In our second annual recap, we are looking back at the year that was in, terms of opinions, centered on legal holds and data preservation. Any expectation that the number of cases would subside fell by the wayside early in 2013 with a number of opinions in the first quarter and the pace has not slackened at all.

The ongoing debate over amending the Federal Rules of Civil Procedure was driving discussions about what constitutes reasonableness and good faith, how and when sanctions should be meted out, and how organizations can mitigate the cost and risk of data preservation. (Read this Corporate Counsel article for more details.)  Certainly the year has continued the trends we’ve seen:

  • Organizations that fail to put a sound legal hold process in place are suffering the consequences;
  • That the courts have demonstrated a continued lack of tolerance for inadequate steps when responding to a preservation duty (while protecting those that have a solid policy and process in place — see RF SUNY); and
  • The risks are ever-increasing, including the rise of new data sources such as social media, mobile devices and third-party custodians.

We now offer to you the Top 10 Legal Hold and Data Preservation Opinions of 2013:

10. Haskins v. First American Title Insurance Co., (D.N.J. Oct. 18, 2012) – This opinion weighed in on a gray area of data preservation when it ruled that “independent agents” were subject to the parent company’s preservation obligation and therefore required to receive a litigation hold. The case delved into issues pertaining to First American Insurance’s “possession, custody and control” of the agents who are critical to their business but are not employees as per FRCP Rule 34(a).

9.   Dunbar v. Google (N.D. Cal. Apr. 2, 2013) – U.S. Magistrate Paul Grewal’s ruling has the potential for far-reaching interpretation regarding the extent to which document revisions are subject to preservation. While the tech behemoth argued that the revisions fell under the Rule 37 ‘safe harbor’ provisions, the court found otherwise and ordered further discovery for prior iterations of the document.

8.   In re Pradaxa Products Liability Litigation, (S.D. Ill. Sept. 25, 2013) – In what is being characterized as one of the largest mass civil lawsuits, defendant Boehringer Ingelheim Pharmaceuticals, Inc. (BIPI) avoided sanctions due to the destruction of a key custodian’s email because it occurred prior to the trigger and in accordance with the company’s document retention policy. The court found that the duty to preserve had not yet attached, nor was the destruction done with willful intent. The court’s analysis provides a textbook example of analyzing trigger events, implementing a document retention policy, and the importance of releasing litigation holds.

7.   Research Foundation of SUNY v. Nektar Therapeutics (N.D.N.Y. May 15, 2013) – The court denied the defendant’s motion seeking an adverse inference instruction and monetary sanctions “on the inability [of the defendant] to adduce evidence suggesting the existence, let alone destruction, of relevant documents.” While documents were lost, the plaintiff did a lot of things well that made an impression on the court. By having a solid policy in place, issuing timely litigation holds, saving backups and auditing custodial compliance, they were able to repel the defendant’s efforts to level harsh sanctions for spoliation.

6.   Christou v. Beatport, LLC (D. Colo. Jan. 23, 2013) – When the case was initiated the plaintiffs “served a ‘litigation hold letter’ on the defendants, directing them to preserve several categories of documents, including text messages.” As the case progressed, no text messages were produced in discovery requests and then it was revealed the defendant had lost his mobile phone along with any texts saved on it. The court acknowledged the spoliation, but deemed an adverse inference to be “too harsh” so opted to allow the plaintiffs to call the defendants’ spoliation to the attention of the jury.

5.   Gatto v. United Air Lines, Inc. (D.N.J. Mar. 25, 2013) – An adverse inference sanction was granted in this personal injury litigation after the plaintiff deactivated his Facebook account resulting in the deletion of the information. While not finding malice, the court found that the defendants’ case was “prejudiced because they have lost access to evidence that is potentially relevant.”

4.   AMC Technology, LLC v. Cisco Systems, Inc. (N.D. Cal. July 15, 2013) – The court denies a motion for sanctions after a laptop was reformatted according to the defendant’s standard retention policies and prior to being identified as potentially relevant. The court concluded that “the scope of this duty is not limitless. A litigant has an obligation to preserve only evidence ‘which it knows or reasonably should know is relevant to the action.’” The court deemed that while the evidence was spoliated after the ‘trigger event’ that Cisco could not reasonably foresee that relevance.

3.   Zest IP Holdings, LLC v. Implant Direct Mfg., LLC (S.D. Cal., Nov. 25, 2013) –  The court issued an order in a patent infringement suit in which it granted an adverse inference and monetary sanctions for spoliation sanctions deemed “grossly negligent.” The ruling saw the defendants’ arguments of “no harm, no foul” and “we saved everything” rejected as defenses for spoliation of evidence. The court established that in this case when preservation failed, in spite of no showing of bad faith, that an adverse inference sanction was an appropriate remedy.

2.   Sekisui American Corp. v. Hart (S.D.N.Y. June 10, 2013)  – An opinion by U.S. Magistrate Judge Frank Maas in which the plaintiff was found to be negligent with respect to actions to preserve relevant data. The court concluded that the defendants failed to demonstrate prejudice, and the requested adverse inference sanction was not warranted. Judge Maas makes reference in a footnote to the proposed amendment to the FRCP Rule 37(e) when upholding the Orbit One standard in which prejudice must be shown.

1.   Sekisui American Corp. v. Hart (S.D.N.Y. Aug. 15, 2013) – U.S. District Judge Shira Scheindlin dramatically overturned Judge Maas’s opinion in which she asserted that the plaintiffs in this action were deserving of an adverse inference and monetary sanctions for gross negligence for willfully destroying evidence and failing to issue an adequate litigation hold. The 32-page ruling presents a forceful rejection of trends from some courts that required prejudice to be demonstrated in order to impose severe sanctions. In reversing the prior opinion in Sekisui, Judge Scheindlin deemed the facts in this case neither required bad faith nor prejudice for an adverse inference.

As 2013 winds down, now is an opportune moment to revisit these opinions and understand how the courts are scrutinizing preservation efforts. The good news is that courts are showing reasonableness when spoliation occurred despite good-faith efforts.

As you move into 2014, understand what gaps may be present in your organization and resolve to address them in the New Year. You can check the maturity of your legal hold processes by seeing how your process compares with the in the landmark Legal Hold and Data Preservation Benchmark Survey 2013. A good starting point is the Legal Hold and Data Preservation Best Practices and look for new exciting educational materials next year.

Have a prosperous 2014!

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