Summary: A recent decision by the Court of Federal Claims, AAB Joint Venture v. United States, Nos. 04- 1719 C, 06-49 C, 05-114 C, 05-1172 C, 2007 WL 646158 (Fed.Cl. Feb. 28, 2007), discussed the efforts required to be taken by any party to preserve documents, particularly electronic documents, when litigation is anticipated and to produce those documents in the course of the litigation.

Facts: AAB entered into a contract with the U.S. government to design and construct a storage and logistics base in Israel for use by the Israeli Defense Force. AAB ultimately filed several complaints alleging differing site conditions and miscellaneous changes. During the course of these suits, AAB served several requests for the production of documents and interrogatories on the government. In its responses to the interrogatories, the government identified several individuals who were involved in the contract and who were admitted to have generated e-mail relevant to the litigation. Nevertheless, in addition to failing to produce some specifically identified hard-copy documents requested by AAB, the government failed to produce most of the e-mails responsive to AAB’s requests.

AAB sought a motion to compel and sanctions from the court, based on the government’s failure to adequately preserve and produce the sought-after materials after litigation was anticipated. AAB argued that the government failed to preserve back-up tapes and e-mails and did not issue written instructions to its employees to suspend data destruction until over three years after it should have anticipated litigation. The government responded, in part, by arguing that production of the e-mails would require restoration of back-up tapes that would cost between $85,000 and $150,000, an undue burden. In addition, the government stated that although it did not issue written instructions to preserve evidence to its employees until three years after AAB notified it of differing site conditions, employees had received oral instructions to preserve evidence at the time of this notice.

Decision: The Court of Federal Claims ruled that:

  • The duty to preserve evidence, including e-mails and back-up tapes, attaches whenever a party knows or should know that the evidence may be relevant to anticipated litigation. After additional investigation, if the government determines that documents had been destroyed after the duty to preserve evidence attached, the government was ordered to produce a sworn declaration attesting to that fact.
  • The transfer of e-mails to back-up tapes, while under a duty to preserve this evidence, does not excuse the government from having to produce these materials. The costs of production normally fall on the party responding to the discovery requests. Cost shifting is allowed, under some circumstances, but the court must “balance the likelihood that restored documents will prove relevant to the instant litigation with whether the cost of restoration places an undue burden on Defendant.”
  • The court ruled that while cost is a consideration it must consider in ruling on a motion to compel, “the Court cannot relieve Defendant of its duty to produce those documents merely because Defendant has chosen a means to preserve the evidence which makes ultimate production of relevant documents expensive.” Because the cost of restoring the back-up tapes was small in comparison to the amount at stake in the litigation (over $30 million), the government was ordered to restore the tapes and produce any relevant documents.
  • Interestingly, however, because AAB was not able to provide clear evidence that relevant documents would be on the back-up tapes, the court ordered a phased approach in the restoration of the back-up tapes. The court initially ordered the government to restore one-fourth of the total number of back-up tapes and produce relevant documents at the government’s expense. AAB could subsequently argue for additional back-up restoration, but the court would use the results from the initial restoration to guide its benefit-burden analysis if the government requests cost-shifting.

Practitioner’s Tips:

  • As soon as litigation is anticipated, employees should be notified, both in writing and orally, that they are to preserve all relevant documents, including e-mails and other electronic media. IT staff should be involved in efforts to preserve electronic media, in the original format, including any back-up tapes. Any record retention policies in effect that allow for destruction of documents should be temporarily suspended.
  • If a party is aware that certain documents have only been preserved on back-up tapes, that party runs the risk of sanctions if it recycles or destroys those back-up tapes.
  • The Federal Rules of Civil Procedure have recently been amended to address the production of electronic media. Parties are now required to discuss the availability and production of electronic media early in the case. In addition, the rules now provide guidelines for the following topics that relate to electronic media: the form and extent of electronic media production; initial disclosures of categories of electronic media in a party’s possession; cost-shifting; inadvertent production of privileged documents; and, sanctions for failing to preserve electronic media. Counsel and clients need to be cognizant of this changing discovery landscape.