Effective Dec. 1, 2006, the federal courts created new rules that govern the retention of electronic data in the event litigation is reasonably anticipated.
The scope of the new retention policy is quite broad, and sanctions for failing to follow these new rules can be quite draconian.
A court in the Southern District of New York found that an adverse inference allowed the jury to believe that e-mails destroyed by the defendant would have said the damning things alleged by the plaintiff. This instruction led to a $29 million verdict against the defendant.
In a federal court in Florida, a partial default judgment was issued against the defendant for failure to retain and produce the contents of backup computer tapes. The court allowed the jury to decide only reliance and damages and instructed them that all the other elements of the claims were considered proven because of the discovery abuses. It led to a $1.45 billion verdict against the defendant.
Now that I have your attention, here is what is considered electronically stored information (ESI): e-mail, text documents, spreadsheets, databases, voicemail, text messages, cell phone call logs, server logs, configuration files, archives, contents of treo, blackberry, or pda memory, magnetic imprints left on hard disks, and any other bit of data or information that is stored anywhere in any way in electronic form.
The obligations to preserve ESI involve the issue of “key players.” These are the individuals that are actually involved in the circumstances giving rise to a case.
One of the first steps in compliance with the new rules will be for client and counsel to identify these “key players.”
The new duties outlined here apply when the party “reasonably anticipates litigation.” Until that line is crossed, there is no obligation to preserve the information.
Until then, a company may adopt whatever policies it chooses regarding the preservation or destruction of electronic information. The destruction of electronic evidence through good faith application of an electronic records retention/destruction policy may not be used against anyone provided it occurred before a reasonable anticipation of litigation.
The law says litigation must reasonably be anticipated at the point the key players recognize the likelihood of a lawsuit arising from a given circumstance, or when they are in possession of sufficient information that a reasonable person would anticipate the likelihood of litigation. Importantly, this notice might reasonably occur long before a lawsuit is filed or a first demand is received from opposing counsel.
When you reasonably anticipate litigation, it is important to have an action plan in place to satisfy these minimum requirements:
- Immediately suspend any systems that automatically destroy ESI.
- Counsel must interview IT personnel to learn how the IT system works.
- Counsel and the party must identify the key players with respect to the litigation at hand.
- Counsel must interview the key players to determine what ESI they may have created in personal files.
- Counsel and the party must specifically direct the litigation hold.
It is critical to note that simple e-mail correspondence is not enough. Counsel is obligated to take part in interviewing IT staff and key players to generate independent knowledge about the nature and location of relevant ESI and to independently ensure its retention and production.
Knowledge and compliance with these new ESI discovery rules will avoid sanctions that could destroy the ability to defend an otherwise defensible case.
John McCoy is an attorney with the law firm McCoy & Hofbauer that represents propane companies nationally. He can be reached at firstname.lastname@example.org or 262-522-7007.