Feds to Toughen Duty to Preserve

A proposed change to Rule 37 of the Federal Rules of Civil Procedure makes clear that electronically stored information must be preserved “in the anticipation or conduct of litigation” or a party will face sanctions. 

What circumstances indicate that litigation should be anticipated, triggering the duty to preserve electronically stored information? 

Courts have often discussed the obligation to preserve evidence that may be relevant to pending or imminent litigation in other contexts.  Generally, the duty is triggered based on the facts of a particular case.  Once a party is served with a complaint, a party obviously has a duty to preserve documents that the party knows or should know may be relevant to the litigation.  Further, it is clear that once a potential plaintiff is planning to file suit, he or she cannot destroy what would foreseeably be relevant evidence. 

Colorado court decisions also indicate that once a potential party is faced with the explicit threat of specific litigation, the duty to preserve is almost certainly triggered.  An explicit threat includes a letter specifically stating that an adverse party will pursue litigation.  Similarly, when an employee files a formal complaint with his or her employer, and that complaint indicates that the employee intends to pursue legal action, the employer’s duty to preserve is triggered.  However, court decisions indicate that where one has received correspondence stating merely that an adverse party has an issue that it wishes to resolve by negotiation, or by other out-of-court methods, one’s duty to preserve has not yet been triggered. 

At least one Colorado court held that where a construction defect suit was settled and the insurance company that paid the majority of the settlement amount then sued another insurance company in subrogation, the duty to preserve was not triggered at the time of the underlying construction defect action.  This was true even though the defendant insurance company had offered to contribute to the settlement and that offer had been declined by the plaintiff company.   Rather, the duty to preserve was triggered only when the plaintiff company explicitly threatened to sue the defendant company. 

If, before a suit has been filed or threatened, a potential party is concerned that relevant evidence might be destroyed, that party should serve a potential adverse party with a written preservation letter.   This letter will trigger the duty to preserve.  Once one has the duty to preserve electronically stored information, one must take active steps to ensure that information that may be relevant to litigation is not destroyed.  One must put a stop to routine procedures that involve the destruction of electronically stored information that may be relevant to litigation.  It is worth noting that courts do recognize that a change to regular practices of data preservation and deletion can be expensive and time-consuming.  Thus, courts do not seem to be eager to rule that regular practices should be altered in order to ensure the preservation of data unless litigation has actually been threatened or filed.  Where it seems that litigation is only a possibility and that an issue may be resolved by negotiation, a party’s duty to preserve likely has not been triggered.