Advances in technology over the last decade have changed the way
that companies communicate with customers, with clients and with
each other. Rather than making phone calls or sending letters,
employees today, armed with lap tops and the latest hand held
devices, zip off unprecedented numbers of emails and text messages
all vying to provide the most current information possible. Clients
now expect to be updated in "real time" and upper
management demands that they be given the information necessary to
make that happen.
While no one would argue that these advances have opened the door
to allow companies to reach unparalleled levels of efficiency and
service, the requirement to preserve this massive amount of
electronic data when a company is deemed to have "reasonably
anticipated litigation" has also become more important.
Whether your company is planning to file suit or has been
threatened with suit, failure to take steps to preserve electronic
data can result in enormous fines and sanctions, as well as
instructions to a jury that they are to presume that the destroyed
documents would have harmed your case, if they were
available.
At first glance, one may think that these types of severe sanctions
are reserved solely for parties that have intentionally deleted
emails or other electronic data. They are not. A fact that was made
abundantly clear in January of this year when the New York Federal
Court, in the case of Pension Committee of the University of
Montreal Pension Plan v. Banc of America Securities, LLC,
sanctioned six plaintiffs with adverse jury instructions and
monetary fines for what the Court determined was "gross
negligence" as it relates to failing to understand electronic
discovery guidelines.
What did the Court determine was gross negligence? First, it
determined that litigation became "reasonably clear" ten
months before suit was filed. Then, the Court ruled that, at the
time that litigation became reasonably clear, these plaintiffs
failed to: issue a written litigation hold; preserve the electronic
and paper records of "key players"; immediately cease the
deletion of email; and preserve electronic backup tapes when they
are the sole source of relevant information or when they relate to
key players, if the relevant information maintained by those
players is not obtainable from readily accessible sources. As a
result, these plaintiffs were subjected to adverse jury
instructions and monetary fines. It is important to note that there
were no allegations that any of these plaintiffs had acted in bad
faith with regard to their duties, but rather, that the above
practices should be so common place that their failure to
immediately implement them, subjected them to sanctions.
In addition to the issues noted above, seven plaintiffs in the same
case were subjected to lesser monetary fines for "ordinary
negligence" because their searches for relevant electronic
documents were deemed deficient because not all relevant files and
emails were included in the searches. The Court saw this as a lack
of adequate supervision and held that monetary sanctions alone were
appropriate.
The ruling in Pension Committee was handed down by Judge
Shira A. Scheindlin, one of the leading jurists in the area of
e-discovery obligations. She issued what many consider the most
influential opinions on e-discovery obligations in a long running
litigation known simply as Zubulake. She titled her
opinion in Pension Committee as "Zublulake
Revisited: Six Years Later" and has clearly upped the ante
while expressing her frustration at parties' continued failure
to adhere to the original requirements set out in
Zubulake.
What Companies Can Do to Protect Themselves
What does Pension Committee mean for you? Given the
likelihood that Judge Scheindlin's ruling will be cited and
discussed vigorously by Courts all across the country, once
litigation becomes reasonably clear, you must take steps to
preserve and collect all electronically stored information, which
ranges from e-mail messages to web browser history files to drafts
of word documents.
General instructions to employees not to destroy documents that you
or they believe might simply relate to a particular party or
dispute are clearly insufficient. Among other things, active and
specific participation by upper management, inside counsel, IT
departments and outside counsel are mandatory. Counsel should help
identify when litigation is reasonably clear and then detailed
litigation hold letters should be distributed to everyone to ensure
that relevant data and information is being preserved. Upper
management, along with counsel, must make sure that recipients of
litigation hold letters understand their requirements and secure
their cooperation. Former employee files and records must also be
preserved and, if possible, these former employees should be
contacted to make sure that they understand the need to preserve
potentially relevant information. As an additional safety measure,
outside counsel's IT department should work hand in hand with
your IT department to make sure that data is being stored
properly.
Working together with your attorney to ensure compliance with
e-discovery obligations will help avoid possible sanctions that
could be imposed during litigation. It will also help ensure that
your business can go on as usual while navigating the potential pit
falls that are associated with any litigation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
