Inside many businesses, emails and electronic communications are the primary—and sometimes only— way people communicate. As one federal judge noted, email has not only replaced paper memos and letters, but "many informal messages that were previously relayed by telephone or at the water cooler are now sent via email."1
But the convenience of electronic communication comes with some costs: Email's persistence and ease of duplication mean that once a message has been sent, the author loses all control over it. Emails can be easily distributed well beyond their intended audience, and often re-emerge to the detriment of the sender in litigation or other disputes. Snapchat, an app that allows users to send picture and video messages that "self-destruct" after viewing, has achieved a $2 billion valuation by offering at least a partial solution to these problems. Encouraged by Snapchat's success, several recently launched apps aim to bring "self-destructing" messages to a more business-minded user demographic.
For example, an app called TigerText markets itself as an enterprise solution for complying with health care confidentiality and other privacy regulations, while promoters of the app Confide describe it as the "Snapchat of the C-suite." The need for confidential communication regarding sensitive business issues is common among busy executives and professionals, but trying to coordinate schedules for phone calls or other real-time meetings can be challenging, and in today's globalized marketplace this difficulty is often compounded by differences of time zone and geography. At the same time, the ubiquity of mobile devices and our "always-on" culture cause people to be less tolerant of communication delays. But despite the inconvenience and lost productivity involved in arranging real-time talks, it is wise to be cautious about discussing sensitive topics by email because of the risk such communications might find their way into the possession of a litigation adversary, competitor, or other hostile party. The ability to send secure messages that cannot be saved, stored, or forwarded could foster productivity by encouraging frank and timely communications, freeing people from both the need to coordinate real-time conversations and the fear that messages will fall into unwanted hands. As the draw of self-destructing messaging apps for busy professionals is likely to be strong, firms and their legal advisors need to be proactive in contemplating how such apps might be used in the workplace.
These apps raise a number of potential compliance and legal concerns. The fundamental problem with these self-destructing message systems is that users may view communications sent through them as unrecorded, similar to a phone call or face-to-face talk, but this perception is not correct. A communication that is quickly or automatically deleted is not the same as one that was never recorded. Sending communications through a system that makes deletion automatic (and perhaps irreversible) is not likely to excuse noncompliance with any legal or ethical obligation to preserve documents. Lawyers and compliance professionals will need to be vigilant to ensure that corporate personnel are not inadvertently violating document retention obligations by using these services, thereby exposing themselves or their employers to sanctions.
One potential concern is the use of these apps by companies in regulated industries, such as financial services firms, companies subject to Sarbanes-Oxley, or health care organizations, where their use may violate regulatory record retention obligations. For example, regulated financial entities are required to retain broad categories of internal and external communications, including electronic communications, and regulators have been aggressive in enforcing these requirements. In December 2013, the Financial Industry Regulatory Authority (FINRA) fined one member bank $3.75 million for failing to maintain emails, instant messages, and other electronic documents in a format that would prevent their deletion or alteration.2 The extensive recordkeeping obligations imposed by financial regulators make it nearly impossible for such organizations to permit the use of any communication systems that cannot be archived, so these firms may need to augment their policies, and perhaps even implement technological restrictions, to prevent the use of self-destructing messaging systems by their employees.
Companies subject to Securities and Exchange Commission (SEC) rules promulgated under Sarbanes-Oxley may also be somewhat restricted in the use of these messaging apps. These rules generally require companies to retain records relevant to an audit or review for seven years after its completion. This recordkeeping requirement applies broadly to include any documents that form the basis of the audit or review, including all "memoranda, correspondence, communications, other documents, and records" that are "created, sent or received in connection with the audit or review" and "contain conclusions, opinions, analyses, or financial data related to the audit or review."3 Sarbanes-Oxley also created severe criminal penalties for the destruction of, or failure to preserve, certain documents. The act provides for up to 10 years' imprisonment for knowingly violating its audit record retention requirements, and up to 20 years for anyone who should "corruptly alter, destroy, mutilate, or conceal documents with the intent to impair their integrity or availability in an official proceeding" or "knowingly destroy, alter, or falsify documents and other records in federal investigations and bankruptcy."4 Accordingly, companies and their auditors need to consider policies or technological restrictions that limit the ability to use self-deleting messaging systems in these circumstances.
In contrast to the regulatory trend toward greater transparency in financial markets, health care industry regulations emphasize patient privacy and data security. Laws such as the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Health Information Technology for Clinical and Economic Health Act (HITECH), as well as professional ethical rules, require health care organizations to safeguard the confidentiality of patient information, and threaten severe penalties for noncompliance.5 For example, in August 2013, a managed care organization in New York paid the Department of Health and Human Service (HHS) more than $1.2 million dollars to settle allegations that it violated its HIPAA obligations to safeguard data when it returned several photocopiers to a leasing agent without erasing the data contained on the copiers' hard drives.6 The strict privacy requirements imposed on the health care facilities and providers may make self-deleting messages a potentially attractive industry tool. Timely communication among medical providers quite literally can be a matter of life and death, but even in the most urgent of circumstances, patient information must be kept from unauthorized or accidental disclosure. TigerText has attracted considerable attention from media and investors for its success in marketing its messaging service to hospitals and medical practices, and some industry watchers have predicted that TigerText and other apps like it are poised to become valuable tools to the $3 trillion U.S. health care industry.7
As it would be impossible to list every regulatory requirement that might be implicated by the use of self-deleting messengers, companies will need to conduct their own individual analyses and risk assessments. Such assessments should also look beyond regulatory obligations, and determine how using these apps fits into those companies' document retention policies.
Document retention policies generally dictate how long records must be retained, setting a point at which, absent exceptional circumstances, records should be destroyed so as to avoid the cost and litigation risk of storing records that no longer serve a clear legal or business purpose. When documents are unavailable as a result of a comprehensive and consistently-enforced retention policy, courts generally accept this as a defense to claims of spoliation. As the U.S. Court of Appeals for the Fifth Circuit noted,
[T]here is nothing improper about following a document retention policy when there is no threat of an official investigation, even though one purpose of such a policy may be to withhold documents from unknown, future litigation.8
This same motivation to keep documents that might be damaging or prone to misinterpretation out of the hands of litigation adversaries is a strong enticement to use self-deleting messaging apps. However, while courts universally recognize the business need to destroy documents as a matter of course, "[o]nce a party 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."9 This standard, articulated in Zublake v. UBS Warburg, has been widely adopted by state and federal courts, and it largely mirrors the guidelines of the Sedona Conference, which states that the obligation to preserve documents arises "at the point in time when litigation is reasonably anticipated whether the organization is the initiator or the target of the litigation."10 Failure to preserve evidence as required can result in sanctions, ranging from monetary fines to adverse inference jury instructions or even termination of the litigation.11
The obligation to issue a litigation hold and to preserve potential evidence conflicts with the very self-deleting nature that makes the use of such apps appealing, as such messages cannot generally be retained or retransmitted. Unfortunately, there is little guidance as to how courts will treat the use of self-deleting messaging apps in the litigation hold context. On one hand, the obligation to prevent electronic records from being deleted pending litigation is not absolute. Federal Rule of Civil Procedure 37(e) provides that courts generally should not sanction parties for "failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system." Similarly, the Sedona Principles urge that the obligation to preserve relevant evidence "must be balanced against the right of a party to continue to manage its electronic information in the best interest of the enterprise, even though some electronic information is necessarily overwritten on a routine basis by various computer systems," and recommend that "if such overwriting is incidental to the operation of the systems as opposed to a deliberate attempt to destroy evidence in anticipation of or in connection with an investigation or litigation it should be permitted to continue after the commencement of litigation."12
On the other hand, despite the balancing approach advocated by Rule 37(e), courts are hostile toward litigants who are perceived as skirting their discovery obligations or destroying evidence by cleverly engineering information systems, even if those systems superficially comply with case law and consensus guidelines. In a 2009 case, the Supreme Court Commercial Division imposed adverse inferences on a defendant corporation for spoliation because it structured its email system to limit each user to only 200 megabytes of storage.13 Once reached, this limit prevented users from receiving additional email until they manually deleted messages. The court reasoned that, while employees were deleting emails "in the ordinary course of business," it nonetheless constituted gross negligence for the company to fail to ensure that employees would not delete relevant evidence during the pendency of litigation. The use of self-deleting messenger apps for communications relevant to pending or anticipated litigation may raise similar concerns.
The tolerance a court may demonstrate for a party's inability to preserve or produce communications sent using a self-deleting messaging service may vary based on the jurisdiction, the foreseeability of litigation, and the court's assessment of the party's intent in failing to preserve the potential evidence. Proposed revisions to Rule 37(e), if adopted, would require federal courts to consider the reasonableness of efforts to preserve records, the proportionality of any preservation efforts to the litigation, the extent to which parties were on notice of likely litigation, and the reasonableness and clarity of requests by adversaries that such records be preserved.14 While this amendment may add uniformity in the federal courts' analysis of document retention obligations, it does not clarify how reasonable a court may find the use of self-deleting messages in any given scenario. Accordingly, the most conservative practice would be to suspend the use of such services for communications subject to a litigation hold.
These self-deleting messenger apps, and the legal issues they present, are an example of how technology often outpaces the law. The use of instant, private, and secure electronic communications in the health care industry would be generally consistent with the regulatory goals, as well as potentially life-saving—and this is just one example of the business and social advantages these apps may offer. However, the rules relating to the preservation and production of evidence are founded upon decades of experience with paper-based records, making predictions about a court's potential view of these applications in regulatory or litigation contexts difficult. Judicial rules conferences, and professional groups like the Sedona Conference, have labored with much success to adapt traditional evidentiary principles to a digital era, but, as is demonstrated with the case of self-deleting messages, the technology nearly always moves more quickly. Self-deleting message services may present an opportunity to reconsider the sustainability of continued application of rules and principles held over from the days of paper, and the degree to which business practices should be dictated by the looming specter of future litigation. Perhaps a record that feels more like an oral communication to the user should be treated more like an oral communication by the courts. But until there is such a reconsideration, it will be left to practitioners to assist businesses in identifying practices that minimize the simultaneous legal risks of both the over-and under-preservation of records, and to establish records retention policies that are defensible in later litigation.
Reprinted with permission from the March 10, 2014 edition of the NEW YORK LAW JOURNAL
1. Byers v. Illinois State Police, 53 Fed. R. Serv. 3d 740 (N.D. Ill. May 31, 2002).
2. See FINRA News Release, Dec. 26, 2013, https://www.finra. org/Newsroom/NewsReleases/2013/P412646.
3. See 18 U.S.C. §1520(a)(2); 17 C.F.R. §210.2-06(a).
4. 8 U.S.C. §§1512(c), 1519, and 1520(b).
5. See, e.g., 42 U.S.C. §§1302(a), 17931; 42 U.S.C. §1320d– 1320d(9); 45 C.F.R. Parts 160 and 164.
6. U.S. Dep't of Health and Human Svc., "News Release: HHS settles with health plan in photocopier breach case;,"Aug. 14, 2013, http://www.hhs.gov/news/press/2013pres/08/20130814a.html.
7. Heather R. Huhman, Business Insider, "5 Companies That Transformed Enterprise Communication in 2013," Dec. 3 2013, http://www.businessinsider.com/5-companies-that-transformed-enterprise-communication-in-2013-2013-12.
8. See, e.g., Arthur Andersen v. United States, 374 F.3d 281, 297 (5th Cir. 2004) rev'd on other grounds, 544 U.S. 696 (2005).
9. Zubulake v. UBS Warburg, 220 F.R.D. 212, 218 (S.D.N.Y. 2003).
10. See, e.g., VOOM HD Holdings v. EchoStar Satellite, 939 N.Y.S.2d 321, 324 (1st Dep't 2012); The Sedona Conference, "Commentary on Legal Holds: The Trigger and the Process," 11 Sedona Conf. J. 265, 267 (Fall 2010).
11. See Zubulake, 229 F.R.D. at 437 (instructing the jury that it could infer destroyed evidence was adverse to the defendant); U.S. v Philip Morris USA, 327 F. Supp. 2d 21, 26 (D.D.C. 2004) (fining defendants $2.75 million for the destruction of evidence); Telectron v. Overhead Door, 116 F.R.D. 107, 130 (S.D. Fla. 1987) (entering default judgment against defendant for willful and bad faith document destruction).
12. The Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Document Production, Comment 5.a (July 2005).
13. Einstein v. 357 LLC, No. 604199/07, 2009 WL 4543044 (Sup. Ct. N.Y. Cnty., Nov. 12, 2009).
14. See Comm. on Rules of Practice and Procedure, Report of Comm. on Rules of Practice and Procedure 104 (Jan. 3-4, 2013).
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