The Essentials of E-Discovery (Top Five), Straightline

A company’s failure to deal appropriately with electronic discover—innocently or not—can lead to significant sanctions and even adverse judgments in a lawsuit. For example, courts have ordered offending companies to pay the other side’s (sometimes sizable) legal fees incurred to pursue inappropriately withheld or destroyed electronically stored information (“ESI”). Courts have also given juries “adverse inference” instructions that a company’s destroyed or unavailable ESI may be presumed to have been harmful to its legal position. These and similar court orders across the country are driving the development of prudent corporate policies for the handling of ESI in litigation. The following are a few key takeaway points from ESI rulings around the country that a company needs to know:

Issue Litigation Hold Letters Early, Often, and to All Relevant Staff

After restoration of certain backup tapes revealed that employees had deleted emails relevant to an unemployment discrimination case, the United States District Court for the Southern District of New York delivered a series of well-known e-discovery rulings against the defendant, including an adverse inference jury instruction and an order that the defendant pay the plaintiff ’s fees and costs.

The court said that in order to meet its discovery obligations, a company and its lawyers must: (1) issue a litigation hold (2) communicate directly (3) “instruct all employees to produce electronic copies of their relevant active files” and (4) make sure that all backup media are identified and kept in a secure place.

These rulings illustrate that it is important to issue litigation hold notices as soon as possible. The requirement in most jurisdictions is that a litigation hold notice be issued as soon as litigation is reasonably anticipated, which sometimes can be even before suit is filed. For example, if a written demand or threat of suit is made before filing, such communications can trigger the obligation to issue a litigation hold notice. Beyond just issuing a litigation hold at the outset, it is also important to revisit and re-issue the notice throughout the life of the litigation if the scope of relevant information or document custodians changes.

It is also important that all relevant employees receive litigation hold notices; sending them only to upper level employees is not sufficient. Courts have held that reliance on the unauthorized instructions of company employees is no defense to destruction of relevant ESI, so it is in a company’s best interests to ensure all employees are on the same page with respect to the handling of ESI. Also, special consideration, including identification of language differences and alternate computer operating systems, should be given to crafting the proper instructions for non-USA employees in order to avoid inadvertent destruction of relevant ESI.

Involve Information Technology Personnel at the Outset

The United States District Court for the Western District of Washington ordered a plaintiff and its counsel to pay $137,168.41 in sanctions for discovery violations that included: (1) false certification that all relevant records were kept in paper format and there was no ESI; (2) delayed and inadequate (3) counsel’s failure to familiarize himself adequately with his client’s document retention practices and to assist in document production.

Contrary to prior assertions by counsel, the plaintiff ’s corporate representative said in a deposition that electronic technology existed and that the information technology (“IT”) consultant could easily have searched and produced the ESI, but no one had “bothered to ask IT.”

This case illustrates the importance of involving IT staff or consultants from the beginning. These individuals are critical to identifying the scope of accessible ESI so that appropriate individuals can receive litigation hold notices, appropriate preservation and collection procedures can be implemented, and appropriate objections and responses can be made to any propounded discovery requests.

Develop Policies and Procedures for Preserving and Handling ESI

The United States District Court for the Southern District of Mississippi Court sanctioned a defendant for its conduct in handling ESI and prohibited the defendant from seeking indemnification or reimbursement of the sanctions amount from its insurance company after a special master appointed by the court found a lack of “any corporate policy, procedure or concerted effort [to] preserve electronic evidence” in the face of litigation. This ruling underscores the importance of thinking ahead and developing uniform policies and procedures for handling ESI so that you will be prepared whenever litigation is anticipated.

When developing policies and procedures for handling ESI in litigation, companies should take care to consider specific procedures for backup tapes. At least one court—the United States District Court for the Middle District of Pennsylvania—has allowed an adverse inference jury instruction against a plaintiff for destruction of backup tapes, even though the plaintiff did not act in bad faith, but simply failed to curtail its standard procedure of overwriting backup tapes once litigation was reasonably anticipated.

Several courts in addressing ESI discovery issues have specifically dealing with ESI in litigation. While not entirely dispositive, it does appear that strong corporate policies and procedures relating to the handling of ESI may affect whether and to what extent sanctions are imposed, especially if there is corporate-wide understanding of the importance of preserving ESI.

Educate Employees about ESI on an Ongoing Basis

Employees of corporations need to know the consequences of improperly handling ESI, including personal social accounts such as Facebook and Twitter, email accounts and laptops. It is also important that employees understand the duty to preserve relevant information once litigation is anticipated and the consequences of failing to do so.

Holdings from various courts reveal that nothing and no one is immune from discovery and possible sanctions if ESI is improperly deleted. For example, one court imposed sanctions against a defendant company because the president disposed of his laptop computer used for personal and business matters after it was believed to have crashed. Another court ordered an individual party to provide log-on information to his Facebook account so that the court could conduct an in camera review. It is also important to note that courts have often held that they, not necessarily the parties, are the ones to determine what is and what is not relevant. So, an argument that deleted ESI was not believed to be relevant will not necessarily avoid court imposed sanctions.

Litigation Hold Notices May Be Subject to Discovery

Although litigation hold notices from lawyers are usually privileged and not subject to discovery, the court may order a party to produce its litigation hold notice in order to determine its adequacy. Indeed, courts have specifically held that a preliminary hold notices be produced after witnesses testified that they did not save any emails and did not even know what a litigation hold notice was. Once produced, the notices revealed that the party improperly waited until after suit was actually filed to issue them, even though litigation was reasonably anticipated before that date.

Conclusion

Although this list is certainly not exhaustive, the cases collectively demonstrate the importance of preservation and retrieval of ESI and the potential adverse impact of e-discovery missteps on a party’s litigation position. In today’s increasingly electronic world, a company can improve its odds in litigation by adopting effective policies and procedures to address ESI issues, including the following:

• Promptly issue effective and comprehensive litigation hold notices when litigation is reasonably anticipated.
• If litigation occurs, make full disclosure to counsel of potential sources of ESI so that the appropriate objections can be lodged.
• Involve IT personnel at the outset of any litigation that may involve ESI.
• Communicate with all employees, including executives, about the risks of sanctions and adverse inferences if electronic records are lost or destroyed.
• Consider the potential impact of company information stored on laptops and personal computers, as well as employee communications using social media, and adopt appropriate policies.
• Preserve old or archived systems and backup media, including preservation of computers and other devices when an employee witness departs in the midst of litigation.