We all know that it can be damaging to one’s case if a party to a litigation fails to preserve relevant information. But when, exactly, does one’s duty to preserve (potentially relevant information) arise? And what type of sanctions are federal courts imposing under the amended federal rules for preservation failures?
When Does One’s Duty to Preserve Arise?
Different jurisdictions have different rules regarding when the duty to preserve arises but the most common standard is once that party “reasonably anticipates litigation.” This standard is well established in the federal courts and is embraced in New York (see, e.g., Voom HD Holdings LLC v EchoStar Satellite, (2010 NY Slip Op 33764(U)).
And, while it can (sometimes) be difficult to pinpoint precisely when one reasonably anticipates litigation, a recent case in the Northern District of California demonstrates one party’s blatant disregard for its obligation to preserve. Specifically, in Mathew Enter. v. Chrysler Grp. LLC (No. 13-cv-04236-BLF, 2016 U.S. Dist. LEXIS 67561 [N.D. Cal. May 23, 2016]), the plaintiff made no effort to preserve its internal or external emails after threatening the defendant with litigation. Not only did plaintiff affirmatively change the email system it utilized for its business and did so after threatening Chrysler Group, LLC with a lawsuit, but Mathew Enterprises also failed to notify its database vendor of the litigation it threatened to file against defendant. As a result, potentially relevant emails continued to be deleted regularly per normal business practice. Indeed, there was no suspension of the auto-delete functionality used by Mathew Enterprises and no efforts were taken to otherwise maintain the emails.
The Chrysler Group, LLC moved for sanctions against the plaintiff for the loss of these potentially relevant emails, highlighting there was no effort made to preserve and urged the court to utilize spoliation sanctions. The judge, Magistrate Judge Paul Grewal, issued FRCP 37(e) sanctions. Specifically, he expanded the scope of evidence the Chrysler Group, LLC was allowed to bring to trial and he awarded reasonable attorney’s fees. Moreover, Judge Grewal stated, “[Plaintiff’s] lackadaisical attitude towards document preservation took away [defendant’s] opportunity. Not only has spoliation occurred, but it also has prejudiced [defendant].”
The Mathew Enterprise case is a good reminder that preservation obligations must be taken seriously as the ramifications for failing to preserve can be significant. It is thus critical that our clients are properly advised of the need to begin preservation efforts as soon as litigation is reasonably anticipated. (i.e., upon receipt or transmittal of a cease and desist letter, for example).