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Ordinary efforts sometimes just are not good enough. The courts have been raising the standards for preserving electronic evidence, and they expect companies to comply. Businesses, to their chagrin, are finding that they may face stiff sanctions unless they adopt new, more aggressive measures to protect electronic information that may be subject to discovery. And these measures may need to be put in place even if a company is not yet involved in any lawsuit. The dangers facing companies and their counsel are highlighted by two recent cases. In Landmark Legal Foundation v. EPA, 272 F. Supp. 2d 70 (D.D.C. 2003), the Environmental Protection Agency (EPA) found itself in hot water because e-mails on some backup tapes were deleted, despite efforts by the agency’s office of general counsel to notify employees of the need to preserve evidence. The e-mails were covered by a preservation order, but were destroyed pursuant to the EPA’s normal document-retention policy. The court was extremely displeased by this action, finding that the EPA had not taken reasonable steps to modify its procedures. The judge held the EPA in contempt and ordered it to pay the plaintiff’s legal fees. The closely watched case of Keir v. Unumprovident Corp., No. 02 Civ. 8781, 2003 WL 21997747 (S.D.N.Y. Aug. 22, 2003) illustrates how easy it is for even a sophisticated company with highly regarded legal counsel to accidentally violate a preservation order. Unumprovident was required by the court to preserve all relevant evidence as of the date of the complaint, including e-mails found on backup tapes and backup hard drives. However, the company’s information technology (IT) staff decided that preserving a full backup would take too much time (15 days). Instead, with counsel’s approval, the IT staff asked the company’s IT provider, International Business Machines Corp. (IBM), to take a snapshot of the data on the company’s e-mail system as of a specific date. Unfortunately, the IT staff failed to provide IBM with a copy of the court’s preservation order and failed to tell IBM to preserve all e-mails on the backup tapes. The defendant’s counsel failed to correct these oversights; the attorneys had no meaningful discussions with IBM. The result was that IBM’s snapshot included only e-mails extant on the indicated date and that IBM unwittingly overwrote the archived e-mails on the backup tapes. The court found that Unumprovident’s failure to preserve the electronic data was unintentional, but the judge nevertheless sharply criticized the company’s poor compliance with the preservation order. Now the company is waiting to find out what sanctions the court will impose. This case should provide a major wake-up call to businesses and their lawyers about the need to bend over backward in order to protect electronic evidence. The seminal case in this area, In re Prudential Ins. Co. of Am. Sales Practice Litigation, 169 F.R.D. 598 (D.N.J. 1997), holds that a company’s good intentions are not enough to protect it if the company fails to protect electronic evidence. There was no suggestion in this case that Prudential or its employees engaged in intentional spoliation of evidence. On the contrary, Prudential (like Unumprovident and the EPA) told its employees about the need to preserve documents-but the court found that these efforts were insufficient. Because Prudential failed to create a comprehensive document-preservation plan and distribute it to all employees, the court imposed a $1 million fine and ordered new measures to enforce the document-preservation order. And as the EPA recently learned, compliance with ordinary document-retention policies will not excuse a party’s failure to preserve relevant evidence. Even before the computer age, this was the law. For example, in Lewy v. Remington Arms, 836 F. 2d 1104 (8th Cir. 1988), the 8th U.S. Circuit Court of Appeals ruled that document-retention policies must be adjusted to preserve records that the company believes may be the subject of reasonable discovery requests. The need to act early A company is clearly obligated to preserve relevant evidence once a complaint is filed against it. See, e.g., Turner v. Hudson Transit Lines Inc., 142 F.R.D. 68,73 (S.D.N.Y. 1991) (defendant had notice of relevance of records from the time of complaint and therefore had a duty to preserve those records thereafter). However, a growing trend among federal courts is to impose the obligation to preserve documents earlier, as soon as a party knows that its electronic information may be relevant to a foreseeable litigation. See, e.g., Silvestri v. General Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001) (spoliation encompasses the failure to preserve evidence “in pending or reasonably foreseeable litigation”); Kronisch v. United States, 150 F.3d 112, 126 (2d Cir. 1998) (the duty to preserve material evidence arises when a party should know of the evidence’s relevance to future litigation); Zubulake v. UBS Warburg LLC, No. 02 Civ 1243, 2003 WL 22410619 (S.D.N.Y. Oct. 22, 2003) (duty to preserve arose when the “relevant people at UBS anticipated litigation” some 10 months before the lawsuit and three months before the Equal Employment Opportunity Commission discrimination charge). If a party fails to preserve electronic evidence properly, it can face tough sanctions, including adverse inference instructions, preclusion sanctions, default judgments as well as costs and attorney fees. For example, in Linnen v. A.H. Robins Co., 10 Mass. L. Rptr. 189 (Super. Ct. 1999), the court imposed an adverse “spoliation inference” instruction because the defendant negligently destroyed its backup e-mails. The court also required the defendant to pay the plaintiff’s attorney fees and costs relating to the e-mail discovery issues. In Metro. Opera Ass’n v. Local 100, Hotel Employees Int’l Union, 212 F.R.D. 178 (S.D.N.Y. 2003), the court granted summary judgment against the defendant because it had committed multiple discovery abuses, including a failure to look for, preserve or produce electronic documents. (Recently, the defendant union and its law firm moved to have the judge in that case recused. See Tamara Loomis, “Law Firm, Union Client Seek Recusal of U.S. Judge,” N.Y. Law Journal, Oct. 22, 2003.) Another remedy is for the court to award the requesting party broad rights to rummage through the offender’s electronic data. Thus, in Tulip Computers Int’l v. Dell Computer Corp, 52 Fed. R. Serv. 3d 1420 (D. Del. 2002), the defendant’s lack of discovery diligence resulted in a court order that allowed the plaintiff’s expert to review electronically all the e-mails of the defendant’s key employees. In GTFM Inc. v. Wal-Mart Stores Inc., 49 Fed. R. Serv. 3d 219 (S.D.N.Y. 2000), as a sanction for the defendant’s misrepresentation about the extent of its computer records, the court ordered an on-site inspection of these records. This essentially gave the plaintiff free rein to examine the defendant’s computer files. However, the failure to preserve evidence will not always result in sanctions. Sanctions will not be awarded if the producing party made a good-faith effort to preserve relevant evidence, and if the requesting party is unable to show it has been prejudiced by the loss of the data. Thus in Hildreth Mfg. LLC v. Semco Inc., 785 N.E.2d 774 (Ohio Ct. App. 2003), the court denied sanctions for the negligent destruction of data on the plaintiff’s hard drives because it was extremely unlikely that these drives had contained any relevant data. In the end, of course, few prudent businesses would want to find out whether their failure to protect electronic evidence will result in severe sanctions. A safer alternative for companies and their counsel is to be diligent in satisfying the new, stringent judicial requirements for preserving evidence. Whitney Adams is general counsel of Cricket Technologies, based in Reston, Va., and a former litigator. She served as deputy general counsel at the Commodity Futures Trading Commission, assistant general counsel at the Securities and Exchange Commission and assistant U.S. attorney for the District of Columbia. Larry R. Leibrock, who holds a Ph.D. in information sciences, was, until recently, the chief technology officer for McCombs Business School at the University of Texas at Austin and a professor of management information systems.

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