Pearls For Practitioners

The Sedona Conference, a nonprofit organization dedicated to facilitating reasoned and just development of law and policy in several emerging areas, held its sixth annual meeting on Complex Litigation (Complex Litigation VI) March 25 and 26 in the scenic red-rock tourist destination of Sedona, AZ.

In response to the ever-increasing demand by lawyers, judges and litigants for guidance related to the duties, opportunities and overall complexities of litigation in the digital world, the conference again focused on electronic discovery.

A group of 15 of the nation's top judges, practitioners and legal scholars led discussions among the 45 participants ' the number was limited to ensure high-quality, on-target dialogue ' during the meeting.

Among myriad issues related to e-evidence discussed were retention and preservation of records.

Participants agreed that preservation is the most difficult area for practitioners to manage prior to and during litigation ' irrespective of either affiliation with plaintiffs or defendants, or the practitioners' roles as in-house or outside counsel.

A discussion of e-document retention and preservation ' and several pearls of wise guidance from the conference ' follows.

Aiming For Dialogue, Not Baiting Debate

“Our goal is to stimulate dialogue, not adversarial debate, amongst the bench and bar on leading edge issues of law and policy, thus encouraging the sound development of law based on reason, not private interests.”

That's the brief on the organization's mission from Sedona Conference Executive Director Richard Braman.

In striving to reach that goal, three annual conferences sponsored by the Sedona Conference address anti trust, complex litigation and intellectual property rights. Working groups from the Sedona Conference Working Group Series exist in each of these primary areas. The two complex-litigation working groups each studies a topic: one looks at e-documents, and the other at protective orders and public access. The antitrust and intellectual property law working groups study the role of economics in anti-trust, and the intersection between patent and anti-trust law, respectively.

Early in 2003, “The Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Document Production” was published. It was one of the first efforts by a diverse group of defense and plaintiff attorneys, judges, legal scholars and other concerned parties to provide some guidance for addressing the challenges of e-discovery.

The original 14 principles were revised in January of this year following a lengthy review, commentary and critique period. Nine of the 14 original principles set forth in The Sedona Principles address retention or preservation. These nine principles set the backdrop for much of the discussion at Complex Litigation VI.

While substantive conference discussions ran the gamut from tips for counsel attempting to build a record in e-discovery arguments to the best practices for electronic-data review and production from outside the United States, the retention and preservation of e-files and e-mail inspired the most in-depth and fervent give-and-take.

Principles To Litigate By

The retention and preservation of electronic data is a topic that consistently causes litigators, in-house counsel and judges consternation. It's not unusual for the requesting party's counsel to expect and demand the preservation of months', or even years', worth of potentially responsive electronic files in an opponent's possession.

Producing parties, on the other hand, often argue that burdens related to time and expense outweigh the potential probative value of a great deal of electronic data. Many viewpoints similar to these were expressed at the conference. Sedona participants agreed that the proliferation of case law in the area of e-discovery in recent years hasn't provided expected guidance. One participant noted that because the overwhelming majority of e-discovery disputes are adjudicated based on a very narrow and specific set of facts, appeals are rare. The result is that there are few reported decisions to assist litigants and counsel in determining their rights and obligations in data retention and preservation. Consequently, this area is replete with examples of spoliation problems, whether negligent, reckless or intentional.

But the law is crystal clear on one point: Organizations must take reasonable steps to preserve electronic documents for pending or impending litigation. In other words, the same obligations apply to preservation of e-documents as have applied to hard copy documents for years.

Sedona Principle 5, for example, states, in part, that “the obligation to preserve electronic data and documents requires reasonable and good-faith efforts to retain information that may be relevant to pending or threatened litigation.”

The spoliation of potentially responsive discovery material, however, is a much greater concern in the electronic age than it ever was when hard copy ruled the realm of legal records. One major reason for this is the simple and unfortunate fact that the status quo in the electronic world means that data is being destroyed on an ongoing basis. For example, it's standard practice for corporate IT departments to recycle back-up media containing weekly or monthly backups on a regular schedule. When litigation has been commenced or can be “reasonably anticipated,” this common IT practice can result in an irreversible destruction of potentially key e-mail and other files. Unless ' until ' corporate counsel act to suspend the recycling schedule in a timely fashion, a costly spoliation problem may arise.

While no formal recommendations came out of Complex Litigation VI, best practices for preserving data initially on notice of litigation, or reasonable anticipation thereof, include:

• Immediately suspending the corporation's or organization's automated document-destruction procedures;
• Forming a team or task force that includes representatives from executive management, general counsel, outside counsel, IT and any outside e-evidence experts to create a plan for the proper preservation of digital discovery materials (this plan must be based on the specific IT systems and retention policies of that organization as well as the precise time periods and allegations in the pending or impending lawsuit);
• Auditing compliance with the formulated plan on a regular basis; and
• Seeking guidance from the court where appropriate with regard to a party's duties (this may be in the form of a protective or preservation order, or simply a very early special conference with the court).

Counsel may benefit the most when struggling with preservation issues by simply discussing the matter with opposing counsel early, and often. As Sedona Principle 3 suggests, “parties should confer early in discovery regarding the preservation and production of electronic data and documents when these matters are at issue in the litigation and seek to agree on the scope of each party's rights and responsibilities.”

And Just What Does That Mean?

Document preservation raises many questions in organizations, but one of the most difficult questions counsel can explore on the duty to preserve is what, specifically, must be preserved. For sure, organizations needn't preserve every shred of paper, every e-mail, every electronic document and every back-up tape. See, Zubulake v. UBS Warburg LLC, No. 02 Civ. 1243, 2003 WL 22410619, at 3 (S.D.N.Y. Oct. 22, 2003). At a minimum, however, “the routine recycling of magnetic tapes that may contain relevant evidence should be immediately halted on commencement of litigation.” 7 Moore's Federal Practice '37A.12[5][e] (Matthew Bender 3d ed.).

A great deal of litigants' and counsels' immense concern over proper preservation of electronic data is derived from the sanctions courts assign for failure to properly preserve e-data. According to Sedona Principle 14, “sanctions, including spoliation findings, should only be considered by the court if, upon a showing of a clear duty to preserve, the court finds that there was an intentional or reckless failure to preserve and produce relevant electronic data and that there is a reasonable probability that the loss of the evidence has materially prejudiced the adverse party.” (Emphasis added.)

Certainly, some of the case law related to spoliation sanctions in the digital-discovery arena come as no surprise where litigants have fallen far short of meeting their preservation obligations. Consider, for instance, Metro. Opera Ass'n. v. Local 100, Hotel Employees & Rest. Employees Int'l Union, 212 F.R.D. 178 (S.D.N.Y. 2003), in which the court held that defendant and its counsel acted in bad faith in failing to preserve and produce documents on a widespread basis (including destruction of various computers the plaintiff sought in discovery); the court entered a finding of liability and awarded attorney's fees.

But in cases where the conduct is less egregious, the sanctions can be just as devastating. In Linnen v. A.H. Robins Co., 10 Mass. L. Rptr. 189, No. 97-2307, 1999 WL 462015, at 10 (Mass. Sup. Ct. June 16, 1999), the court permitted an adverse jury instruction where the obligation to cease tape recycling arose by inference after an ex parte order governing preservation was lifted. And in Lombardo v. Broadway Stores, Inc., 2002 WL 86810, at 8 (Cal. App. Jan. 22, 2002) the court affirmed sanctions for destruction of electronic files where paper copies of the same files still existed.

Laying Groundwork For Guidance

Recognizing the difficulties many litigants have with preservation and spoliation (especially those in large organizations that handle a great deal of litigation on an ongoing basis), the Sedona Conference Working Group Series is trying to forge “The Sedona Guidelines: Best Practices for Managing Information & Records in the Digital World.” According to Braman, “this is the other half of the equation, as the quality of one's information management abilities is directly related to their information retrieval abilities.” A draft was presented at the March 25-26 conference and, following review and editing, will be available for public comment at www.thesedonaconference.org, near the end of summer.

Consistent with the Sedona Conference's focus on open dialogue and the advancement of creating appropriate and well-reasoned law, public comments from plaintiffs' counsel, defense counsel, IT professionals and consultants, judges and litigants alike are encouraged.

The Sedona Conference, a nonprofit organization dedicated to facilitating reasoned and just development of law and policy in several emerging areas, held its sixth annual meeting on Complex Litigation (Complex Litigation VI) March 25 and 26 in the scenic red-rock tourist destination of Sedona, AZ.

In response to the ever-increasing demand by lawyers, judges and litigants for guidance related to the duties, opportunities and overall complexities of litigation in the digital world, the conference again focused on electronic discovery.

A group of 15 of the nation's top judges, practitioners and legal scholars led discussions among the 45 participants ' the number was limited to ensure high-quality, on-target dialogue ' during the meeting.

Among myriad issues related to e-evidence discussed were retention and preservation of records.

Participants agreed that preservation is the most difficult area for practitioners to manage prior to and during litigation ' irrespective of either affiliation with plaintiffs or defendants, or the practitioners' roles as in-house or outside counsel.

A discussion of e-document retention and preservation ' and several pearls of wise guidance from the conference ' follows.

Aiming For Dialogue, Not Baiting Debate

“Our goal is to stimulate dialogue, not adversarial debate, amongst the bench and bar on leading edge issues of law and policy, thus encouraging the sound development of law based on reason, not private interests.”

That's the brief on the organization's mission from Sedona Conference Executive Director Richard Braman.

In striving to reach that goal, three annual conferences sponsored by the Sedona Conference address anti trust, complex litigation and intellectual property rights. Working groups from the Sedona Conference Working Group Series exist in each of these primary areas. The two complex-litigation working groups each studies a topic: one looks at e-documents, and the other at protective orders and public access. The antitrust and intellectual property law working groups study the role of economics in anti-trust, and the intersection between patent and anti-trust law, respectively.

Early in 2003, “The Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Document Production” was published. It was one of the first efforts by a diverse group of defense and plaintiff attorneys, judges, legal scholars and other concerned parties to provide some guidance for addressing the challenges of e-discovery.

The original 14 principles were revised in January of this year following a lengthy review, commentary and critique period. Nine of the 14 original principles set forth in The Sedona Principles address retention or preservation. These nine principles set the backdrop for much of the discussion at Complex Litigation VI.

While substantive conference discussions ran the gamut from tips for counsel attempting to build a record in e-discovery arguments to the best practices for electronic-data review and production from outside the United States, the retention and preservation of e-files and e-mail inspired the most in-depth and fervent give-and-take.

Principles To Litigate By

The retention and preservation of electronic data is a topic that consistently causes litigators, in-house counsel and judges consternation. It's not unusual for the requesting party's counsel to expect and demand the preservation of months', or even years', worth of potentially responsive electronic files in an opponent's possession.

Producing parties, on the other hand, often argue that burdens related to time and expense outweigh the potential probative value of a great deal of electronic data. Many viewpoints similar to these were expressed at the conference. Sedona participants agreed that the proliferation of case law in the area of e-discovery in recent years hasn't provided expected guidance. One participant noted that because the overwhelming majority of e-discovery disputes are adjudicated based on a very narrow and specific set of facts, appeals are rare. The result is that there are few reported decisions to assist litigants and counsel in determining their rights and obligations in data retention and preservation. Consequently, this area is replete with examples of spoliation problems, whether negligent, reckless or intentional.

But the law is crystal clear on one point: Organizations must take reasonable steps to preserve electronic documents for pending or impending litigation. In other words, the same obligations apply to preservation of e-documents as have applied to hard copy documents for years.

Sedona Principle 5, for example, states, in part, that “the obligation to preserve electronic data and documents requires reasonable and good-faith efforts to retain information that may be relevant to pending or threatened litigation.”

The spoliation of potentially responsive discovery material, however, is a much greater concern in the electronic age than it ever was when hard copy ruled the realm of legal records. One major reason for this is the simple and unfortunate fact that the status quo in the electronic world means that data is being destroyed on an ongoing basis. For example, it's standard practice for corporate IT departments to recycle back-up media containing weekly or monthly backups on a regular schedule. When litigation has been commenced or can be “reasonably anticipated,” this common IT practice can result in an irreversible destruction of potentially key e-mail and other files. Unless ' until ' corporate counsel act to suspend the recycling schedule in a timely fashion, a costly spoliation problem may arise.

While no formal recommendations came out of Complex Litigation VI, best practices for preserving data initially on notice of litigation, or reasonable anticipation thereof, include:

• Immediately suspending the corporation's or organization's automated document-destruction procedures;
• Forming a team or task force that includes representatives from executive management, general counsel, outside counsel, IT and any outside e-evidence experts to create a plan for the proper preservation of digital discovery materials (this plan must be based on the specific IT systems and retention policies of that organization as well as the precise time periods and allegations in the pending or impending lawsuit);
• Auditing compliance with the formulated plan on a regular basis; and
• Seeking guidance from the court where appropriate with regard to a party's duties (this may be in the form of a protective or preservation order, or simply a very early special conference with the court).

Counsel may benefit the most when struggling with preservation issues by simply discussing the matter with opposing counsel early, and often. As Sedona Principle 3 suggests, “parties should confer early in discovery regarding the preservation and production of electronic data and documents when these matters are at issue in the litigation and seek to agree on the scope of each party's rights and responsibilities.”

And Just What Does That Mean?

Document preservation raises many questions in organizations, but one of the most difficult questions counsel can explore on the duty to preserve is what, specifically, must be preserved. For sure, organizations needn't preserve every shred of paper, every e-mail, every electronic document and every back-up tape. See, Zubulake v. UBS Warburg LLC, No. 02 Civ. 1243, 2003 WL 22410619, at 3 (S.D.N.Y. Oct. 22, 2003). At a minimum, however, “the routine recycling of magnetic tapes that may contain relevant evidence should be immediately halted on commencement of litigation.” 7 Moore's Federal Practice '37A.12[5][e] (Matthew Bender 3d ed.).

A great deal of litigants' and counsels' immense concern over proper preservation of electronic data is derived from the sanctions courts assign for failure to properly preserve e-data. According to Sedona Principle 14, “sanctions, including spoliation findings, should only be considered by the court if, upon a showing of a clear duty to preserve, the court finds that there was an intentional or reckless failure to preserve and produce relevant electronic data and that there is a reasonable probability that the loss of the evidence has materially prejudiced the adverse party.” (Emphasis added.)

Certainly, some of the case law related to spoliation sanctions in the digital-discovery arena come as no surprise where litigants have fallen far short of meeting their preservation obligations. Consider, for instance, Metro. Opera Ass'n. v. Local 100, Hotel Employees & Rest. Employees Int'l Union , 212 F.R.D. 178 (S.D.N.Y. 2003), in which the court held that defendant and its counsel acted in bad faith in failing to preserve and produce documents on a widespread basis (including destruction of various computers the plaintiff sought in discovery); the court entered a finding of liability and awarded attorney's fees.

But in cases where the conduct is less egregious, the sanctions can be just as devastating. In Linnen v. A.H. Robins Co., 10 Mass. L. Rptr. 189, No. 97-2307, 1999 WL 462015, at 10 (Mass. Sup. Ct. June 16, 1999), the court permitted an adverse jury instruction where the obligation to cease tape recycling arose by inference after an ex parte order governing preservation was lifted. And in Lombardo v. Broadway Stores, Inc., 2002 WL 86810, at 8 (Cal. App. Jan. 22, 2002) the court affirmed sanctions for destruction of electronic files where paper copies of the same files still existed.

Laying Groundwork For Guidance

Recognizing the difficulties many litigants have with preservation and spoliation (especially those in large organizations that handle a great deal of litigation on an ongoing basis), the Sedona Conference Working Group Series is trying to forge “The Sedona Guidelines: Best Practices for Managing Information & Records in the Digital World.” According to Braman, “this is the other half of the equation, as the quality of one's information management abilities is directly related to their information retrieval abilities.” A draft was presented at the March 25-26 conference and, following review and editing, will be available for public comment at www.thesedonaconference.org, near the end of summer.

Consistent with the Sedona Conference's focus on open dialogue and the advancement of creating appropriate and well-reasoned law, public comments from plaintiffs' counsel, defense counsel, IT professionals and consultants, judges and litigants alike are encouraged.