Basics of the Duty to Preserve and Sanctions
The Federal Rules of Civil Procedure do not define the duty to preserve, which arises from common law. Rule 37(e) enables courts to expand the preservation obligation to “independent preservation requirements.” Id. (stating that “courts may sometimes consider . . . statutes, administrative regulations, an order of another case, or a party’s own information-retention protocols”). While the duty is triggered when a complaint is served, it may arise earlier when a party reasonably foresees litigation.
Rule 37(e) applies only to ESI that has been lost and “cannot be restored or replaced through additional discovery” and only where such ESI “should have been preserved in the anticipation or conduct of litigation.” Fed. R. Civ. P. 37(e)(1); see also Envy Haw. LLC v. Volvo Car USA LLC, No. 17-00040 HG-RT (D. Haw. Mar. 20, 2019) (finding that defendant’s motion for spoliation sanctions failed to establish conclusively that the ESI evidence plaintiff failed to preserve could not be obtained from other sources). The applicable standard is an objective one.
The rule further provides that only when a “party acted with the intent to deprive another party” should severe sanctions apply. Fed. R. Civ. P. 37(e)(1), (2). Concealing relevant information may also trigger sanctions. See Edwards v. 4JLJ, LLC, No. 2:15-CV-299 (S.D. Tex. Mar. 27, 2019) (denying defendant’s motion to reconsider sanctions because defendant engaged in a “concerted, repeated, and evolving effort to conceal evidence that they know was relevant”). Assessing the importance of the evidence is key in determining the proper sanctions. Negative inference charges against spoliators also may be warranted unless a common practice to delete information periodically in specific industries is shown (e.g., routine practice to tape over older surveillance footage).
Limitations: Proportionality and Reasonableness
Of course, preserving all relevant ESI while operating an ESI system in good faith may be impossible. See Fed. R. Civ. P. 37(e) advisory committee’s note to 2015 amendment (recognizing good-faith operation as a relevant factor to consider when evaluating reasonable steps to preserve). Preservation must be proportional to the case. Subject to some limitations regarding ESI found inaccessible, amended Rule 26(1) provides that “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.” Furthermore, courts have generally relied on the standard of reasonableness under the circumstances to preserve relevant and discoverable information. The Sedona Principles, Third Edition suggests that the duty to preserve relevant information requires “reasonable and good faith efforts.” Sedona Conference, The Sedona Principles, Third Edition: Best Practices, Recommendations & Principles for Addressing Electronic Production, 19 Sedona Conf. J. 1, Principle 5 and cmts. 5d–5e at 106–09 (2018).
Legal Holds
A legal hold involves the obligation of a party to take reasonable steps to preserve discoverable evidence that may be used at trial. This includes “potentially-privileged” material, even if that material ultimately is found to be exempt from discovery. See EPAC Techs., Inc. v. Thomas Nelson, Inc.., No. 3:2-CV-00463, 2016 WL 11339512, at *11, n.28 (M.D. Tenn. Jan. 29, 2016). Thus, as long as the ESI is not destroyed “with the intent to deprive another party of the information’s use in the litigation,” sanctions should not apply. Fed. R. Civ. P. 37(e)(2). Should the ESI be lost or cannot be restored through additional discovery, a party may seek curative measures to address prejudice if such loss was intended to deprive the other party from using the information in the litigation.
In Cruz v. G-Star Inc., an employment case, the court imposed monetary sanctions and recommended an adverse inference jury instruction for the defendant’s deletion of relevant ESI because the defendant had been put on notice of pending litigation and a legal hold was in place. No.17-cv-7685 (PGG) (S.D.N.Y. June 19, 2019). Rather than admitting to the ESI destruction, the defendant repeatedly objected to the plaintiff’s request for discovery.
Compliance with a legal hold is key. In HealthPlan Servs., Inc. v. Dixit, a copyright infringement and breach of contract case, the defendant failed to preserve and collect relevant ESI properly from a laptop: it relied on one of its own employees rather than seeking professional help (i.e., a trained IT employee) to perform the search of relevant emails. 2019 WL 6910139 (M.D. Fla. Dec. 19, 2019).
Counsel and the Duty to Preserve
To satisfy the preservation obligation of discoverable information in a client’s possession, control, or custody, attorneys must do more than advise the client of its duty to preserve. The duty to preserve relevant and discoverable ESI applies to every party to litigation, including all parties’ counsel.
Although Rule 37(e) acknowledges attorneys’ role in the preservation process, some courts have gone further and held that counsel have an independent duty not only to participate in a client’s efforts to meet the preservation requirement but also to monitor the process for as long as the duty to preserve exists. “Counsel must go beyond mere notification and ‘take affirmative steps to monitor compliance,’ . . . to continually ensure that the party is preserving relevant evidence.” Browder v. City of Albuquerque, 187 F. Supp. 3d. 1288, 1295 (D.N.M. 2016); see also Fed. R. Civ. P. 37(e) advisory committee’s note to 2015 amendment (stating that “[i]t is important that counsel become familiar with their clients’ information systems and digital data . . . to address these issues”).
In the seminal case Zubulake v. UBS Warburg, the court found that counsel had an obligation “to oversee compliance with the litigation hold, monitoring the party’s efforts to retain and produce the relevant documents.” Zubulake v. UBS Warburg, 229 F.R.D. 422, 432 (S.D.N.Y. 2004). Adequate communication with the client to ensure proper preservation and with IT personnel to ensure proper understanding of ESI is also essential. See Phoenix Four, Inc. v. Strategic Res. Corp., No. 05 Civ 4837, 2006 WL 1409413, at *5 (S.D.N.Y. May 23, 2006). More recently, in Franklin v. Howard Brown Health Center, an employment discrimination case, the court held that the defendant failed to take reasonable steps to preserve relevant emails and instant messages when its counsel neglected to oversee the preservation process left in the hands of a nonexpert employee after perfunctorily issuing litigation hold. No. 17 C 8376, 2018 WL 4784668 (N.D. Ill. Oct. 4, 2018).
Conclusion
Sanctions have been awarded for ESI spoliation based upon intentional, bad faith, and negligent conduct. To avoid sanctions, compliance and transparency are critical. The preservation obligation, which starts as soon as your client has been put on notice of a potential claim, must be carried out with a dependable and consistent document-retention policy that lets your client and you understand what is retained. Frequent internal communications that provide reminders and updates regarding the legal hold process should also be implemented, along with periodic audits to ensure custodians’ compliance. If your client has deleted some information or data, be transparent and let the court and adverse counsel know.
As the global COVID-19 pandemic pushes organizations and individuals to transition to remote work and further rely on videoconferencing services as their new and necessary channel to continue business, counsel and clients alike will have to reevaluate their preparedness for preservation and most likely keep recorded videoconferences in mind when implementing a legal hold.
It is important to remember that our duty as counsel does not end with the issuance of a legal hold notice but rather when the duty to preserve stops. Hence, ongoing monitoring remains critical.
