Hang On to Your E-mail!

By Hafez Daraee

Electronic documents come and go. An e-mail is received — an e-mail is deleted.

But if there is — or even might be — a lawsuit in your future, failure to preserve electronic documents now could have devastating consequences.

Six years ago, U.S. District Court Judge Schira Scheindlin of New York handed down the first of her opinions in a series of cases that have come to be known as the Zubulake decisions. These decisions are becoming a national model for discovery of electronically stored information.

Recently, in University of Montreal Pension Plan v. Banc of America Securities, LLC, et al., an opinion that Judge Scheindlin dubbed, "Zubulake Revisited: Six Years Later," she reemphasized the strong duties of parties (and potential parties) in litigation to locate and preserve electronic documents, and she articulated an approach for deciding how severely a party would be punished for ignoring those duties.

Gathering and Preserving Electronic Documents

Judge Scheindlin concluded that because plaintiffs' counsel had begun investigating the background issues related to the case at least two years before the lawsuit was filed, counsel's failure to issue a written "litigation hold" letter to its own client constituted gross negligence because that failure was likely to result in the destruction of relevant information. A "litigation hold" letter is an admonition from an attorney to the client (and sometimes to opposing counsel) that all electronic documents (e-mails, Word documents, electronic spreadsheets, and the like) that could be pertinent to a lawsuit must be preserved. Judge Scheindlin made it clear that if the attorney does not timely issue such a letter and the client does not preserve the documents, both may be in serious trouble. Judge Scheindlin's decision follows an emerging pattern in federal and state courts. Parties who fail to identify and preserve electronic documents, even before a lawsuit is filed, can be sanctioned. Sanctions can include monetary fines, exclusion from evidence of electronic documents produced late, and even a judgment by default against the failing party.

Consequences Associated With Failing to Preserve Documents

Judge Scheindlin concluded that if a party fails in its duty to preserve electronic documents, the appropriate sanction should (1) deter the parties from engaging in destruction of electronic documents; (2) hold responsible the party who wrongfully created the risk that documents would be destroyed; and (3) restore the prejudiced party to the same position it would have been in absent the wrongful destruction of evidence by the opposing party.

The court stated that it should always impose the "least harsh sanction that can provide an adequate remedy" and articulated the choices from least to most harsh as "further discovery, cost-shifting, fines, special jury instructions, preclusion, and entry of default judgment and dismissal."

It has become clear beyond doubt in recent years that in the view of the courts, there is no difference between a paper memo in a file and an e-mail electronically stored in a computer in-box. To the extent that documents could pertain to future or existing litigation, they must be preserved. If they are not, the courts will not be forgiving, and the consequences will be potentially devastating to the claim, the litigants, and their attorneys.

Companies should have clear document retention/destruction policies, as well as procedures designed to safeguard such information. The initial investment necessary to create policies and safeguards is inconsequential compared to the costs resulting from failure to protect electronic information.

Published Spring 2010

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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