Be Prepared for E-Discovery

Published: August 31, 2004, By Sheila A. Millar, Attorney-at-Law, Keller & Heckman, Washington, DC

In today's interconnected world, electronic discovery in litigation is an increasingly important issue. In fact, in many cases today, the bulk of the relevant documents may be in the form of e-mails. Thus, courts are facing questions of the cost and burden of electronic discovery and penalties for spoliation of evidence (a legal term for the failure to preserve evidence).

Two recent decisions announced in July should be noted by all members of the converting industry, particularly corporate managers, chief information officers (CIOs), and counsel, as they imposed severe sanctions against companies that failed to preserve or produce electronic evidence.

In Zubulake v. U.S. Warburg LLC, No. 02 Civ. 1243 (S.D.N.Y., July 20, 2004), the court issued the fifth in a series of rulings on electronic discovery issues in a case alleging gender discrimination, failure to promote, and retaliation. In this case, the company was on notice regarding the impending claim when Ms. Zubulake filed a complaint with the Equal Employment Opportunity Commission (EEOC), and it had a legal obligation to preserve evidence from that point on.

The judge concluded the company failed to retain requested electronic information despite a request from counsel, and its employees deleted relevant e-mails. In addition, counsel failed to request information from one employee, failed to give litigation “hold” instructions (instructions to halt normal document destruction procedures in light of litigation) covering back-up tapes, failed to communicate adequately with an employee about how computer records were retained, and failed to safeguard back-up tapes.

The judge determined the evidence was clear: E-mails were not produced, or were not produced in a timely fashion, and some were lost irretrievably.

She concluded that notifying employees of the litigation and the duty to preserve evidence was not enough; counsel has an affirmative obligation to monitor compliance by, e.g., interviewing IT personnel and key employees, conducting or supervising electronic searches in an effort to identify relevant documents, etc.

The judge outlined basic steps for counsel:

1. Issue a litigation hold when litigation is commenced or reasonably anticipated and issue periodic reminders of the litigation hold;
2. Communicate with key players likely to have relevant information about their obligations to produce and retain that information and issue periodic reminders;
3. Instruct all employees to produce electronic copies of relevant active files, making sure that back-up media a party is required to retain are identified and stored in a safe place.

In this latest ruling, the judge sanctioned the company as a result of its actions, including ruling the jury would be instructed to draw a negative inference about the deleted e-mails, a very significant penalty relevant to the claim.

A US District Court in the District of Columbia also imposed sanctions against Philip Morris for electronic discovery failures in U.S. v. Philip Morris USA, Inc., Civ. Action No. 99-2496 (D.D.C. July 21, 2004). In that case, despite a case management order requiring preservation of all documents potentially relevant to the litigation, the company continued to delete electronic documents from its system on a 60-day cycle.

Moreover, 11 senior employees working on issues the court characterized were of “central relevance” to the lawsuit failed to follow established document preservation procedures, including a print-and-retain policy. The court imposed a monetary sanction totaling $2.75 million, $250,000 for each of the 11 employees who failed to comply with document preservation obligations, and barred those individuals from testifying at trial.

In imposing these sanctions, the court was influenced particularly by the fact that Philip Morris was a sophisticated corporate litigant, although it did not order adverse inference instructions.

In both cases, clearly the courts were determined to send a strong message to litigants and their counsel about their e-discovery obligations. This is easier said than done, given the breadth of electronic communications and the increasing number of devices used to send those communications, to say nothing of the various back-up tapes involved.

Suffice it to say, companies and their counsel should include e-discovery control procedures in litigation plans, working with IT staff and key employees to make sure relevant electronic evidence is produced and retained.