Vol. 84, No. 5, May 2011
Lawyers and their clients may find the preservation and production of electronically stored information to be a confusing and expensive undertaking. Many large corporations generate enormous amounts of electronic information that often becomes obsolete and difficult to recover. Although federal courts have addressed the preservation obligations of lawyers and their clients, Wisconsin courts have not specifically addressed these issues in the electronic discovery context. As a result, parties with significant amounts of electronically stored information are often unsure about their preservation obligations and the tools that are available to assist in this process.
This article addresses preservation by use of litigation holds and document-retention policies. First, the article outlines the parameters of the obligation to preserve electronically stored information and explains how a litigation hold can help a party meet this obligation. The article then defines and explains appropriate use of a document-retention policy in regard to electronically stored information. Finally, the article demonstrates how appropriate use of a document-retention policy and a litigation hold can invoke the safe-harbor provisions of Wisconsin law and insulate the producing party from liability for inadvertent destruction of electronic evidence.
The Duty to Preserve Electronically Stored Information: The Litigation Hold
The law is well settled that a person or entity that reasonably anticipates being involved in litigation is required to preserve all potentially relevant information until the matter is concluded.1 This law has been in place for many years and applies directly to electronically stored information.2 However, electronically stored information differs in some ways from traditional paper records: electronic data is voluminous, is easily disbursed, and can be deleted or modified by the routine application of basic computer systems. Electronically stored information can be stored in many formats, may be difficult to locate, and sometimes is obsolete. Therefore, different principles govern the retention, preservation, and production of electronically stored information.
The proper application of these principles requires appropriate preservation efforts. Thus, a party must take immediate steps to preserve electronically stored information once litigation is reasonably foreseeable.3 Although courts do not expect perfection in this regard, it is often difficult and expensive to thoroughly preserve all electronically stored information that might be relevant to a discovery request. Meeting basic preservation obligations, such as issuing a litigation hold, identifying key players, and ensuring that records are preserved, is an important first step.4 Next, counsel should ensure that document-deletion policies are immediately suspended until the search for responsive records is complete.5 If these steps are followed, the producing party will be in a much better position to defend against accusations of spoliation or bad faith.
This process is more difficult than it sounds. Counsel must be involved and work with the client to identify potential sources of information.6 In large cases, counsel must also communicate with information-technology personnel to make sure that all document deletion policies are suspended and that key players preserve relevant data. When necessary, counsel must ensure that back-up tapes and other archived data is preserved for an appropriate time. The failure to comply with this protocol can lead to the destruction of electronically stored information and accusations of spoliation of evidence.
A company that strictly follows a well-defined litigation-hold policy can protect itself from such accusations. A litigation-hold policy outlines a process to follow for preserving electronically stored information when litigation is foreseeable and can provide a crucial road map by supplying specific instructions that define the producing party’s preservation obligations. An effective litigation-hold policy should satisfy the following criteria:
• The policy should state that the producing party’s preservation obligations are triggered when litigation is reasonably foreseeable.
• The policy should instruct employees to immediately notify a designated contact person about all potential claims and litigation against the entity so that the person can institute the preservation process.
• The policy should require the immediate suspension of any document-retention or deletion policies once litigation is reasonably foreseeable.
• The policy should provide a protocol for carefully documenting all preservation efforts. For example, in an employment discrimination case involving a management-level employee, the company should immediately document efforts to preserve electronically stored information on a custodian-by-custodian basis, particularly when key players possess such information.
• The policy should ensure that only individuals who have the technical expertise necessary to collect all responsive data are entrusted with the responsibility of preserving or retrieving responsive data.
• The policy must ensure that all back-up tapes and archived data are preserved until the matter is concluded.
• The policy should require sufficient documentation to demonstrate that sincere, good-faith efforts have been made to preserve responsive electronically stored information.
• If search terms are used to retrieve information, the policy should make sure that the search terms and established protocol are capable of capturing potentially relevant data.
As this check list illustrates, the preservation of electronically stored information can be time-consuming and expensive. One might conclude that a litigation-hold policy is a waste of time that is not worth the expense. However, some courts have held that the failure to implement a written litigation hold gives rise to a presumption of gross negligence, which can give rise to sanctions.7 Without a proper litigation hold, the client faces a considerable risk of being forced to engage in expensive motion practice directed at the client’s alleged failure to comply with its preservation obligations. The proper implementation of a litigation-hold policy will help to prevent this unnecessary expense, especially when coupled with an effective document-retention policy.
Timothy D. Edwards, Wayne State 1989, is a partner at Axley Brynelson LLP, Madison. He is chair of the firm’s electronic discovery and record management team. He can be reached at TEdwards@axley.com.
The Document Retention Policy
A strong preservation protocol will be reinforced by proper use of a document-retention policy. A document-retention policy sets the schedule for the retention and destruction of specific business records, in compliance with applicable legal guidelines, and further provides for the timely destruction of these documents. For example, a document-retention policy may provide for the retention of tax records, employment records, board minutes, accounting records, and other documents that must be kept for a specific time under the law.
A document-retention policy also can provide for the preservation and destruction of documents that lack legal significance to the company. For example, such a policy could set the timetable for the destruction of nonbusiness-related emails and other documents that are not integral to the company’s day-to-day operations. The retention of such documents is a business decision that is not dictated by specific legal obligations.
It is common for companies and governmental entities to put into place programs that routinely and automatically destroy electronic data on scheduled intervals. Many computer programs include automatic deletion processes, such as the scheduled erasure of Web browsing history in some Internet applications. If such a process continues after litigation is reasonably foreseeable, it is possible that crucial documents will be destroyed and that accusations of spoliation will follow. This can be avoided if a document-retention policy is carefully followed and automatically suspended when litigation is reasonably foreseeable.
To be effective, a document-retention policy should satisfy the following criteria:
• Employees should be provided with specific, ongoing, and documented training regarding compliance with the policy.
• The policy must be objectively and consistently enforced.
• The policy should specifically identify and define records that must be retained.
• The policy should spell out which records must be preserved for a specific period of time, such as payroll records under the Fair Labor Standards Act, tax records, and so on.
• The policy should specifically identify documents that should be retained for a specific period of time.
• The policy must include a provision that calls for the immediate suspension or revocation of the document retention and deletion process once litigation is reasonably foreseeable.
• Employees who fail to comply with the policy should be consistently disciplined in an objective and even-handed manner.
The Safe-harbor Provision of the Wisconsin Rules of Civil Procedure
A document-retention policy can be used to preserve and destroy electronically stored information at appropriate intervals. Such a policy can produce additional, often-overlooked, benefits. Under Wisconsin’s new “safe-harbor” provision, 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.”8 Under this provision, a party with a document-retention policy cannot be sanctioned for the destruction of electronically stored information if the policy is immediately suspended once litigation becomes reasonably foreseeable. In the ideal situation, the entity will have in place a litigation-hold policy that triggers preservation efforts, including the suspension of the document-retention policy. In turn, the document-retention policy allows for the destruction of electronically stored information, without threat of sanction, whenever a litigation hold is not in effect. When used together, the policies create an effective insurance policy that can overcome accusations of bad faith and spoliation and lower litigation costs related to electronic discovery.
Preservation obligations in the electronic discovery context involve the application of old principals to a new setting. Despite the complexity of the technology and changes in the law, steps can be taken to preserve data and avoid unnecessary accusations of wrongdoing. Use of a document-retention policy and a litigation-hold policy will simplify preservation efforts when litigation is threatened or foreseeable. As electronic discovery continues to play a significant role in litigation, the proper use of these tools can provide effective insurance to parties that take these obligations seriously.
1Neumann v. Neumann, 2001 WI App 61, ¶ 86, 242 Wis. 2d 205, 626 N.W.2d 821.
2Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003).
3Id. at 218.
4Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 432-33 (S.D.N.Y. 2004).
7Pension Committee of Univ. of Montreal v. Banc of Am., 685 F. Supp. 2d 456, 465 (S.D.N.Y. 2010).
8Wis. Stat. § 804.12(4m).