DOCUMENT RETENTION ISSUES FOR IN-HOUSE COUNSEL

Rebecca A. BrommelBrownWinick

666 Grand Avenue, Suite 2000Des Moines, IA 50309-2510

Telephone: 515-242-2452Facsimile: 515-323-8552

E-mail: brommel@brownwinick.com

Document Retention - Generally

• Purpose: Set forth how your company will preserve and destroy information

• Purpose: Ultimately save time in searching for up to date and necessary information

• Purpose: Helps business deal with documents when and if litigation or investigations occur

In-House Counsel Responsibilities

• Development of the Policy– Oversee records inventory and appraisal– Help identify legally required retention periods– Update policy as law or technologies change

• Enforcement of the Policy– Training of employees– Review/audit procedures regularly

In-House Counsel Responsibilities (con’t)

• The “Litigation Hold”– Clear procedures set forth in policy– Be in charge (or determine who is in charge)

of determining when the hold is in effect– Communication to employees– Determination of scope of hold– Determine when hold expires

Litigation Holds Generally

• May apply even if you are not a party to the litigation, but are simply a “holder” of documents/information

• “Reasonably foreseeable” litigation– Service of petition/complaint– Demand letter– Subpoena or informal request for records– Legitimate verbal threat of litigation– Notice of investigation by law enforcement or

government agency– Formal employee complaints to management– Incident involving personal/property injury

Duty to Preserve

• The litigation hold relates to company’s duty (and your duty as attorney) to preserve evidence

• Minimum duty – develop and oversee and preservation process, even if you do not yet have a formal document retention policy

• Also duty to alert others with relevant documents through issuance of hold letters

What do you do?

• Assess scope of necessary hold• Discuss with others internally who “hold” those

documents• Determine whether there are those “outside”

who also hold relevant documents• Discuss and determine the costs of review,

retrieval, costs and strategy of the hold and any necessary response

Duty to Preserve – Test for Sanctions

1. Is the document retention policy reasonable considering the facts and circumstances surrounding the records at issue?

2. Have lawsuits or complaints been filed concerning the types of records at issue? If so, what is the frequency and magnitude of those lawsuits or complaints?

3. Was the document retention policy instituted in bad faith?

Duty to Preserve – Test for Sanctions (con’t)

• Standards may be different pre v. post litigation commencement

• Typically requires:– Evidence of intent to destroy– Intent to destroy is for purposes of obstruction

or suppressing the truth– Evidence of bad faith/mal-intent– Opposing party is prejudiced by the

destruction

Duty to Preserve - Sanctions

• Payment of reasonable expenses, including attorney fees• Adverse Jury Instruction• Orders from Court:

– Establishing certain facts– Refusing to allow your company to support or oppose certain

claims/defenses– Refusing to allow your company to introduce certain evidence– Striking parts of pleadings/defenses– Stay of proceedings until documents provided– Dismissal of action (if plaintiff)– Judgment by default (if defendant)– Contempt of court

Likelihood of Sanctions

• Sanctions decreased in 2010 – awarded 55% of time where they were sought

• E-discovery sanctions reached all time high prior to 2010– 410 cases where sanctions sought – awarded 230 times– Most common misconduct – failure to preserve electronic

evidence, failure to produce, delayed production– Rarely sanctioned attorney without also sanctioning client– Most severe sanctions: dismissal, adverse jury instruction,

significant monetary awards– Most common sanction: payment of attorneys fees and costs

Source: Weiss, Debra Cassens, E-Discovery Sanctions Reach All-Time High for Litigants and Lawyers, (Jan. 13, 2011) posted on www.abajournal.com

Case Law Examples

• Nacco Materials Handling Group, Inc. v. The Lilly Co., 2011 WL 5986649 (W.D. Tenn. Nov. 16, 2011)– Lawsuit arose from Lilly’s alleged unauthorized use of Nacco’s

secure dealer website– Lawsuit served 2/25/2011– Lilly’s attorney sent litigation hold letter to Lilly’s President

3/09/2011 providing specific instructions as to issuance of a litigation hold and the wide sweep of the hold

– Lilly’s President only sent letter onto 7 others in company– 5/2011 – Lilly searched electronic servers for term “Yale”

(Nacco’s d/b/a)

Case Law Examples (con’t)

• Nacco Materials Handling Group, Inc. v. The Lilly Co. (con’t)– Lilly failed to:

• Issue company-wide litigation hold (only sent to 7 of 160 employees, not even all the “key players”)

• Provide additional instruction to employees re: the hold• Take steps to prevent emails from being deleted, to prevent data from being

overwritten or to identify and preserve backup tapes• Take steps to collect evidence from key players or search key players’

computers to determine if information existed• Oversee or supervise the collection process (left it up to employees)• Did not follow up with employees to determine what efforts had been made• Document their search and collection efforts• Identify a person “in charge” of the preservation, search and collection• To retain a technical expert (because they were not equipped to handle the

computer searches)

Case Law Examples (con’t)

• Nacco Materials Handling Group, Inc. v. The Lilly Co. (con’t)– Court first determined degree of culpability – was the conduct negligent,

grossly negligent, or willful, wanton and reckless– Exhibits the “continuum” of fault that many courts are now using to

determine sanctions in failure to preserve cases– Court found that Lilly was, at a minimum, neligent– Sanctions:

• Reimbursement of costs to Nacco for its forensic examination of Lilly’s computers and forensic examination of hard drives

• Payment for mirror imaging of computers of persons in Lilly’s parts department

• Lilly also required to file an affidavit detailing each step it took to preserve, search for and collect potentially relevant information from date of service of complaint to present, detailing the date and person taking such steps

• Also awarded Nacco its reasonable costs, including attorney fees, associated with bringing the Motion

Case Law Examples (con’t)• Innis Arden Golf Club v. Pitney Bowes, Inc., 257 F.R.D. 334 (D.

Conn. 2009)– Innis Arden sued Pitney Bowes and other “potentially responsible parties”

(PRPs) under CERCLA and state law to recover costs incurred in removing PCB from its property

– Innis Arden failed to preserve soil samples– Court held that duty to preserve began when Innis Arden’s counsel was

actively involved in investigation and analysis of samples in preparation for legal action against the PRPs and when they hired the company to do the sampling

– Even though Court did not find “purposeful destruction”, the loss was significant and could not be adequately remedied by an adverse jury instruction

– Sanction imposed: preclude Innis Arden from introducing any evidence based upon the soil samples it took and then subsequently destroyed (note impact on expert witness testimony)

– Lessons: (1) Plaintiffs have equal duty to preserve; (2) even if not purposeful destruction, importance of evidence can impact sanctions

Ethical Implications

• No specific rule related to document production/preservation (yet)

• Court sanctions may = resulting ethical implications

• Iowa Rule of Prof’l Conduct 32:1.3 – “A lawyer shall act with reasonable diligence and promptness in representing a client.”

• Iowa Rule of Prof’l Conduct 32:1.17 – Organization as client

Lessons Learned

• Have a good written document retention plan

• Be diligent upon receipt of anything that triggers a litigation hold

• Control and oversee the hold process• Document the who, what, when and where

of the hold process• Regularly review and audit procedures

and employee compliance

Website: www.brownwinick.comToll Free Phone Number: 1-888-282-3515

OFFICE LOCATIONS:

666 Grand Avenue, Suite 2000Des Moines, Iowa 50309-2510

Telephone: (515) 242-2400Facsimile: (515) 283-0231

616 Franklin PlacePella, Iowa 50219

Telephone: (641) 628-4513Facsimile: (641) 628-8494

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