|Lawyers may be surprised to learn the extent to which they risk sanctions for not preserving electronically stored information (ESI) correctly. Indeed, recent headlines regarding judicial action in the electronic discovery area reveal a minefield of sanctionable conduct. Fortunately, court decisions regarding the preservation of ESI provide practical insights into common mistakes that, once understood, are easy to avoid.|
Courts have defined "spoliation" as the "destruction or significant alteration of evidence, or the failure to preserve evidence for another's use in pending or future litigation."1 In January 2010, a federal district court in New York stated, "By now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records--paper or electronic--and to search in the right places for those records, will inevitably result in the spoliation of evidence."2 This statement, from the court's decision in Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities LLC, captures the state of the law as it has developed in the past six years. It is expected to be the standard in the area of electronic evidence preservation for some time to come.
The Pension Committee decision also illustrates an emerging theme of judicial intolerance for litigants who convey to the court their inattention to detail in discovery practice and thus their lack of respect for the judicial process. Pension Committee's author, Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York, also authored the seven opinions in Zubulake v. UBS Warburg LLC, known as the Zubulake line of cases, which are the standard-setting decisions in modern electronic discovery.3 Pension Committee summarizes a number of key decisions in the intervening years since the last Zubulake opinion and contains the implicit admonition to lawyers that they clearly have not been paying attention to what the court held before.
This tone from the bench should make litigators sit up and take notice. The duty to preserve documents falls on both litigants and counsel. For this reason it is important for litigators to understand not only the substantive requirements in this area, including issuing a written instruction to preserve documents, but also the potential consequences--including sanctions against counsel personally.
Practice and precedent in the area of electronic discovery have been evolving since the late 1990s, with an increasing formalization since the adoption of amendments to the Federal Rules of Civil Procedure in 2006.4 State courts have also adopted rules to address the handling of electronic evidence in discovery and trial, including the adoption in California of Assembly Bill 5 in 2009, the Electronic Discovery Act.5 Federal and state courts around the country have issued detailed decisions analyzing many nuances of attorney decision making, providing practical guidance on handling ESI.
The California Court of Appeal recently explained that spoliation is condemned because it "can destroy fairness and justice." Without access to complete evidentiary information, the risk of an erroneous decision increases.6 Most practitioners are well aware of the impact of spoliation and condemn the conscious destruction of evidence. However, "spoliation" encompasses far more than intentional destruction of materials. The culpability for spoliation ranges from negligence to intentional conduct.7
While many decisions addressing spoliation focus on intentional destruction of evidence, those rulings are not particularly enlightening to the average litigator. If parties or counsel cannot figure out on their own that such behavior is inappropriate, telling them so will not help. Cases involving the deliberate purging of data on BlackBerries (Southeastern Mechanical Services v. Brody)8 or disposing of laptops during litigation (Arista Records LLC v. Usenet.com)9 make entertaining reading in the sensational manner of reality television. Less clear is how lawyers can avoid conduct that could result in a finding of spoliation in which something less than conscious destruction occurs. For example, Pension Committee stands for the proposition that certain basic standards of practice regarding litigation are so commonplace and widely understood that ignorance, even if innocent, is no longer an excuse that will avoid sanctions.
Like the types of sanctions available for spoliation under the Federal Rules of Civil Procedure, the sanctions that the California Code of Civil Procedure provides are equally broad and far ranging. Following notice and opportunity for a hearing, a court may impose several types of sanctions: 1) monetary sanctions (against a party or attorney), 2) issue sanctions, 3) evidence sanctions, or 4) terminating sanctions.10 As a general rule, sanctions imposed for spoliation are not intended to punish the offending party but are instead supposed to remedy the underlying discovery abuse that has been committed.11 Issue or terminating sanctions are typically requested to remedy the loss of relevant evidence due to spoliation.12 An issue sanction would result if a court orders that "designated facts shall be taken as established in the action in accordance with the claim of the party adversely affected by the misuse of the discovery process."13 Or a court may issue terminating sanctions for particularly egregious cases of intentional spoliation of evidence.14
Federal and State Spoliation Tests
Federal courts typically apply a three-part test in determining whether a party is responsible for spoliation. The party seeking sanctions must show that:
1) The party that has control over the evidence had an obligation to preserve it at the time it was destroyed.
2) The records were destroyed with a culpable state of mind.15
3) The relevance of the destroyed evidence to the party's claim would allow a reasonable trier of fact to find that the evidence would support that claim or defense.16
Courts have held that relevance can be established in a number of ways. They have found that relevance "may be inferred if the spoliator is shown to have a sufficiently culpable state of mind."17 Also, the "moving party may submit extrinsic evidence tending to demonstrate that the missing evidence would have been favorable to it."18
Application of the federal test continues to evolve. In Scalera v. Electrograph Systems, Inc.,19 a federal district court in the Eastern District of New York found the defendant negligent because counsel communicated the preservation obligation orally, and the defendant did not commence the process to search hard drives until after the human resources director had retired and her hard drive had been erased.20 Nevertheless, the court ultimately did not impose any sanctions. Instead, the court held that the plaintiff had submitted no extrinsic evidence "tending to demonstrate" that the deleted materials would have been helpful to her case.21
The more recent Pension Committee case presents a slightly different analysis. In Pension Committee, a case originally filed in February 2004, the court held that a group of plaintiffs who failed to issue a written litigation hold until 2007 were not only negligent but grossly so.22 The court also found that one or more of the plaintiffs failed to collect or preserve any electronic documents prior to 2007 and continued to delete documents after the duty to preserve arose. The court concluded that "it is fair to presume the responsible documents were lost or destroyed. The relevance of any destroyed documents and the prejudice caused by their loss may also be presumed."23 The court held that a spoliation instruction was the appropriate sanction.24
Subsequent to Pension Committee, Judge Lee Rosenthal in the Southern District of Texas issued her ruling in Rimkus Consulting Group v. Cammarata25--a decision commentators sometimes treat as a companion to Pension Committee. In Rimkus, Judge Rosenthal applied a slightly different standard for finding culpable negligence.26 The Rimkus test includes an analysis of reasonableness and proportionality, compared to what many perceive as a bright-line test in Pension Committee. According to Judge Rosenthal, "Whether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done--or not done--was proportional to that case and consistent with clearly established applicable standards."27 Accordingly, under the Rimkus test, the extent of preservation efforts should be analyzed in light of factors such as the size of the lawsuit and the burden of the preservation efforts.
In California, courts apply a burden-shifting approach that requires the accused spoliator to disprove any prejudice:
[A] party moving for discovery sanctions based on the spoliation of evidence must make an initial, prima facie showing that the responding party in fact destroyed evidence that had a substantial probability of damaging the moving party's ability to establish an essential element of his claim or defense.28
In Williams v. Russ,29 the California Court of Appeal's application of this burden-shifting test resulted in the imposition of terminating sanctions. The court determined that the plaintiff had intentionally allowed material unfavorable to his claims to be destroyed. As to the relevance test, the trial court applied a burden-shifting test that was affirmed on appeal: "Because [the plaintiff] bore the burden of disproving prejudice [under the burden-shifting test], he was required to show that any other documents from the file that he claimed existed [and did not spoliate] would in fact have allowed [the defendant] to adequately reconstruct the client file. He did not."30
A useful resource for lawyers analyzing the issue of electronic discovery sanctions can be found at the blog e-Discovery Team, written and moderated by electronic discovery scholar Ralph Losey.31 Losey's blog offers a holistic approac that is inormed but not driven by case law. In an article posted on the blog, William Hamilton presents an "E-Discovery Sanctions Cube" demonstrating how sanctions become increasingly likely as a party or counsel progresses along a graph of vertical and horizontal axes that represent willfulness, prejudice, and time.32 For example, discovery errors that occur with a low degree of willfulness but perhaps create prejudice may be less likely to result in sanctions than a more willful, equally prejudicial mistake. As time to correct or remedy the error before trial decreases, the likelihood of sanctions also increases.
Hamilton's analytical framework is useful for considering Pension Committee and a number of other decisions in the electronic discovery arena, including the infamous Qualcomm v. Broadcom33 series of decisions. These are often referred to as "judicial frustration" or "angry judge" cases. Without regard to the exact legal factors in a particular jurisdiction, it is simple and reasonable to look at a case and posit, "The longer you wait, the worse the problem gets; the worse the problem gets, the more prejudice to the party; and if you compound the problem by incompetence or inattention, you will offend the court." Under these circumstances, woe betide the litigator.
The decisions in electronic discovery cases are fact-intensive. Reading them requires a time investment, but practitioners can derive practical benefits from the mistakes of others in this area. The rulings apply critical judicial hindsight to litigation decision processes (or sometimes the lack of decisions).
Pension Committee34 involved parties who were accused not of misconduct but merely of carelessness. The case involved claims by multiple investors of securities fraud against a group of funds. Judge Scheindlin found that numerous plaintiffs had been aware of the likelihood of litigation and yet failed to issue written litigation holds or undertake practical steps to preserve documents. As a result of the plaintiffs' failures to correctly implement preservation procedures, the court found that e-mail had actually been deleted and lost, and the circumstances warranted a finding that the lost material would have been relevant. Ultimately a number of plaintiffs were sanctioned for spoliation in the form of an adverse jury instruction.35
Judge Scheindlin took the opportunity to outline standards for finding negligence, gross negligence, and willfulness, as those terms are used regarding spoliation of evidence. Also, with respect to the actions of the plaintiffs, she discussed the type of conduct that falls in each of these categories, both generally and specifically. The judge found that in addition to the failure to issue written preservation instructions, the processes that the plaintiffs had followed to collect documents were inconsistent and unreliable, often including failure to identify and collect large amounts of e-mail. Some of these failures were a result of allowing the plaintiffs' executives or employees to decide individually what information might be relevant, and some resulted from having the data collection overseen by those with little knowledge of the parties' IT infrastructure or the steps necessary for proper collection.
The basic lessons of Pension Committee are first, when the party anticipates litigation, the party should issue instructions--in writing--to preserve documents and ESI. Second, those accountable for implementing the litigation hold should have sufficient personal knowledge of the technical processes to determine whether they are appropriate and are actually likely to capture all relevant information. Pension Committee's explicit requirement that the litigation hold notice must be in writing arguably changes the existing standard. However, the accountability requirement is not new. Instead, it simply restates what litigators should already know. They must understand the evidence--most specifically, what it is, and where it resides.
Swofford v. Eslinger,36 a September 2009 decision from the Middle District of Florida, is a decision in which the facts are straightforward, the language is blunt, and the take-home message for attorneys is unambiguous. If attorneys had not learned from Zubulake and its progeny to date that counsel is responsible for implementing and monitoring effective preservation of evidence, including specifically ESI, they cannot miss that message in Swofford.
The court captures the time frame for ESI preservation (or lack thereof) with precision. The claim was a state law tort and 42 USC Section 1983 action brought by Robert Swofford against the sheriff of Seminole County, Florida, and two individual deputies. The deputies had shot Swofford multiple times during the pursuit of an unrelated fleeing criminal suspect onto Swofford's property. The incident with Swofford and the deputies occurred in April 2006. In August 2006 and February 2007, Swofford's counsel sent letters to the sheriff's office requesting that evidence relating to the incident be preserved. Both deputies permanently deleted e-mails from their accounts between April 2006 and April 2007. The laptop of one of the deputies was erased in October 2007. Key physical evidence--including the guns, radios, and uniforms the deputies wore during the incident--were recycled, misplaced, or destroyed at various times after the plaintiff sent the preservation requests to counsel.
The court found that the steps taken by the sheriff's office to preserve documents were so ineffective as to warrant a finding of deliberate misconduct.37 The in-house counsel of the sheriff's office acknowledged receiving the letter to preserve evidence, but admitted that he had done nothing to see that evidence was actually preserved other than send copies of the letter to the sheriff and several high-ranking officers within the sheriff's office. The two individual defendants never personally saw the request to preserve evidence, although the court found they had received notice through the in-house counsel and were accountable for complying. The court cited Zubulake and noted, "It is well established that counsel may not simply distribute a single written request to preserve evidence and do nothing more."38
The Swofford court granted the plaintiff's motion for sanctions for bad faith spoliation, including the recycling of the deputies' laptops and the deletion of e-mail. The order also sanctioned the in-house counsel personally for not effectively implementing the hold as well as issuing monetary sanctions in the form of a fee award and an adverse inference instruction.
Swofford and Pension Committee are cases in which the facts were complex and the stakes were high. Moreover, those high stakes were most likely apparent from the inception of the case. Both Scalera v. Electrograph Systems, Inc.39 and Estrada v. Delhi Community Center40 involved sanctions for spoliation of ESI in single-plaintiff employment discrimination cases. Rimkus v. Cammarata, a noncompetition case, falls somewhere in the middle.
One of the common questions that arises in discussions of electronic discovery is how to manage its impact in smaller cases, including those involving small business contracts, collections, and single-plaintiff employment claims. Practitioners should know that the underlying ethical and process management requirements in a small case are no different than in a large case and should in some ways be easier to address.
In Scalera, the plaintiff brought suit under the Americans with Disabilities Act and New York's human rights law for claimed failures to accommodate her chronic illness. She had a fall on the job and filed a workers' compensation claim. Her employment ended, she made an claim with the EEOC, and then she brought suit. The decision addressed her motion for sanctions for spoliation. The plaintiff alleged that the defendant had been negligent in not properly implementing a litigation hold and in failing to produce e-mail communications that would have revealed the plaintiff's requests for accommodation. The defendant contended that various types of ESI were unrecoverable,41 and the plaintiff requested an adverse inference instruction.
The court found that the employer's determination of when the duty to preserve arose was the right one. The defendant was on notice when it received the EEOC notice, not when the plaintiff fell or when she retained a lawyer or sent a demand letter to the landlord on a slip-and-fall injury.42 Thus, because the EEOC charge was received after the date the plaintiff's hard drive and e-mails were erased pursuant to the defendant's policies, no duty to preserve potential evidence was breached.43 In contrast, the hard drive of the director of human resources was erased following her retirement, which occurred over a month after the defendant received the plaintiff's EEOC charge. Thus, the court found that the defendant had been negligent in failing to preserve those documents, because the obligation to preserve already existed.
Given the influence of Judge Scheindlin's rulings in this area, the standard in Pension Committee is likely to be cited over the Scalera analysis of culpability and nonimposition of sanctions. However, the facts in Scalera remain illustrative of common discovery problems that crop up in smaller cases. Much of the defendant's initial response to litigation appears to have been conducted in house--probably because the claim was straightforward, and keeping costs low was a priority.
In-house counsel called a meeting to instruct employees to preserve data but did not circulate a formal litigation hold instruction. The company's IT group began collecting data from individuals designated by counsel at the first meeting as sufficiently important within the company. The key HR executive's computer was wiped and recycled. (This is a common risk when a litigation hold goes only to individuals with knowledge of case-specific facts and not to institutional custodians of information, such as management for IT and HR.) Individual employees had idiosyncratic ways of retaining e-mail outside of the company's backup system, and the company did not account for this, claiming that its HR records process provided for all pertinent records, such as e-mail requests for accommodation, to be printed out and placed in individual personnel files. The plaintiff produced e-mails that had not been printed and had not been produced by the defendant.
The defendant escaped sanctions because the court concluded that the lost data would not have helped the plaintiff. But the fact remains that the court found in this case that the discovery response was negligent.
Estrada v. Delhi Community Center, an unpublished 2009 court of appeal decision, is an unusual case because the plaintiff received terminating sanctions for electronic discovery violations (as well as other discovery problems). A close reading of the facts indicates that plaintiff's counsel was making multiple inappropriate tactical decisions and abusing the discovery process in more ways than just those concerning the electronically stored evidence. The electronic discovery issue was the plaintiff's conduct in taking her personal computer to a repair shop and having the operating system reinstalled during the course of the litigation. It is not clear how technically sophisticated she was personally (or how sophisticated her counsel was), but the court held that the plaintiff was informed about the reinstallation process and aware that it would result in the deletion of data.44 There was no question that the plaintiff was on notice of the need to preserve data, because her counsel was closely involved in ongoing discovery, and the computer was alleged to contain material relating to her claims.
Guidance for Litigators
By the time a problem with the preservation of ESI comes to light, courts are left to reconstruct decisions made months if not years before, as in Pension Committee. The body of law on spoliation of ESI has now evolved well enough to be very useful for litigators generlly, if not for the parties in the already decided sanctions decisions.
Pension Committee has attracted voluminous, detailed commentary and analysis, including discussions on the standards of care and whether the decision mandates that failure to issue a written litigation hold is negligence per se. Pension Committee does not address counsel conduct separate from that of the party, but Swofford received attention because it addresses the part of the Zubulake decisions establishing that evidence preservation is a lawyer's personal and ethical responsibility, separate from the obligation of his or her litigant client. While Swofford involves no written instruction to preserve documents other than the request of the plaintiff's counsel, the activity in that case occurred when Zubulake was a well-known and well-publicized legal standard. Zubulake and Swofford teach that a lawyer must have personal knowledge of the measures taken to implement a litigation hold. The cases further instruct that a party (and thus the party's lawyer) must conform to a specific standard of conduct to ensure that documents do not actually get deleted or disappear.
Attorneys are required to perform their duties competently in the representation of their clients.45 Competence includes the ability to advise clients about preservation--both the timing of preservation obligations and the actual substance and process of preservation, including the type of data and format for collection, but also what kind of ESI is likely to be inadvertently lost. Judges now expect counsel to be competent in electronic discovery. In admonishing counsel, a judge stated, "Electronic discovery requires cooperation between opposing counsel and transparency in all aspects of preservation and production of ESI....It is time that the Bar--even those lawyers who did not come of age in the computer era--understand this."46
Effective electronic discovery starts with properly implemented preservation, including the issuance of clear, practical, preservation instructions. The duty to preserve is a dual duty, falling on both counsel and parties. Decisions like Swofford47 make it clear that attorneys have an independent duty to preserve information as well as a duty to ensure that the client also does so. Failure to properly preserve electronic evidence is a breach of an attorney's professional obligations as well as a breach of the attorney's duty to provide competent professional service to the client. Counsel who breach their dual duties place themselves and their clients at risk for sanctions.
What Pension Committee requires for parties regarding their conduct indirectly creates more specific and detailed requirements for counsel.48 In Pension Committee the absence of a written litigation hold was part of the problem.49 Most counsel will probably deduce that they must issue a formal written communication for a litigation hold. This is a prudent default approach but, like all rules, proper application depends mostly on lawyers having a nuanced, context-sensitive understanding of what the rule means. For example, if a client is a very small entity with very few computers (as were some of the sanctioned plaintiffs in Pension Committee), counsel may question whether it is really necessary to issue a written preservation instruction. However, if the employees in the small organization are not tech savvy and have no understanding how to prevent deletion of documents, counsel's obligations include the development of that understanding on the part of both counsel and client employees and instructing the client to make a record of the necessary instruction and its implementation.
By contrast, in a large and complex organization with a well-informed and sophisticated IT staff, the client presumably is capable of implementing a litigation hold. Indeed, the client may have an existing litigation hold protocol and a written form for issuing the holds. However, if the claim concerns sexual harassment, for example, or stalking by an executive or a technically sophisticated employee with a high security clearance, issuing a written litigation hold may be affirmatively harmful because it may alert a significant witness or codefendant to delete e-mail. In that case, the best implementation of a litigation hold strategy may include a directive from outside counsel to inside counsel only, as well as a call for an immediate forensic investigation documented solely in counsel's files.
It is easy to say that the cure for preservation problems is to issue litigation holds consistently and document the steps to implement them. However, these actions are only part of counsel's responsibility. The real solution is for practitioners to take the issuance and implementation of litigation holds seriously and treat the evidence preservation process as an integral part of the litigation response and investigation.
Early evidence assessment and preservation sets the stage for executing the rest of the case correctly. Practitioners should be flexible and consider the possibility that litigation may terminate early and not require a detailed and prolonged investigation and collection of data. Nevertheless, counsel's preservation model should prepare for a launch into the full-scale collection of ESI.
Cases like Swofford critique (and impose consequences for) the unexamined and mechanistic circulation of litigation holds. Most litigators understand that at some point they should acquaint themselves in detail with witnesses and evidence. The requirement to issue a litigation hold ensures that counsel will do so sooner rather than later, because issuing a litigation hold correctly requires counsel to understand precisely where potential evidence resides and how witnesses communicate with one another.
All litigators learn--or should learn--the difference between, and the consequences of, doing their jobs while fully engaged or practically asleep. The lesson of Pension Committee may just be that simple.