When faced with litigation, many companies will hire a lawyer and otherwise continue to operate as if everything else is normal. However, a recent Florida court decision has shown that certain steps are required to satisfy document and data preservation obligations associated with litigation. If those steps are not followed, the case can be lost before ever making it to trial.
When Does Evidence Need to be Preserved?
The obligation to preserve documents and data starts as soon as the company realizes it is or could be a party to a lawsuit. At that point, the company must not destroy unique, relevant evidence that might be useful to the opposing party. To meet this obligation, the company must immediately take active steps to ensure and prevent the destruction of evidence, including electronic data. This duty to preserve evidence applies to all employees who are likely to have relevant information to the pending or future lawsuit and the “key-players” in a lawsuit. This can include ordinary, non-management staff.
A company and its employees must retain and preserve those documents and materials that the company knows, or reasonably should know, are: i) relevant to the potential or actual lawsuit; ii) reasonably calculated to lead to the discovery of admissible evidence; or iii) reasonably likely to be requested during discovery, not just those that are already subject to a pending discovery request.
What Can Happen if a Company Does Not Take Reasonable Steps to Preserve Evidence?
In a recent case, a Contractor was sanctioned due to its failure to preserve cell phone data, including text messages and photographs. During construction, a hurricane made landfall and pushed equipment owned by the Contractor into a bridge, causing damage that closed the bridge and prevented travel. Thereafter, the Contractor was sued by businesses who claimed they suffered losses resulting from the bridge closure.
Despite being aware of a potential lawsuit and issuing a written litigation hold, the Contractor failed to take appropriate steps to prevent the destruction of cell phone data that was potentially relevant to the lawsuit. Multiple cell phones used by non-management employees on the project were wiped, lost, or otherwise unavailable. As a result, text messages and photographs were deleted and were not recoverable.
The Contractor was unable to explain why it did not timely collect the cell-phone data. The Court concluded that the Contractor acted in bad-faith by not preserving the data. The Court then sanctioned the Contractor by awarding presumptions requested by the claimants that (1) the cell phone data was relevant and favorable to claimants; and (2) the data would have shown that it was not the specific employees whose cell phone data was lost that caused the equipment to damage the bridge.
Finally, the Court imposed monetary sanctions against the Contractor totaling over $90,000.00 to reimburse the claimants for costs incurred.
What Steps Should Be Taken?
When faced with a lawsuit or a potential lawsuit, the following steps should be taken:
- Identify all employees who are likely to have relevant information;
- Inform those employees that they may have information and documents which needs to be collected and preserved;
- Issue a written litigation hold as soon as possible to the applicable employees suspending routine document/data destruction;
- Obtain written confirmation that the employees have received the litigation hold and that they understand their responsibilities;
- Clarify any questions or misunderstandings that the applicable employee might have regarding their document/data preservation obligations;
- Make copies or backup all relevant documents and materials, including electronically stored information;
- Collect and store the potentially relevant documents and materials; and
- In the event that any identified employees leave the company, instruct them to follow appropriate document preservation steps prior to their departure.
Conclusion
A company faced with future or pending litigation must ensure that a litigation hold is implemented, its normal document destruction practices are suspended, the relevant documents and materials are collected and stored, and confirm that the applicable employees fully understand their document preservation obligations. Without taking those steps, a party risks losing the case and paying their opponent for the privilege of doing so.