Advancements in technology have fundamentally transformed the landscape for storing and maintaining documents, making it cheaper and more efficient to store data in electronic form. These developments also create new and substantial risks with respect to the duty to preserve evidence if litigation is reasonably foreseeable. To militate against such risk, businesses and practitioners should routinely update their document retention policies, ensure that they have adequate storage and file maintenance capabilities, and conduct employee training related to document preservation. This article examines the duty to preserve evidence in the context of impending or ongoing litigation, what constitutes spoliation of evidence, and the potential consequences that flow from failing to implement sufficient safeguards.
The Duty to Preserve Evidence
The duty to preserve evidence is triggered when a party reasonably believes that litigation is foreseeable and, as such, may arise “many years before litigation commences[.]” Micron Technology, Inc. v. Rambus Inc., 255 F.R.D. 135, 148 (D. Del. 2009). From a pre-litigation standpoint, the rationale behind such an obligation is to prevent a party from subverting the discovery process by discarding potentially relevant evidence prior to the filing of a complaint. When the duty is triggered, however, a party must promptly effectuate a litigation hold in order to preserve potentially relevant documents and move to suspend internal document retention and destruction policies. See Wm. T. Thompson Co. v. General Nutrition Corp., 593 F. Supp. 1443, 1455 (C.D. Cal. 1984) (holding that while a litigant does not have a duty to retain every document in its possession, even in advance of litigation, it is under a duty to preserve what it knows or reasonably should know will likely be requested in discovery). The duty to preserve evidence supersedes routine or informal document retention policies and requires strict adherence to the litigation hold. See MOSAID Techs. Inc. v. Samsung Elecs. Co., 348 F. Supp. 2d 332, 339 (D.N.J. 2004)(holding that it is not “a defense to a spoliation claim that the party inadvertently failed to place a ‘litigation hold’ or ‘off switch’ on its document retention policy”); see also State Nat’l Ins. Co. v. County of Camden, 2012 U.S. Dist. LEXIS 38504 (D.N.J. Mar. 21, 2012) (sanctioning a party for failing to issue a litigation hold, suspend auto-deletion of email, or retain copies of any backup tapes after being notified about a lawsuit against it.).
Considerations for Document Retention Policies
The enforcement of sensible retention protocol can minimize the potential for legal risk related to the preservation of documents. Corporate counsel and attorneys with organizational clients should apprise senior management of the importance of reviewing and updating document preservation and destruction policies to be in accord with legal retention requirements. Such a policy should include, at a minimum, (1) an identification of the types of documents that will be preserved, (2) the manner in which they will be stored, (3) where and for how long the documents will be retained, (4) how documents will be destroyed or discarded, and (5) the protocol for collection and disclosure if a document production becomes necessary. Clients should also be made aware that “[t]he duty to preserve potentially relevant evidence is an affirmative obligation that a party may not shirk.” MOSAID Techs. Inc., 348 F. Supp. at 339.
The development of a written records retention policy and schedule for updating same applies equally to attorneys in practice. Not only is this good practice, but attorneys have separate recordkeeping obligations dictated by Rules of Court and the Rules of Professional Conduct. Attorneys also have an independent interest in maintaining and preserving documents, including portions of a former client’s file, for the defense of potential malpractice claims or ethics investigations.
Spoliation of Evidence and The Failure to Preserve
Spoliation is “the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 430 (S.D.N.Y. 2004). It occurs “when a party has intentionally or negligently breached its duty to preserve potentially discoverable evidence[.]” Kounelis v. Sherrer, 529 F. Supp. 2d 503, 518-519 (D.N.J. 2008).
The consideration of a party’s document retention policy is only relevant where litigation is already anticipated and the destruction of documents was in bad faith. See, e.g., Jones v. Bremen High Sch. Dist. 228, 2010 U.S. Dist. LEXIS 51312 (N.D. Ill. May 25, 2010)(deletion of emails in violation of document retention policy were not part of a deliberate effort to conceal evidence); Trask-Morton v. Motel 6 Operating L.P., 534 F.3d 672, 681 (7th Cir. 2008)(“courts have found a spoliation sanction to be proper only where a party has a duty to preserve evidence because it knew, or should have known, that litigation was imminent.”); Latimore v. Citibank Fed. Sav. Bank, 151 F.3d 712, 716 (7th Cir. 1998)(a party’s “inadvertent failure to comply with [document retention] regulation” did not require adverse inference sanction). Generally, the good faith destruction of documents in the ordinary course of business will not constitute spoliation.
Depending on the jurisdiction, spoliation can give rise to various forms of sanctions, including, for example: an adverse inference instruction to the jury, exclusion of evidence or testimony, dismissal of a claim, or an award of attorneys’ fees and costs. See Sanofi-Aventis Deutschland GmbH v. Glenmark Pharms., Inc., USA, 2010 U.S. Dist. LEXIS 65323 (D.N.J. July 1, 2010)(imposing an adverse inference against the defendants after the Court determined that they practiced systematic document destruction when no litigation hold was in place). Courts have awarded attorneys’ fees and costs as a result of inadequate document retention safeguards, including a failure to put in place a litigation hold when required to do so. See State Nat’l Ins. Co. v. Cty. of Camden, 2011 U.S. Dist. LEXIS 164093, at *26 (D.N.J. June 30, 2011)(“[I]n light of the failure to implement the litigation hold here, the Court finds that an award of reasonable attorneys’ fees and costs incurred in connection with investigating the scope of the County’s email deletion is appropriate in this case.”).
The Bottom Line
The duty to preserve evidence applies to both hard copy and electronically stored documents. To avoid unnecessary risk, companies and practitioners should create and consistently enforce a cogent document retention policy. These policies should be periodically reviewed and updated both internally and by counsel to ensure compliance with legal retention requirements.
Reprinted with permission from the November 22, 2023 edition of The Legal Intelligencer © 2023 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.