Document retention and Spoliation
The legal system is unhappy with any enterprise that destroys records for the purpose of positioning itself for possible future litigation, even if such litigation that is not specifically anticipated. The courts tend to call this action spoliation. Below is an interesting case:
Sanctions ordered for ESI spoliation because defendant did not implement a litigation hold and start preserving email until start of the litigation even though there was a known issue.
Phillip M. Adams & Associates, L.L.C. v. Dell, Inc., 2009 U.S. Dist. LEXIS 26964 (D. Utah Mar. 27, 2009).
A defendant’s email preservation system that consisted of instructing employees to preserve email of long term value on their local computers, coupled with “very little evidence compared to what would be expected,” led the court to conclude that the “safe harbor” of Fed. R. Civ. P. 37(e) did not apply and that the defendant should be sanctioned for spoliation.
Plaintiff in a patent infringement action claimed a defendant reverse engineered plaintiff’s patented programs for solving a defect in floppy disk controllers. Plaintiff sought sanctions against the defendant for spoliation when discovery from the defendant did not provide any evidence that the defendant had infringed upon plaintiff’s patents. In asserting spoliation, plaintiff relied on email and other evidence obtained by plaintiff in other litigation and from other defendants. The defendant countered that the lack of additional email was understandable because the defendant’s email servers were “not designed for archival purposes” and employees had been instructed to locally preserve only email “of long term value.”
The court held that the defendant’s practice of having employees archive email did “not establish the good-faith nature” of the defendant’s data management practices. Also, Fed. R. Civ. P. 37(e) did not provide a “safe harbor” for email apparently not saved by employees because the fact that the defendant had backed-up servers on which it stored financial data demonstrated that the defendant “does know how to protect data it regards as important.”
“Indisputably,” according to the court, “we have very little evidence compared to what would be expected.” Computer and component manufacturers such as the defendant “were sensitized” to the floppy disk controller errors due to class actions over the errors in 1999-2000, and the defendant should have been preserving evidence related to those errors since then. However, it was clear to the court that the defendant’s “lack of a retention policy and irresponsible data retention practices are responsible for the loss of significant data.” The court concluded that sanctions against the defendant were appropriate once prejudice to plaintiff from the loss was determined following additional briefing by the parties.
Defendant says its “email servers are not designed for archival purposes, and employees are instructed to locally preserve any emails of long term value. ASUSTeK employees send and receive email via company email servers. Storage on ASUSTeK's email servers is limited, and the company directs employees to download those emails they deem important or necessary to perform their job function from the company email server to their individual company issued computer.
ASUSTeK informs its employees that any email not downloaded to an employee's computer are automatically overwritten to make room for additional email storage on ASUSTeK's servers. It is ASUSTeK's routine practice that its employees download to their individual computer those emails the employee deems important or necessary to perform his or her job function or comply with legal or statutory obligations.”
When deciding whether to sanction a party for the spoliation of evidence, courts have considered a variety of factors, two of which generally carry the most weight: (1) the degree of culpability of the party who lost or destroyed the evidence, and (2) the degree of actual prejudice to the other party. The most widely known sanction is the adverse
Inference instruction, but other sanctions range from admonitions to granting judgment or dismissal.
In 2000, An employee allegedly obtained patented material and illegally used them to test ASUS motherboards. In 2005, ASUS received a demand letter threatening litigation.
Complaint filed in 2006. The question is this when did the duty to preserve arise?
The court found that the duty arose "in the 1999-2000 environment” “when several manufacturers were sued for billions of dollars in class action lawsuits related to defects. Is this fair to the defendants? Or is it a situation for patent infringement cases where the defendant is not innocent until proven guilty?
I find this to be an intriguing decision which is the main reason it is a topic on this blog. Since the court suspected bad faith on the company’s part yet no evidence was shown to prove it the judge still ordered sanctions. What do you think? Was sanctions warranted in this case?
One thing does seem certain here that the courts are becoming more and more distrustful of early aggressive records deletion policies. The problem in this case is the defendant did not have even a decent records retention policy in place.
To read the full opinion click here:
https://ecf.utd.uscourts.gov/cgi-bin/show_public_doc?2005cv0064-731
John Randall
President
Randall Consulting
Coming up: Planning and ESI
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