By Beth-Ann E. Krimsky, Esq.
Whether large or small, businesses today operate in a world of proliferating e-mail communications. E-mail has simplified and accelerated the speed of business communication. We use it for the ability to reach out at a time convenient for the sender, the ability to respond at a time convenient for the recipient, the ability to record and store information, messages and responses, in an easy, less formal type of business communication. However, as we have all been warned, once it is in black and white, it may always be in black and white. Even if the content of e-mail communication is not harmful to a business or a future litigation position, the existence of the e-mails alone may cause tremendous financial and legal obligations in the litigation context. Based on newly developing case law, even if e-mail communications are innocuous, the consequences of not preserving and producing e-mails can be devastating in light of the potential imposition of monetary sanctions and the severe remedies a court has the discretion to impose if e-mails are not preserved.
Recent examples include the imposition of a $2.9 million fine against a U.S. company due to its failure to preserve and produce e-mail evidence. The U.S. District Court calculated the fine by assessing $250,000 for each of the 11 principal employees involved with the “missing” information. Another U.S. District Court allowed a plaintiff’s attorney to instruct a jury that the missing e-mail evidence must have been unfavorable to the defendant thereby creating an overwhelming appearance of liability.
For better or worse, e-mails are most businesses current form of business communication and therefore they must be managed properly. Just because the information is stored electronically, that data is no less of a document than parchment paper would be and as such, businesses must be aware of, and plan for, the potential use of e-mails in the litigation context before they are in litigation and after they are in litigation. The cost of not planning before, and not complying after, can be extremely high.
Training Regarding the Impact of E-Mails
Because e-mails are likely to exist for the indefinite future, the best course of action for a business is to educate its employees regarding proper content and management of e-mails. What is viewed as a spontaneous thought or a quick response in the course of a business day may later be presented as a blown up Exhibit “A” at trial. While angry words on the phone or in person can dissipate or be followed by an apology, once an e-mail is sent, it is forever in black and white and on electronic back-up tapes that can be accessed and seen completely out of context. Further, to the extent one e-mail is saved and another is lost, the saved e-mail can take on heightened importance and the implication of “conveniently losing” the explanation can be enough to convince a court or jury of wrongdoing.
Consider this string of e-mails that could have been sent with the best intentions:
Human Resources Director to Company President, 10/2/03, 3:00 p.m.
I have been researching the implementation of the Diversity Initiative we have been discussing. I would like to hire a diversity coordinator to survey our personnel and help us focus our efforts. The cost is $16,000 for the full survey and report process.
Company President’s Response to Human Resources Director, 10/3/03, 10:30 a.m.
What do we need a diversity survey for? We are not diverse and we know who is prejudiced in our company. That is a waste of money.
Although the fictitious company may have gone on to implement an acceptable diversity policy, while the second e-mail is likely to be shown at the racial discrimination trial of an employee who was fired on 10/4/03, the first e-mail may not have been saved or produced and may never see the light of day. Further, even if the plaintiff employee did not work with one of the “prejudiced” people in the company, the admission in writing of a hostile work environment could be enough to sway a jury.
Furthermore, many employees are under the mistaken impression that pressing the delete button on their computer makes the problem disappear. In light of sophisticated back-up systems and the likelihood that an e-mail was sent by, or to, a third person, once it is sent, it is likely to reappear. Although you may say “ I would never write that,” we all must be aware that a seemingly innocuous comment in a black and white business document that is date and time stamped can take on a formal appearance and therefore may be given greater importance than intended. No one can control every word written, but reminders of the impact of e-mails can and must be disseminated. Once employees are aware of the potential for disasters, they are more likely to self-edit and take care in the use of the written word. In addition, there are some high risk areas that warrant extra training regarding the use of e-mails such as human resource decisions, planning and reviews that impact every company and product development and liability concerns.
The Double Burden of E-Mails in the Litigation Arena
The Cost of Electronic Discovery
In the ordinary context of discovery in litigation in the United States, each party may examine the documents relevant to the dispute that are maintained by the other side. The term “documents” is construed broadly and generally includes e-mails and computer generated and stored data. The cost of providing the documents and/or data for review is generally the responsibility of the producing party. Thus, the more prolific the e-mail culture is in your company, the more expansive and costly the discovery process may be. Recent case law suggests a willingness of the courts to consider shifting that burden from the producing party to the requesting party but only after an exhaustive balancing of numerous factors. See Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y 2003). In Zubulake, the court reconfirmed the general presumption that the party responding to a discovery request must bear the cost of complying with the request and asserted that cost shifting should only be considered if undue burden and expense is involved. The court then set forth a new seven factor test with each factor to be weighed in the following order:
(1) The extent to which the request is specifically tailored to discover relevant information;
(2) The availability of such information from other sources;
(3) The total cost of production, compared to the amount in controversy;
(4) The total cost of production, compared to the resources available to each party;
(5) The relative ability of each party to control costs and its incentive to do so;
(6) The importance of the issues at stake in the litigation; and
(7) The relative benefits to the parties of obtaining the information.
In another recent case, Wiginton v. Ellis, 2004 WL 1895122 (N.D. Ill. August 9, 2004), another U.S. District Court added a new factor: “ the importance of the requested discovery in resolving the issues of the litigation,” as it split the estimated $250,000 cost of extracting e-mails from tapes and performing key word searches on a 75/25 basis with the seeker of the e-mails being responsible for 75% of the cost while the creator was still responsible for 25% of the cost, just in the discovery phase. While this trend is helpful for a defendant who may be responsible for an extensive data based production, cost shifting is not the ordinary course of business and is only possible after a court’s application of the fact intensive discretionary factors. Given what may be an unavoidable cost, businesses would benefit from an upfront cost analysis of document retrieval at the time it invests in its document management retention system.
The Cost of Not Complying with E-Mail Discovery Can Be Worse than the Cost of Complying
Over the past few years, courts have begun to send resounding shots of warning to businesses and attorneys — produce, produce, produce, or else.
In two recent court opinions issued by two different United States District Courts just a day apart, those courts imposed significant and deterrent-based sanctions on businesses and attorneys to the tune of $2.9 million in one case, and what may be an even greater sanction, allowing a jury to be told “ e-mails were destroyed so you may assume they were harmful to the party who destroyed them.”
Zubulake v. UBS Warburg, LLC, 2004 WL 1620866, (S.D.N.Y July 20, 2004), a female employee sued her employer for gender discrimination. The court at various times in the discovery portion of the case concluded that despite counsel’s urging to retain all documents and e-mails, key employees either failed to preserve e-mails, failed to take necessary steps to back up data, failed to produce back-up tapes and/or destroyed electronic information. While the court focused on the corporate manager’s failures to produce, it also issued a very clear warning to all business counsel to help ensure that spoliation of evidence does not occur. Specifically, the court pronounced that counsel:
a. Must “issue a ‘litigation hold’ at the outset of litigation or wherever litigation is reasonably anticipated, . . .” which should be periodically reissued throughout the case.
b. Should communicate directly with the key players in the litigation, and the employees likely to have relevant information to inform them of the requirement to preserve evidence. Speaking to in-house counsel alone does not appear to be sufficient.
c. Must “ instruct all employees to produce electronic copies of their relevant active files . . . and make sure that all back-up media which the party is required to retain is identified and stored in a safe place.” The court went on to suggest that counsel should strongly consider taking possession of back-up tapes to avoid the possibility of inadvertent recycling.
The court also imposed financial sanctions on the defendant and most importantly, permitted what is referred to as an “adverse inference instruction” to a jury with respect to the deleted emails. The specific instruction could only lead the jury to believe the deletions were intentional and were to prevent the jury from seeing damaging evidence. The message was clear that the corporate defendant could not hide behind their IT manager, could not say the documents were gone when they were backed up and was required to cooperate with its own counsel to provide access to the documents.
The very next day in
United States v. Philip Morris, U.S.A., Inc., 327 F. Supp. 2d 21 (U.S.D.C. July 21, 2004), a different U.S. District Court found that the defendant deleted and irretrievably lost e-mails that were likely to have contained information relevant to the litigation. It appeared that the employees at the highest corporate level failed to follow the document retention policies of the employer and a court order that would have ensured the preservation of those e-mails. While the court in that case did not impose the “adverse inference instruction,” it did preclude any witness who failed to comply with the document retention policy from testifying and it required the defendant to pay a $2,995,000 monetary sanction. The court stated that even though it will never know what, if any, role the destroyed e-mails had to the plaintiff’s case, “ it is essential that such conduct be deterred, that the corporate and legal community understand that such conduct will not be tolerated and that the monetary sanctions fully reflect the reckless disregard and gross indifference displayed by [the defendants] toward their discovery and document preservation obligations.” This ruling was not a final ruling in the case, but merely related to pretrial evidence and issues.
At the present time, proposed amendments to the Federal Rules of Civil Procedure regarding the discovery of electronic information and e-mails are under consideration and are open to public “comment.” Until such time as any amendments are adopted the current broadly worded rules apply and the court’s interpretations govern. While it may appear that a strong “destruction of documents” policy is attractive, it can only be effective if there is no back-up system, which there usually is, or if you are able to retrieve documents from third parties, which at present is highly unlikely. In light of the fact that e-mails may be indestructible they must be managed. The best course of action is to think and read twice before you press that send or delete button.
How to Heed the Warnings
First, businesses should recognize that e-mail dissemination must be managed throughout the company and not only through the information services department. Content training and an explanation of the permanent nature of e-mails must be provided for any person with access to email. Second, businesses must plan for the potential for litigation discovery when the document retention system is installed so any document retrieval can be as cost effective as possible. If a system is already in place, procedures for back-up and other capabilities should be reviewed now and not after a litigation has started. Third, businesses and counsel must have a litigation e-mail retention and production policy in place both before and after a dispute arises. In the event of a dispute all relevant employees must cooperate with counsel to ensure that all records are provided to counsel. If one thing is clear, even an innocent disappearance can take on new and great importance in the context of the discovery of electronic information.