Don’t Call Discovery Over Document Retention Policies Premature After You Admit Destroying Relevant Discovery

A Defendant sought reconsideration of a Court order allowing discovery on their document retention policies and litigation hold strategy on the grounds 1) the order was premature and 2) it was irrelevant and not discoverable. Cactus Drilling Co. v. Nat’l Union Fire Ins. Co., 2014 U.S. Dist. LEXIS 45251, 11-14 (D. Okla. 2014).

The Court denied the motion.

The discovery at issue centered on a key player who left the Defendant’s company whose files were accidently destroyed. The Court stated:

Plaintiff is entitled to inquire into the circumstances of the destruction of such relevant files while this litigation is pending, whether defendants took proper precautions, and whether such precautions were actually exercised by defendants’ employees. Thus, clearly a discovery request on defendants’ document retention and litigation hold practices and policies and whether such policies were followed with respect to Ms. Valerio’s hard copy Cactus file is relevant and discoverable.

Cactus, at *13.

The Court also held that the order was not premature, as the Defendants requested a ruling on whether they had to produce the discovery and witness for deposition in their Joint Status Report. Cactus, at *12.

The parties were ordered to meet and confer over privilege and stipulation issues over the pending discovery. The Court “vented” over the parties prior cooperation in a footnote:

The Court has been disappointed with the parties’ inability to communicate in good faith and work out many discovery issues that could have been resolved between the parties. Such behavior has necessitated repeated intervention by the Court, unnecessarily and significantly depleting the Court and the parties’ valuable time and resources. Accordingly, the Court advises the parties that it will not look favorably on any party engaging in less than good faith behavior that leads to further abuse of the Court’s time and resources.

Cactus, at *14, fn 5.

Bow Tie Thoughts

Discussing the preservation of discovery, its scope and privilege is NEVER premature. These issues should be at the first meet and confer. Attorneys should be actively thinking about preservation the moment the case begins. Lawyers cannot afford to take a “let’s see how the motions go” before ensuring discovery is preserved.

Why do attorneys wait to exercise their duty of competency to ensure the preservation of discovery? Some might not know how to, others might not want to spend the money and others might think they can keep their clients happy by having the least amount of intrusion. These are all bad reasons.

An effective client interview and litigation hold strategy is less invasive then the joys of a person most knowledgeable deposition over how a litigation hold was enacted. Moreover, motion practice is not known for its low billable hours.

There are some lawyers who model their meet and confer strategies right out of Tombstone. This is not a good idea. There are issues worth fighting about, but methods of preservation, the scope of discovery, and other technical issues should stay objective. These issues are vital for moving the case forward, but are not worth brawling over. Save the fight for the merits.

No Sanctions for Following Records Retention Policy

ThinkMcFly_DocRetentionIt is not every day you see lawsuits about insurance policies from 1986 to 1987.

Add Judge  Paul Grimm’s powerhouse footnotes and you get a great lesson in document retention policies and litigation holds (plus a great footnote on the state of mind exception to hearsay for all the evidence fans).

This asbestos insurance coverage litigation was not filled until November 2012. As one could expect, there were significant gaps in documents from the passage of time. The Court stated the following regarding the destruction of documents in footnote 6:

Were there any evidence in the record to show that AC&R so much as had threatened legal action before the destruction of those documents, it might be sufficient to find that PMA acted improperly in destroying its documents and was not prejudiced by the passage of time. See Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 524 (D. Md. 2010) (“It generally is recognized that when a company or organization has a document retention or destruction policy, it ‘is obligated to suspend’ that policy and ‘implement a “litigation hold” to ensure the preservation of relevant documents’ once the preservation duty has been triggered.” (citation omitted) (emphasis added)). Because the duty to retain documents did not arise for PMA until after their destruction, it cannot be penalized for following its records retention policy.

Ac&R Insulation Co. v. Pa. Manufacturers’ Ass’n Ins. Co., 2014 U.S. Dist. LEXIS 9063, 29-30 (D. Md. 2014).

Bow Tie Thoughts

You cannot sanction a party for following its normal document retention and destruction policy if there is no duty to preserve. Correspondence that took place during the Reagan years is highly unlikely to still exist as a simple matter of a company’s document destruction policy.

What will be an interesting question is litigation in the 2030s. Will electronically stored information on 20 year old external hard drives still be reasonably accessible if they still exist? Will such “old” information be proportional to the merits of a case? I only have to look at my old laptop from law school to imagine the challenge in recovering old civil procedure outlines.

My gut instinct is the answers to these questions will be “no.” However, let’s see what the future holds.

You Need a Duty to Preserve Before Issuing Sanctions

In a case where the Court called the Defendants’ disclosures troubling, the Plaintiffs sought sanctions for the failure to back-up hard drives or issue a litigation hold.

There was one big problem with the Plaintiffs’ argument: they did not prove that the Defendant had a duty to preserve the email when it was destroyed. Magnuson v. Newman, 2013 U.S. Dist. LEXIS 138595, at *44 (S.D.N.Y. Sept. 25, 2013).

The Court stated the earliest the Defendants could have been on notice of the duty to preserve was on August 18, 2010, when they were served the original complain. Magnuson, at *45. Additionally, the Defendants had a three-month email retention policy. Id. 


The Plaintiffs did not even argue the timing of the destruction of the email, instead focusing exclusively on the fact the Defendants:

1) Did not back up their computers or;

2) Issue a litigation hold. Id.

In the Plaintiffs’ view, that amounted to per se gross negligence. Id. 

The Court noted that the Plaintiffs did not cite any authority requiring the Defendants to “back-up” their computers. Magnuson, at *45-46.

The Court stated the Second Circuit abrogated the holding of Pension Committee’s holding that it is gross negligence per se to not issue a litigation hold. Id. Moreover, whether a party failed to failed to issue a litigation hold is one factor in determining whether a party should be sanctioned for spoliation. Magnuson, at *46.

The Plaintiffs failed to demonstrate that the duty to preserve had yet triggered when relevant email was lost as a part of a routine data retention policy. As such, sanctioned were not warranted, however the Court warned that it would preclude any late emails from being introduced at trial. Id. 

Bow Tie Thoughts

The duty to preserve is the trickiest part of litigation for attorneys in my opinion. Lawyers have to give clients news they do not want to hear that can disrupt business. Often times lawyers are in denial about having to learn how clients communicate to identify relevant sources of ESI. Despite these challenges for many, there is simply no escaping the duty to preserve.

That being said, lawyers cannot argue sanctions are warranted if there was no duty to preserve. Moreover, the failure to issue a litigation hold is one factor in determining sanctions, not an outcome determinative fact.

Of Diapers & Litigation Hold Sanctions

Diapers. Perhaps the most effective tool for encouraging family planning. Now a messy diaper shipment case delivers a message on the importance of issuing a litigation hold.


A Defendant brought a sanctions motion against a Plaintiff for their alleged failure to preserve evidence in a case over $3 million worth of diapers.

The Plaintiff admitted they had a duty to preserve electronically stored information. That did not happen because a formal litigation hold was not issued.

The Plaintiff’s failure to issue a litigation hold was not gross negligence per se under Chin v. Port Auth. of N.Y. & N.J., 685 F.3d 135, 162 (2d Cir. 2012) cert. denied, 133 S. Ct. 1724, 185 L. Ed. 2d 785 (U.S. 2013).

The Court stated, “the facts here establish that SJS’s failure to take the most basic document preservation steps, even after it discovered the packaging nonconformities and filed this action, constitutes gross negligence. Such failure is particularly inexcusable given that SJS is the plaintiff in this action and, as such, had full knowledge of the possibility of future litigation.” Sjs Distrib. Sys. v. Sam’s East, Inc., 2013 U.S. Dist. LEXIS 147549, at *10-17 (E.D.N.Y. Oct. 11, 2013), citing Sekisui Am. Corp. v. Hart, No. 12 CV 3479, 2013 U.S. Dist. LEXIS 115533, at *6 (S.D.N.Y. Aug. 15, 2013). This failure met the Defendant’s burden to show the Plaintiff was culpable for the loss of ESI. Id. 

Judicial Spoliation Wipes

BabyRedDiaperJudges look forward to disputes on whether lost email was relevant to case as much as changing a diaper.

The Court found that some of the Plaintiff’s lost email messages would have related to the business transaction between the parties. However, there was no extrinsic evidence of the relevance specifically. Sjs Distrib. Sys., at *11-13.

The Court had to determine a sanction that would (1) deter parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore “the prejudiced party to the same position [it] would have been in absent the wrongful destruction of evidence by the opposing party.” Sjs Distrib. Sys., at *13-14, citing Goodyear Tire & Rubber Co., 167 F.3d at 779.

The Court refused to issue a preclusion order on the Plaintiff from using any documentary evidence after a specific date relevant to the lawsuit. The Defendant had recovered some of the Plaintiff’s communications from 3rd parties and their own records. Sjs Distrib. Sys., at *14. Preclusion was simply too drastic a sanction, given the fact there were other ways to find some of the relevant email communications.

The Court held the proper sanction was an adverse inference against plaintiff that it negligently deleted emails in the fall of 2010 that would have been relevant and favorable to defendant. The Court reasoned that such an order would restore the Defendant to the same position it would have been absent the destruction of ESI by the Plaintiff. Sjs Distrib. Sys., at *15-16. 

The Court also ordered an award of fees to be determined after reviewing the Defendant’s time billed for the motion. Id. 

Bow Tie Thoughts 

Attorneys have to take litigation holds seriously. That means having a set plan for communicating to a client’s custodians, identifying data sources and ensuring ESI is being properly preserved. The duty to preserve is not something that can be said in passing to a HR manager in the hopes it is done correctly. Have a plan and take action.

There are many tools on the market for issuing litigation holds. I have many friends at Legal Hold Pro that have a great cloud solution for issuing holds, tracking interview responses and documenting compliance. There are other options available.

The cost to use one of these tools is not prohibitive. Cloud solutions help keep fees reasonable. Moreover, the cost to a firm’s reputation because a Judge said a firm was “grossly negligent” in their duty to preserve is far more costly than properly issuing a litigation hold.

2012 Case Law Year-In-Review

2012 eDiscovery Case Law included everything from Tweets to Computer-Assisted Review. However, there was also a very basic theme that is hard to ignore: Cases should be about the merits. And for cases to be decided on the merits, attorneys need to educate themselves on electronic discovery so they know what to argue to a Judge.

Many 2012 cases focused on search terms search term efficiency, demonstrating undue burden, and proportionality, which all highlighted the need for attorneys to understand electronic discovery. Attorneys cannot competently represent their clients without understanding what technology is relevant in a case; the possible sources of electronically stored information; and what technology to use to review electronically stored information.

I discuss many of these cases in my Year in Review, available on the above YouTube link and on my podcast channel.

I wish everyone a very success 2013.

Audio Recording Sanction Blues

Many eDiscovery attorneys associate Chicago with 1) the Blues Brothers and 2) Magistrate Judge Nan Nolan.

AudioTapeJudge Nolan granted in part and denied in part a motion to compel in an employment dispute.

The Judge found the Defendant had a duty to preserve audio recordings of calls that had been destroyed under the company’s retention policy.

The Court further held that the destruction of an audio recording to be grossly negligent or supported a finding of fault.

As such, the Defendants were to be sanctioned with a presumption at the summary judgment stage as to whether plaintiff hung up on a customer, and if the case went to trial, the court should instruct the jury with a “spoliation charge” to be determined by the District Court.   Banks v. Enova Fin., 2012 U.S. Dist. LEXIS 170000, 1-2 (N.D. Ill. Nov. 30, 2012).

The Defendants quickly found an expressway to the District Court, arguing the Magistrate Judge’s order was clearly erroneous. Id.

I Can’t Turn You Loose

The Defendant argued the Magistrate Judge did not have the authority to impose sanctions under a court’s inherent power without bad faith in the Seventh Circuit. There was no citation to any case law for this position. Banks, at *4-5.

While adverse inference instructions do require a showing of bad faith, the Court did not find any bad faith related to the destruction of the tapes. Banks, at *5. However, the District Court noted that the Magistrate Judge did not issue an adverse inference instruction and it was within the Court’s discretion to craft sanctions proportional to a case. Banks, at *6.


The Defendant also challenged the Magistrate Judge’s finding the Defendant had a duty to preserve.  The Court found the Defendants had a duty to preserve the audio recordings based on 1) the termination of the employee based on the phone calls; 2) the Plaintiff’s meeting with his supervisor over his termination; 3) the unemployment claim litigation; and 4) the EEOC charge. Banks, at *6-7.

The Seventh Circuit’s case law states that the duty to preserve arises when a party “’knew, or should have known, that litigation was imminent.” Banks, at *7, citing Viramontes v. United States Bancorp, 2011 U.S. Dist. LEXIS 7850 (N.D. Ill. Jan. 27, 2011).

The District Court noted the issues with terminating an employee alone being a triggering event for a lawsuit:

It would be too onerous a burden to place on all employers a duty to preserve any and all documents that form the basis for the termination of an employee because of the possibility that the terminated employee might sue.

Banks, at *7.

The District Court upheld the Magistrate Judge’s findings that the Defendant had a duty to preserve, because the Defendant could reasonably anticipate litigation when the Plaintiff brought his unemployment claim. Banks, at *7.

The central issue in the dispute was whether the Plaintiff hung up on a customer. The key evidence for his termination were the audio recordings, which still existed when the Defendant appealed the Plaintiff’s initial award of unemployment benefits, however were later destroyed. Banks, at *7-8.

Bow Tie Thoughts

The duty to preserve is a malpractice area for attorneys when transitioning from records information management to a litigation hold. Moreover, eDiscovery is now years beyond email messages and Excel files. Attorneys must discuss with their clients the different electronically stored information in their possession, how they communicate both internally and externally, and what ESI can be related to the subject matter of the lawsuit.

Voicemail/audio recordings is just one example of ESI that can be overlooked. Text messages and social media are already “common” in litigation. It is only a matter of time before augmented reality will start appearing in litigation.

Attorneys must be proactive in conducting client interviews and understanding the types of ESI that can be subject to a lawsuit. To not do so is to risk singing the blues at a sanctions hearing.

Remote Control Duty to Preserve

Can a party issue a litigation hold to one of its contractual agents to preserve information by remote control?

The answer is yes, yes they can.

In Haskins v. First Am. Title Ins. Co., the first issue was whether the Defendant was in “possession, custody, or control” of documents held by its “independent title agents,” and second whether the Defendant had a duty to direct its agents to “preserve” the documents. Haskins v. First Am. Title Ins. Co., 2012 U.S. Dist. LEXIS 149947 (D.N.J. Oct. 18, 2012).

By way of background, the lawsuit involved allegations of overcharging on title insurance. The “independent title agents” issued most of the policies. Haskins, at *1-2.

Under Federal Rule of Civil Procedure Rule 34(a), a requesting party can request information within an opposing party’s “possession, custody, or control.” This does not actually require physical control. Haskins, at *3.

Moreover, the Court explained, “It logically follows that a litigating party has control of documents if a contractual obligation requires a non-party to provide requested documents to the litigating party upon demand.” Haskins, at *4.

Furthermore, a party has control if it has “a right to access the [requested] documents or obtain copies of them.” Haskins, at *4, citing Andrews v. Holloway, 256 F.R.D. 136, 145 n.13 (D.N.J. 2009).

The Court zeroed in on the Defendant’s contracts with its agents that gave the Defendant control of the files, because the Defendant the right to access and use of the files. Haskins, at *6-8.

Litigation Hold Overview

Case law holds that a party has a duty to preserve when a party “knows or reasonably should know” that litigation is foreseeable. Haskins, at *11-12, citing Mosaid Techs. Inc. v. Samsung Elecs. Co., Ltd. 348 F. Supp. 2d 332, 336 (D.N.J. 2004). Once there is a duty to preserve, a party must “put in place a litigation hold to ensure the preservation of relevant documents.” Haskins, at *12, citing Major Tours, Inc. v. Colorel, No. 05-3091(JBS/JS), 2009 U.S. Dist. LEXIS 68128, at *2 (D.N.J. Aug. 4, 2009).

In the age of smartphones and complex networks, the Court stated for a hold to be “suitable” (probably code for reasonable), “a party must identify potentially relevant sources of information, implement procedures to retain that information, and produce information responsive to discovery requests.” Haskins, at *12.

If there is a failure to preserve data and a party seeks spoliation sanctions, a party must demonstrate four factors:

1) The evidence must have been in the party’s control;

2) It must be relevant to claims or defenses in the case;

3) It must have actually been suppressed or withheld by the party; and

4) The duty to preserve evidence must have been reasonably foreseeable to the party.

Haskins, at *12-13, citing Bull v. United Parcel Serv., Inc., 665 F.3d 68, 73-74 (3d Cir. 2012).

The Court held that the Defendant had a duty to preserve, because litigation was active and the material relevant. As such, the Defendant was required to issue a litigation hold of documents within its possession, custody or control. As the Court explained, control did not require physical control, but contractual control was enough to require the Defendants to issue a litigation hold to its independent agents.

Bow Tie Thoughts

The duty to preserve can become tricky with third parties bound by contractual obligations that show control over data. The issue of data stored in “cloud computing” could become extremely complicated, especially if data is hosted in different states or countries from the venue of a lawsuit.

In the end, control of “cloud storage” will be a review of  “Terms of Service” in contractual agreements, most of which are likely clickwrap agreements. These cases will be interesting to watch, especially as more companies host data in a “cloud.”