By S. McKinley Gray, III and Stephen C. McIntyre

Editor’s Note: S. McKinley Gray, III and Stephen C. McIntyre are members of the Labor and Employment Practice Group of Ward and Smith, P.A.

With the rise of affordable business technology, businesses of all sizes and complexities now create, save, and delete massive amounts of electronically-stored information and documentation. Transactions, casual communications between co-workers, storage of documents, and a host of other activities which only a few years ago were accomplished in person, by phone, or on paper now are completed through the use of email or other electronic information technology. Often, records and documents relating to these activities are stored, sometimes unintentionally, on electronic devices.

The Good and the Bad

While the use of electronic information technology has resulted in increased business efficiency and lower business costs, its use also has created legal headaches for a number of businesses. Employers faced with litigation often must defend quickly and poorly drafted emails written by their employees which were the result of hasty and poor decision making or a tasteless or tactless sense of humor. Even worse, at other times, employers have been forced to deal publicly with emails and other electronic documents which contain written evidence of their employees engaging in harassing or other inappropriate or even illegal behavior. For example, a tremendous number of sexual harassment claims have been filed because supervisors simply clicked the "Forward" button and distributed inappropriate emails to co-workers. And, of course, the tales of woe resulting from the inadvertent use of "Reply to All" are legion.

In the field of business litigation, parties to lawsuits regularly seek extremely important electronically-stored information from an opposing party, only to find the all-important documents, and the corresponding emails, have been deleted or are no longer accessible. Courts now are doing their best to force businesses to preserve all documents relevant to a lawsuit – especially those documents that have been stored electronically.

The Law

Generally, all parties to a lawsuit are required to preserve evidence from the point in time when they first "reasonably anticipate" litigation. When a party fails to preserve relevant documentation and other stored information after that point in time, the party can be subject to judicially-imposed sanctions for the destruction or deletion of that documentation. In legal terminology, this is called "spoliation" of evidence.

While there is a lot of room for argument on the time at which a party should be held to have "reasonably anticipated" litigation, what is clear is that the duty to preserve evidence often attaches long before a lawsuit officially is filed. What also is clear from recent court decisions is that the deletion of relevant electronic information is becoming a routine reason for judges to impose harsh sanctions upon businesses and other private parties for spoliation of evidence.

Recent Cases

Judges across the country now are required to apply age-old spoliation of evidence principles to new-age information technology. The results have been significant sanctions against parties. Even more daunting, judges in some recent cases have held that if the case gets to trial, an instruction will be given to the jury that essentially creates a presumption against the party that failed to preserve relevant electronic information. For example, in January 2010, a federal judge in New York sanctioned a number of parties in a multi-party case for not preserving electronic records. The federal judge forced those parties to pay a significant portion of the opposing parties’ attorneys’ fees, and the judge also ruled that an adverse jury instruction would be given at trial simply because of the failure to appropriately preserve electronic information. In February 2010, a federal judge in Texas imposed sanctions on a party to a lawsuit and stated that an adverse jury instruction would be given at trial because of the party’s willful destruction of electronic evidence. The adverse instruction is usually to the effect that the jury can presume that the electronic evidence destroyed would have been harmful to the case of the party destroying it. This instruction often is devastating to that party’s case.

How to Minimize the Likelihood of Sanctions

All businesses that use information technology face the difficult task of determining what to save and what to delete. While all businesses have some risk of being named a party to a lawsuit and facing an electronic document discovery request for a document that was deleted, there are ways in which a business can minimize the likelihood that it will face sanctions if litigation arises.

First, businesses need to develop, implement, and consistently enforce an effective electronically-stored information litigation policy. The policy should be communicated to employees and should explain the importance of preserving relevant electronic documents which might be subject to litigation. The policy also should require all employees to report to management any matter or event the employees think might result in litigation by or against the business.

Second, businesses should put a competent person or team of persons in place who:

(1) Will be apprised by members of management or any employee of any potential litigation either by or against the business;

(2) Can identify employees who might have relevant information to a lawsuit if one is reasonably anticipated;

(3) Can implement a written "litigation hold" which instructs employees who have potentially relevant information to preserve and deliver to the person issuing the litigation hold all relevant information, whether stored electronically or otherwise; and,

(4) Can collect and review (or at least organize for a third party such as outside counsel to review) the information produced in response to the litigation hold.

The issuance of the written litigation hold should be documented, describe the subject matter of the litigation, and be distributed to all persons who might have access to relevant documentation or information.

Third, businesses need to ensure that they have the appropriate information technology and competent personnel that have the ability to stop automatic deletion programs. Businesses, often for legitimate electronic storage space reasons, routinely delete all emails and/or other documents that are over a certain number of days or months old. While such policies are legal, they can cause a business to face severe sanctions if the automatic deletion program is allowed to run its course during the time in which the business should have reasonably anticipated litigation. Once litigation is reasonably anticipated, it is essential that a written litigation hold be issued, implemented, and documented, and the business should stop the automatic deletion of any files which might be relevant to the upcoming litigation.

Fourth, management should stay in contact with those employees who might have relevant information to ensure that any and all new information is being provided to the appropriate person or persons handling the case.

Most important of all, a business must train all of its employees to understand that willful deletion of electronic information relevant to reasonably anticipated litigation can lead to severe sanctions. While physically sticking a paper document into a shredder and hiding the remains seems worse than simply pressing the "Delete" button on a computer keyboard, courts now are recognizing that both actions are essentially identical and equally improper.

Conclusion

Businesses are producing and deleting more electronic information than ever. It is extremely important that all businesses stay mindful of their obligation to preserve all relevant electronic information once they reasonably anticipate litigation. Failure to preserve relevant documentation not only can subject a business to severe sanctions, but it also could cause it to lose a case which it otherwise would have won.

© 2010, Ward and Smith, P.A.

Ward and Smith, P.A. provides a multi-specialty approach to the representation of technology companies and their officers, directors, employees, and investors. S. McKinley Gray, III and Stephen C. McIntyre practice in the Labor and Employment Practice Group where they represent clients in a wide range of employment litigation, regulatory, and legislative matters. Comments or questions may be sent to smg@wardandsmith.com or scm@wardandsmith.com.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.