When attempting to manage an overwhelming amount of digital information, often referred to as “electronically stored information” or “ESI”, an organization must decide what information it values and should therefore preserve, and what information it can destroy in the interest of maintaining an efficient operating system. Businesses should establish document retention and destruction policies to provide guidelines for managing ESI which should be created after considering the business, regulatory, tax, information management, and infrastructure needs of the organization, including the need to conserve electronic storage. For example, if a company determines that it only needs to retain e-mail with business record significance, that should be specifically set forth in the policy. A time frame should be established for maintaining ESI, one that is adhered to uniformly and routinely. ESI preservation should be for as long as necessary, but not infinitely.
Litigation
When an organization is involved in litigation; however, opposing parties may value the organization’s information quite differently. For example, information in e-mails may appear to lack any business need for preservation, but for an opposing party trying to establish an organizational intent, such information may be critical. As organizational concerns focus on the risks of accumulating and storing too much digital information and the need to control the growth of electronic information, information potentially relevant as evidence may be at risk. Therefore, employers should be aware that a potential defendant in a lawsuit has an obligation to preserve ESI before a lawsuit is even filed, thus the policy should contain a provision for “legal holds” to preserve documents related to an anticipated litigation, investigation or audit.
As stated above, a duty to preserve evidence exists when a party has notice that the evidence is relevant to litigation or when a party should know that the evidence may be relevant to future litigation. The intentional destruction of evidence subject to this duty to preserve is sometimes referred to as spoliation, which New Jersey has recognized as a separate cause of action. However, it should be noted that intentional misconduct in withholding e-discovery is not required for a court to make a spoliation determination; instead, poor document retention practices, or failure to maintain such practices, may provoke sanctions from the court. Evidence of spoliation may give rise to sanctions including: dismissal of claim or granting judgment in favor of a prejudiced party; suppression of evidence; an adverse inference, referred to as the spoliation inference; fines; and attorneys’ fees and costs. As a federal court in New Jersey noted, sanctions are appropriate when there is evidence that a party’s spoliation of evidence threatened the integrity of the court and when the party alleging spoliation was prejudiced by the destruction of the ESI.
Safe Harbor
Due to the fact that e-mail messages, regardless of whether or not they have been deleted from an employee’s inbox, are discoverable in federal court pursuant to Federal Rule 34(a), employers have a vested interest in monitoring these messages.
Additionally, recent amendments to Federal Rule 26 refined the way that electronic data is discovered under the Rules. Specifically, the initial disclosure provisions in Federal Rule 26(a) were amended to require the disclosure of “electronically stored information,” that the party may use to support its claims or defenses. Section (b)(2) of the Rule, which provides limitations on discovery, was also amended to provide limitations related to electronic data. It provides that a party can identify sources of electronically stored information as not reasonably accessible based on burden of cost. If the parties disagree about this designation, either party can move the court for a determination. Even if the court determines that the information is not reasonably accessible, the court may order its production for good cause shown and make a determination as to who is responsible for the costs.
However, Federal Rule 37(e) provides a “safe harbor” for electronically stored information. Specifically, Federal Rule 37(e) provides that “[a]bsent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” (emphasis added). Therefore, the safe harbor is only available to those who have taken proactive measures, such as the ones detailed below, to address many of the issues surrounding ESI. The United States Supreme Court has stated that the existence of a reasonable records and information management policy, instituted and applied in good faith, should be considered in determining appropriate consequences for the destruction of evidence. The “safe harbor” provision; however, may fall short when a corporation is provided a litigation hold letter or other notice of ESI preservation and fails to suspend its document retention/destruction policy.
As noted above, employers have a legitimate business interest in monitoring and managing electronic information. At the very least, companies should implement a reasonable policy in writing, to be circulated amongst its employees and also visible in common areas, such as the kitchen or lounge, taking into considering the needs of the specific organization. In addition, potential litigants must make additional efforts to safeguard potentially relevant electronic information. This would help the company survive any allegation of “spoliation” that may arise during the course of litigation.
Nicole E. Russak is an Associate at WJ&L and practices in the Tax, Trusts & Estates and Transactional areas.