A lawyer’s Seven Step Program for preserving and producing transitory electronic data

February 12th, 2009 | By Steve Puiszis

Arista Records, LLC v. USENET.Com, Inc., 2009 WL 185992 (S.D.N.Y. Jan. 26, 2009).

Arista Records is yet another decision where sanctions were imposed, including the issuance of an adverse inference instruction, for the failure to properly preserve and produce electronic information. The case is significant because the decision focused on requests for transitory server log data and information on dynamic web pages.

It would be a gross oversimplification to say Arista Records merely stands for the proposition that sanctions can be imposed when a party disables features of its computer system or reconfigures its servers in a way that results in the loss of electronic data. While that indeed was the court’s ultimate ruling, the Arista Records decision raises a number of important issues. Therefore, we have distilled several of the more important points from Arista Records into what we call our Lawyer’s Seven Step Program for the Preservation and Production of Transitory Electronic Data:

• Step 1: Know what to preserve and when to preserve it.
• Step 2: Communicate with your client.
• Step 3: Bring a motion for a protective order concerning inaccessible sources of information.
• Step 4: Confirm in writing before taking any ediscovery measures.
• Step 5: Exercise extreme caution in what you say or agree to produce.
• Step 6: Use a technologist or expert wisely.
• Step 7: Avoid system changes that can result in the loss of data.

Let’s take a more detailed look at these steps below.

Step 1: Know what to preserve and when to preserve it.

The duty to preserve electronic data involves two related issues, determining what evidence should be preserved and when the duty to preserve that evidence is triggered. It is well recognized that a party is obligated to preserve evidence when it has notice that the evidence may be relevant to pending litigation or future litigation that is reasonably anticipated. The duty to preserve can be triggered pre-suit, but certainly attaches when a claim is filed and known.

Arista Records is significant because it rejected a “one size fits all” approach as to when the duty to preserve is triggered. The district court rebuffed defendant’s argument that it had no duty to preserve transitory electronic data that had no essential business purpose, citing several decisions where similar server log data was ordered produced. However, the court recognized that the time when a duty to preserve specific evidence is triggered can turn on the nature of the evidence or data being sought.

The district court acknowledged that some of the information sought in discovery such as the transitory usage data on the defendants’ server logs was not “routinely created or maintained by the Defendants for their business purposes, and requires additional steps to retrieve and store.” The court concluded that a party may not have a duty to preserve that type of transitory data when suit is initially filed. However, once a party has been placed on notice that an opponent considers that type of data relevant by virtue of a specific request for its production, a duty to preserve would then be triggered. That meant that the loss of any such data which occurred before a specific request for its production was made could not form the basis for spoliation sanctions. However, as explained below, sanctions were imposed for failing to properly preserve that data after the plaintiffs specifically requested its production.
 

Step 2: Communicate with your client.

Communicating with your client is one of the keys to avoiding ediscovery sanctions as even Cool Hand Luke can tell you. The need to preserve electronic data, and the nature and scope of the client’s preservation obligation should be one of the first communications (both orally and in writing) that an attorney has with his or her client. Determining what potentially relevant ESI the client has in its possession or under its control should be a part of those initial conversations to confirm that the client has issued a litigation hold and is preserving that information. However, those initial conversations with the client and the client’s key personnel should extend beyond preservation issues. An attorney should endeavor to learn as much as reasonably necessary about the client’s information and email systems, learn how employees store their information and where they store it. Those discussions with the client should also include any topics that are likely to be covered at the initial Rule 26(f) conference with opposing counsel such as the format in which any requested data will be produced and strategies to preserve privilege and work product.

Moreover, determining whether a particular source of electronic data is not reasonably accessible because of undue burden or cost is a critical topic that should not be initially overlooked. The party asserting undue burden must be prepared to prove it, and the necessary factual predicate to assert inaccessibility under Rule 26 can only be obtained from the client. Any problems that may be encountered in preserving and producing electronic data from any of the client’s information sources requires prompt and thoughtful attention with the client.

There were several apparent communication breakdowns in Arista Records, which the district court criticized. For example, the same day that defense counsel agreed to produce snapshots of digital music files on the clients’ servers, the client disabled a feature of the system which prevented the data from being produced. Additionally, potentially damaging information appearing on the defendant’s web site was removed shortly after suit was filed. That type of data loss can hopefully be avoided through timely and appropriate communications with the client.
 

Step 3: Bring a motion for a protective order concerning inaccessible sources of information.

The defendants in Arista Records objected to preserving server log data because of the volume of that data and its transitory nature. Defendants contended that they would have to modify the operation of their servers to preserve the usage data which they claimed would have a materially adverse impact on the functionality of their servers. In response to the plaintiffs’ sanctions motion, defendants explained that when they experimented with modifying the operation of one of their servers to extract its log data, the server crashed. However, the defendants never moved for a protective order under Rule 26(c) to address the issue of burden.

The Advisory Committee Notes to Rule 26(b) explain that simply designating a source of information as inaccessible, does not relieve the party of its common law or statutory duty to preserve data from that source. Thus, unless your opponent agrees in writing that inaccessible sources of electronic data need not be produced; the safest course of action is to bring a motion for a protective order. This is especially true with transitory electronic data which may be lost or overwritten after a matter of days or weeks if it is not preserved.
 

Step 4: Confirm in writing before taking any ediscovery measures.

There are three “C’s” to effective ediscovery risk management. Communication with the client and opposing counsel (Step 2) is one of those essential “C’s.” Another is to confirm in writing any agreements or understandings you reach with opposing counsel before taking any ediscovery measures that could result in the loss of data or require the expenditure of significant cost or expense by the client. Given the cost of ediscovery and the potentially disastrous impact which the spoliation of data can have on a case and more importantly, a client relationship, confirming any agreements with opposing counsel is key to preventing any misunderstandings and will hopefully short circuit any sanctions motion. The third essential C is “cooperation,” and our three Cs of ediscovery risk management will be the subject of a future post.

In Arista Records, prior to the filing of suit, counsel for the plaintiffs demanded that certain features of the defendants’ system which were “the source of repeated and conspicuous copyright infringement” be disabled. After the defendants took no action, plaintiffs filed suit and then propounded discovery. At that juncture, plaintiffs’ counsel insisted that before any settlement discussion could occur, the defendants had to disable access to the digital music files which formed the basis of plaintiffs’ copyright infringement claim. The defendants disabled access to those digital music files without preserving them even though the plaintiffs had requested their production in discovery. That action resulted in the loss of data which the plaintiffs had sought.

The district court concluded that “even assuming” the plaintiffs had asked defendants to disable access to those music files, the defendants “still had an obligation to preserve the data requested in discovery.” The fact that the district court in Arista Records “assumed” the plaintiffs had requested that access to the music files be disabled means that the defendants either failed to notify opposing counsel of their intentions or failed to properly confirm their intended course of action in writing. One suspects that had the defendants reduced their willingness to disable access to the music files in writing, one of two things would have happened. Plaintiffs’ counsel would have reminded the defendants that the requested information must be preserved which should have caused the defendants to pause and seek a clarification from the plaintiffs or the court which could have prevented the data loss. Alternatively, if a putative letter was sent to the plaintiffs noting that the defendants were acting at plaintiffs’ insistence and provided adequate time for plaintiffs to respond before any action was taken, the district court may have reviewed the record from a more forgiving point of view.
 

Step 5: Exercise extreme caution in what you say or agree to produce.

Agreeing to produce any type of electronic data without first confirming with your client that the information has been preserved, is readily accessible and available to be produced is a prescription for danger. The district court in Arista Records noted that sanctions have been imposed where counsel agreed to produce evidence, but later failed to actually produce it. Indeed, the 2006 Advisory Committee Notes to Rule 37(f) – now Rule 37(e) after the so called “style amendments” to the federal rules – explain that the various factors which a court will consider when assessing a party’s good faith include the steps that the party took to comply with a court order or an agreement between the parties. (emphasis added). One quote which from Arista Records bears repeating: “[i]t is essential to our system of justice that lawyers and litigants, above all, abide by their agreements and live up to their own expectations.”

The failure to exercise careful precision in what you propose or agree to produce can end up disadvantaging your client. Care has to be exercised even with conditional or alternative proposals to your opponent when it comes to ediscovery.

For example, In re Classic Mare Lease Litigation, 2009 WL 260954 (E.D.K.Y. Feb. 2, 2009), after the defendant produced 273,000 pages of financial information in a TIFF format with load files that would allow the documents to be imported into document management database, one the plaintiffs moved to compel production of the financial records in their native state because they would be “more useable.” The district court concluded that the defendant did not err by producing the records in a TIFF format because it was “most likely to be useable – to some extent- by any of the parties … none of whom had the necessary software” to view the data in its native format.

Normally that finding should have ended the matter. However, one of parties was willing to purchase the necessary software to view the data in its native state and pursued the issue. The district court ordered the data be reproduced (luckily at the requesting party’s expense) and relied upon a letter written by defense counsel as a basis for its decision. That letter explained production of the data in its native state would be useless without the software used to create the data. Nonetheless, in that letter counsel offered to provide the financial records “in a format that would allow you to upload them into your Summation or Concordance database, and we can provide you with the native in its native format if you choose to buy the software.” (emphasis added.) The district court interpreted counsel’s letter as an agreement to produce the data in its native format. Therefore, the court held the parties to the agreement that they purportedly reached notwithstanding Rule 34(b)(2)(E)(iii) which provides “a party need not produce the same electronically stored information in more than one form.” So to borrow a line from an old TV show, Hill Street Blues: “Let’s be careful out there” when writing to your opponent.
 

Step 6: Use a technologist or expert wisely.

Occasionally, we have suggested that lawyers consider using an IT expert at various of stages of a proceeding that was likely to be ediscovery intensive. For lawyers who feel they are “technology challenged,” the use of an expert can be helpful at the initial meeting with members of a client’s IT department or at the initial Rule 26(f) conference with opposing counsel. IT experts can also help in establishing that a particular source of electronically stored information is inaccessible within the meaning of Rule 26 because it is unduly burdensome or costly for the client to preserve and/or produce. However, when an expert is retained for this purpose, he or she should be permitted to do their job; cutting corners should be avoided as the Arista Records opinion demonstrates.

The defendant in Arista Records provided the court with a declaration from the “Distinguished Career Professor of Computer Science and Public Policy and The School of Computer Science at Carnegie-Mellon University” in opposition to the plaintiffs’ motion for sanctions. Ultimately however, the district court struck those portions of the expert’s declaration which purported to describe the capabilities of the defendants’ system because the expert failed to comply with Federal Rule of Evidence 702 and the strictures of Daubert.

Among other things, the district court concluded that defendants’ expert failed to conduct any independent analysis and failed to take any steps to obtain the information necessary to understand what the codes and numbers on the defendants’ server logs represented. The expert did not conduct any tests to determine actual retention times of the transitory data on defendants’ servers and did not even determine how much storage capacity was available on the defendants’ system. The court concluded that the expert’s declaration was replete with conclusions that appeared to be nothing more than information supplied by the defendants.

The court granted plaintiffs’ motion to strike because the expert simply repeated information that the client provided him without any independent investigation or analysis. The district court in Arista Records concluded: “An expert who simply regurgitates what a party has told him, provides no assistance to the trier of fact through the application of specialized knowledge.”
 

Step 7: Avoid system changes that can result in the loss of data.

In Arista Records, the district court concluded that the defendants acted in bad faith by intentionally disabling access to the digital music files or groups without first preserving the server logs or usage data and then changing the configuration of their servers which caused those music files to be overwritten at a much faster pace. Removing critical information from the defendants’ web page did not help. The fact that the defendants were able to nonetheless produce a vast quantity of the data plaintiffs sought (200,000 digital music files and 73,000,000 file headers from the server logs) did not save them from the imposition of spoliation sanctions. The district court explained that the production of this data did not serve to cure the defendants’ discovery abuses “because it was not substantially equivalent to the destroyed data.” Similarly, the defendants offer to authenticate copies of the offending web pages that plaintiffs were able to obtain during their pre-suit investigation was not sufficient to preclude sanctions because plaintiffs were unable to ascertain what other incriminating web pages the defendants destroyed.

There are certain activities that an attorney simply cannot control, but what an attorney can do is make sure the client is properly advised. There are many seemingly innocent actions which a client may take including the installation of new software or routine computer maintenance such as disk defragmenting that will result in the loss of data. Completely innocent system upgrades or reconfigurations can also result in data loss as in Arista Records. It is unrealistic to expect that companies will forgo necessary maintenance or system upgrades simply because they have been sued. However, what they can do and what attorneys should advise their clients is to delay any procedures that could result in the loss of electronic data without first ensuring that all potentially ESI is properly preserved.

So there you have our seven step program. But don’t take it from us, read the decision. Arista Records is a lengthy opinion given the number of issues the court addressed. However, it is well worth your time. Before you sit down with the decision however, dial up Coldplay’s song Lost. The song’s lyrics are appropriate for the Arista Records decision:

Just because I’m losing
Doesn’t mean I’m lost
Doesn’t mean I’ll stop
Doesn’t mean I would cross …

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