March 24, 2016 | All Technology Topics

Document Preservation . . .When, What, Who and How.

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By Andrew M. Hinkes on behalf of the Electronic Discovery and Digital Evidence Committee, Business Law Section of the Florida Bar

With the proliferation of email, messaging, cloud storage, and the increasing portability of data, issues concerning electronically stored information (“ESI”) continue to complicate civil discovery. Irrespective of the format, parties must take appropriate steps to ensure that documents relevant to litigation are preserved, at the risk of significant sanctions if relevant information is destroyed.[1] This article provides an overview of the duty to preserve relevant evidence for Florida practitioners.

The Two Fundamental Inquiries of Preservation.

Identifying the boundaries of the duty to preserve evidence involves two related inquiries: when does the duty to preserve evidence attach, and what evidence must be preserved.[2] To avoid loss of evidence and potential sanctions, parties must not only timely preserve documents, they must preserve the right documents.

When does the Duty to Preserve Arise?

Florida law is unsettled as to when the obligation to preserve documents is triggered. In League of Women Voters of Fla. v. Detzner,[3] the Florida Supreme Court suggested the existence of a “a duty to preserve evidence . . . when a party should reasonably foresee litigation,” based on a line of case precedent including Am. Hospitality Mgmt. Co. of Minnesota v. Hettiger, which states that where a defendant has evidence within its control, it can “be charged with a duty to preserve evidence where it could reasonably have foreseen the [plaintiff’s] claim.”[4] However, the League of Women Voters of Fla opinion does not overrule other precedent holding that there is no common law duty to preserve,[5] or that a duty to preserve evidence arises by contract, by statute, or by a properly served discovery request (after a lawsuit has already been filed).[6] Florida’s law remains unsettled.[7] In light of the uncertainty, the prudent course is to err on the safe side and assume that a Florida court will find that the duty to preserve is triggered as soon as litigation can be reasonably foreseen.

Under the law of the 11th Circuit, “[a] party has an obligation to retain relevant documents, including emails, where litigation is reasonably anticipated.”[8] Due to the potential application of a different standard, and lack of clarity, different outcomes may result in Florida state and federal court cases.

Litigation Holds: The What, Who and How of Preservation.

Although Florida’s courts have not yet announced a standard for litigation holds, federal courts have provided guidance. Once a duty arises, parties must comply by implementing a litigation hold. Litigation holds should identify the scope of evidence to be preserved (including dates, custodians, a/k/a “key players,” logical types of data, and logical locations of data at issue), the persons responsible for the hold, the duration of the hold, and the mechanisms for implementing and maintaining the litigation hold.[9] These tasks typically include collection and imaging of ESI sources, and the cooperative development of search terms intended to identify potentially responsive documents within the collected ESI.

The scope of the hold should include all evidence that is relevant to the litigation. Assessing relevance necessarily requires lawyers to confer with their clients, client record managers, and IT personnel, to identify custodians, the physical and logical location of their relevant data, and to implement the hold.  Further, the current document retention and destruction policies in place (if any) must also be considered. Any automated destruction processes that could affect data identified within the scope of the hold should be immediately suspended. The implementation of the litigation hold should be based upon documented procedures for identifying the time period, custodians likely to possess evidence, logical and physical locations of data, and the processes used to identify, capture and store the preserved data.

After the scope of preservation is identified and all automatic deletion affecting the data at issue is stopped, affirmative steps must be taken identify, preserve, and search those sources for relevant data. These procedures may include imaging or forensically capturing ESI data sources, implementing search terms, and, of course, retaining physical files. This procedure should also include interviews of custodians regarding factual issues to identify other custodians or sources of evidence that may have been overlooked. Affected client personnel should be educated as to the hold, and reminded that the hold is in place to prevent the loss of data. The hold persists through the discovery process, and should be monitored through continued education of affected employees.

Litigation holds are often fluid. During fact investigation and discovery, parties frequently learn about new facts, which may lead to the identification of new custodians and areas for preservation, and require a modification, or enlargement to the scope of the hold. Courts may also look to prior litigation holds implemented regarding related issues and assess whether current holds are reasonable.

Although not required in Florida state court practice, required preliminary disclosures in federal court encourage early communication between parties regarding preservation and production protocols and create opportunities to flesh out preservation issues at early stages. State court practitioners should take note of the efficacy of the newly revised Federal Rules 16 and 26 which contemplate early discussion of ESI retention and production issues, and consider whether to seek analogous production and preservation stipulations in their state court matters.

Preservation is a Shared Responsibility of Client and Counsel.

The responsibility to preserve evidence is increasingly attributed jointly to both client and counsel. Courts have held lawyers and their counsel jointly responsible for sanctions imposed due to failures to properly implement litigation holds. For example, in Procaps S.A. v. Patheon Inc.,[10] the court held counsel 50 percent responsible for a Rule 37 fee-shifting award entered as a result of defective hold efforts. In Procaps, counsel sent a litigation hold notice, but otherwise failed to ensure that the client preserved evidence.[11] Similarly, in Brown v. Tellermate Holdings, Ltd.,[12] counsel was admonished by the Court for failing to participate in client retention efforts. The court stated that “[l]ike any litigation counsel, Tellermate’s counsel had an obligation to do more than issue a general directive to their client to preserve documents which may be relevant to the case. Rather, counsel had an affirmative obligation to speak to the key players at Tellermate so that counsel and client together could identify, preserve, and search the sources of discoverable information.” The court stated that counsel “have a duty (perhaps even a heightened duty) to cooperate in the discovery process; to be transparent about what information exists, how it is maintained, and whether and how it can be retrieved; and, above all, to exercise sufficient diligence (even when venturing into unfamiliar territory like ESI) to ensure that all representations made to opposing parties and to the Court are truthful and are based upon a reasonable investigation of the facts.”[13]

Failure to comply with preservation obligations may implicate even more severe sanctions for spoliation beyond awards of costs and fees; adverse inference instructions, evidentiary presumptions, defaults, and striking of pleadings, are available to punish the loss of relevant evidence. The dual touchstones for sanctions due to failure to retain documents are prejudice to the other party, and bad faith underlying the failure to retain/destruction.[14] Despite recent liberalization of the federal rules to stanch the overwhelming flow of spoliation motion practice,[15] failure to preserve responsive information can greatly increase the costs and difficulty of litigation.

Role of Document Retention Policies.

Document retention policies are frequently implemented by companies to bring order to the chaos of data management, and to comply with regulatory or statutory obligation. These policies generally provide for the duration and means of retention of forms of data, and processes and procedures for the disposal of data. If client computer systems automatically destroy or delete email, archival data, and other electronically stored information, a safe harbor may protect the client from liability, provided that this automatic destruction is timely suspended.[16] Thus, the destruction of documents in accordance with a defensible document retention policy will generally not be deemed spoliation.[17] However, prima facie unreasonable document retention policies, such as policies that fail to comply with obvious regulatory requirements, or which call for the wholesale destruction of documents, will not fall under the good faith exemptions.

Preservation is an Art, Not a Science.

At its core, preservation still relies upon the understanding by counsel of the client’s legal obligations and communication between counsel and the client regarding these obligations. Counsel should communicate early and often with their clients, and their clients’ IT staff, regarding preservation, and encourage candor among employees/key players to allow the counsel and client, together, to properly assess and collect potentially responsive material. Although ESI has complicated the process (and increased the costs) of civil discovery, proper retention will allow parties to engage in meaningful discovery without the increasingly burdensome sideshow of spoliation and/or sanction litigation.

 

Andrew M. (“Drew”) Hinkes is Of Counsel with Berger Singerman LLP, focusing primarily on state and federal commercial litigation matters. He also advises clients regarding electronic discovery, document retention issues, electronic privacy issues, web site terms of service and privacy policies. Drew is also frequently published and cited for his work on IT and technology-related issues, including virtual currencies, smart contracts, distributed ledger-based technologies, computer data security/breaches, and technology regulation.

 

[1] See Point Blank Sols., Inc. v. Toyobo Am., Inc., No. 09-61166-CIV, 2011 WL 1456029, at *8 (S.D. Fla. Apr. 5, 2011), quoting Orbit One Commc’ns, Inc. v. Numerex Corp., 271 F.R.D. 429, 431 (S.D.N.Y.2010) (there is always “a pervasive risk that electronic information will be lost during the course of litigation, whether through inadvertence, intentional spoliation or failure to institute and properly implement a litigation hold.”).

[2] Id. at *11, citing Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y.2003).

[3] 40 Fla. L. Weekly S 432, (Fla. July 9, 2015).

[4] Am. Hospitality Mgmt. Co. of Minnesota v. Hettiger, 904 So. 2d 547, 549 (Fla. 4th DCA 2005).  See also Osmulski v. Oldsmar Fine Wine, Inc., 93 So. 3d 389, 393 (Fla. 2d DCA 2012), 393 (finding that if evidence is within the defendant’s control, the defendant possesses “a duty to preserve evidence where it could reasonably have foreseen the [plaintiff’s] claim.”).

[5] See Gayer v. Fine Line Constr. and Electric Inc., 970 So. 2d 424, 426 (Fla. 4th DCA 2007).

[6] See Royal & Sunalliance v. Lauderdale Marine Center, 877 So. 2d 843, 845 (Fla. 4th DCA 2004); Bondu v. Gurvich, 473 So. 2d 1307,1312 (Fla. 3d DCA 1984); Miller v. Allstate, 573 So. 2d 24, 27 (Fla. 3d DCA 1990); Strasser v. Yalamanchi, 783 So. 2d 1087, 1093–94 (Fla. 4th DCA 2001).

[7] See William F. Hamilton et. al., Streamlining and Modernizing Florida’s Pre-Litigation Preservation Standard: Modern Technology Demands A Modern Solution, Fla. B.J., May 2014, at 18.

[8] Managed Care Sols., Inc. v. Essent Healthcare, Inc., 736 F. Supp. 2d 1317, 1324 (S.D. Fla. 2010), citing Southeastern Mechanical Services, Inc. v. Brody, No. 8:08–CV–1151–T–30EAJ, 2009 WL 2242395, at *2 (M.D. Fla. Jul. 24, 2009) (noting that “[o]nce a party files suit or reasonably anticipates doing so … it has an obligation to make a conscientious effort to preserve electronically stored information that would be relevant to the dispute.”); Wilson v. Wal–Mart Stores, Inc., No. 5:07–cv394–Oc–10GRJ, 2008 WL 4642596, at * 2 (M.D. Fla. Oct. 17, 2008) (footnote omitted) (stating that “the law imposes a duty upon litigants to keep documents that they know, or reasonably should know, are relevant to the matter.”).

[9] See Bratka v. Anheuser-Busch Co., 164 F.R.D. 448 (S.D. Ohio 1995)(parties should identify custodians “ “having responsibility for the matters which are the subject of the discovery request and all employees likely to have been the authors, recipients or custodians of documents falling within the request,” contact and interview “all such individuals . . . regarding their knowledge of the existence of any documents covered by the discovery request,” preserve and collect “all documents within their knowledge” and review those materials “to see whether they indicate the existence of other documents not retrieved or the existence of other individuals who might have documents” and following up).

[10] No. 12-24356-CIV, 2014 WL 800468, (S.D. Fla. Feb. 28, 2014).

[11] Procaps counsel failed to meet with client representatives, failed to meet with IT managers to discuss how ESI would be located, did not retain a consultant to collect or search for responsive data, and allowed/instructed certain executives and employees to conduct manual searches without the benefit of the discovery requests or a list of search terms from counsel, and generally failed to realize that the client never implemented a litigation hold. The Procaps Court assessed fees against Procaps and its counsel, and implemented a preservation protocol that included identification of custodians, conferral with IT personnel to understand the IT infrastructure of the party, cooperative development of search terms to be applied against identified custodians’ ESI, agreement on production formats, imaging of responsive data sources, efforts to recover legacy/deleted data, and laying out a review protocol.

[12] No. 2:11-cv-1122, 2014 WL 2987051 (S.D. Ohio July 1, 2014).

[13] Id. at *2; see also Knickerbocker v. Corinthian Colleges, 298 F.R.D. 670 (W.D. Wash. 2014).

[14] See Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944, 946-947 (11th Cir.2005), Nationwide Lift Trucks, Inc. v. Smith, 832 So. 2d 824, 826 (Fla. 4th DCA 2002), Harrell v. Mayberry, 754 So. 2d 742 (Fla. 2d DCA 2000).

[15] See December 1, 2015 updates to Rule 37(e).

[16] See F.R.C.P. 37(e), Fla. Rule Civ. P., 1.380(e).

[17] See Wilson v. Wal–Mart Stores, Inc., No. 5:07–cv–394–Oc–10GRJ, 2008 WL 4642596, at *2 (M.D. Fla. Oct. 17, 2008) (footnote omitted) (citing Matya v. Dexter Corp., No. 97–cv–763C, 2006 WL 931870, at *11 (W.D.N.Y. Apr. 11, 2006)) (stating that “[a] party is not guilty of spoliation when it destroys documents as part of its regular business practices and is unaware of their potential relevance to litigation.”); Floeter v. City of Orlando, No. 6:05–CV–400–Orl–22KRS, 2007 WL 486633, at *7 (M.D. Fla. Feb. 9, 2007) (denying the plaintiff’s request for spoliation sanctions against the defendant city where “[t]he evidence established that the overwriting of server backup tapes was done as part of a long-standing [c]ity practice.”).