Effectively managing company data means more than HIPAA compliance and avoiding data breaches. As two of my colleagues Brett Anders and Cliff Atlas would tell us, failing to preserve electronic evidence can jeopardize a company’s litigation strategy. Their recent article discusses a new decision that illustrates the kind of sanctions litigants could suffer even where the failure to preserve appropriate information was not the result of an intentional act, but was merely negligence.

The Hon. Shira Scheindlin, whose decisions have been perhaps the most influential in the area of e-discovery, wrote the decision in Pension Committee of the Univ. of Montreal Pension Plan v. Banc of America Securities, LLC, No. 05 Civ. 9016 (S.D.N.Y. Jan. 15, 2010) (pdf). The plaintiffs in the case failed to issue litigation hold notices until 2007, even though the litigation commenced in February 2004. The sanctions were significant:

  • attorney’s fees and costs incurred by the defendants in bringing their motion,
  • costs of discovery relating to uncovering the facts of the wrongdoing, and
  • a jury instruction highlighting certain of the plaintiffs’ gross negligence in complying with discovery and explaining how the jury can conclude that an adverse inference should be drawn against those plaintiffs.

So, not only was there a direct monetary sanction, but the court made it more difficult for the plaintiffs to win their case. Brett and Cliff provide the following tips for managing e-discovery obligations, which they expand upon in their article:

  • For plaintiffs, anticipate litigation well before the case is filed and take appropriate steps then to preserve the appropriate information.
  • Cast a wide preservation net so that you collect records from all employees, even those with only a passing encounter with the issues in the litigation.
  • Back up tapes can be critical when “they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those players is not obtainable from readily accessible sources.”
  • Make sure those preserving the data understand what they need to do and are appropriately supervised.
  • Maintain a litigation hold policy and plan ahead!