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Preserving Electronic Information When Litigation is on the Horizon

The explosion of electronic communications and data over the past twenty years has been both a boon, and a curse, for attorneys and their clients. The ubiquitous nature of email and other forms of electronic data can provide a treasure trove of candid statements made by parties to a dispute, and reveal a level of factual detail undreamed of by lawyers in the pre-digital age. Among the many curses of this explosion of data, however, are substantial increases to the overall cost of reviewing and analyzing information during the discovery phase of litigation, and the burden on all parties to adequately preserve, in a timely fashion, relevant data. The danger of inadvertent destruction of relevant electronic information is much greater than many business clients appreciate.

In recent years, courts have struggled to strike an appropriate balance between the necessity for preserving relevant information when a lawsuit is contemplated or filed, and the potentially substantial burden that full data preservation can impose. When a client contacts an attorney about a matter that may result in litigation, the attorney has a duty to promptly advise the client to preserve all relevant evidence, and this duty begins as soon as the party reasonably anticipates that litigation may be on the horizon. As soon as a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a “litigation hold” to ensure preservation of relevant documents and electronic data. The duty on a plaintiff to do this often is triggered prior to the commencement of litigation, because the plaintiff can control the timing of filing a lawsuit.

It may appear simple for a client to follow a directive not to destroy relevant documents and information. For a client untutored in the mechanics of instituting a litigation hold, however, the potential for inadvertent destruction of relevant information is greater than one might expect. Larger companies, that have in-house legal resources or are subject to litigation on a regular basis, generally have well-established legal hold procedures that incorporate both legal department staff and IT staff. (If they don’t, they should). Small and mid-size companies often have no such resources or expertise. For clients that are inexperienced in legal hold procedures, it is incumbent on an attorney representing such a client to give clear direction and guidance for proper document and data preservation. A client may assure its attorney that no relevant email or data will be destroyed, but will the client’s IT department thereafter receive clear instructions from management, and follow those directives? Is all potentially relevant email and data stored on a central server that is subject to the IT department’s preservation efforts, or might there be relevant data on individual employees’ computer hard drives, or on employees’ personal computers, or on mobile devices, or on the personal computers of former employees or contractors? Once you start asking questions about the details of data preservation, it’s not unusual for a client to have overlooked one or more necessary steps for preservation, even when the client assumes that it has taken all appropriate steps.

An evolving area of case law addresses the responsibility of attorneys to ensure that their clients adequately preserve data, and the sanctions that may result (against the attorney, the client, or both) if relevant information is destroyed. Courts have taken varying approaches, even within the federal court system, which amended its rules of civil procedure in 2006 to specifically address electronic discovery. It is fair to say that significant negative consequences may result, for both the client and the attorney, if relevant information is destroyed or is not disclosed in the discovery process. Parties contemplating involvement in litigation must not assume that innocent failures to preserve information will be forgiven, or will be subject to only minor sanctions. In appropriate circumstances, courts will impose fines, award costs, or order the dismissal of the entire lawsuit (if the plaintiff is the offending party). In cases where a court finds that the offending party’s conduct was not just negligent, but was undertaken in bad faith, it can instruct the jury to presume that missing information was relevant to the case and would have been prejudicial to the offending parties case, had it not been destroyed.

Another critical function of the litigation attorney, beyond adequately advising a client of the steps to be taken to preserve information, is to manage the process of electronic discovery as the lawsuit progresses, and advocate on behalf of the client for a fair balance between absolute preservation of every scrap of potentially relevant data and the substantial cost that may be required in a particular case to achieve 100% preservation. This concept of “proportionality” is recognized in the federal rules of civil procedure and in the procedural rules of many state court systems. It calls upon courts to limit the frequency or extent of discovery if the burden or expense of a proposed discovery process outweighs its likely benefit. Many courts have recognized that a blanket preservation-of-all-relevant-data order may be prohibitively expensive to adhere to in a particular case, and could unduly burden parties that are depending on computer systems for their operations. Courts often can be persuaded that a blanket order to preserve all potentially relevant data would impose substantial economic burden, and will be open to limiting the scope, duration, or methods of preservation that are required to preserve relevant information without imposing undue hardship. An attorney representing a party that is faced with current or contemplated litigation often will have grounds to argue that particular methods of preservation, or the scope of requested discovery, would constitute an unnecessary burden. Prior to the attorney making such arguments to the court, however, a business facing litigation should err on the side of preserving all data that might conceivably be relevant to the dispute, by all means that are objectively reasonable in light of the circumstances (and keeping in mind that that the other side may challenge the reasonableness of any steps taken or not taken). Well-considered legal hold procedures must be promptly implemented, and routine destruction of data (including back-up data) must always be suspended without unreasonable delay. Perhaps most important, preservation of relevant email, data and documents should be one of the first things that is discussed between attorney and client, in any situation in which litigation is contemplated.

Cheryl Brown is an attorney with the Business and Transactional practice group at Davis, Agnor, Rapaport & Skalny, LLC. For questions about this article or your own labor and employment law matters, please do not hesitate to contact Cheryl at 410.995.5800 or cbrown@darslaw.com