Are Employers Still in Denial About E-discovery Readiness? Survey Says ....

Head in Sand.jpgI recently gave a presentation about controlling e-discovery costs in employment litigation. The topic is especially relevant to employers because e-discovery costs and risks are often inherently one-sided. And there is nothing more frustrating for a company to settle a claim with little to no merit, simply because the cost of litigation - magnified by e-discovery costs - drives the decision-making process. But I digress.

As to the presentation, it was presented in collaboration with i-Sight (a leader in providing web-based case management software for corporate investigations) and, specifically Joe Gerard, Dawn Lomar, and Lindsay Khan. For any professionals that get the opportunity to work with Joe and his team, I highly recommend it: They are very easy to work with and do an exceptional job of making the presenter look good. But I digress yet again.

As to the seminar, it appeared to be well received based on the number of people who signed up and actually stayed on for the entire presentation.

During the seminar questions were asked of the attendees about the efforts of their organizations towards e-discovery planning and procedures. Two of those questions and corresponding responses are as follows: 

  • Does your organization have a e-discovery retention plan?

Disappointingly, only 24% of attendees responded that their organizations had an e-discovery retention plan. 76% of respondents. 

  • How confident are you that your company’s retention plan would survive judicial scrutiny?

The responses to this question should be very concerning for employers. Specifically, the majority of the responses fell in the range of "Not at all confident" to "Somewhat Confident." Only five attendees responded "Extremely Confident." It is, however, worth noting that no one responded "Who do I write the check to" (an actual choice).  

The Take Away for Employers

The results of the above informal survey illustrate the two biggest contributors to e-discovery mistakes and sanctions arising out of those mistakes.

First, the key to avoiding mistakes in responding to e-discovery litigation challenges begins with actively creating sound e-discovery procedures before a lawsuit arises. Taking the results of the above survey at face value, such proactive planning is woefully deficient. In fact, employers you would expect to be on top of e-discovery issues are not (See The Importance of Timely Preserving Email in Employment Discrimination: Part I, discussing e-discovery missteps by a major law firm that actually advertised its "expertise" in advising clients on e-discovery).

Second, procedures do little good if a company is not ensuring that all personnel are aware of the importance of diligently following the procedures. But borrowing a concept from Colin Powell, part of this diligence means instilling in an organization's employees the concept of "never walking past a mistake." In other words, those responsible for carrying out an e-discovery litigation plan should be encouraged to share their views for improving the process.

Avoiding & Reducing Risks of Sanctions in Employment Litigation

Risk, Reduce, Avoid.jpgI am presenting a Webinar titled E-discovery Tips for Winning Employment Cases, on May 31, 2012. One of the main problems the presentation addresses is reducing the difficulty employers experience when it comes to meeting their preservation obligations in response to employment litigation. However, with various regulations, record keeping requirements and creative lawyers, this is becoming easier said than done. 

A recent federal district court case, Grabenstein v Arrow Electronics, Inc. (PDF), highlights one aspect of this difficulty. In that case, the plaintiff claimed that the defendant former employer failed to accommodate her disability and that it discriminated against her because of that disability by terminating her employment. Plaintiff further argued in her motion for sanctions that the former employer's obligation to preserve electronically stored information (emails) arose long before the employer had notice of the claim. 

More troubling for employers, the court agreed, finding essentially that the defendant's obligation to preserve e-mails did in fact exist before the employer had notice of the eventual litigation, e.g., before Plaintiff was fired, before Plaintiff filed her Charge of Discrimination with the Equal Employment Opportunity Commission (EEOC), and before the defendant employer received notice of the Charge of Discrimination from the EEOC. 

Overview of Spoliation

Before getting into the Grabenstein, case, it is important to understand what spoliation of evidence refers to; Spoliation is generally defined as the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation. One requirement for a sanction order to be proper is that the party had a duty to preserve evidence because it knew, or should have known, that litigation was imminent.  

When is the Preservation Trigger Date

A central issue in a spoliation claim is when a party's obligation to preserve evidence arose. In the Grabenstein case, as with most cases, plaintiffs seek to move back the date triggering the employer's duty to preserve as early as possible in order to bring into play potential sanctions. Here, the plaintiff argued that the former employer was obligated to preserve the e-mails in question even before it had notice of impending litigation, pursuant to a record keeping requirement under 29 C.F.R. § 1602.14, and that failure to adhere to its obligation was grounds for a spoliation inference.

In sum, 29 C.F.R. § 1602.14 "requires an employer covered by [the ADA] to retain all personnel records for [one year] after they are created and, when a charge of discrimination has been filed against the employer, to retain all records relevant to the charge until the dispute is resolved." 29 C.F.R. § 1602.14.

The Court agreed, noting that where a party has violated an EEOC record-retention regulation, a violation of that regulation can amount to a breach of the duty necessary to justify a spoliation inference in an employment discrimination action. Accordingly, the Court found that the Defendant violated its obligation to retain portions of Plaintiff's "personnel or employment record(s)" pursuant to 29 C.F.R. § 1602.14 when it deleted e-mails relating to her entitlement to disability benefits.

Pulling the Trigger for Preservation - No Harm if the Plaintiff is Shooting Blanks  

The Court eventually decided that sanctions were unjustified for various reasons. The most important reason for employers, however, is that Plaintiff provided no evidence that the e-mails were destroyed in bad faith, in part, because there was no evidence to show that the e-mails were destroyed other than in the normal course of business pursuant to the defendant employer's e-mail retention policy.

Advance Planning is Key to Meeting Preservation Obligations 

The E-discovery Tips for Winning Employment Cases webinar on May 31, 2012, will discuss in more detail steps employers should take to properly identify the trigger date for preserving employment related evidence, as well as what steps should be taken to minimize the risks if that trigger date is missed.

Briefly, however, it is absolutely critical for an employer to have in place an appropriate record retention policy, that is consistently followed, and includes a means for suspending the retention policy in response to actual or possible litigation. This is because such a policy and documented procedures for suspending that policy puts the employer in a position to demonstrate any emails or other evidence lost was not due to bad faith, which is generally required to impose an adverse inference or other sanctions. 

If an Employment Discrimination Claim Crashes & Burns Are You Going to be Burned in the Fire? Best Practices for Electronic Discovery Preservation.

Hard Drive Crash & Burn.jpgAttorney Robert D. Brown, Jr. of the Gibbons law firm has a great write-up about a recent dismissal of an employee's discrimination claim. The dismissal was granted after the plaintiff destroyed certain computer related evidence. See How a Case Can Crash and Burn: Why a Litigant Should Not Set Afire a Computer After It Crashes (Preservation 101).

The case, Evans v. Mobile County Health Department (PDF), (S.D. Ala. Jan. 24, 2012), involved a reverse discrimination and retaliation lawsuit against the former employer Mobile County Health Department. The spoliation sanctions arose out of the former employee's intentional burning of a 13 year old personal computer that was alleged to have contained discoverable electronically stored information (ESI). 

Mr. Brown's post provides a thorough discussion of the facts and procedural background of this case, which I won't duplicate. 

Instead, I'd like to point out that this case also highlights two important issues for attorneys and provide e-discovery recommendations in-house counsel and plaintiff and defense attorneys.

First, this case illustrates the important role that attorneys must play in assisting their clients to meet their judicial and ethical obligations to preserve digital information.

This point is reinforced by what the Court highlighted in ordering spoliation sanctions against the plaintiff. Specifically, the court noted that the plaintiff employee testified as follows:

Finally, although plaintiff testified that she was unaware of a court obligation not to destroy evidence and that she did not intentionally destroy her computer to cover-up unfavorable evidence, she also admitted that her attorney told her to preserve all relevant documents regarding her complaints of racial discrimination, which, of course, would include the emails she mentioned during her deposition

Second, this case also highlights the need for legal counsel to provide meaningful assistance that is documented. In this regard, the court opinion does not offer any further insight beyond the preceding quote in terms of what was explained to the plaintiff about her scope of preservation.

Reading between the lines, I would be comfortable assuming that not much assistance or guidance was actually provided by the attorney as to preserving electronically stored information.

This assumption is also based my experience as an associate attorney listening to clients being generally advised to "make sure to copy all the documents relevant to this lawsuit" for the attorneys to review at some later date. This recommendation evolved to "preserve all relevant documents and don't forget about emails."

Often, however, there was no discussion about what relevance means in the legal sense of the word or recommendations for actually preserving electronically stored information. In short, clients were left to figure the details out for themselves. But especially when it comes to e-discovery preservation, "the devil is in the details." And these details continue to be overlooked up to the present - even by sophisticated law firms involved in employment discrimination claims.  

Best Practices for Initial Preservation of Electronically Stored Information 

The following are a few recommendations for in-house counsel and outside attorneys that should be considered when it comes to meeting ethical and legal obligations for the preservation of computer related evidence: 

  • Discuss the client's preservation obligation at the earliest opportunity. For example, I've incorporated a preservation discussion into my standard retention agreement and will often raise the issue at the first client meeting.     
  • After discussing the preservation obligation, document the obligation. This documentation should be viewed as both a risk management exercise on the attorney's part (or for cynics who don't prefer euphemisms, a CYA) and also an attempt to genuinely assist the client in meeting their ethical obligations. For example, in addition to discussing preservation in the retention agreement, I provide a full discussion of what must be preserved and general steps to take for preserving emails and the like, including examples of categories of data to consider for preservation.  
  • For business clients, it may make sense to meet directly with IT professionals as soon as possible because they are likely to know the digital terrain. With this knowledge, an efficient and defensible preservation plan can take shape.   
  • Further, it is important to avoid lawyer jargon when discussing preservation obligations, especially with individuals who may not be accustomed to the litigation process. For example, "relevance" is a term that lawyers commonly throw around. But this may not mean the same thing to a non-lawyer who is not well-versed in the elements of the claims for defenses.     

These are just a few considerations that attorneys and their clients need to consider when it comes to preserving digital information that may be involved in litigation. For more recommendations on when a litigation hold should be implemented, contact Jason Shinn.  

How Texting Can Drag Employers into the Middle of Divorce Litigation

Texting Hands.jpgDivorce can be a horrendous process for those directly involved. But it can also be challenging for employers who are inadvertently dragged into divorce proceedings. This is because a company's interests are increasingly put at risks as digital evidence in the form of text messaging or emails becomes "Exhibit A" in divorce trials. 

In this regard, NPR has an interesting article discussing the increasing prevalence of using text messaging in divorce (CU In Court: Texts Can Be A Divorce Lawyer's Dream"). For the article, NPR interviewed private investigator Stephen Ward of Pinkerton Consulting and Investigations. Mr. Ward had this to say about text messages found on smart phones: 

It's a treasure trove of information ... [but] if they're on a company phone? You could be looking at things that are trade secrets, that you're not entitled to see ... It's actually corporate property, it's not yours, and you've done something completely illegal (referring to stealing a password to access the text messages).

Speaking from experience, I was retained a few years ago as an e-discovery consultant in substantially the identical scenario Mr. Ward described. Specifically, the wife of a rising star at a company allegedly accessed his employer provided smart phone to confirm suspicions of an extramarital affair. She was right, but the manner in which she accessed the phone created various issues under computer related statutes and other legal issues.  

I was hired to consult with the wife's attorney to sort those issues out and collaborate with the husband's employer to make sure emails and text messages relevant to the divorce were preserved and would be available for the pending divorce litigation. 

What Should Employers Do When Company Smart Phones and Emails are Involved in Divorce Litigation?

Based on the preceding experience and conducting other employee investigations involving technology, a number of issues arise that should be immediately discussed with legal counsel. But a couple of considerations: 

  • Spouses Aren't The Only Ones Who are the Last to Know. 

Employers should expect that they will be at the bottom of the list to find out that company devices and the digital evidence they contain are likely to be critical evidence in a divorce proceeding. Let's face it, not many employees or executives want to initiate the conversation about needing to preserve evidence because their spouse discovered incriminating text messages on their company provided smart phone.

In fact, knowing this in my case, the decision was made to send correspondence directly to the employer to request that it preserve the husband's emails and text messages in order to make sure that such evidence would be there for the divorce proceeding. This not only made sense from a preservation obligation, but it also headed off potentially increased costs for retrieving such information months down the road. 

  • A Cheating Spouse is Bad. Committing a Crime is Worse.

Accessing without authorization a spouse's smart phone, tablet, company laptop, etc. can expose a person to civil and criminal charges - even if such access proves the spouse was cheating. In other words, the ends do not justify the means.

Consider for example an ongoing Michigan case involving Leon Walker who is charged with felony misuse of a computer, which carries up to five years in prison, for his unauthorized access of his then wife's Gmail account. This is really a tragic story in that Mr. Walker suspected that his wife was involved in an affair and he confirmed this suspicion after he logged into her email account without her permission. He was able to do this because his wife kept the password next to the computer.

To avoid potential criminal or civil liability for the unauthorized access of digital evidence, it is critical to consult with an attorney so that emails or text messages can be properly obtained through subpoenas or the discovery process. 

  • Employers Should Hope for the Best but Plan for the Worst.

Employers should take steps to educate employees about the proper use of employer provided technology devices. Equally as important, employers should frequently stress that company information should not be transferred to personal devices or otherwise commingled with personal information. But employers need to be realistic and expect that these points will be ignored.

For this reason, companies also need to impress upon employees that if they have reason to believe company devices, text messages, emails or other information may be involved in litigation, then management must be made aware in order to make strategic decisions for preserving this information in a cost-effective manner. In addition to divorce cases, trade secret misappropriation claims, employment discrimination, or harassment claims are also common examples of where such preservation obligations may be triggered.    

For more information about preserving digital evidence or conducting technology related investigations, contact Jason Shinn. 

Asking Departing Employees to Sign a "Legal Hold Waiver" is the Wrong Tool for Meeting E-Discovery Preservation Obligations

ToolboxCraig Ball, a top-shelf e-discovery thought leader, recently wrote a blog post asking "Should a Legal Hold 'Waiver' Be Secured from Departing Employees?" As explained below, the answer is no. 

But first for background purposes, a party - an individual or business entity - has an obligation to preserve information, in any format, e.g., documents, emails, and other digital information, that relate to anticipated or ongoing litigation. The "legal hold" is usually the first tool for meeting this obligation. 

Against this backdrop, Mr. Ball proposed the following as a proposed "legal hold" waiver: 

I do not contemplate making a claim or bringing a lawsuit against XYZ Corporation arising from my termination or other matters relating to my employment. Accordingly, I have no expectation that XYZ Corporation will preserve information in anticipation of a claim or litigation by me.

The genesis for Mr. Ball's legal hold waiver was a recent case, NVE v. Palmeroni, in which a New Jersey District court awarded monetary sanctions and an adverse jury instruction against a former employer who had sued its former employee for claims involving breach of fiduciary duty. For a great analysis of this e-discovery case see Mark Sidoti's blog post discussing the case. 

Why a Litigation Hold Waiver is not the Right Tool for Employers 

While I agree that employers should and can do more with respect to limiting their risks when it comes to e-discovery spoliation claims, I respectfully disagree with Mr. Ball's proposal that employers should obtain litigation hold waivers from departing employees. A few reasons to consider:     

  • First, NVE was not a typical employment discrimination claim because the employer initiated the litigation. It is reasonable to expect that a party - whether an individual or business - initiating litigation should have their preservation house in order and this preservation obligation is going to arise long before the complaint is filed. 
  • Second, in concluding that sanctions were appropriate, the court framed the company's e-discovery preservation obligations essentially as a rudderless wreck. From here, it was easy for the court to sift through the wreckage to come up with the following points in support of its decision to sanction the employer: (i) NVE failed to institute the required litigation holds; (ii) Legal counsel failed to properly oversee the discovery process (a non-lawyer made critical litigation decisions); and (iii) NVE was unable to clearly articulate the steps it took to preserve, search and produce the requested discovery. Under these circumstances, a litigation hold waiver is unlikely to insulate any party against e-discovery sanctions.  
  • Third, employment terminations are often emotionally charged events. Also, discharged employees often do not appreciate the difference between a termination - even an "unfair" termination - and a termination arising out of unlawful discrimination. The two simply are not the same. So mixing the emotion involved in a firing and a lack of experience or understanding of the legal nuances inherent in employment discrimination and then asking for written confirmation that the person won't sue is often going to be a recipe for disaster.

Alternative to a Legal Hold Waiver - Controlling Your Destiny

Jack Welch once said, “Control your own destiny or someone else will.” Incorporating a litigation hold waiver into the termination process, however, allows a terminated employee to control - at least in part - the employer's e-discovery preservation response. But this risk is unnecessary if an employer proactively manages the situation by investigating the circumstances and making informed decisions from the outset. In this regard, a few points to focus on are as follows:  

  • Implement and adequately oversee a preservation program;
  • The preservation program should include informed individuals, including information technology professionals, along with managers and employees likely to have first hand knowledge about the terminated employee;
  • Experienced legal counsel will also need to be a part of the preservation program in order to make material decisions regarding preservation issues. As the NVE Court demonstrated, failing to use legal counsel to make such decisions is a major consideration in awarding sanctions; 
  • If it is a "close call," employers should err on the side of caution and take appropriate steps to preserve information likely to relate to future litigation. This may include making a forensic copy of the discharged employee's hard drive, preserving the terminated employee's email mailbox, and saving server logs, or any other "digital fingerprints" that may relate to prospective litigation.     

The NVE case certainly underscores the need for properly addressing e-discovery preservation obligations and the severe, adverse consequences for failing to do so. But this case should motivate employers to refocus on their e-discovery obligations rather than doubling down on a litigation hold waiver.

Proper E-Discovery Preservation Critical for Avoiding the Cuckoo's Nest

one-flew-over-the-cuckoos-nest.jpgKen Kesey, an American author best known for his novel One Flew Over the Cuckoo's Nest (1962), once exclaimed “To hell with facts! We need stories!”

Mr. Kesey's exclamation often becomes the storyline when a party to litigation mismanages their e-discovery preservation obligations and is then forced to respond to sanctions and spoliation claims.

This truth recently played out when a Michigan federal court ordered (PDF) the city of Detroit to pay costs and attorney fees for its failure to preserve emails relevant to litigation. The tab for both stands at approximately $735,000. The Court also ordered an adverse jury instruction for its e-discovery preservation failures.

Background Leading up to the E-Discovery Sanctions

To appreciate why Mr. Kesey's exclamation comes to mind in response to mismanaged e-discovery preservation, a little background on the underlying dispute is necessary. 

Specifically, the e-discovery sanctions were ordered in a case involving claims brought by the children of an exotic dancer who was murdered in Detroit. Normally (and unfortunately) this would not be news.

But according to the Third Amended Complaint (PDF), the slain dancer was alleged to have "performed" at a 2002 party "hosted" at the Manoogian Mansion, which was the residence of Detroit's former Mayor, Kwame Kilpatrick.

It is alleged that attendees at this party included Kwame Kilpatrick, his entourage, Detroit police officers, and exotic dancers. It is further alleged that the party was "crashed" by Kwame's wife who then physically attacked the slain dancer (Tamara Greene). Shortly afterwards Ms. Greene was shot, which fueled speculation that her death was somehow tied to the party.   

The Lawsuit Behind the E-Discovery Sanctions 

This party and subsequent homicide - or so the lawsuit story goes - was the subject of a massive cover up involving the Mayor, police officers and other high ranking city officials loyal to the mayor. As part of this cover up Detroit city officials, police officers, and others deliberately and repeatedly delayed and obstructed the murder investigation and actively concealed material evidence in the investigation of Greene's death in order to protect those involved in the infamous "Manoogian Mansion Party." 

E-mail Spoliation - When the Facts Take a Backseat to the Story 

As conspiracy theories go, this arguably falls short of a second gunman and grassy knolls. But going back to Mr. Kesey, the facts of the underlying claim (whether a fight between a mayor's wife and a stripper took place at an illicit party) become less important when the storyline turns to deleted emails and destroyed evidence. 

In this regard, Michigan's then Attorney General Mike Cox, Michigan state police, news organizations, and others investigated whether an illicit party at the Detroit mayoral mansion ever took place. These investigations showed no such party occurred.

In fact, the 2003 investigation by Michigan's Attorney General consisted of examining over 30 witnesses under oath; over 120 witnesses were interviewed; approximately 90 subpoenas were issued for witnesses and documents; forensic analysis of computers was performed; and over 10,000 pages of documents and records were reviewed.

But when deleted or missing emails come into play, the facts are not the story. Instead, the story as told by the Court is that a defendant failed (miserably I might add) to preserve emails and now must pay attorney fees and costs and go into trial with an adverse jury instruction against it.

The story in the media is even worse: [Lawyer] wants Detroit to pay his firm $735,622 over destroyed e-mails", "Judge scolds city over trashed e-mails in Tamara Greene case," or Federal judge slams City of Detroit for destroying e-mails in stripper slaying case." 

The Take Away

The bottom line is that stories like this - monetary sanctions and negative headlines - underscore the need for properly responding to e-discovery preservation obligations. Recommendations for properly addressing e-discovery matters in response to employment litigation have previously been provided herehere and here.

Additionally, feel free to contact me for more information. I've been responsible for responding to e-discovery challenges on behalf of corporate clients going back to 2001. I have also implemented best practices and protocols for law firms and been hired as an e-discovery trial expert in state and federal employment litigation matters.    

Knowing When to Hold 'Em: Considerations for Getting the Preservation Obligation Right in Employment Discrimination Claims

GamblingGrowing up, my dad was a huge country music fan. I refused to appreciate this style of music for no other reason than it was what my parents liked. But one song I vividly remember was the Gambler by Kenny Rogers.

The refrain from that song always plays in my mind when it it comes to addressing e-discovery preservation obligations: "You got to know when to hold 'em ..."

Having worked with lawyers and business organizations to address e-discovery challenges since 2001, it is easy to appreciate the feeling that "knowing when to hold 'em," i.e., when should a "litigation hold" be implemented in response to an employment discrimination claim, is analogous to hitting a moving target in the dark. 

This is because there are multiple instances along a preservation time-line of "when" the duty to preserve may arise. Examples include:

  • When an employee files an internal complaint of discrimination or harassment?
  • When a rejected applicant sends a letter threatening a claim for failing to hire the applicant? 
  • When the employer launches an internal investigation?
  • When an EEOC charge is filed? And what happens if the EEOC issues a Dismissal of the charge, but the charging party still has the statutory 90 days to file a federal suit? Is the employer now obligated to continue the preservation during this 90 day period or risk sanctions?

Additionally, an employer's obligations to preserve information may range from the complaining employee and his or her supervisor, a department, or the entire company.

Further, it is important to emphasize that individual plaintiffs must carefully comply with preservation obligations because Michigan courts have dismissed claims for failing to do so. Gillett v. Mich. Farm Bureau (Dec. 22, 2009) (Plaintiff's sexual harassment claim dismissed after plaintiff admitted deleting e-mails from a personal account after filing suit).

Additional Thoughts on Getting the Litigation Hold Right - Reasonable Anticipation

The remainder of the Gambler's refrain explains that one also has to "know when to walk away and know when to run." Unfortunately, employers and employment attorneys do not have the option to walk or run away when e-discovery preservation goes wrong in litigation (which happens more than it should).

It is, therefore, important to focus on the "what" should be preserved and "when" preservation is required. The general rule for when this hold must be implemented is when litigation is "reasonably anticipated." But there is no bright-line rule as to when a party crosses this threshold. Therefore, determining whether a party should reasonably anticipate litigation is a fact-intensive inquiry. 

Once that threshold is crossed, however, there is almost always more value in taking a conservative view as to "when" a litigation hold must be implemented as well as what must be preserved. Additionally, experienced counsel should be able to work with in-house counsel and management to implement a defensible, yet cost-effective preservation plan.   

Two remaining considerations when it comes to implementing the hold: 

  • The litigation hold notice should be issued to all record custodians/employees reasonably likely to have information relevant to a claim. Also, these "key players" may include outside vendors; and
  • An employer should cautiously work with its legal counsel to determine if the employer's IT professionals should actually carry out the litigation hold process for electronic data (e.g., databases, e-mail accounts, computers, cell phones PDAs, or on flash drives) as well as with regard to taking control of backup tapes and stopping any automatic overwriting of electronic data of such preservation should be conducted by a retained expert/technology trial consultant. 

The litigation hold process should be created in collaboration with management, IT professionals, and experienced legal counsel. If you have questions about litigation hold practices, the attorneys of E-Business Counsel have worked with business clients and employers to minimize legal risks and defense costs in addressing preservation obligations and the litigation hold process in broad range of litigation matters, including employment law claims, product liability, and complex commercial litigation.  

Are Employers Still Confused When it Comes to E-discovery Preservation?

Line of Questions.jpgA recent employment discrimination claim highlights that employers and their lawyers still struggle with e-discovery preservation obligations. 

In Haraburda v. Arcelor Mittal USA, Inc.(N.D. Ind. 6/28/2011) (PDF) the defendant former employer was ordered by the Court to implement a broad litigation hold to preserve information that may be discoverable (i.e., information that relates or may lead to information that relates to the litigation) in the plaintiff's lawsuit. 

The Defendant Employer's Failure to Implement any Preservation Hold

Plaintiff learned that after she filed her employment discrimination complaint that certain emails were deleted during the EEOC investigation. The employer's HR manager responded to these deleted emails taking the position that:

... files stored on company computers are company property and can be assessed and/or deleted as the company views appropriate.

The defendant employer further rejected plaintiff’s request for assurances that going forward discoverable information would be preserved and refusing to "implement a litigation hold or other process to preserve evidence" until after a required litigation conference (the Rule 26(f) conference, which may not be scheduled until months after a complaint is filed). Plaintiff then moved for an Order to Preserve Evidence. 

In contrast to the employer's position, the Court recited what is (or should be) essentially litigation preservation 101: when "[a party] knows, or should have known, that litigation was imminent" then preservation obligations are triggered and "the party should implement a plan to find and preserve relevant evidence." Accordingly, the Court granted plaintiff’s motion and ordered defendant to "place a litigation hold on any and all documents and information that may reasonably be related to the pending litigation."

The Take Away

This case actually mirrors another matter discussed on this blog where a Metro Detroit law firm was sued for employment discrimination and it was also alleged to have failed to implement a litigation hold thereby losing discoverable information. Both cases are prime examples of bad litigation strategy. They further illustrate that without appropriate e-discovery planning you are simply inviting plaintiffs' attorneys and judges to step in and implement the steps "they" think the employer should have taken. 

The bottom line is that having the best litigation strategy to defend against an employment discrimination claim means very little if it is unconnected to meeting basic e-discovery preservation obligations. Accordingly, a good employment litigation strategy must coordinate actions and resources between the substantive legal issues and e-discovery preservation so as to accomplish a comprehensive plan that puts an employer in a strong position to defend against the claims and, if necessary, argue against over broad and often expensive "hold any and all" type plans that are judicially imposed or requested by opposing counsel. Follow this link for an overview of e-discovery issues that should be addressed

Former Employee Gets a Free Pass for Deleting Evidence in Employment Dispute

Free Pass.jpgA recent employment termination turned litigation offers important lessons for employers and employees when it comes to preserving computer information maintained on company issued laptops and related equipment.

In Larkin v. Trinity Lighting, Inc. (PDF) (S.D. Miss. Apr. 20, 2011), Larkin was employed by Trinity as a salesperson and provided a company laptop, desktop computer, and an external hard-drive.

He was terminated and Trinity directed Larkin to return all of these devices. Larkin complied ... sort of. He returned the devices, but not before deleting all of the files (approximately 111,384 files).

Larkin then filed suit against Trinity alleging it failed to make bonus payments. Trinity filed a counterclaim asserting, among other claims, that Larkin breached his fiduciary duty and engaged in fraudulent activity during the course of his employment, including fraudulently altering a bonus structure.

Trinity sought to compel Larkin to pay the costs associated with the restoration of the deleted computer evidence, which was estimated to cost between $8,000 and $10,000 to restore a portion of these files (the retrievable user-created files deleted after Larkin's termination).

Trinity argued that Larkin had actual knowledge that he was not to delete these files and that he did so in anticipation of the impending law suit because the files contained evidence of Larkin's breach of fiduciary duty and fraudulent activity. In further support, Trinity pointed to the fact that Larkin consulted with an attorney prior to the deletion of the files.

Larkin admitted that he deleted the files. But he contended that he did not anticipate that litigation would be filed and he only consulted counsel solely for the purpose of negotiating severance pay. Thus, Larkin contended that he had no duty to preserve the computer files.

In deciding the issue, the Court accepted that Larkin committed spoliation (destroyed evidence that should have been preserved due to the litigation), but declined to impose sanctions. In assessing sanctions, the Court focused on the following factors: (1) The degree of fault of the party who altered or destroyed the evidence; (2) The degree of prejudice suffered by the opposing party; and (3) Whether there is a lesser sanction that will avoid substantial unfairness to the opposing party.

While factors one and three seemed to clearly weigh in favor of Trinity, the Court, in a conclusory fashion, noted that Trinity had not ultimately been deprived of any information as the the information was "apparently retrievable" and Trinity could retrieve it at its cost.

The Take Away for Employers and Employees

The Duty to Preserve Evidence and When this Duty Arises

Larkin obtained a good result - he avoided paying a $10,000 computer forensic bill - but that does not necessarily mean he made a good decision. In fact, I'm surprised the Court did not impose sanctions against Larkin in light of the undisputed facts: A former employee admitting to deleting all files - company and personal - from the company owned computers after being advised to return all such property - computers and files - against the backdrop of a dispute over a lot of money (court filings indicate over $200,000). 

The right decision would have been to understand the duty to preserve evidence: A legal duty exists to preserve information under the control of a party who reasonably knows or can reasonably foresee such information being material to a potential or pending legal dispute. This duty may arise under statutory authority, case law, court procedural rules, or the inherent authority of the court. 

The threshold for preserving evidence is "reasonable anticipation," which most frequently arises after a lawsuit has been filed, and a party receives service of the complaint or counterclaim. For non-parties, the duty often arises upon being served a subpoena or deposition notice, which provides express notice of pending litigation. But courts also have concluded that a duty to preserve evidence may arise prior to litigation, when a defendant or non-party receives pre-litigation communications or once it becomes reasonably certain that an action will be filed. 

Computer/Technology Use Policy

Providing company issued laptops and computers to remote employees like Larkin is commonplace. Consider that eighty-two employers in Fortune's 2011 list of "100 Best Companies to Work For" offer telecommuting opportunities to employees. Further, a survey by the Society for Human Resource Management found that 84% of organizations offering telecommuting provide company laptops and desktop computers to their employees (page 18).

Regardless of whether your company offers a formal telecommuting program, it should have a computer/technology policy restricting the deletion of any company files and the personal use of employer provided computers, including the saving and storing of non-work, personal information.

Trinity, however, made no reference to such a computer/technology use policy to eliminate or undercut Larkin's stated reason for his mass deletion: He did not have enough time to delete only personal files and information. My assumption is that Trinity did not have such a policy in place. Whether such a policy would have changed the outcome is uncertain. But it is certain not having a policy did not help Trinity's position. 

Prominent Detroit Law Firm Settles Employment Discrimination Claims Following Allegations of Mismanaging E-Discovery Preservation

Digital Background.jpgOn May 31, 2011, Crain's Detroit Business (by Chad Halcom) reported that a prominent Detroit law firm and its Vice-Chairman had settled litigation involving various employment law claims filed by a former executive assistant. 

I previously reported on this employment discrimination litigation and also discussed the lessons to be learned from the law firm's alleged mishandling of its electronic discovery obligations. In sum, the alleged e-discovery mismanagement centered on the law firm's failure to properly implement a "litigation hold" for the preservation of discoverable information, e.g., emails and digital information.  

According to Crain's Detroit Business, details of the settlement were not disclosed. The circumstances leading up to the settlement were also not provided, including whether the allegations of the e-discovery misconduct played any role in the parties reaching a settlement.

But whether it did or not isn't significant. Instead, it illustrates that it is far better to create your own litigation strategy than to have external forces dictate your choices. This is especially true in employment discrimination claims where employers will often want to direct attention to the plaintiff's employment deficiencies and the nondiscriminatory reasons for why an adverse employment decision was made in the first place.

Failing, however, to take the initiative to properly address e-discovery issues at the front end of the litigation (or sooner if there is a reason to anticipate litigation) often results in e-discovery issues becoming a distraction from the merits, or lack thereof, of the actual litigation.

Here is some practical insight for properly addressing e-discovery issues prospectively rather than reactively.

The Importance of Timely Preserving Email in Employment Discrimination: Part II

Fog & Uncertainty.jpgPart I of this post discussed the background of a party's obligation to preserve email information in response to an employment litigation claim and when that obligation may arise. As explained in Part I, this discussion took place in the context of an employment discrimination claim against a prominent Detroit law firm Honigman Miller Schwartz and Cohn and one of its named attorneys. 

Cutting through the Fog in Determining Email Preservation Obligations 

With the background in Part I, there are a number of take-aways for employers when responding to employment discrimination claims.

  • First, it is important to understand what courts will and will not accept as excuses for deleting email. Courts routinely refuse to allow parties to avoid their obligations to preserve emails and related digital information simply by resorting to an argument to the effect of "it's not our fault, our network automatically deletes email." In fact, a 2005 case (DaimlerChrysler Motors v. Bill Davis Racing, Inc.) sanctions were ordered against the defendant because email was deleted due to an automatic deletion program. Further, while a court may be forgiving if the party failing to suspend its email deletion policy lacked the IT resources to address email preservation, it is a gamble that I would not want to take. This is especially true where, as is the case in the  Fitzhenry Litigation, the Defendant law firm actually represents having expertise in preserving email and conducting e-discovery
  • Second, it is critical to identify the trigger date for when your preservation obligations arise. In assessing this date, it is common for companies and their attorneys to overlook that the trigger may arise long before litigation is actually filed. For example, in the Fitzhenry litigation, as is true for most employment discrimination claims, there is often a pre-litigation trigger date due to charges being filed with the EEOC or Michigan Department of Civil Rights that predate the filing of a lawsuit.   
  • Third, once the trigger date arises, it is essential to take appropriate steps to communicate with key stakeholders and likely document custodians about their obligations to preserve information pertaining to the suit. Taking appropriate preservation obligations may allow your company to take advantage of certain "safe harbor" rules under both Federal and Michigan Court Rules that excuse a party's failure to preserve relevant information under certain circumstances. Further, properly handling preservation efforts often avoid expensive retrieval efforts downstream. In this regard, the "ballpark" estimate for the Defendant law firm and attorney to retrieve deleted information was identified as "$20,000."  
  • Fourth, it is important to have a process in place to monitor and confirm your litigation hold is effective and properly managed. Such a process is critical if attorneys choose to delegate preservation and production of discoverable information to the clients' employees and document custodians. To illustrate why a process is critical, consider the testimony of the defendant attorney concerning what steps he took to preserve and produce information relevant to the Plaintiff's employment discrimination claim:   

Q. Have you provided any documents yourself in response to our request for discovery? 

A.  Not that I remember.

Q.  Has anybody that you are aware of looked through your computer that you use for information or documents? Anything you're personally aware of? 

A. Not that I remember. 

* * * 

Q. Has anybody asked you to go look for documents? 

A. I don't believe so. 

Q. Okay. Have you asked anybody to look for documents? I presume the answer is no. 

A. Not that I recall.

  • Fifth, you do not want a key manager, decision-maker or, in this case, an established attorney to testify that they did nothing to look for responsive information and emails or that they were not told to make such a review. Such testimony creates the perception, which can quickly become reality to a judge or jury, that a party has failed to meet its discovery obligations. This failure also commonly results in judicial intervention in the form of an outside computer forensic specialist to review Defendants' computer systems/email archives, which was requested by counsel for Ms. Fitzhenry. Having been on both sides of this situation, the prospect of an outsider rummaging through the digital drawers of your business organization is not a possibility you want to be facing.  

Conclusion

The bottom line is that properly addressing e-discovery is easier said than done. This is evidenced by a respected and sophisticated law firms with apparent e-discovery expertise having to respond to motions alleging that it failed to properly address e-mail preservation and manage its e-discovery obligations. Substantive knowledge and e-discovery experience is critical to properly, efficiently, and cost-effectively manage e-discovery challenges and opportunities. 

The Importance of Timely Preserving Email in Employment Discrimination: Part I

Shooting Self in Foot.jpgA prominent Detroit law firm, Honigman Miller Schwartz and Cohn, was recently sued by a former executive assistant after she was discharged following an on-the-job injury and related employment discrimination claims.

For any employer, dealing with such a garden variety employment discrimination claim has risks and costs. But the suit against Honigman also provides a cautionary road map for employers about how these risks and costs may spiral out of control by failing to properly preserve emails. And as this two-part series explains, failing to properly implement a litigation hold can equate to shooting yourself in the foot and making any employer - even prominent law firms - look silly.  

Properly Implementing a Litigation Hold is the First Step in Properly Defending against Any Employment Discrimination Claim

Brian Baxter of Law.com provides a thorough explanation of the factual background of the employment discrimination lawsuit against the Honigman law firm (including the sordid details comparing the law firm environment to that of Mad Men).

But for purposes of this post, it is important to note that after the suit was filed the Detroit-based law firm and its firm's vice-chair and attorney, Alan Schwartz, were accused of withholding or failing to preserve important discovery materials, including e-mails. This failure was highlighted in Plaintiff's Motion to Compel Discovery (PDF). In sum, Plaintiff alleged that Defendants made a "unilateral, undisclosed decision not to provide electronic information dating back more than 90 days from the date of the written request was made because all emails are automatically deleted after 90 days" under the law firm's retention policy. Spoiler alert: Failing to "turn off" any automatic email deletion programs in response to employment litigation is generally not going to turn out well for your company.   

Parties to litigation have obligations to preserve information

It is important to understand two important points before discussing why automatic deletion of email conflicts with the proper defense of an employment discrimination claim:

  • First, a party to litigation has an an obligation to preserve information relating to the litigation. This obligation includes documents, emails and related digital information;
  • The duty to preserve the preceding types of information arises not only when litigation is filed but it also arises when a party reasonably should know that the evidence may be relevant to anticipated litigation.

A litigation hold, therefore, simply refers to preserving information, regardless of the format (e.g., documents, emails, databases, paper etc.) in the context of litigation.Against this backdrop, it is critical for any party anticipating or involved in litigation to determine the "trigger date" for when its obligation to preserve information begins.

Defendants appear to shoot themselves in the foot when it comes to pulling the preservation trigger

There are multiple instances of "when" the Defendants should have implemented a litigation hold, i.e., preserved relevant information in the litigation. For example:  

  • In 2006 and 2009, Plaintiff's Motion notes that Defendants' privilege log identified documents being withheld from production based on the attorney-client privilege and attorney work product doctrine (a review of the log, however, shows that the earliest work product dates back to 2009). Attorney work product describes content that is generally created in anticipation of litigation and anticipation of litigation should equal preservation.
  • On September 29, 2010, according to the Complaint, Plaintiff received from the Equal Employment Opportunity Commission (EEOC) a right to sue letter. It is not clear when Plaintiff first filed her complaint with the EEOC. But again, the EEOC charge should have triggered a preservation response. 
  • The case was filed on October 12, 2010, which unquestionably triggers a party's obligation to preserve emails/information relating to the filed litigation.
  • On November 9, 2010, Plaintiff served her written request to Defendants for production of documents and information - electronic or otherwise. 

Despite this time line, the defendant law firm and attorney failed to suspend an automatic email deletion program in relation to any of these trigger dates. This failure is especially difficult to reconcile when Defendants were supposedly preparing for litigation in 2008/2009 or, at the latest, upon the EEOC filing.

The second part of this post will discuss the consequences for failing to properly manage preservation obligations in response to an employment discrimination claim and steps to avoid that scenario.