November, 2007

Unlike most of us who enjoyed our turkey dinners, counsel for the federal government had few reasons to celebrate Thanksgiving. In two reported decisions – one on each coast – federal district courts issued broadly worded orders requiring government defendants to preserve evidence. Both courts were responding to allegations in motions filed by public interest plaintiffs that loss or destruction of data was possible.

On the East Coast Judge Kennedy, adopting the report and recommendations of Magistrate Judge Facciola, ordered defendants to “preserve media, no matter how described, presently in their possession or under their custody or control, that were created with the intention of preserving data in the event of its inadvertent destruction”. In addition, the court ordered defendants to “preserve the media under conditions that will permit their eventual use, if necessary… .” Citizens for Responsibility and Ethics in Washington v. Executive Office of the President, Civ. No. 07-01707-HHK) (D.D.C. Nov. 12, 2007).

A few days earlier on the West Coast, Chief Judge Walker ordered defendants to “preserve all evidence that may be relevant to this action” and extended the preservation duty to evidence that might be in the hands of non-parties “who possess materials reasonably anticipated to be subject to discovery in this action”. Counsel were ordered to “exercise efforts to identify and notify such non-parties, including employees of corporate or institutional parties” and to submit to the court “under seal and pursuant to FRCP 11, a statement” that they had inquired of their clients that the routine “destruction, recycling, relocation, or mutation of such materials” had been halted or that duplicates or copies suitable for discovery had been made. In re National Security Agency Telecommunications Records Litigation, MDL 06-1791 (VRW) (N.D. Cal.Nov. 6, 2007).

CREW and NSA are both highly charged political cases, so it remains to be seen if in the ordinary civil case (a matter, as Judge Facciola described it during a hearing on the motion in CREW, involving “Suzie Smith against Joe Blow”), a court would enter an order with such far reaching and burdensome obligations. It is possible that the government’s reluctance in both matters to enter into stipulations regarding the preservation of evidence was a factor behind the decisions to enter the broadly worded preservation orders. Perhaps even more significantly, the CREW plaintiffs had alleged that e-mails had been deleted, and Judge Facciola found that “backup media are the only place where they may be and the obliteration of this backup media obviously threatens CREW with irreparable harm”.

Counsel and IT Professionals Take Note

Beyond the scope of the material to be preserved, the portions of these two orders that should cause counsel (both corporate and retained) and IT departments to beware are the obligations (1) to preserve media under conditions that would permit its eventual use; (2) to communicate with non-parties, including the employees of corporate or institutional parties and to inform them of the obligation to preserve information; and (3) to submit a statement by “[t]he most senior lawyer or lead trial counsel representing each party” pursuant to Rule 11 the preservation obligations “ha[d] been carried out”.

Motion Practice

One interesting side bar is the remarkably different routes taken by each of the plaintiffs to bring the preservation issue before the courts. The CREW plaintiffs moved for a temporary restraining order, assuming the burden of the familiar standard for the award of a preliminary injunction. The NSA plaintiffs filed a simple motion for an order prohibiting the alteration or destruction of evidence. (Go here and here, the web sites of CREW and the Electronic Frontier Foundation, respectively, to read papers filed in support of the motions by plaintiffs and the transcript of the hearing before Judge Facciola in CREW.)

What is a Backup Tape?

Unlike the broader order in NSA, the CREW preservation order was limited to backup media. Judge Kennedy’s order does not contain the interesting material found in Magistrate Judge Facciola’s “Report and Recommendation”, and even Judge Facciola’s Report necessarily omits the fascinating detail in the transcript of the hearing on CREW’s motion. For counsel and IT staff the most interesting discussion during the hearing was the complete inability of the participants to agree on a definition of a “backup tape” and whether the government had any. Judge Facciola’s first question after greeting the parties was

“As I understand it – this is what confuses me – is the problem at this point and the difference between you, the difference between backup tapes and disaster recovery backup tapes? And, if so, what is the difference between those two things, if there is a difference.”

More than 25 pages later, including an amble down the deeply worn path of the standards for issuance of a TRO and a brief recess to allow the parties to attempt to reach a stipulation, the judge still did not have an answer to his question. But it was not for lack of trying. In an effort to help the parties at least agree on what they were discussing, Judge Facciola described his understanding of the backup process in his courthouse. (In brief, the routine removal of tapes by a third party vendor to offsite storage with eventual overwriting of tapes.)

This attempt did not advance the argument between the parties. Counsel for plaintiff continued to refer to disks, CD’s and DVD’s as possible backup media. Judge Facciola seemed to limit his definition of backup media to magnetic tapes, saying at one point, “CDs and DVDs, I agree — I think we all agree, do not fall within the definition of disaster recovery tapes”. Plaintiff seemed to limit the request to “backup media … use[d] to preserve data that can be used forensically for disaster recovery”. It is possible that the parties were confusing Exchange server backup tapes and media used in disaster recovery sites to recover and resume critical operations. But the terminological confusion was never resolved.

Stipulating to the Preservation of Evidence May Not Be Enough

The government in both matters offered to provide a declaration under penalty of perjury that it “would preserve and maintain the backup tapes or disaster recovery tapes that were in existence ….” But it was unwilling to enter into any stipulation that could form the basis for an order.

Judge Facciola found although “stipulations entered into between parties can save time and money, there is no obligation upon a party to accept one” and that “[u]nlike a court order, a declaration is not punishable by contempt. In other words, without such an order destruction of the backup media would be without consequence”. (He did not discuss the court’s power to impose sanctions for the destruction of evidence.)

In his Report, making clear his understanding of the media at the center of the dispute, Judge Facciola quoted the definition of backup from the Sedona Conference Glossary for E-Discovery and Digital Information Management (May 2005 Version): “to create a copy of data as a precaution against the loss or damage of the original data. Many users backup their files, and most computer networks utilize automatic backup software to make regular copies of some or all of the data on the network”. He then recommended that the trial court issue an order “to prevent the destruction of backup media”. Judge Facciola’s draft order was adopted by the trial court and extended to media in the possession, custody or control and “under conditions that will permit their eventual use, if necessary … .”

Turning to NSA, although Chief Judge Walker did not expressly order the defendants to preserve evidence under conditions that would permit its eventual use, he ordered that “[p]reservation is be interpreted broadly to accomplish the goal of maintaining the integrity of all documents, data and tangible things reasonably anticipated to be subject to discovery … .”

In his view

[p]reservation includes taking reasonable steps to prevent the partial or full destruction, alteration, testing, deletion, shredding, incineration, wiping, relocation, migrating, theft, or mutation of such material, as well as negligent or intentional handling that would make material incomplete or inaccessible.

This would seem to be the same standard as CREW without language as direct.

Must Parties Notify Employees of Non-Parties With Access to Evidence That a Duty to Preserve Evidence Exists?

Judge Kennedy confirmed that the obligation to preserve evidence extended to information in the custody of a non-party but under the control of a party, for example backup tapes stored offsite in a facility owned by a non-party. Of more concern, however, is that Chief Judge Walker extended the preservation obligation to require an effort to communicate the existence of the obligation to non-parties: “[c]ounsel are under an obligation to exercise efforts to identify and notify such non-parties, including employees of corporate or institution parties”.

Conclusion

The orders issued in these two cases should be considered together as early signals of where courts may take the duty to preserve evidence in the face of allegations of potential spoliation.

We here at R+P have added a new blog to our roll. “Post Process: Everything to do with E-Discovery & ESI". This site covers the full range of e-discovery issues, with excerpts from and links to court decisions and articles. The author, using the nom de web rjbiii, identifies himself as a consultant with a BS in computer science and a JD. He has organized information on his site in a number of useful categories, including by circuit and district court, judge, topic, and specific rule of procedure or evidence.

Demand Letters and The Duty to Preserve Information

Two recent decisions by magistrate judges resolving motions for sanctions based on defendants’ discovery violations illustrate that (i) a party’s own conduct can inadvertently trigger an obligation to preserve, and (ii) unless a demand letter is specific regarding the possibility of litigation, a court might refuse to find that receipt of such a letter triggered an obligation to preserve. Google Inc. v. American Blind & Wallpaper Factory, Inc., 2007 WL 1848665 (N.D. Cal. June 27, 2007); Cache La Poudre Feeds, LLC. V. Land O’Lakes, Inc., 2007 WL 684001 (D. Colo. Mar. 2, 2007).

The decisions by Magistrate Judges Seeborg and Shaffer in Google and Cache, respectively, are rich sources of learning regarding preservation and production, but this post will focus on the demand letters sent by the parties before the litigation was filed or served. Future posts will cover other useful practice tips mined from the two decisions.

What? You Mean That Now I Have to Save Stuff?

Well, yes you do have to preserve information if you send a demand letter to a potential adversary. Indeed, depending on the circumstances, it may be that by sending a demand letter you may have imposed a duty on yourself without imposing a corresponding duty on the other side.

In Google the demand letter at issue was sent by the eventual defendant, American Blind. Not only did American Blind’s letter give Google a basis to file a declaratory judgment action at a time and in a forum convenient to Google, the company triggered an obligation to preserve its own documents and information relevant to the dispute. It was an obligation American Blind failed to discharge and did not even bother to contest.

In June of 2002 American Blind sent Google a “’cease and desist’ letter that portended litigation”. Some eighteen months later, in December of 2003, Google turned the tables on American Blind and served it with a complaint seeking declaratory relief.

After initial motion practice, the trial court found that a “justiciable controversy arose between the parties no later than June of 2002”, when American Blind sent a “cease and desist” letter to Google. Discovery by Google revealed that prior to May of 2006 – even after having been served with a complaint — American Blind had failed to preserve or collect information relevant to the dispute. In a subsequent motion to compel, Google alleged that this failure was the basis for “terminating, evidentiary, or monetary sanctions”.

On Google’s motion, the magistrate judge used the trial court’s earlier ruling on justiciability to support a factual finding that “American Blind’s duty to preserve relevant evidence arose not later than December of 2003, and likely arose some eighteen months earlier”, when the cease and desist letter was mailed by American Blind. The court imposed both evidentiary and monetary sanctions, holding that certain facts had been “judicially established” and fining American Blind $15,000.

I Guess We All Just Can’t Get Along

We can’t all just get along if we want our threats of litigation to be taken seriously.

In Cache, Plaintiff Cache argued that defendant Land O’Lakes should have anticipated litigation as early as April 4, 2002, when its outside counsel called Land O’Lakes’s general counsel and informed him that Cache had been using a particular trademark for at least ten years before Land O’Lakes started using it in about January 2002. Two months later, on June 5, 2002, Cache’s outside counsel followed up her April call with a letter repeating that Cache had been using the trademark for at least 10 years and expressing a concern that customers of both Cache and Land O’Lakes could be confused. In closing, Cache’s general counsel explained that the purpose of the letter was “’to clearly put [Land O’Lakes] on notice of our client’s trademark rights and clearly establish the opportunities we have given Land O’Lakes to avoid exposure. The second purpose of this letter is to determine whether this situation can be resolved without litigation and media exposure … We think you will agree that the company’s interests are best served by trying to resolve this unfortunate and difficult situation”.

A year later on June 3, 2003, Land O’Lakes’s outside counsel wrote to Cache’s outside counsel suggesting that the parties discuss the possibility of obtaining a consent to use the mark. Two weeks after receipt of the Land O’Lakes letter, on June 17, Cache’s outside counsel responded by expressing a concern over continued infringement, but indicating an interest in listening to a proposal. Not until February 24, 2004, almost eight months later, however, did Cache file a complaint. Cache subsequently brought a motion accusing Land O’Lakes of spoliation by failing to discontinue in April 2002 its practices of (i) automatically deleting e-mails older than 90 days and (ii) overwriting backup tapes.

The court found a number of flaws in Cache’s argument that the obligation to preserve was triggered in April 2002, focusing on Cache’s June 2002 letter. In the court’s view the letter did not threaten litigation; it did not demand that Land O’Lakes preserve potentially relevant information; and it raised the possibility that litigation was not the only solution to the dispute. The court also noted that the lawsuit was not filed until almost two years after the first telephone call in April 2002. The Magistrate Judge concluded that “a party’s duty to preserve evidence in advance of litigation must be predicated on something more than an equivocal statement of discontent, particularly when the discontent does not crystallize into litigation for nearly two years. Any other conclusion would confront a putative litigant with an intractable dilemma: either preserve voluminous records for an indefinite period at potentially great expense, or continue routine document management practices and risk a spoliation claim at some point in the future”.

However, because Land O’Lakes failed to adequately preserve and collect documents after the complaint had been filed, the court imposed a small monetary sanction and ordered that Land O’Lakes file a series of declarations and certifications regarding the completeness of its production.

Tips

If you decide to send a “cease and desist” or “demand” letter, be aware that a court is likely to conclude that you have triggered an obligation to preserve your own information. Whatever obligation or burden you seek to impose on your potential adversary will be imposed on you as well. If you automatically delete e-mails or overwrite backup tapes of key personnel, you should suspend those practices and institute a legal hold. Check your retention schedules to make sure that your documents or records will not be destroyed while you negotiate.

Your demand letter should be specific about the threat of litigation. Recognize that your time to file an action is beginning to run and that a court will probably not look favorably on an unreasonable delay between sending the letter and filing a complaint. The Cache court was very skeptical of “equivocal statement[s] of discontent” or unreasonable delays before bringing litigation.

Be as specific as you can about the need to preserve information. Do not overreach or send confusing or overbroad demands. Even more so than with equivocal demands, the court in Cache was scathing regarding “poorly drafted discovery requests”. (Discovery requests, by the way, that most of us have served or received: “’all documents concerning, referencing, evidencing, resulting from, or identifying []’”.)

If you enter into a tolling agreement, make sure that the agreement covers the preservation of information.

About This Blog

Welcome to the initial post of the Retention and Preservation blog. This blog will be limited to issues of retention and legal holds; others in the blogosphere will have to cover the full range of e-discovery. At least for now, I do not expect to be the Drudge Report of electronic discovery. However, I do plan on discussing the best of the best practices for information retention, to analyze current decisions on retention and preservation, and to post practice hints from guest bloggers who are responsible for these issues every day. I hope that you will find enough interesting information to persuade you to check back from time to time.

Comments and suggestions on format or content are welcome.

Thank You

Stephanie Gonsalves and Amanda Woodrum deserve all of the credit for teaching me how to blog, counseling me when I overlooked the obvious, and, most of all, trying to keep me to a schedule. I also would like to thank Deidre Paknad, who challenged me when I suggested to her that a blog on retention and preservation would fill a need.

All of the mistakes are mine and mine alone.

Blogroll and Other Resources

On the right side you will find links to other blogs, books, and an article by Judge Scheindlin on electronic discovery sanctions. I will expand that list as I come across additional resources that I believe will help practitioners deal with these problems.

EDRM: The site operated by George Socha and Tom Gelbman. Home of the ubiquitous Electronic Discovery Reference Model, it is an excellent source of information on electronic discovery, in particular the EDRM XML Standard designed to improve the e-discovery process.

K&L|Gates: This site operated by the law firm is the single best resource for news and decisions regarding e-discovery. In addition to information on recent decisions, if you follow the links on the site you will be able to review local federal district court rules addressing e-discovery. (In future posts I will look more closely at the default standard in the District of Delaware and the “Suggested Protocol for Discovery of Electronically Stored Information” in the District of Maryland.)

The Sedona Conference: This site contains links to the Conference’s many reports, working groups, and information regarding continuing legal education on the topic, among many others, of electronic discovery.

“Discovery of Electronically Stored Information: Surveying the Legal landscape”: Magistrate Judge Hedges has written an overview of electronic discovery. A very useful introduction.

“Electronic Discovery: Law and Practice”: A loose leaf publication covering the law and technology of electronic discovery by two practitioners.

“Evaluating the Electronic Discovery Capabilities of Outside Law Firms: A Model Request for Information and Analysis”: An excellent resource that can be used as part of a due diligence process to evaluate outside counsel’s (or your own) preparedness for electronic discovery. Inexperience of counsel and vendors is a serious issue. You are not doing yourself or your client any favors if you have not thoroughly vetted the e-discovery experience of your outside counsel and vendors.

“Electronic Discovery Sanctions in the Twenty-First Century”, Shira A. Scheindlin, Kanchana Wangkeo, 11 Mich. Telecom. Tech. L. Rev. 71 (2004): A law review article authored by Judge Scheindlin and one of her law clerks that analyzes all opinions on the topic of sanctions between January 1, 2001, and the date of publication. Although it was written before the new rules went into effect, it is still the best place to start research on sanctions.