2014 demonstrated that management and discovery of electronic information continues to be a challenging issue in litigation.  A review of 2014 court decisions also underscores the importance of litigation hold notices, records retention policies and practices, early identification of potential sources of relevant information, and general litigation readiness.  It is clear that counsel, parties, and potential litigants must take reasonable but defensible steps to preserve and collect electronically stored information stored in various formats.  While preservation obligations continue to increase, there is some good electronic discovery news—parties may start seeing some relief on the expense and time associated with the review of electronic information.  Courts continued in 2014 to endorse the use of technology to improve the efficiency and accuracy of document review management.  

Litigation Hold Notice Possibly Discoverable

In United States ex rel. Barko v. Halliburton Co., the District Court for the District of Columbia held that litigation hold notices circulated to company employees were discoverable.[1]  The litigation hold notice in Barko was sent by defendants’ CEO and Vice President of the Legal Department to all employees.  Employees were later directed to forward the litigation hold notice to other employees who may not have received it.  The litigation hold notice did not instruct employees to keep the contents of the notice confidential.  

The court recognized that litigation hold notices were protected by the attorney-client privilege or work product doctrine in other jurisdictions; however, this “particular” litigation hold notice was discoverable according to the court because (1) the notice was widely disseminated, (2) no steps were taken to protect the confidentiality of the notice, and (3) the notice was likely to lead to the discovery of admissible evidence. 

Prior to Barko, litigation hold or document retention notices prepared by counsel have usually been protected by the attorney-client privilege and/or the work product doctrine unless there is a spoliation dispute.[2]  But Barko is a reminder for counsel and parties to evaluate their litigation hold procedures and consider the following precautions:

  • Litigation hold notices should be sent only to relevant personnel such as the IT department, key custodians, or personnel likely to possess relevant information.
  • The litigation hold notice should contain confidentiality provisions and instruct recipients not to discuss the notice with anyone other than counsel.
  • The litigation hold notice should provide clear and concise guidelines on what to preserve—but it should not contain sensitive or confidential company information in the event disclosure is required.

Sanctions, Sanctions, Sanctions

The duty to preserve relevant evidence arises once litigation is “reasonably anticipated.” A preservation obligation “arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.”  Silvestri v. Gen. Motors Corp., 271 F.3d 583, 591 (4th Cir. 2001).  A duty to preserve relevant electronic information is thus triggered by one of the following events:  (i) receipt of a complaint; (ii) receipt of a subpoena for information as a third party to an existing lawsuit or investigation; (iii) receipt of a formal order of investigation from a regulatory body; or (iv) any notice or awareness of a potential legal claim. 

Failure to comply with preservation obligations may warrant sanctions including monetary penalties, adverse inference instructions, preclusion of evidence, or in extreme cases, default judgment or dismissal.  A court “enjoys considerable discretion over whether to sanction the offending party.”  Calderon v. Corporacion Puertorriquena de Salud, 992 F. Supp. 2d 48, 52 (D.P.R. 2014).  Once the preservation obligation is triggered, it is imperative that counsel, companies, and company personnel take adequate steps to preserve and collect electronically stored information. 

A number of 2014 electronic discovery decisions involved sanctions for failure to preserve electronic information, including: 

  • Brown v. Tellermate Holdings Ltd., No. 2:11-CV-1122, 2014 WL 2987051 (S.D. Ohio July 1, 2014) (defendant precluded from using evidence and ordered to pay attorneys’ fees and costs for failure to preserve information stored on company database).
  • Mazzei v. Money Store, No. 01CV5694 JGK RLE, 2014 WL 3610894 (S.D.N.Y. July 21, 2014) (defendants sanctioned with attorneys’ fees and costs associated with searching a database in the possession of a third party).
  • Small v. Univ. Med. Ctr. of S. Nevada, No. 2:13-CV-00298-APG, 2014 WL 4079507 (D. Nev. Aug. 18, 2014) (special master recommended sanctions that included adverse inferences and monetary penalties for failure to institute a timely litigation hold notice, notify IT personnel, and preserve company computers, custodian laptops, network files, intranet server, custodian personal mobile phones, and Blackberries).
  • Novick v. Axa Network, LLC, No. 07-CV-7767 AKH KNF, 2014 WL 5364100 (S.D.N.Y. Oct. 22, 2014) (defendant sanctioned with an adverse inference jury instruction and monetary sanctions for failure to preserve audio recordings).
  • In the Matter of Certain Opaque Polymers, No. 337-TA-883 (US International Trade Commission sanctions party for not sending out a litigation hold notice, failing to preserve evidence, and destroying evidence on laptops).

Duty to Preserve Encompasses Text Messages and Social Media

In 2014, several courts determined that text messages and social media are discoverable electronic information and subject to preservation.  The plaintiff in Hosch v. BAE Sys. Info. Solutions, Inc., No. 1:13-CV-00825 AJT, 2014 WL 1681694 (E.D. Va. Apr. 24, 2014) deleted all text messages and voicemails from his iPhone prior to producing his phone to counsel.  Determining this to be “severely egregious conduct,” the court dismissed plaintiff’s case with prejudice and awarded the defendant attorney’s fees and costs.  In Calderon v. Corporacion Puertorriquena de Salud, 992 F. Supp. 2d 48 (D.P.R. 2014), the court ordered an adverse inference instruction against plaintiff for failure to preserve text messages.  Although the litigation had not commenced when the text messages were deleted, the plaintiff had contacted his attorney and the record indicated that the plaintiff “reasonably foresaw litigation.”

The magistrate judge in Painter v. Atwood, No. 2:12-CV-1215 JCM NJK, 2014 WL 3611636 (D. Nev. July 21, 2014) granted an adverse inference against the plaintiff for deleting relevant Facebook comments.  The magistrate judge rejected the argument that plaintiff was a twenty-two year old girl who failed to appreciate her preservation obligation.  The district court upheld the magistrate judge’s adverse inference sanction for spoliation of evidence.  InSmith v. Hillshire Brands, No. 13-2605-CM, 2014 WL 2804188 (D. Kan. June 20, 2014), the court allowed for the discovery of social media that revealed plaintiff’s emotions or mental state

Technology Assisted Review Gaining Steam

Courts continued in 2014 to approve or encourage technology assisted review (“TAR”) or predictive coding to search for relevant electronic discovery.  In February of 2014, Judge Denise Cote of the Southern District of New York recognized the reliability of predictive coding in Fed. Hous. Fin. Agency v. HSBC N. Am. Holdings Inc., No. 11 CIV. 6189 DLC (S.D.N.Y. July 24, 2014):

I think there’s every reason to believe that, if [predictive coding is] done correctly, it may be more reliable — not just as reliable but more reliable than manual review, and certainly more cost effective — cost effective for the plaintiff and the defendants.[3] 

Courts approved the use of predictive coding in Dynamo Holdings Ltd. P’ship v. C.I.R., No. 2685-11, 2014 WL 4636526 (U.S. Tax Ct. Sept. 17, 2014) as well as F.D.I.C. v. Bowden, No. CV413-245, 2014 WL 2548137 (S.D. Ga. June 6, 2014).  In Bridgestone Americas, Inc. v. Int’l Bus. Machines Corp., No. 3:13-1196, 2014 WL 4923014 (M.D. Tenn. July 22, 2014), the plaintiff was permitted to “to switch horses in midstream” to use predictive coding.  Although the parties were not allowed to change course and use predictive coding in Progressive Cas. Ins. Co. v. Delaney, No. 2:11-CV-00678-LRH, 2014 WL 3563467 (D. Nev. July 18, 2014), Nevada Magistrate Judge Peggy A. Leen recognized that “[p]redictive coding has emerged as a far more accurate means [that than human review or keyword searches] of producing responsive ESI in discovery.”