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.

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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Default judgment entered as a sanction for spoliation and deliberate withholding of ESI

MeccaTech, Inc. v. Kiser, 2008 WL 6010937 (D. Neb. April 2, 2008)

You know things are bad when the lawyers withdraw. In MeccaTech (MTI), the magistrate judge observed: “Misconduct of this magnitude is a rare occurrence.” It was determined through discovery that one of the defendants employed a consultant to intentionally erase items from his computer before he left MTI’s employment in attempt to shield his activities from discovery. Another instructed his co-defendants to make sure that all emails were on a platform to which MTI did not have access. The defendants, in response to MTI’s discovery requests, also claimed that there was no responsive information prior to February of 2005. However, ESI recovered from a discarded hard drive of one of the defendant’s computers established that the defendants were actively working on strategies to transfer business from MTI during that time frame.

The magistrate judge concluded that the failure to impose severe sanctions on the defendants “would only serve to reward their obvious disrespect for the judicial process and encourage others to engage in the same conduct.” Therefore, the magistrate recommended the entry of a default judgment against one defendant, that three other defendants should be precluded from defending the plaintiff’s claims of breach of duty and fraud, that the documents recovered from one of the defendant’s hard drives should be admissible in evidence, and that the facts contained therein should be considered established for purposes of the pending action. On April 23, 2009, the district court adopted the magistrate’s report and recommendations, and entered the proposed sanctions except as to one defendant, who in the interim had reached a settlement with MTI.

While MTI is notable for the sanctions that were imposed, the decision brings into focus the reality that where a client refuses to follow an attorney’s advice on the preservation or production of ESI, that attorney should carefully evaluate whether to withdraw from the engagement, and the potential for adversity that can occur when the attorney and client disagree on preservation and production issues.

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Court acknowledges the Fifth Amendment’s Due Process Clause may limit the sanctions that can be imposed for destroying electronic documents

Preferred Care Partners Holding Corp. v. Humana, Inc., 2009 WL 982460 (S.D. Fla. April 9, 2009)

It is every trial lawyer’s worst nightmare. You are one month away from trial, drafting motions in limine, and preparing jury instructions when your client calls to advise that they just found over 10,000 pages of potentially responsive electronic documents and emails in folders that were never searched. And to make matters worse, you learn that those electronic documents may support the claim you are defending that your client improperly used proprietary information which was obtained from your opponent pursuant to a confidentiality agreement. What do you do? Do you immediately contact opposing counsel about the additional records? Do you notify the court and seek its guidance as to how best to approach the problem that has now arisen? Or, as occurred in Preferred Care Partners, do you simply destroy the electronic documents while preserving paper copies without first notifying opposing counsel or the court?

It should come as no surprise that in Preferred Care Partners, the court entered sanctions for the “clearly egregious manner in which the defendant carried out its discovery obligations.” The fact that the electronic documents in question should have been destroyed long before the suit was filed pursuant to the terms of the confidentiality agreement under which they were obtained did not change the analysis. The defendant’s “print and purge” strategy was clearly inappropriate. However, the court ultimately concluded that the defendant’s discovery “shortcomings were neither intentional nor done in bad faith, but rather resulted from the grossly negligent oversights of counsel.”

What makes Preferred Care Partners notable is the district court’s acknowledgment that in light of Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707 (1982), the Fifth Amendment’s Due Process Clause may limit the sanctions imposed for the loss of ESI. The court in Preferred Care Partners recognized that the Due Process Clause requires that discovery sanctions must not only be just, but also specifically related to the particular claim or defense affected by the misconduct. Therefore, due process requires a nexus between the lost or destroyed ESI, and either the plaintiff’s claim or the defendant’s defense.

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