Sanctions rejected where evidence was destroyed pursuant to routine, good-faith records management practice before receipt of any notice of a likelihood of litigation

Today’s post demonstrates the importance of a document retention/destruction policy applicable to a company’s paper and electronic records that is consistently applied and routinely followed.

In Mohrmeyer, plaintiff sought discovery sanctions in the form of an adverse inference instruction because Wal-Mart failed to preserve certain records relevant to his accident. The particular record, a maintenance log, was not typically preserved in the ordinary course of the company’s business. It was routinely discarded on a weekly basis. Plaintiff noted that Wal-Mart employees attended to him immediately after his fall, called 911 and summoned an ambulance to take him to the hospital. As a result, the plaintiff in Mohrmeyer claimed that Wal-Mart’s duty to preserve all relevant documents was triggered immediately following his fall because Wal-Mart “should have known” that his accident would result in litigation.

Mohrmeyer is significant because the court recognized:

The law does not and should not require businesses to preserve any and all records that may be relevant to future litigation for any accidental injury, customer dispute, employment dispute, or any number of other possible circumstances that may give rise to a claim months or years in the future, and there is absolutely no contemporaneous indication that a claim is likely to result at the time the records are destroyed pursuant to a routine records management policy.

That Wal-Mart preserved some records relating to the plaintiff’s accident pursuant to its policy involving accidental injuries did not change the result in the court’s view because the particular maintenance log was only temporarily retained and was routinely discarded. Merely because Wal-Mart summoned an ambulance for the plaintiff did not make the litigation more likely to occur. The court found no deliberate or improper conduct by Wal-Mart involving its failure to preserve what the court described as a “transient record.”

The court recognized that a duty to preserve applies only when a party has been put on notice that evidence is relevant to pending litigation or which may be relevant to future litigation that is likely to occur. It concluded that at the time the maintenance log was discarded, there only existed a speculative possibility that a lawsuit might be brought. The court observed that before the log was destroyed Wal-Mart had received no telephonic or written warning from the plaintiff or his counsel raising the possibility of a lawsuit and there was no history of litigation between the parties which made a lawsuit more likely to occur. The court was not willing “to presuppose the likelihood of litigation for every slip and fall accident that occurs.”

The court in Mohrmeyer distinguished the factual scenario presented from an airline disaster where the “trigger date” for the preservation of evidence would clearly be the date of the disaster “because of the high likelihood of litigation following such [an event].” The mere fact that an accident had occurred was insufficient to establish that litigation was likely to ensue.

The court also noted that the plaintiff testified in his deposition that he did not even consider filing a lawsuit until a couple of months after the accident occurred, which was long after the maintenance records were destroyed in the ordinary course of the company’s business. This is a good practice point to remember in discovery in any matter where discovery sanctions potentially may be sought.

Accordingly, Mohrmeyer concluded that when evidence is destroyed pursuant to a company’s “routine, good-faith records management practices” before any notice of the likelihood of litigation is received, discovery sanctions of any type are not warranted.

Vitruvian Man image courtesy Flickr user Michael Licht under this Creative Commons license.

How the privilege applicable to a lawyer’s litigation hold letter may be forfeited, and the ethical dilemma it potentially triggers – the Morton’s Fork created by Major Tours v. Colorel.

Major Tours, Inc. v. Colorel, 2009 WL 2413631 (D.N.J. Aug. 4, 2009)

Wikipedia defines Morton’s Fork as “a choice between two equally unpleasant alternatives (in other words, a dilemma), or two lines of reasoning that lead to the same unpleasant conclusion. It is analogous to the expressions ‘between the devil and the deep blue sea’ or ‘between a rock and a hard place.’” Wikipedia explains that Morton’s Fork is “the opposite of the Buridan’s Ass.” It is similar to a “Catch 22” in that it involves a “no win situation,” but does not involve the use of circular logic.

What is the only area of law where a lawyer is required, under the pain of sanctions, to write a letter and provide advice to a client that potentially can be used as evidence against that client? Where else is “discovery about discovery” becoming the norm, rather than the exception? The answer is the post-Zubulake world of electronic discovery in which we now find ourselves.

Today, if a lawyer fails to issue written litigation-hold instructions, and/or then fails to take appropriate follow-up steps, the lawyer can be sanctioned if electronically stored information (“ESI”) is not properly preserved by the client. While a lawyer’s litigation-hold letters are generally considered privileged, e.g., Muro v. Target Corp. 250 F.R.D. 350, 360 (N.D.Ill. 2007), the court in Major Tours held that they must be produced when a preliminary showing of spoliation has been made. And, when that occurs, a lawyer’s litigation hold letter will invariably be used against the client as evidence that the client failed to heed the lawyers advice.

The court in Major Tours concluded that a duty to preserve was triggered by a letter sent to the New Jersey Attorney General and the Commisioner of the New Jersey Department of Transportation approximately twenty-two (22) months prior to suit being filed. A litigation hold was not issued until after suit was brought, and the court found it was “probable that relevant evidence was lost before the defendants issued their litgation hold.” Thus, in the court’s view, because a preliminary showing of spoliation had been made, the attorney’s litigation-hold letter had to be produced. In other words, the client forfeited the right to assert attorney-client privilege by failing to issue a litigation hold before the attorney’s privleged litgation hold letter was ever sent to the client.

The rationale applied in Major Tours could trigger an ethical dillemma, and the potential for a conflict for outside counsel in future cases when a duty to preserve ESI was arguably triggered before suit was filed, and the client failed to institute a litgation hold at that time. If the lawyer failed to send a litigation hold letter, the lawyer could be sanctioned. However, if the lawyer sends a hold letter and the court follows the approach taken in Major Tours, the attorney’s privileged communication potentially may become discoverable, and be used as evidence against the client. While a party may be entitled to learn what steps an opponent took to preserve ESI once a preliminary showing of spolilation occurs, finding the attorney-client privilege was forfeited in this scenario would appear to be an ill-concieved approach. It triggers for the lawyer a Morton’s Fork – a choice of protecting himself from sanctions knowing that his advice may potentially be used against the client. Thus, does Zubulake’s requirement that a lawyer issue written litgation-hold instructions inevitably create a conflict between the lawyer and his client?

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An opinion sure to make everyone’s “Top Ten” list of ediscovery decisions for the year

Goodman v. Praxair Servs. Inc., 632 F.Supp.2d 494 (D.Md. 2009)

Near the end of the year, various commentators and bloggers will typically post their list of top ediscovery decisions for the year. While it may be a bit early for predictions, one decision that should make everyone’s top ten list this year is Goodman v. Praxair Services. The decision was written by Judge Paul Grimm who also was the author of the Hopson, Victor Stanley and Mancia decisions. Judge Grimm always seems to be on the leading edge of ediscovery issues.

Praxair is notable for its comprehensive treatment of issues that frequently arise involving the preservation of electronically stored information (“ESI”) and sanctions that can result for the failure to do so. The decision contains more ediscovery law than many book chapters on the topic. Even the most experienced ediscovery practitioner will find some helpful insights in the decision. If there is one ediscovery decision you read this year, Praxair should be the one. The issues addressed by Judge Grimm in Praxair include:

• The trigger date for a duty to preserve
• The timeliness of a spoliation motion.
• Identifying the “key players” to whom the litigation hold should be directed.
• Determining what ESI is under a party’s control.
• Distinguishing the duty to preserve from the duty to produce.
• Ediscovery and small “mom and pop” companies.
• Whether sanctions can be imposed for the spoliation of evidence by an agent.
• State of mind required for spoliation sanctions.
• Four scenarios when costs and attorney fees are allowed.
• Sanctions for unilaterally preserving only the ESI that a party deems relevant.

Judge Grimm even traces the “historic roots” of spoliation to Armory v. Delamirie, 93 Eng. Rep. 664 (K.B. 1722), which he describes as a Dickensian tale of avarice and greed involving a chimney sweep’s discovery of a jewel and a goldsmith’s subsequent attempt to keep it for himself. Because of Judge Grimm’s comprehensive treatment of the issues noted above, we have divided our review and commentary on Praxair into multiple parts that will appear over the next few days on Practical Ediscovery. This first part outlines Praxair’s factual background and addresses when a duty to preserve is triggered.

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The failure to timely issue a litigation hold did not itself create a question of material fact warranting the denial of summary judgment

Kotakis v. Wesco Distrib., Inc., 2009 WL 1850827 (W.D.Pa. June 26, 2009)

In Kotakis, plaintiff filed a Title VII claim asserting she was subjected to discrimination and retaliation because of her gender. The defendant moved for summary judgment, and plaintiff argued that a genuine issue of material fact was triggered because the defendant failed to take steps to preserve its electronically stored information (“ESI”) until nearly eleven (11) months after receiving notice of the litigation.

The district court quickly disposed of plaintiff’s argument. It observed that following Lujan v. National Wildlife Fed’n., 497 U.S. 871, 888 (1990), the party opposing summary judgment must proffer specific evidence found in the record which demonstrates the existence of a genuine factual dispute on a material issue which requires resolution by a jury. The district court in Kotakis held no question of material fact was presented by the plaintiff, and entered summary judgment in defendant’s favor.

In a footnote, the district court acknowledged plaintiff’s argument that the defendant failed to timely issue a litigation hold, but noted a recent decision, Phillips v. Potter, 2009 WL 1362049, *4-6 (W.D.Pa. May 14, 2009), which ruled that sanctions were inappropriate even though the defendant failed to timely issue a litigation hold when “there was no evidence that relevant documents were destroyed.” The district court in Kotakis found the logic of Potter persuasive, and applied its rationale in rejecting plaintiff’s summary judgment argument. Kotakis, 2009 WL 185027 at *4, n.2.

Thus, when a party opposing summary judgment fails to establish that potentially relevant ESI was lost due to a failure to timely institute a litigation hold, the mere fact that the moving party failed to timely take the necessary procedures to preserve ESI does not, in and of itself, provide a basis to deny the entry of summary judgment.

Must a lawyer’s litigation hold letter be written by an IT professional?

Green v. McClendon, 2009 WL 2496275 (S.D.N.Y. Aug. 13, 2009)

This isn't Mrs. McClendon

In Green v. McClendon, the court ordered that sanctions be entered against Mrs. McClendon and her counsel for the failure to preserve certain electronically stored information (“ESI”) about an Excel spreadsheet that she produced in discovery. The ESI was lost when “the son of a friend” who was “familiar with computers” reinstalled the operating system on her home computer. The court in Green was uncertain if the plaintiff had actually been deprived of any information because all files on the defendant’s home computer were downloaded onto discs before the hard drive on the computer was reinstalled, and those discs were subsequently produced in discovery. Nonetheless, the court ordered that sanctions be entered, and in the process fashioned an order that may have spawned a potential conflict of interest for defendant and her counsel.

One of the criticisms of ediscovery is that it has evolved into a tactical game of “gotcha,” where one of the goals is to shift the focus from the merits of the case to sanctions on the opposing party. The court’s opinion in Green suggests that trend has not abated. Unfortunately, in a zeal to protect all things digital, the court in Green assumed either that a litigation hold was not properly issued or that the client “brazenly” disregarded those instructions. The court apparently never considered whether the client may not have known or failed to realize that the reinstallation of her home computer’s hard drive would result in the loss of electronic information under the circumstances.

An issue simmering beneath the surface of Green is how detailed must a lawyers’ litigation hold instructions be in order to comply with the attorney’s ethical and professional duties? Does the applicable standard of care require that lawyers now specifically advise their clients to not reinstall the hard drives on their home computers? If so, given the myriad of technological ways ESI can be lost, must a lawyer’s litigation hold letters be written by an IT professional? It is the client’s obligation to preserve evidence not the lawyer’s responsibility. As litigation-hold letters become longer and more detailed, how likely is it that they will be read, understood and followed by the client?

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General concern over litigation does not trigger a duty to preserve evidence

Realnetworks, Inc. v. DVD Copy Control Ass’n, Inc., 2009 WL 1258970 (N.D. Cal. May 5, 2009)

Determining when the duty to preserve evidence arises can be a “sticky wicket” as our friends “across the pond” like to say. Clearly, when a party has decided it will pursue litigation, a duty to preserve ESI or documents potentially relevant to the claim is triggered. On the other side of the ledger, certainly by the time a defendant is served with a lawsuit, the duty to preserve relevant information has arisen. However, courts have recognized that a duty to preserve can be triggered long before a lawsuit is filed – the duty is recognized once litigation is “reasonably anticipated.” There are no bright lines to follow under the “reasonable anticipation” standard. Attempting to determine when the potential for litigation crosses the threshold from mere possibility to reasonable anticipation can depend on a number of different factors that can vary in importance from case to case.

In Realnetworks, the district court concluded that “[a] general concern over litigation does not trigger a duty to preserve evidence.” A “theoretical threat of litigation” or a “general apprehension of lawsuits,” does not suffice. The district court in Realnetworks held that a duty to preserve relevant documents or information was not triggered until a specific potential claim was identified or future litigation became probable.

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Rule 26(c) motion to stay discovery – an underutilized tool to control ediscovery costs

Ellington Credit Fund, Ltd. v. Select Portfolio Servs., Inc., 2009 WL 274483 (S.D.N.Y. Feb. 3, 2009); Stone v. Lockheed Martin Corp., 2009 WL 267688 (D. Colo. Feb. 2, 2009).

Given the current economic climate, many retailers are offering two-for-one specials to boost sales. That same approach is warranted with this post since both the Select Portfolio and Lockheed Martin decisions address the same topic – Rule 26(c) Motions to Stay Discovery.

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

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.
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Learn how to avoid ediscovery sanctions from Cool Hand Luke

Keithley v. The Home Store.com, Inc., 2008 WL 3833384 (N.D.Cal., Aug.12, 2008)

What is the one line from the movie Cool Hand Luke that everyone remembers?

No, it’s not Carl the floor walker’s speech about spending “a night in the box” for various rule violations. And no, it’s not Dragline’s comments about Lucille as she washes a car in front of the chain gang while they are cutting down weeds on the side of a road. It’s the Captain’s infamous line after he knocks Luke to the ground with a billy club: “What we’ve got here is failure to communicate.” And that is today’s tip for avoiding ediscovery sanctions.

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