With the proliferation of email communication and other electronically stored information (“ESI”), litigation over the handling of ESI has also grown in scope, complexity and expense. In this post, we discuss the issue of the destruction of ESI, making relevant documents unavailable for exchange in pre-trial discovery. Clearly, a party found to have intentionally deleted incriminating email is subject to serious sanction by the courts. Inadvertent destruction of ESI, such as failing to shut off an auto-delete function in Outlook or on a backup drive, can also land a party in hot water.
The general rule is that a party should implement a “litigation hold” when it reasonably anticipates litigation. The litigation hold should be crafted with counsel and delivered to all potential document custodians or persons that might have relevant ESI or other documents. Oftentimes, counsel will need to consult with IT staff to understand a client’s network architecture and develop protocols to ensure overwrite, delete or other functions are disabled and to collect and preserve potentially relevant ESI for review by counsel or other qualified persons.
In the seminal 2003 decision in Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y.), the Federal District Court in Manhattan held that “[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.” The Zubulake decision has been followed by the courts in New York and across the country.
In VOOM HD Holdings LLC v. EchoStar Satellite L.L.C., 93 A.D.3d 33, 939 N.Y.S.2d 321 (1st Dep’t 2012), defendant started sending notices to plaintiff of alleged breaches and termination of the parties’ agreement for the distribution of television programming over a satellite network. Defendant, however, did not issue a litigation hold letter to its employees until after the start of the lawsuit and did not suspend email auto-delete until four months after the lawsuit started. Defendant also allowed its employees to unilaterally determine which emails should be preserved, instead of collecting all potentially relevant documents. Potentially relevant email were lost. Defendant’s main defense was that it did not expect full blown litigation because it was in heavy settlement discussions with plaintiff.
The appellate court covering Manhattan and Bronx adopted Zubulake and held that a party “reasonably anticipates litigation” when it is on notice of a “credible probability” that it will be involved in a lawsuit, seriously contemplates commencing a lawsuit or takes specific actions to commence a lawsuit. The court found the defendant reasonably anticipated litigation when it started sending termination and breach notices and itemized a laundry list of defendants’ failures in not putting in place a comprehensive litigation hold. The court affirmed the lower court’s sanction of the defendant for its spoliation of ESI by granting that an adverse inference instruction against defendant would be issued at trial, i.e. an instruction to the trier of fact to assume the unpreserved document was adverse to the party.
It is critically important that a party facing any prospect of business litigation consult early on with an experienced litigation attorney about a proper litigation hold. If you have any questions regarding litigation holds and the preservation of documents, please do not hesitate to contact us.