Gaining the Advantage in Litigation

The e-discovery frenzy that has gripped the American legal system over the past decade has become increasingly expensive. Particularly costly to organizations is the process of preserving and collecting documents. These aspects of discovery are often lengthy and can be disruptive to business operations. Just as troubling, they increase the duration and expense of litigation.

Because these costs and delays affect clients as well as the courts, it comes as no surprise that judges have now heightened their expectation for how organizations store, manage and discover their electronically stored information. Gone are the days when enterprises could plead ignorance for not preserving or producing their data in an efficient, cost-effective and defensible manner. Organizations must now follow best practices-both during and before litigation-if they are to navigate the stormy seas of e-discovery.

Fortunately, the courts have not left litigants to grope blindly for direction. Particularly in 2011, the judiciary has provided a roadmap for what type of best practices organizations should implement to effectively address e-discovery. And while there were many lessons the courts imparted, three stand out in particular as the "golden rules": (a.) Issue a timely and comprehensive litigation hold; (b.) suspend aspects of document retention policies; and (c.) manage all stages of the document collection process.

The Three Golden Rules

1.  Timely litigation hold. The first of these rules is also the most important: issue a timely litigation hold. The need for a litigation-hold process arises when litigation is pending or is reasonably foreseeable under the circumstances of a given case. The hold is the first step required to ensure and enable the preservation of pertinent evidence for litigation.

Without a timely hold instruction, the entire discovery process may very well collapse. For documents to be produced in litigation, they must first be preserved. And they cannot be preserved if the key players or data source custodians are unaware that they must be retained. Indeed, employees and data sources may discard and overwrite electronically stored information if they are oblivious to a preservation duty. The failure to issue a proper hold instruction thus leaves organizations vulnerable to data loss and court punishment. No case is more instructive on this issue from 2011 than E.I. du Pont de Nemours v. Kolon Industries (E.D. Va. July 21, 2011).

In DuPont, the court issued a stiff rebuke against defendant Kolon Industries for failing to issue a timely and proper litigation hold. That rebuke came in the form of an instruction to the jury that Kolon executives and employees deleted key evidence after the company's preservation duty was triggered. The jury responded by returning a stunning $919 million verdict in favor of DuPont.

The destruction at issue occurred when Kolon deleted emails and other records relevant to DuPont's trade secret claims. After being apprised of the lawsuit and then receiving multiple litigation hold notices, several Kolon executives and employees met together and identified emails and other documents that should be deleted. The ensuing data destruction was staggering. Nearly 18,000 files and emails were deleted. Furthermore, many of these materials went right to the heart of DuPont's claim that key aspects of its Kevlar formula were allegedly misappropriated to improve Kolon's competing product line.

Surprisingly, however, the court did not blame Kolon's employees as the principal culprits for spoliation. Instead, the court criticized the company's attorneys and executives, reasoning they could have prevented the destruction of information through an effective litigation-hold process. The three hold notices circulated to the key players and data sources were either too limited in their distribution, ineffective since they were prepared in English for Korean-speaking employees, or too late to prevent or otherwise alleviate the spoliation.

The DuPont case underscores the importance of the timely issuing of an effective litigation hold. As DuPont teaches, organizations should identify what key players and data sources may have information. A comprehensive notice should then be prepared to communicate the precise hold instructions in an intelligible fashion. Finally, the hold should be circulated immediately to prevent data loss.

Organizations should also consider deploying the latest technologies to help effectuate this process. This includes an e-discovery platform that enables automated legal hold acknowledgements. Such technology will allow custodians to be promptly and properly notified of litigation and thereby retain information that might otherwise have been discarded.

Coupling an e-discovery platform with an effective archiving solution can also strengthen the legal-hold process. Archiving software can be programmed to prevent employees from deleting emails and other electronically stored information. By ingesting data into a central repository and leaving copies of the materials on local computers, employees can have access to their archived records. They cannot, however, delete those documents from the software archive. In addition, a litigation hold can be placed on archived data to prevent automated retention rules from overwriting information. Either of these features might have prevented much of the spoliation—and resulting sanctions-that occurred in the DuPont case.

2.  Suspending document retention policies. The next golden rule of e-discovery involves suspending aspects of document retention policies to ensure preservation of relevant information. This goes beyond placing a hold on archival data. It requires an organization to identify the data sources that may contain relevant information and then modify aspects of its retention policies to ensure that data is retained for e-discovery. Taking this step will enable an organization to create a defensible document retention strategy and be protected from court sanctions under the Federal Rule of Civil Procedure 37(e) "safe harbor" provision.

Rule 37(e) shields litigants from sanctions even though their data has been destroyed pursuant to the routine operation of their electronic information systems. Described in layman terms, organizations may avoid court punishment even though their computer systems deleted email and other electronic data. To find shelter in the safe harbor, however, courts require that the "routine operation" be carried out in "good faith." This typically entails modifying or suspending aspects of a retention policy when a preservation duty attaches. The decision from Viramontes v. U.S. Bancorp (N.D. Ill. Jan. 27, 2011) is paradigmatic on how organizations can avoid sanctions under Rule 37(e) by suspending aspects of retention policies.