E-Discovery Issues Critical for Corporate Parties in Litigation
More and more companies are discovering that litigation not only involves preserving copies of contracts, invoices, and records. It also involves extensive search, retrieval, preservation, and review of email, text messages, website data (new and archived), intermal memoranda, and independent forensic review of computer hard drives and servers. The ease and efficiency computers, email, and the internet have bestowed upon corporate performance and efficiency have also made discovery, particularly in federal court where parties may be subject to mandatory disclosure, a complex and often expensive undertaking for both sides to litigation.
Once a company is put on notice of a claim, it has a duty under current federal law to place an immediate hold on any document/information destruction processes that may impact or touch upon information in that claim. Failure to do so can result in sactions for improper handling/destruction of evidence. See the Zubulake line of cases.
The duty to preserve attaches when a party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation. Once a company reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a “litigation hold” to ensure the preservation of relevant documents. A party must preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery, and/or is the subject of a pending discovery request. This duty to preserve extends to any documents or tangible things made by individuals “likely to have discoverable information that the disclosing party may use to support its claims or defenses, and this includes documents prepared for those individuals (such as attachments to emails, documents identified in emails, etc.) Backup tapes may also have to be preserved. You should bring counsel in as quickly as possible to determine the extent materials and information must be preserved to ensure proper preservation procedures are timely implemented.
Failure to do so can and has resulted in some very serious court sanctions against offending companies:
- Vacated jury verdict due to delay in producing e-data. Residential Funding v. DeGeorge Financial, 306 F.3d 99 (2nd Cir. 2002);
- Adverse Inference Jury Instruction given where employee sent emails to supervisors complaining about sexual harassment and employer continued routine destruction of email, consistent with company policy, until suit was filed. Broccoli v. Echostar Communications Corp., 2005 WL 1863176 (D. Md. August 4, 2005); Negligent destruciton of e-data can give rise to adverse inference. Mastercard v. Moulton, 2004 WL 1393992 (S.D.N.Y. June 16, 2004);
- Email custodian not allowed to testify at trial; Philip Morris fined $2.7 Million where Philip Morris erased email after a preservation order was issued. U.S. v. Philip Morris, No. 99-2496 (D.D.C. July 21, 2004);
- $29 Million jury verdict with $20 Million in Punitive Damages for discrimination plaintiff after adverse inference instruction given regarding destruction of computer backup tapes. Zubulake v. UBS Warburg (S.D.N.Y. April 6, 2005).
