Recently, a federal court issued a $750,000 sanction against a defendant organization for negligently failing to preserve, search for and produce relevant electronic information in a lawsuit. While this type of order is becoming more commonplace as courts continue to raise the bar in discovery, this case is noteworthy because the organization’s conduct was negligent rather than willful. The case is also significant because the discovery violations were discovered after the case had been tried and a jury found in favor of the organization.
During the discovery process, the organization had appointed a single employee to coordinate with outside counsel and to act as the “internal document gatherer.” The employee would meet with outside counsel to determine what kinds of documents were needed and then meet with fellow employees to gather responsive documents. The Court did not cite any evidence that the employees intentionally withheld any relevant documents. Rather, the Court found fault with what it called “lack of effort” on the part of the organization.
The discovery violations that the Court found particularly egregious were these:
- The organization relied entirely upon a single employee to coordinate identification and gathering of documents
- No key word or other appropriate searches were conducted on the organization’s electronic mail systems
- The organization failed to implement appropriate records preservation practices in response to the litigation including failure to notify its IT Department of the need to preserve relevant information
- A handful of relevant documents were not located and produced in the litigation
This decision is entirely consistent with the growing trend where courts are holding litigants to higher and higher standards when it comes to retaining, finding and producing electronic documents during a lawsuit. Litigants and their counsel who fail to heed these warnings, do so at their peril.
The following are some basic guidelines that if followed will reduce the risk of discovery sanctions for failure to produce relevant documents:
- Recognize that when litigation begins or is reasonably anticipated, the obligation to preserve relevant records attaches
- Notify employees of their duty to preserve potentially relevant records in writing as soon as possible after the preservation obligation arises – this includes the Information Technology Department which typically is the custodian of corporate electronic mail and other electronically stored information
- Implement appropriate records retention and litigation preservation policies
- Consider having a mirror image made of the hard drives of key players’ computers and/or taking those computers out of commission, along with keeping a detailed chain of custody log.
Because what will be deemed to be reasonable with regard to electronic document preservation will differ based upon the unique facts of the case, employers should partner with inside and/or outside counsel to create a document preservation, location and production strategy when the preservation obligation attaches.