“Hold On” - Evidence Preservation and Litigation Holds
Mark E. Bale, Esq.
Schwartz Semerdjian Cauley & Moot, LLP
As guitarist and lead singer Brittany Howard croons in Alabama Shakes’ recent hit single “Hold On,”…“You got to hooooooooooooooooold on…” Howard’s lyrics serve as an important reminder to litigants and their attorneys regarding the need to gather and preserve documents and electronically stored information (“ESI”) as potential evidence early in the litigation process and, in certain instances, even before a lawsuit has been filed. When in doubt about whether a party, or a potential party, to a civil lawsuit should be taking steps to maintain and prevent destruction or loss of hard copy documents or ESI, by all means, instruct the client or potential client to “hooooooooooooooooold on” to that information or they may face significant consequences. While this general concept holds true in both federal and state practice, there are some variations in the applicable law.
Litigants owe an “uncompromising duty to preserve” what they know or reasonably should know will be relevant evidence in a pending lawsuit, or one in the offing, even though no discovery request or order to preserve the evidence has yet been made. Schwarzer, Tashima & Wagstaffe, Rutter Group Prac. Guide: Federal Civ. Pro. Before Trial, (The Rutter Group - June 2016 Update) Ch. 11(I)-C, ¶ 11:125. (Emphasis original.) This obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation—most commonly when suit has already been filed, providing the party responsible for the destruction with express notice, but also on occasion in other circumstances, as for example when a party should have known that the evidence may be relevant to future litigation. Kronisch v. U.S., 150 F.3d 112, 126 (2nd Cir. 1998.) As soon as a potential claim is identified, a party is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action. In re Napster, Inc. Copyright Litigation, 462 F.Supp.2d 1060, 1067 (N.D. Cal. 2006.) The duty is triggered, at the latest, when the defendant is served with the complaint. In re Ethicon, Inc. Pelvic Repair Systems Product Liability Litig., 299 FRD 502, 512 (SD WV 2014.) Before litigation begins, most courts agree that the “receipt of a demand letter, a request for evidence preservation, a threat of litigation, or a decision to pursue a claim will all trigger the duty to preserve evidence.” Id.
The December 2015 amendment to the Federal Rule of Civil Procedure (“FRCP”) Rule 26 added the requirement that the parties specifically address the issue of ESI preservation as part of their initial Rule 26 conference and discovery plan. (See FRCP 26(f)(3).) The Rule 26 amendment highlights how potentially thorny the issue of evidence preservation has become in the modern digital age and how critical it is to be on top of the issue at the earliest possible stage. The Rule 26 amendment also emphasizes how important it is for the parties to address and discuss evidence preservation issues early in the case and work cooperatively to sort through them.
“Spoliation” is the willful destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation. (See United States v. Kitsap Physicians Svs., 314 F.3d 995 (9th Cir. 2002).) Acts of spoliation do not themselves give rise in civil cases to substantive claims or defenses, but spoliation of evidence may give rise to court imposed sanctions. Silvestri v. General Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001.) The court’s authority to sanction a party for spoliation derives from two sources: the inherent power of federal courts to levy sanctions in response to abusive litigation practices, and the availability of sanctions under FRCP Rule 37. (See Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006.)
With respect to ESI specifically, the December 2015 amendment to FRCP 37(e) changed the language of the rule to deal with the failure to preserve ESI, rather than the failure to produce ESI. FRCP 37(e) now addresses the sanctions that may be imposed for spoliation of ESI and the considerations that the courts must balance in determining if sanctions are appropriate. The spirit of the rule amendment is remediation as opposed to punishment. Upon finding prejudice to another party from loss of the information, a court may order measures no greater than necessary to cure the prejudice. (FRCP 37(e)(1).) Only upon finding that a party acted with the intent to deprive another party of the information’s use in the litigation may a court: (A) presume that the lost information was unfavorable to the party; (B) instruct the jury that it may or must presume the information was unfavorable to the party; or (C) dismiss the action or enter a default judgment. (FRCP 37(e)(2)(A)–(C).) The Advisory Committee Notes to the December 2015 FRCP amendments explicitly state that the rule does not apply when information is lost before a duty to preserve arises.
California State Law
Unlike federal discovery law, the California Civil Discovery Act (“Discovery Act”) does not specifically prohibit spoliation of evidence before a lawsuit has been filed or before a discovery request, however, California courts may issue an injunction in aid of discovery, requiring a party to preserve relevant evidence in its possession for discovery purposes. (See Dodge, Warren & Peters Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1419.) Disobedience of such a court order constitutes an abuse of discovery for which the court may impose sanctions under California Code of Civil Procedure (“CCP”) § 2023.030. CCP § 2023.030 provides for the imposition of monetary sanctions, issue sanctions, evidence sanctions, terminating sanctions and contempt sanctions. (CCP § 2023.030(a)-(e).)
Like federal law, there is no tort cause of action for the intentional destruction of evidence after litigation has commenced. (See Williams v. Russ (2008) 167 Cal.App.4th 1215, 1223; Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1.) However, such intentional destruction of evidence is a misuse of the discovery process that is subject to a broad range of sanctions under CCP § 2023.030 as described above. Id. The trial court has broad discretion in selecting discovery sanctions, subject to reversal only for abuse. Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 992. Also consistent with federal law, discovery sanctions under California law are intended to remedy discovery abuse, not to punish the offending party. Williams v. Russ, supra, 167 Cal.App.4th at 1223. The trial court is to consider both the conduct being sanctioned and its effect on the party seeking discovery and, in choosing a sanction, should attempt to tailor the sanction to the harm caused by the withheld discovery. Doppes v. Bentley Motors, Inc., supra, 174 Cal.App.4th at 992.
In addition, where there is spoliation of evidence, the prejudiced party may be entitled to an adverse inference jury instruction. CACI 204 entitled “Willful Suppression of Evidence” states: “You may consider whether one party intentionally concealed or destroyed evidence. If you decide that a party did so, you may decide that the evidence would have been unfavorable to that party.”
With respect to ESI specifically, CCP § 2023.030(f)(1) states that “…absent exceptional circumstances, the court shall not impose sanctions on a party or any attorney of a party for failure to provide electronically stored information that has been lost, damaged, altered, or overwritten, as the result of the routine, good faith operation of an electronic information system.” CCP § 2023.030(f)(2) clarifies, however, that “[t]his subdivision shall not be construed to alter any obligation to preserve discoverable information.”
Litigation Hold Letters
While sanctions for spoliation under both federal and state law are intended to be remedial and not for punishment, the failure to preserve evidence can result in severe consequences for a party failing to properly preserve and/or prevent destruction of evidence.
Best practices call for attorneys to issue “litigation hold” letters to their client(s) at the earliest feasible opportunity. For an attorney representing a plaintiff or potential plaintiff, when it appears that a client has a claim that may result in a lawsuit, a litigation hold notice should go out to the client. In addition, as part of an initial notice of representation or demand letter to a potential defendant, a request for evidence preservation should be made thereby arguably triggering the duty to preserve. For an attorney representing a defendant or potential defendant, once a client receives a demand letter, notice of a potential claim, or is served with a lawsuit, a litigation hold letter should be sent to the client right away.
A litigation hold or evidence preservation letter should:
- Describe for the recipient in a simple, straightforward way what the dispute is about and what the key event or events are including date ranges and identification of those involved or potentially effected;
- Explain why it is necessary to preserve all potentially relevant evidence;
- Explain the potential negative consequences for failure to preserve evidence;
- Describe the types of evidence to be preserved (i.e. paper, electronic data of all types, electronic devices to be maintained, audio, video, photographs);
- Instruct the recipient to immediately suspend any automatic document destruction or data deletion policies or practices;
- Advise the recipient to circulate the notice to all potential evidence custodians;
- Invite contact from the recipient with any questions about the request;
- Request confirmation of receipt and acknowledgment of understanding of the letter.
So feel free to sing along and remember to advise your clients to “hooooooooooooooooold on…” to potential evidence as early as possible.