Hold Everything: Requirements and Tips About Document Retention

John A. Stone, Esq.

WHY YOU SHOULD PROTECT YOUR DOCUMENTS

The law governing document protection in the context of litigation and the

consequencesof failing to do so.

Litigation Has Separate Document Retention Rules

While various state and federal statutory and regulatory regimes may impose rules about how and how long certain documents and information must be maintained (and kept confidential), litigation – including merely anticipated or reasonably likely litigation – imposes additional distinct and separate requirements.

All parties to this case have a legal duty to preserve evidence.

While a litigant is under no duty keep or retain every document in its possession, even in advance of litigation it is under a duty to preserve what it knows, or reasonably should know, will likely be requested in reasonably foreseeable litigation.

The duty to preserve material evidence arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.

Disability Rights New Jersey, Inc. v. Velez, 2011 WL 2937355, n.3 (D.N.J. 2011) [emphasis added, citations omitted]

The duty to preserve evidence arises when a party reasonably believes that litigation is foreseeable and, as such, may arise “many years before litigation commences[.]”

Mediva Pharma Suisse AG v. Roxane Laboratories, Inc. , 2010 WL 310697, *13 (D.N.J. 2010) [emphasis added, citation omitted].

Spoliation is “ ‘the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.’

“The Third Circuit has adopted a four-factor test for evaluating spoliation claims, finding that spoliation occurs where: “(1) the evidence was in the party's control; (2) the evidence is relevant to the claims or defenses in the case; (3) there has been actual suppression or withholding of evidence; and (4) the duty to preserve the evidence was reasonably foreseeable to the party.” “The party who seeks a spoliation sanction bears the burden of proving these factors.”

McCann v. Kennedy University Hosp., Inc., 2014 WL 282693, *5 (D.N.J. 2014)

The Third Circuit held … that “a finding of bad faith is pivotal to a spoliation determination.” The Court's ruling made it clear that “actual suppression requires more than ordinary negligence.” … [In] order to make a showing that evidence was withheld in bad faith, the party who seeks a spoliation sanction bears the burden of proving intent.

McCann v. Kennedy University Hosp., Inc., 2014 WL 282693, *7 (D.N.J. 2014) [citations omitted]

In New Jersey’s state courts, a party “has a duty to preserve evidence when (1) litigation is pending or likely, (2) the alleged spoliator has knowledge of such litigation, (3) the evidence is relevant, and (4) the non-spoliating party is prejudiced by the concealment or destruction of the evidence.

That the spoliation is negligent is not dispositive, although it is “ ‘a factor to be considered when determining the appropriate remedy for the spoliation.’ With respect to the scope of the duty to preserve evidence, however, “a potential spoliator need do only what is reasonable under the circumstances.”

When spoliation is found to have occurred, the judge may fashion a civil remedy to serve the purposes of making the non-spoliating party whole, punishing the wrongdoer, and deterring others from engaging in such activity. … “[T]he time when an act of spoliation is discovered will indeed strongly suggest the appropriate course of action in that case....”).

Chapin v Samaras, 2014 WL 1125016, *3 (App. Div. 2014) [citations omitted, emphasis added]

BAD FAITH COULD BE INFERRED FROM FAILURE TO IMPLEMENT A LITIGATION HOLD AFTER YOU KNEW OR

SHOULD HAVE KNOWN ABOUT ACTUAL OR EVEN POSSIBLE LITIGATION

If a party fails to produce documents after a litigation hold should be in place that party may be subject to sanctions due to a failure to preserve.

Since a spoliation inference is a possible sanction for failure to implement a litigation hold, it follows that a litigation hold only applies to documents within a party's possession, custody, or control. … [T]his includes documents that are not necessarily in the party's physical possession. Therefore, a litigation hold may extend to third parties, and courts have issued orders to this effect. [T]he duty to preserve “extends to documents ... in the possession, custody and control of the parties to this action, and any employees, agents ... or other non-parties who possess materials reasonably anticipated to be subject to discovery.”Haskins v. First American Title Ins. Co., 2012 WL 5183908, *4 (D.N.J. 2012) [citations omitted, emphasis added]

Evidence of spoliation may give rise to sanctions, which include: dismissal of a claim or granting judgment in favor of a prejudiced party; suppression of evidence; an adverse inference; fines; and attorney's fees

Mediva Pharma Suisse AG v. Roxane Laboratories, Inc. , 2010 WL 310697, *14 (D.N.J. 2010) [citation omitted].

There is no “no harm, no foul rule” for spoliation Sanctions are warranted “when there is evidence that a

party's spoliation of evidence threatens the integrity of th[e] Court.”

Spoliation sanctions serve the following three functions:

remedial, punitive and deterrent. They level the playing field so that the prejudiced party is restored to the position it would have been in absent the spoliation. They punish the spoliator for its misconduct and they warn other potential litigants that spoliation of evidence will not be tolerated and will be dealt with by the Court if necessary.

Mediva Pharma Suisse AG v. Roxane Laboratories, Inc. , 2010 WL 310697, *14 (D.N.J. 2010) [citation omitted].

The Adverse or Spoliation Inference An adverse inference that permits a jury to infer that

‘destroyed evidence might or would have been unfavorable to the position of the offending party.’

Mediva Pharma Suisse AG v. Roxane Laboratories, Inc. , 2010 WL 310697, *14-15 (D.N.J. 2010) [citations omitted].

An adverse “inference is predicated upon the common sense observation that when a party destroys evidence that is relevant to a claim or defense in a case, the party did so out of the well-founded fear that the contents would harm him.”

Cappagross v. State Farm Insurance Co., 2010 WL 3404974, *10 (D.N.J. 2010) [citation omitted]

The Four Factors For Spoliation In order for the spoliation inference to apply, the party

seeking the adverse inference must establish that the following four factors have been satisfied:

“First, it is essential that the evidence in question be within the party's control.”

“Second, it must appear that there has been actual suppression or withholding of the evidence.”

Third, the evidence destroyed or withheld was relevant to claims or defenses.”

“And fourth, it was reasonably foreseeable that the evidence would later be discoverable.”

Mediva Pharma Suisse AG v. Roxane Laboratories, Inc. , 2010 WL 310697, *14-15 (D.N.J. 2010) [emphasis added, citations omitted].

“If a party has notice that evidence is relevant to an action, and either proceeds to destroy that evidence or allows it to be destroyed by failing to take reasonable precautions, common sense dictates that the party is more likely to have been threatened by the evidence” and, regardless of the “offending party's culpability[,] ... it cannot be denied that the opposing party has been prejudiced”

Mediva Pharma Suisse AG v. Roxane Laboratories, Inc. , 2010 WL 310697, *14-15 (D.N.J. 2010) [italics in original, other emphasis added, citations omitted].

The Destroyed Document Must Be Relevant for a Finding of Spoliation

In addition, with respect to the third factor, that the destroyed or withheld evidence is “relevant,” … typically, where the culpability of the offending party is negligence, gross negligence or even recklessness (as opposed to willful or knowing) the party seeking the spoliation inference must establish not only that the destroyed or withheld evidence is probative …, but also “must adduce sufficient evidence from which a reasonable trier of fact could infer that the destroyed or unavailable evidence would have been of the nature alleged by the party affected by its destruction.” In other words, the party seeking the spoliation inference must make a sufficient showing from which a fact finder could reasonably determine that the destroyed or withheld evidence would have been favorable to the movant.

Mediva Pharma Suisse AG v. Roxane Laboratories, Inc. , 2010 WL 310697, *14-15 (D.N.J. 2010) [citations omitted].

You Must Proactively Protect Your Documents A duty to preserve is an “affirmative obligation,” which

arises “when the party in possession of the evidence knows that litigation by the party seeking the evidence is pending or probable and the party in possession of the evidence can foresee the harm or prejudice that would be caused to the party seeking the evidence if the evidence were to be discarded.”

NVE, Inc. v. Palmeroni, 2011 WL 4407428, *5 (D.N.J. 2011) [emphasis added]

Once 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 [and things].”

Robinson v. Winslow Township, 2010 WL 3326678, *5 (D.N.J. 2010) [emphasis added]

Spoliation May Trump Privilege

Additionally, there has been a growing trend among courts to find the attorney-client privilege is lost when spoliation has occurred.

Although, in general, litigation hold letters are privileged, courts have adopted the view that when spoliation occurs those letters become discoverable. These cases, although specific to whether litigation hold letters are discoverable, recognize a growing trend of waiver of privilege to require production of documents where spoliation has occurred.

Magnetar Technologies Corp. v. Six Flags Theme Park, Inc. 886 F.Supp.2d. 466, 482 and n. 114, 116 and 117(D.Del. 2012)

An Opponent May Be Entitled to Discovery Regarding Spoliation

A party who destroyed documents may be deposed about the procedures it used to preserve documents after finding defendants expunged hard drives of employees after litigation had begun.

Cache La Proudre Feeds, LLC v Land O’Lakes, Inc. 244 F.R.D. 614, 634 (D.Colo. 2007)

The best offense is a good defense

Failure to properly protect your documents could impair your ability to take advantage

of an opponent’s failure to protect their documents

How to Protect Your Documents

The term “document” has the broadest meaning possible

For example, and without limitation, documents include “hard” copies, originals or electronically stored information (“ESI”) including all drafts as well as finalized documents, originals and copies of desk files, attachments, memoranda, letters, work papers, drafts, handwritten notes, typed notes, faxes, forms, trade data, reports, tables, , slides, or other graphics, audio or video tapes, working or personal files, guidelines, procedures, minutes, calendar entries, telephone messages, computer disks, CD-Roms, voicemails, PowerPoints, and any other document. ESI, in turn, without limitation includes e-mails and attachments, e-documents (i.e., electronically maintained data of any kind such as audio and video files), databases, and team rooms. Email includes emails retained in the “in-box,” “sent items,” and “deleted items” file locations. ESI may also be found or stored on network drives, desktop, laptop, home computer, iPad, iPhone, tablet, blackberry, Android based or other PDA’s, CDs/DVDs, diskettes, flash drives, and back-up tapes.

Duplicates Documents that are known to be

duplicates of documents held by other persons or entities must be maintained.

Personal Communication Devices Documents contained in or which arise from

the use of a home computer, personal laptop, iPad, blackberry, iPhone, Android, note book, and emails created or stored, received sent, using a personal email account must also be saved.

Documents Should Not Be Altered Documents should not be altered or

“marked up” in any way. Any new documents, including ESI, data or tangible objects created relating to the litigation must also be preserved.

Implement And Advise All Of A Litigation Hold Immediately and proactively put a litigation

hold on any and all of its documents that could in any way relate to the litigation

All of your employees, agents and representatives, who are in possession of relevant materials should provide all such materials to you before leaving your company or ceasing to act on your behalf.

Protect and preserve the following documents.All electronic mail and attachments sent or received by and party or relevant non-party or their agents and representatives, and information about electronic mail (including message contents, header information, and logs of electronic mail system usage)

  All communications concerning, referencing or in any way related

to the litigation

Databases (including all records and fields and structural information in such data bases) containing any concerning, references to or information in any way relating to the litigation

  All logs of activity on computer systems that may have been used to

process or store electronic data containing information concerning issues related to the litigation

 

All word processing files, design program files, and file fragments containing information about, concerning, referencing or in any way related to the litigation

 All electronic data and file fragments created by application programs which

process information about, concerning, referencing or in any way related to the litigation

 All electronic files and file fragments containing information from file calendars

and scheduling programs containing any references to or information in any way relating to the litigation

 All electronic data files and file fragments created or used by electronic

spreadsheet programs where such data files contain any references to or information in any way relating to the litigation

All other electronic data containing information about, concerning or

referencing information in any way relating to the litigation 

You should also Stop any recycling, automatic deletion programs or overwriting of and

backup storage media, including which occur as part of catastrophic backup procedures.

Save all “hard” and electronic documents that in any way relate to the litigation

Collect and preserve any documents related in any way to the litigation, including in electronic form, whether at the office, at home, or on any laptop or PDA, including equipment used by former employees or agents or representatives must also be collected and preserved.

Ensure that all metadata and ordinary data are preserved under any and all of your data and document retention programs.

 

You should also… Make mirror images of any relevant drives

before formatting or erasing of hard drives occurs.

Save, and do not dispose of or alter, any software or equipment, even if it is being replaced as part of routing upgrade procedures.

Not scrub any files to remove metadata.

Protect Documents In Storage Or Scheduled To Be Destroyed You should also… Protect against modification and deletion of any

electronic data files concerning, referencing or in any way relating to the litigation that are maintained in online storage and/or direct access storage.

 Stop any activity that may result in the loss of electronic data concerning, referencing or in any way relating to the litigation, including in off line storage including magnetic tapes and other media. This activity includes rotation, destruction, overwriting and/or erasure of such media in whole or in part.

You should also…

Not alter or erase electronic data concerning, referencing or in any way relating to the litigation, and not perform any procedures (such as data compression of disk defragmentation or optimization routines) which may impact such data on any stand-alone microcomputers and/or network workstations, unless a true and correct copy had been made of such active files and of completely restored versions of such deleted electronic files and file fragments and unless copies have been made of all directory listings (including hidden files) for all directions subdirectories containing such files, and unless arrangements have been made to preserve copies.

 

You should also… Preserve copies of all application programs

and utilities that may be used to process electronic data concerning, referencing or in any way relating to the litigation.

 Maintain an activity log that documents all modifications made to any electronic data processing system that may affect the system’s capability to process any electronic data concerning, referencing or in any way related to the litigation

You should also take the following steps immediately with respect to all personal computers used by your employees, agents and representatives concerning, referencing or in any way relating the litigation.

Make a true and correct copy of all electronic data on fixed drives attached to personal computers relating to concerning, referencing or in any way relating to your company including active files and completely restored versions of all deleted electronic files and file fragments.

Collect and put into storage all diskettes, magnetic tapes and cartridges, external data devices and other media in connection in connection with computers prior to the date of this letter and the directives it contains.

Preserve copies and listings until the litigation is completely and finally resolved.

You should also… Contact any outside services or consultants who are in

possession of documents or information that your company controls and direct them to preserve all such documents and information.

If your company uses or has used any third-party vendor services, such as “Cloud” based computing or data storage companies, Softward as a Service (“SaaS”), Platform as a Service (“PaaS”) or Application Service Provider (“ASP”), to hold electronically stored information (“ESI”), please instruct the vendors to maintain all such information.

If your company uses or has used any third-party vendor services, such as “Cloud” based computing or data storage companies, Softward as a Service (“SaaS”), Platform as a Service (“PaaS”) or Application Service Provider (“ASP”), to hold electronically stored information (“ESI”), please immediately send us all such vendor agreements so we may begin to understand the vendor’s retention and notice procedures.

You should also… Immediately provide these directives to all those at your

company or who act on your company’s behalf with respect to your company’s email network and computer systems as well as those responsible for your company’s record management program.

Immediately provide these directives to all of your company’s employees, agents or representatives who had any involvement with or any knowledge of parties in or related to the litigation. 

Re-circulate these directives to all your company’s employees, agents or representatives (including vendors and service providers).

Each such person and entity who receives these directives should sign an acknowledgement of that receipt each time these directives are provided.

Hold Everything: Requirements and Tips About Document Retention

If you have any questions, please contact John Stone at: JStone@decotiislaw.com or 201-928-1100