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eDiscovery Update: Litigation holds — the do’s and don’ts

Peter Coons

A recent decision in New York State court is a prime example of how not to conduct electronic discovery.

On Feb. 16, Judge Fried issued an opinion that dismissed a complaint against defendant Paul Hastings while granting defendants motion for sanctions against the plaintiff. The action, which was initially filed in 2008, was for professional malpractice brought by plaintiff 915 Broadway Associates LLC against defendant Paul, Hastings, Janofsky & Walker LLP.

At issue was the fact that a letter of credit expired without being drawn upon. Plaintiffs claim it was the defendant’s — plaintiff’s former counsel — responsibility to inform plaintiff about the expiration date. Paul Hastings responded by claiming it was the responsibility of 915 Broadway, and not of Paul Hastings, to monitor dates related to the financial aspects of the transaction, which required no legal prowess to interpret.

Additionally, Paul Hastings claimed that one of the principal players at 915 Broadway willfully destroyed documents after the duty to preserve such documents arose in 2008 when the litigation hold was circulated. This last part is the crux of the matter.

New York law requires a party to preserve evidence that may be relevant to pending or reasonably anticipated litigation. Therefore, “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,” Voom VD Holdings LLC v. EchoStar Satellite LLC, 2012 N.Y. App. Div., quoting Zubulake v. UBS Warburg LLC, SD NY 2003.

The litigation hold was distributed in 2008 but it appears no one read it.

In his own deposition, the individual that destroyed evidence confirmed he received the litigation hold in April 2008, and even sent it along to others. However, he was not informed by counsel to preserve evidence until more than two years after this litigation began. This is a great example of why it is not sufficient to solely send out a hold notice. It is prudent and necessary to verify the recipient not only read the notice but understands what must be done and not be done.

Judge Fried opined:

“A party’s discovery obligations do not end with the implementation of a ‘litigation hold’ — to the contrary, that’s only the beginning. Counsel must oversee compliance with the litigation hold, monitoring the party’s efforts to retain and produce relevant documents. Proper communication between a party and her lawyer will ensure (1) that all relevant information (or at least sources of relevant information) is discovered; (2) that relevant information is retained on a continuing basis; and (3) that relevant non-privileged material is produced to the opposing party,” Ahroner v. Israel Discount Bank of New York 2009.

The hold notice also requested that the automated or manual practice of email deletion be suspended. This also did not occur as the individual admitted that he deleted all of his emails related to the matter pursuant to his routine practice of deleting messages older than 90 days that were in his deleted messages folder. When documents and messages were finally collected in December of 2010 the individual did not produce a single email to Paul Hastings.

The IT department also failed in its duties to preserve evidence and suspend automated deletion practices. We cannot completely blame IT here as apparently they were never informed by counsel or anyone within 915 about the preservation obligation.

As a result, any emails that may have been “saved” from a manual deletion process were purged permanently after 14 days. Even worse, the IT department decommissioned an email server in 2011 that may have contained potentially relevant messages. Most disturbing about this is that spoliation concerns were raised by Paul Hastings in 2010.

“Most importantly, it is clear that 915 Broadway continued to allow evidence to be destroyed even after Paul Hastings raised its spoliation concerns before me. Specifically, the IT reports indicate that in January 2011, the email server associated with the electronic data sent and received by Steven Hornstock and Earle Altman was decommissioned, and a new email server was deployed.

“Thus, even though it may have been possible to recover unknown numbers of relevant electronic files automatically deleted during the relevant period, ‘recovery of those deleted items from 2007-2008 cannot now be made’ because an integral server was discarded and replaced months after 915 Broadway knew that there were serious questions about potential spoliation and the completeness of the evidentiary record in this case,” Judge Fried said.

Clearly the plaintiff and its counsel failed. Is it any wonder that the case was dismissed or that the judge granted the motion submitted by defendants?

“On a motion for spoliation sanctions involving the destruction of electronic evidence, the party seeking sanctions must establish that (1) the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the records were destroyed with a ‘culpable state of mind;’ and (3) the destroyed evidence was ‘relevant’ to the moving party’s claim or defense.”

Numbers one and two are apparent but what about the “relevant” part in number three?

The court addressed that part as well by stating Paul Hastings demonstrated that data for many of the key players were destroyed. The court further stated, “In any event, even if Paul Hastings had not provided evidence as to the relevancy of the spoliated documents, Paul Hastings is not required to come forward with dispositive evidence that the destroyed documents were relevant (see Ahroner v. Israel Discount Bank of New York), supra [relevance of the spoliated documents will be inferred if it is destroyed as the result of, at a minimum, gross negligence].”

What lessons can be learned from this matter?

1. It is critical to send out a litigation hold notice when a party can reasonably anticipate litigation.

2. It is even more critical to survey each person that received the notice to ensure they fully comprehend its meaning and instructions.

3. Engage the IT department early in the process as they are a vital component in the litigation process within most organizations.

4. Trust, but verify. If the IT department and key players state they have suspended automated deletion practices and have preserved documents, it must be verified. The case depends on it!

Peter Coons is a senior vice president at D4, providing eDiscovery consulting services to clients. He is an EnCase Certified Examiner, an Access Data Certified Examiner, a Certified Computer Examiner (computer forensic certificates) and is a member of the High Technology Crime Investigation Association, the professional organization for people involved in computer forensics.

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