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.”

Preservation and Collection In The Evolving Data Landscape: Cloud, Mobile and BYOD

EDiscovery begins with preservation and collection. Errors and omissions in preserving and collecting data create the greatest risk of spoliation and sanctions than any others, because when data is missed at the source it may never be collected or, worse, it may disappear. If an adverse party, agency or court then identifies the collection gap later, the results can be disastrous.

When the eDiscovery industry began to evolve from the seeds of the litigation support industry which had provided processing for paper records, preservation and collection began, naturally, with PCs and servers. Virtually all electronic records would be found on a network resource or a user’s local PC. Fear of sanctions resulted in broad retention policies, which in turn gave rise to enormous data stores which then needed to be culled and processed for litigation.

The high cost of handling these data stores caused corporations to get serious about retention policies and litigation holds, in order to ensure that necessary data was preserved and junk wasn’t. This meant that collection efforts were carefully targeted so that only the data that was actually needed was harvested for processing and review. The common practice evolved – relevant custodians were identified, then their PC’s were imaged and network email was preserved. In most cases, that sufficed as an exemplary collection process.

Fast forward to 2014. Most of us still do use PC’s, and most corporations do still have networks and email servers, but those devices really aren’t where most of us live our electronic lives. Most of our activity takes place on our phones and our tablets. That’s where we email, where we text, and where we network.  That’s where we take our photos and our notes and even our entertainment. On an average day, most of us use our phones far more than our desktops or laptops. Business communication occurs principally on our phones and only secondarily elsewhere.

In addition, the “cloud” has evolved into a leading data store and source, for both individuals and businesses. Most of us have a cloud-based email account and at least some documents and photos stored in the cloud. Business use of the cloud continues to evolve and grow and supplant traditional LAN-based storage models.

A key factor here, as well, is the growth of Bring Your Own Device (“BYOD”) policies, in which employers allow or even encourage employees to use their personal devices for business purposes. Those diverse devices then come to hold discoverable information subject to preservation and production obligations, making them targets for collection in the eDiscovery context.

These developments have indelibly altered the data landscape for eDiscovery. PC’s and servers are still relevant, but they’re not where the true action is. Any effective collection effort needs to target phones, tablets and relevant cloud-based resources in order to be complete and ensure that gaps won’t be revealed later, bringing the risk of sanctions, adverse inferences, and all the other consequences of incomplete production and compliance.

Compliance Obligations: They're Not Just for Parties Anymore

It is axiomatic that parties to a litigation can find themselves on the hook for fees and sanctions when spoliation is found, but the case of Logtale, Ltd. v. IKOR, Inc. in the Northern District of California highlights the principle that counsel can be sanctioned as well, when counsel is found to have neglected their duty to ensure a client’s search for responsive documents and information is complete. In this case the defendants and their counsel were each assessed a portion of a $1.4 million sanction award.

Neither counsel nor their clients can take discovery obligations lightly - attorneys need to ask the right questions in order to fully understand the landscape of their clients' data to ensure that their own representations of compliance are true and accurate. Anything less than that exposes both the client and counsel to potential liability.

All the salient details can be found in the always interesting ELL blog.

http://ellblog.com/another-reminder-that-attorneys-are-responsible-for-the-e-discovery-behavior-of-their-clients/