Americans love to litigate.  We sue each other over every big and little perceived harm, from the collapse of the nation’s largest financial institutions to the dry-cleaner that lost the judge’s pants.  It is our right and we love to exercise it – and all that comes with it, including onerous discovery obligations. 

Decades of common law teaches us that, as a general rule, there is no duty to preserve documents relevant to potential litigation until the duty is triggered by one or more factors indicating a credible threat that litigation is reasonably likely.  Exactly when that duty is triggered is a complicated issue not addressed here, but there is some comfort in knowing that there is no duty until there is a duty.

What this means for businesses and other organizations is that, as a matter of records retention practices, companies can decide how long they need to retain records for business purposes and destroy documents in the ordinary course of business when they are no longer needed.  This is particularly important in the age of electronically stored information (ESI), when the automatic deletion, overwriting and purging of old and unneeded ESI is critical to the efficient functioning of a business.  Indeed, as a result of the 2006 amendments to the Federal Rules of Civil Procedure, Rule 37(e) specifically provides a so-called “safe harbor” for ESI that is destroyed “as a result of the routine, good-faith operation of an electronic information system.” 

Related to this subject, organizations have always been free to determine how their ESI is managed – e.g., how they design their IT infrastructure, what investments are made regarding software applications – based solely on business needs rather than requirements for potential litigation.  So, one would assume that companies can rest assured that they can manage their ESI in a way that meets their business needs as long as they take proper steps to preserve ESI once the duty has been triggered.  Right?  Not so fast.

A couple of recent decisions have called into question routine practices for managing ESI in a way that challenges these fundamental principles.  In Adams v. Dell, 2009 WL 910801 (D.Utah March 30, 2009), the court granted a motion for sanctions, in part, based on the defendant’s “questionable information management practices.”  In particular, the court found that it “may be unreasonable” for a company to maintain ESI in a way that puts the burden on individual employees to retain email and other electronic records that are necessary for business or legal purposes.  Strikingly, the court found that, “[w]hile a party may design its information management practices to suit its business purposes, one of those business purposes must be accountability to third parties,” here, potential opposing parties in future litigation.

More recently, in Capitol Records v. MP3Tunes, 2009 WL 2568431 (S.D.N.Y. Aug. 13, 2009), the court criticized the IT architecture of one of the plaintiffs, in particular with respect to the lack of an effective system to perform centralized email searches for discovery purposes.  As a shot across the bow, the court stated that “[t]he day undoubtedly will come when burden arguments based on a large organization’s lack of internal ediscovery software will be received about as well as the contention that a party should be spared from retrieving paper documents because [it had a poor filing system].” 

Taken together, these decisions could be interpreted to mean that companies must consider litigation as a “business purpose,” like any other, and take steps in designing their IT infrastructure, information management policies and software investments accordingly.  The issue was enthusiastically discussed during the judges roundtable discussion at the recent Georgetown Advanced E-Discovery Institute – with well-reasoned and spirited opinions on all sides of the debate.  It remains to be seen whether these cases are outliers or the tip of a new iceberg in the developing law about management of ESI, but organizations would be well advised to think about how effectively their ESI policies and systems support their litigation as well as their business needs.

About Jeane Thomas

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