E-discovery and the Duty to Preserve

Part 1 of this series is available here.

If you’re involved in a suit in federal court, then the Federal Rules of Civil Procedure apply to you.  Rule 26(b) provides, among other things, that parties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, according to certain stated factors. What does that mean? It means that in many cases, a vast amount of electronic data could be relevant and thus a vast amount of electronic data may need to be preserved in order to comply with your company’s legal responsibilities.

What triggers these preservation obligations?

The duty to preserve generally arises when litigation is reasonably anticipated, which certainly occurs when a lawsuit is served or a governmental investigation initiated. However, it may occur even before that. The Sedona Conference (an influential research institute active in the area of e-discovery) has emphasized that, although determining when the duty to preserve is triggered is a fact-specific question, the touchstone is reasonable anticipation. Thus, if, for example, an employee’s attorney contacts you alleging the employee was forced to work off the clock and says he plans to file suit unless you settle, you should take appropriate preservation steps right then. If an employee threatens suit during a heated termination conversation, you may want to consider taking preservation steps then, as well. The duty to preserve continues until the action is completely concluded, either by settlement, voluntary dismissal with prejudice, or final judgment after all appeal periods have expired.

What if you don’t preserve all relevant evidence?

Federal Rule of Civil Procedure 37 answers that question. The failure to preserve potentially relevant information is called spoliation, and a court can order sanctions for this conduct. Effective in December 2015, the amended Rule 37(e) states that when electronically stored information that should have been preserved in anticipation of or during litigation is lost because a party failed to take reasonable steps to prevent the loss and when it cannot be restored, the court will determine whether or not the party intended to destroy evidence. If the court finds intent, it can order severe sanctions including dismissal of the case or an “adverse inference” jury instruction (when the jury can infer that the destroyed evidence would have been unfavorable to the destroying party). If the loss is not intentional, the court may order measures no greater than necessary to cure the prejudice.  The amended rule should allow the courts to more closely tailor the discovery (and any sanctions) to the specific facts of the case. However, it is always best to avoid situations where sanctions may be imposed.

Where do you start?

There is no substitute for having a complete “information governance” scheme in place before litigation arises. An information governance and retention plan is a set of policies and procedures designed to manage and protect information. As we’ll discuss in a later article, creating and implementing an information governance and retention plan should be a team effort. But once litigation does arise, you need to identify both the relevant records custodians and any potentially relevant records that are in the company’s possession, custody, or control. This duty can be remarkably broad, as it can encompass everything from text messages to digital time punches, on company and personal equipment.

More employees than ever are using personal devices to work. The bring-your-own-device movement can lead to increased productivity and flexibility, but when litigation arises it can also lead to the need for extensive litigation hold schemes. Potentially relevant information could include text messages between employees, booting-up times stored on a personal laptop, or information stored in an employee’s personal cloud. Employers need to understand who the relevant custodians are and where the data may be stored before they can take appropriate steps to ensure its preservation.

What about data preservation for putative or unnamed class members?

Before the amendments to Rule 37, the lack of guidance about ESI led many employers to preserve every single piece of data in an effort to avoid sanctions. While safe, that route is expensive, particularly in a class action. The amended rules require only that a party take “reasonable” steps to preserve ESI. What is reasonable and proportional will be a fact-specific determination depending on factors like the type of case, the size and sophistication of the company, the cost of preservation, and the importance of the ESI to the litigation. Unfortunately, the new rule still doesn’t answer all questions about the extent of an employer’s duty to preserve records related to putative class members. However, the rule does encourage the parties to confer and seek the court’s guidance at an early stage, which may be a helpful tool to reduce your company’s financial burden and the risk of sanctions.

There is no one-size-fits-all solution to e-discovery, but following these tips will assist in ensuring your organization complies with its responsibilities.