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Preserving Evidence When Litigation is Reasonably Anticipated
The Legal Intelligencer
The recent trial between technology leaders Apple Inc. and Samsung Electronics Co. was closely followed by electronics consumers worldwide. The technology at issue was cutting-edge. However, the case, Apple v. Samsung Electronics, Civil Action 11-1846 (N.D. Cal 2012) (referenced opinions at Docket Nos. 1321 and 1894), also produced an e-discovery opinion that brings us back to the core of a party's duty to preserve evidence in anticipation of litigation. In Apple, the court sanctioned both Apple and Samsung for their failures to preserve potentially relevant information when litigation was reasonably anticipated.
Apple first sought an adverse inference jury instruction against Samsung. The issue was whether Samsung took adequate steps to avoid spoliation of electronic documents after Samsung should have reasonably anticipated the lawsuit. Samsung principally used an internal email system that automatically deleted emails after two weeks. To avoid the automatic deletion, Samsung's employees could select emails that they wanted to preserve past the automatic deletion.
On August 4, 2010, during the course of negotiations between Apple and Samsung for licensing rights, Apple presented to Samsung a detailed analysis of why Apple believed Samsung was infringing upon Apple's patents. After that presentation, on August 23, 2010, Samsung emailed a litigation hold notice to certain Samsung employees, but Samsung's email went to only 27 Samsung custodians. The notice requested that the employees preserve any and all documents that may be relevant to the potential litigation between Samsung and Apple, and specifically stated that there was a reasonable likelihood of future patent litigation. However, Samsung did nothing for the following seven months.
When Apple filed its lawsuit on April 15, 2011, Samsung issued an additional legal hold notice, this time to more than 2,300 Samsung employees, which eventually was increased to more than 2,700 Samsung employees. Following up on this broader litigation hold, Samsung's in-house document preservation team presented Samsung's employees with information regarding the litigation hold, its importance and how to preserve documents. Yet Samsung never stopped its policy of automatically deleting emails after 14 days. To compound that problem, Samsung also never followed up with its employees to determine whether they were complying with the legal hold notice and preserving information.
The court held that Samsung could have reasonably anticipated the litigation in August 2010. At that time, Samsung's duty to preserve evidence arose. Samsung was obligated to "identify, locate and maintain information that is relevant to specific, predictable and identifiable litigation." Furthermore, the court held, Samsung had an obligation to suspend its auto-delete policy. It was insufficient for Samsung to issue a litigation hold to only 27 employees and rely upon its employees to comply. "In effect, Samsung kept the shredder on long after it should have known about this litigation, and simply trusted its custodial employees to save relevant evidence from it."
The day after the court's opinion finding that Samsung had failed to preserve evidence, Samsung filed a motion for sanctions against Apple, arguing that Apple, too, failed to preserve relevant information when it reasonably anticipated litigation. Apple did not issue a litigation hold notice until April 2011, when it brought its suit against Samsung. Samsung argued that Apple's duty to preserve evidence commenced at the same time as Samsung's, or in August 2010, eight months prior to the filing of the litigation.
The court agreed. The court found that, as the plaintiff, Apple was on even greater notice than was Samsung of the reasonable likelihood of litigation. The court rejected Apple's argument that litigation was not reasonably expected until Samsung released yet another generation of allegedly infringing products. Nor did the court give any weight to Apple's argument that Apple had a culture of document retention. Neither one of those arguments absolved Apple from its duty to preserve relevant information for the anticipated lawsuit.
Accordingly, the court held that same jury instruction fashioned for Samsung's failure to preserve evidence would be given for Apple's discovery abuses. Based on these identical adverse inferences, the parties and the court agreed that neither instruction would go to the jury.
The Apple case underscores the significance of in-house counsel's role to preserve evidence for reasonably anticipated litigation before a suit is filed. Often, in-house counsel has information regarding reasonably anticipated litigation before outside counsel.
At the time litigation is anticipated, either as a plaintiff or as a defendant, in-house counsel should consider identifying all of the key players and sources of relevant data and information, and may want to immediately distribute a litigation hold notice. That hold notice must be distributed to a sufficient number of key players. As seen in Apple, distributing the initial hold notice to 27 employees, when there are more than 2,700 employees with relevant information, is insufficient.
Next, in-house counsel may want to instruct an organization's information services personnel or appropriate individuals to suspend the normal document retention policies and require that all electronic information is preserved. It is insufficient for an organization to issue a litigation hold notice and then to rely upon its employees to comply with that hold notice.
Furthermore, once the litigation hold notice is issued, an organization should supervise its employees and remind them of their duty to preserve evidence. An organization may also wish to take additional steps, as possible, to ensure that its employees are complying with the issued litigation hold notice.
By following these principles, organizations can potentially avoid the sanctions imposed upon Apple and Samsung, thereby reducing both litigation risks and costs.
Ryan E. Borneman is an associate in the trial practice group of Duane Morris' Philadelphia office. He practices in the areas of commercial, consumer lending and financial services litigation and appellate practice. The views expressed in this article are those of the author and do not necessarily reflect the views of the author's law firm.
This article originally appeared in The Legal Intelligencer.