Comprehensive and Crucial Preservation Obligations in Small v. University Medical Center

The recent dramatic District Court order in Small v. University Medical Center highlights the importance of due diligence and care in preservation, collection and production of ESI and the extreme risks that arise when failures occur in preservation, collection and production. The decision details a host of discovery failures and omissions committed by the defendant including failing to preserve network shares, laptops and mobile devices utilized by the majority of relevant custodians.

The defendants in this Fair Labor Standards Act class action had received a preservation notice at the start of the action directed at both hard copy and electronically stored documents. Apparently, the defendant’s legal hold policy didn’t address electronic records in any way, because the testimony recounted in the decision demonstrates clearly that the hold notice was never put in front of the IT department until it was far too late.

The ownership of the devices and drives varied – some were corporate-owned devices, others were personal devices used for business purposes. Ownership, however, was ultimately irrelevant to the preservation obligation – defendant was held to be responsible for preservation of those personal devices, as it permitted employees to use them for business purposes.

The court found that the preservation failures irreparably prejudiced the plaintiffs, who as a result lacked vital responsive material such as various iterations of relevant corporate policies as well as text messages to and from key custodians. The failure to preserve these vital information sources was so egregious, the court held, as to merit sanctions…but not any old sanctions – this court actually entered a judgment in favor of the named plaintiffs as a result of the defendant’s discovery failures and abuses.

By any standard, entry of judgment is an extreme measure – in effect, this is a determination that the Defendant’s actions muddied the evidentiary waters so completely that a determination of the merits of the case was no longer necessary.

As extreme as this measure may be, its imposition is premised on the Defendant’s conduct. The emphasis on communication and cooperation that permeates recent discovery-related decisions is present here. “Counsel and parties” the court noted, “have duties to clearly communicate, cooperate in the discovery process, and undertake an adequate investigation of facts before making representations. These duties arise irrespective of whether relevant evidence is electronic or non-electronic.”

Moreover, the court added a wake-up call for attorneys and others involved with preservation and compliance, imposing a duty to fully understand the role of electronically stored information such that it may be properly preserved and produced. “Ignorance of technology,” said the court, “does not excuse counsel or clients from their duties to preserve and produce ESI.”