July 05
Electronic Evidence Update: How to Help Clients Meet Their Duty to Preserve Evidence in the Computer Age
by Mark D. Walters and Wright Noel
When it comes to electronic discovery in litigation, the reality is that many lawyers and companies fail to address the issue thoroughly. Many attorneys now ask for e-mails, word-processing documents, and spreadsheets in discovery, knowing quite well their opponent will not fully comply with the request. Further, many attorneys do not have an understanding as to how their clients and opponents should meet their legal obligations for evidence preservation and electronic discovery. Hence, they cannot communicate effectively on the issue, and they gloss over it as best they can, which is often not very well. In fact, the unspoken truth of electronic evidence preservation and discovery today is the widespread use of “don’t make me and I won’t make you.”
This approach is risky for a number of reasons. First, most documents today are created on computers, and many of these documents are never printed on paper. According to a 1999 study conducted by researchers at the University of California, Berkeley, 93 percent of all information created in 1999 was generated in digital form, meaning on a computer. The numbers are probably higher now because computers are used for even more purposes than in 1999 (e.g., e-mail, instant messaging, digital photographs, computerized voice mail and faxes, Blackberries, etc.). Further, 70 percent of all documents are never printed on paper.1 In other words, 70 percent of documents created today never make it to the file cabinet. To complicate matters further, computers automatically overwrite and destroy deleted documents and files, which are discoverable.2 Indeed, by continuing to use their computers, your opponent and your client may be deleting relevant and discoverable information. Attorneys cannot ensure that their clients are meeting their duty to preserve evidence unless they are familiar with the electronic evidence issues, and they review those issues with their clients. This needs to occur early in the case.
A string of decisions in an employment case from the Southern District of New York, Zubulake v. UBS Warburg, Inc., appears to have set new benchmark standards for modern discovery and evidence-preservation issues. The five Zubulake cases3 first gained notoriety when the court announced a new seven-factor test in Zubulake I for how courts should analyze cost-shifting arguments for electronic discovery.4 More recently, in Zubulake IV and Zubulake V, the court addressed two important issues regarding electronic discovery that all attorneys should pay attention to: (1) what electronic records must potential litigants preserve, and (2) what must attorneys do to help their clients meet their duty to preserve?
What Evidence Must Potential Litigants Preserve?
In Zubulake IV, the court answered the question: What documents must companies preserve when they are on notice of potential litigation? Zubulake IV instructs attorneys and potential litigants to identify the key players and take appropriate steps to preserve and “retain all relevant documents (but not multiple identical copies) in existence at the time the duty to preserve attaches and any relevant documents created thereafter.”5 The court stated that, at the time the duty to preserve arises, litigants can preserve relevant backup tapes, make mirror images of selected hard drives, and implement other steps to ensure that discoverable and relevant documents are preserved.6
Under current discovery rules, companies are required to preserve a broad range of documents: ones “likely to have discoverable information that the disclosing party may use to support its claims or defenses.” While potential litigants are not required to save every backup tape, they are required to preserve all documents, including all electronic documents, known to contain information relevant to the dispute. Each company and attorney must make their own decisions, but it is perhaps safest to follow Zubulake IV’s guidance and retain all relevant backup tapes and make mirror images — or clones — of the key employees’ hard disk drives. Taking these steps will preserve the universe of documents that exists at the time the duty to preserve arises.
How to Help Clients Meet Their Duty to Preserve Evidence
Representing companies that use computers in their day-to-day operations — all companies today — requires lawyers and in-house counsel to become familiar with technology related to document creation and preservation, because lawyers must consult with their clients, and their clients’ information-technology departments, on the need to preserve electronic documents.
In Zubulake V, the court set forth three ongoing steps lawyers should follow to help their clients preserve documents: (1) issue a litigation hold; (2) talk to the key players regarding document preservation; and (3) obtain the electronic documents:
First, counsel must issue a “litigation hold” at the outset of litigation or whenever litigation is reasonably anticipated. The litigation hold should be periodically re-issued so that new employees are aware of it, and so that it is fresh in the minds of all employees.
Second, counsel should communicate directly with the “key players” in the litigation, i.e., the people identified in a party’s initial disclosure and any subsequent supplementation thereto. Because these “key players” are the “employees likely to have relevant information,” it is particularly important that the preservation duty be communicated clearly to them. As with the litigation hold, the key players should be periodically reminded that the preservation duty is still in place.
Finally, counsel should instruct all employees to produce electronic copies of their relevant active files. Counsel must also make sure that all backup media which the party is required to retain is identified and stored in a safe place.7
To fulfill these obligations, the Zubulake V court stated that attorneys “must become fully familiar with their client’s document retention policies, as well as the client’s data retention architecture.”8 This may require attorneys to learn new skills and subject matter so they can truly communicate with the key players and information-technology personnel, and so they effectively and competently monitor the litigation hold on an ongoing basis:
In short, it is not sufficient to notify all employees of a litigation hold and expect that all relevant information will then be retained and produced. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched. This is not to say that counsel will necessarily succeed in locating all such sources, or that the later discovery of new sources is evidence of a lack of effort. But counsel and client must take some reasonable steps to see that sources of relevant information are located.9
The three steps Zubulake V announced appear to be emerging as the benchmark standards for helping clients meet their evidence preservation duty. Hence, litigators and in-house attorneys should consider adopting these steps into their practice when advising clients on evidence preservation issues when litigation appears likely.
What Could Happen If Your Client Fails to Preserve?
Lawyers who know electronic-evidence issues can often gain an advantage through discovery. In many cases, they can show through depositions that the other side failed to meet its evidence-preservation obligations. In Zubulake V, the court found that the employer failed to preserve and produce all discoverable electronic documents. As a result, the court ordered the employer to produce the improperly withheld documents; pay to retake certain depositions; pay the attorneys’ fees and costs the employee incurred in the discovery fight; and, substantially swinging the case in the employee’s favor, the court ruled that it would give the following adverse-inference jury instruction:
You have heard that [the employer] failed to produce some of the e-mails sent or received by [the employer] personnel in August and September 2001. Plaintiff has argued that this evidence was in defendants’ control and would have proven facts material to the matter in controversy.
If you find that [the employer] could have produced this evidence, and that the evidence was within its control, and that the evidence would have been material in deciding facts in dispute in this case, you are permitted, but not required, to infer that the evidence would have been unfavorable to [the employer].
In deciding whether to draw this inference, you should consider whether the evidence not produced would merely have duplicated other evidence already before you. You may also consider whether you are satisfied that [the employer’s] failure to produce this information was reasonable. Again, any inference you decide to draw should be based on all of the facts and circumstances in this case.
There are very few things that juries like less than someone who fails to play by the rules. According to the trial judge in the Zubulake case, an adverse inference instruction ends the case by forcing settlement:
Nothing, no sanction is worse than an adverse inference before a jury. If you give an adverse inference, that’s the end of the case. It’s as bad [as a] judgment, if not worse, because then you get punitive damages, you don’t just get judgment. You risk punitives, and we all know that once a judge says there is going to be [an] adverse inference, that’s the road to settlement. There is no way that a case can be tried with such an inference . . . .10
Indeed, it is extremely difficult to explain away why your client hid or destroyed evidence, even inadvertently. Defending a client against whom an adverse jury instruction is given is like taking the client on the Titanic’s maiden voyage. Better to avoid sailing on that ship if you can, but it is even better to have never bought a ticket for the voyage in the first place.
The emerging trend is clear: lawyers and judges now know that there is a treasure trove of discovery in electronic documents, yet many lawyers fail to inform and instruct their clients about the duty to preserve electronic documents.
Using the “don’t make me and I won’t make you” approach without an express written agreement from opposing counsel is extremely risky. Opposing counsel probably knows about the Zubulake cases and the growing body of cases involving spoliation sanctions against a party that failed to preserve and produce electronic records. Failing to help your client meet his duty to preserve electronic documents may give your opponent an opportunity to ask difficult questions in discovery. It may also result in trying to defeat at least one motion to compel and could lead to harsh sanctions up to and including dismissal or an adverse-inference jury instruction. The most economical way to deal with electronic evidence is to follow Zubulake IV and V and integrate the following into your litigation practice:
• Inform your client about his duty to preserve evidence, including electronic evidence such as e-mail, spreadsheets, word-processing documents, instant messages, etc. Also inform your client of the risks for failing to meet the duty to preserve.
• Discuss with your client whether or not he has a plan in place to preserve and produce electronic documents when responding to regulators or discovery requests. If your client does not have a plan — and many will not — help him develop such a plan.
• When litigation appears likely, send a written “litigation hold” to your client — including members of your client’s IT department — informing your client that he is required by law to preserve documents and electronic storage media known to contain relevant and discoverable information. Tell your client to immediately stop destroying and rotating backup tapes from shortly before and after the relevant time period.
• At the same time you issue the litigation, interview a sufficient number of people to determine who the key players are in the dispute. Interview enough people, including members of your client’s IT department, to gain a working understanding as to how documents are created, preserved, and deleted within your client’s computer network.
• Make evidence-quality mirror images — or clones — of the key players’ hard disk drives and other storage media used by the key players such as CD-ROMs, diskettes, flash memory, Blackberries, PDAs, etc.
• Regularly reissue the litigation hold to the key players.
Following these steps will save money and headaches for all involved. These steps will help you avoid having to search every backup tape and every hard disk drive for discoverable documents. Following these steps will help your client meet his duty to preserve electronic evidence; you can decide later what steps will be necessary to respond to discovery requests. In addition, by following these steps you will help your client avoid possible discovery battles over spoliation of evidence, which will also help manage litigation costs.
The age of electronic discovery is upon us. The odds are great that virtually every document your clients create is on a computer and stored on electronic media. To ignore this fact is risky. In addition, it is also risky to assume that opposing counsel is going to follow the “don’t make me and I won’t make you” approach. However, follow this approach without an express written agreement and, sooner or later, opposing counsel is going take you and your client for a ride on the spoliation voyage, leading to risky collisions with icebergs of discovery disputes, dismissal, or an adverse-inference jury instruction for spoliation of evidence.
Mark D. Walters and Wright Noel are with Blank Law & Technology P.S., a Seattle-based law firm (formerly Blank & Associates P.S.) that focuses on electronic discovery, computer investigations for law firms and businesses, and ethics and security training for information technology professionals. Messrs. Walters and Noel thank Jonathan Yeh and Cathy Castell for their valuable assistance in writing this article.
NOTES
1 Coping When Everything Is Digital? Digital Documents and Issues in Document Retention White Paper; Baker & McKenzie Cyberspace Law & Policy Center (2004).
2 “E-mails and other electronic documents are discoverable, as are deleted documents still located in a computer’s hard drive.” Kucala Enterprises, LTD v. Auto Wax Co., 2003 WL 21230605 (N. D. Ill. ), at *4 n5, 56 Fed. R. Serv. 3d 487 (citing Byers v. Illinois State Police, No. 99 C8105, 2002 WL 1264044, at *10-11 (N. D. Ill. June 3, 2002)).
3 Zubulake v. UBS Warburg LLC, 217 F. R. D. 309 (Zubulake I) (addressing the legal standard for determining the cost allocation for producing e-mails contained on backup tapes); Zubulake v. UBS Warburg LLC, 2003 U. S. Dist. Lexis 7940, No. 02 Civ. 1243, 2003 WL 21087136 (S.D.N.Y. May 13, 2003) (Zubulake II) (addressing Zubulake’s reporting obligations and suggesting that cost shifting is only appropriate when the data to be searched is inaccessible); Zubulake v. UBS Warburg LLC, 216 F. R. D. 280 (S.D.N.Y. 2003) (Zubulake III) (allocating backup-tape restoration costs between Zubulake and UBS); Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) (Zubulake IV) (ordering sanctions against UBS for violating its duty to preserve evidence); Zubulake v. UBS Warburg, LLC, No. 02 Civ. 1243 (SAS), 2004, U. S. Dist. LEXIS 13574, 2004 WL 1620866 (S.D.N.Y.) (Zubulake V) (court issued harsh discovery sanctions against employer for spoliation of electronic evidence).
4 The Zubulake I seven factors are: (1) the extent to which the request is specifically tailored to discover relevant information; (2) the availability of such information from other sources; (3) the total cost of production compared to the amount in controversy; (4) the total cost of production compared to the resources available to each party; (5) the relative ability of each party to control costs and its incentive to do so; (6) the importance of the issue at stake in the litigation; and (7) the relative benefits to the parties of obtaining the information.
5 Zubulake IV, 220 F. R. D. at 218.
6 Ibid, at 217-218.
7 Zubulake V, 2004 WL 1620866 (S.D.N.Y.) at *9-*10.
8 Ibid at *8.
9 Ibid.
10 Hon. Shira Ann Scheindlin, trial judge for the Zubulake v. U. S. B. Warburg LLC case. Speaking at the E-Evidence Thought Leadership Luncheon, New York City, Sept. 23, 2003.
