over for a promotion. The client and I decided to preserve all the records about the plaintiff held by the plaintiff’s supervisor and by everyone above that supervisor at the company.”

Ethox smiled with approval, and Paradox added, “We also preserved records regarding others considered for similar promotion about the same time as plaintiff.”

“That sounds like the right approach,” Ethox confirmed.

“Everything seemed fine, even after the plaintiff sued. When we received the plaintiff’s list of witnesses and produced our list, we confirmed that we had preserved documents for everyone on both lists.”

“So what happened?” Ethox queried.

“The promotion at issue happened several years ago,” Paradox answered. “Everyone at the company forgot that, at that time, a director in another department gave suggestions about the promotion criteria. That director has since retired. . . .”

“And you didn’t preserve the retired director’s information,” Ethox anticipated.

“Our litigation hold captured some emails, which we produced,” Paradox agreed. “But we didn’t retain the director’s records. Nemesis claims our failure to preserve the director’s records constitutes spoliation.”

“If we can prove what you told me,” Ethox encouraged Paradox, “I think we can avoid sanctions. Look at AMC Technology LLC v. Cisco Systems, Inc.” Ethox located a printout of the July 15, 2013, opinion. “There, the federal magistrate judge denied a motion for sanctions on very similar facts.

“AMC and Cisco were in a contract dispute,” Ethox continued. “Cisco instituted a litigation hold covering all employees who had negotiated with AMC. But Cisco failed to preserve the documents of another employee, Terry McKeon, who had contributed sales information to Cisco’s negotiation team. Then McKeon retired. Pursuant to company policy, Cisco wiped McKeon’s computer clean about 30 days later. In the interim—four days after McKeon retired—AMC sued Cisco. . . .”

“Ouch,” Paradox interrupted.

“Exactly.” Ethox continued, “Several months later, the parties exchanged initial disclosures. No one listed McKeon as a potential witness. But after a year of litigation, AMC learned of McKeon’s role and requested McKeon’s documents. Then AMC learned that Cisco had scrubbed McKeon’s computer after being sued.”

“The court sanctioned Cisco,” Paradox groaned.

“No,” Ethox reassured Paradox. “Cisco admitted that it knew of the lawsuit before it scrubbed McKeon’s computer. But Cisco argued, and the court agreed, that a party has duty to preserve only evidence the litigant knows or should know is relevant to the litigation.

“The test is ‘reasonable foreseeability,’” Ethox added. “The AMC court refused to make Cisco preserve everything, explaining, ‘Requiring a litigant to preserve all documents, regardless of their relevance, would cripple parties who are often involved in litigation or are under the threat of litigation.’”

“So,” Paradox summarized, “since we took reasonable steps and did not anticipate the retired director’s records needed to be preserved, we may defeat the sanctions motion?”

“Right,” Ethox answered. “In AMC, the court emphasizes McKeon’s lack of apparent involvement. McKeon was not involved in the negotiations. He also was not on an internal committee Cisco established for its relationship with AMC. Plus Cisco had already produced McKeon’s documents that were retained by other employees, and AMC could not prove the missing information would be relevant. So the court denied AMC’s request for sanctions.”

Paradox sighed with relief. “I am glad you knew about the AMC case.”

Ethox laughed and said, “Always glad to be of assistance.”

Michael Downey

The author is with Armstrong Teasdale LLP, St. Louis. He also teaches legal ethics at Washington University School of Law.