Just how itchy is that trigger finger? Posted By Daniel Kaiser, Esq. on August 19, 2009
Our tip of the hat to Ralph Losey for his early comments on Phillip M. Adams & Associates, L.L.C., v. Dell, Inc., a recent case that has been turning heads everywhere. This case is certainly worth a read, and although it touches on a topic covered in one of our earlier posts, the outcome was surprising enough to be worth exploring again.
This was a case in which the defendant was sanctioned for not implementing a litigation hold, thus eliminating emails and data dated as far back as 1999. The catch: the defendant apparently did not receive notice from the plaintiff of a potential infringement claim until 2005, and claims to have implemented a litigation hold from that point forward. 
The Utah Magistrate judge reasoned that the entire computer and component manufacturing industry were essentially on notice of potential litigation (and as a result their litigation holds should have been triggered) in 1999 due to the presence of class action lawsuits against certain players in the industry in 1999 and 2000 based upon claims of defects in floppy disk controllers.
Moving on, the Magistrate found the defendant’s electronic information system architecture, which relied upon each employee to archive or delete their own emails and documents according to company practices, to be unreasonable. The Magistrate referred to the company’s system architecture as one “of questionable reliability which has evolved rather than been planned . . . .”[1] Even more to the point, the Magistrate did not find the defendant to be in possession or control of a coherent document retention policy.
At stake–the ability of companies to rely on the Safe Harbor protections of FRCP 37(e) which reads:
(e) Failure to Provide Electronically Stored Information. Absent 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.[2]
A few problems leap out of the pages of this ruling:
- Ralph Losey does a nice job of pointing out that per Rule commentary and case precedent, the good-faith requirement of Rule 37(e) refers to destruction of electronically stored information prior to the triggering of a duty to preserve (rather than the subjective reasonability of the electronic information system itself). He also makes the point that Sedona does not indicate reasonability adjudications for records management systems as a prerequisite for Rule 37(e) protection. On the other hand, one should keep in mind that Sedona does mandate reasonability in email retention policies by saying that “[w]hatever their form, email retention policies must be reasonable in purpose and reasonable as applied.”[3]
- It is also interesting to note that even if there had been class actions in the industry, they had been directed against different companies for a product defect. If the defendant’s trigger for a litigation hold had been tripped, by the Magistrate’s reasoning it would be for an issue different than the one in question: patent infringement.
- By introducing dubious triggers to the litigation hold, this decision tends to weaken the Rule 37(e) Safe Harbor and promotes potentially cumbersome wide-angle data retention any time tangentially related lawsuits are taking place in a particular sector of the market.
- Based on the record in the text of the opinion, why didn’t the defendant do a little more to set up the elements of their Rule 37(e) defense to begin with?
On that last point, the Utah Magistrate judge seemed to be treading on more familiar ground in charging that “[the defendant] offers no statements from management-level persons explaining its practices, or existence of any policies.”[4] If not, why not?
The Magistrate went on to reference Guideline 1 of The Sedona Guidelines: Best Practice Guidelines & Commentary for Managing Information & Records in the Electronic Age (November 2007) as follows: “[a]n organization should have reasonable policies and procedures for managing its information and records.”[5] This built up to the Magistrate judge’s conclusion that “[t]he absence of a coherent document retention policy is a pertinent factor to consider when evaluating sanctions.”[6]
Even if the ruling comes across, on the whole, as heavy handed, and even if this decision is reversed on appeal, these final points are important. While it’s an open guess as to what the Magistrate judge may consider to be a “coherent” document retention policy, (or, for that matter, whether or not most of us would agree with him,) a management-level explanation of the defendant’s practices and policies does not seem hard to deliver. The defendant claimed Rule 37(e) Safe Harbor protection against sanctions for pre-litigation elimination of electronically stored information. When making such a claim, always remember to build the elements of your defense in advance through careful implementation and oversight of a company-wide document retention policy.[7] Then, when you need them, you can argue the elements supporting your Rule 37(e) defense piece by piece.
[1] Phillip M. Adams & Associates, L.L.C., v. Dell, Inc., 2009 WL 910801 (D.Utah March 30, 2009).
[2] Fed. R. Civ. P. 37(e).
[3] The Sedona Conference Working Group on Electronic Document Retention & Production (WG1), The Sedona Conference Commentary on Email Management: Guidelines for the Selection of Retention Policy, 8 The Sedona Conference Journal 239, 240 (Fall 2007).
[4] Phillip M. Adams & Associates, L.L.C., v. Dell, Inc., 2009 WL 910801 (D.Utah March 30, 2009).
[5] Id.
[6] Id.
[7] See ESI Maintenance – Sailing the Safe Harbor, posted March 12, 2009.
Post A Comment