Legal Holds and Trigger Events

Back up Preservation

Lack of Evidence Draws Suspicion, Backup Tape Preservation Question and Third Party Expert's Involvement

Maggette v. BL Development Corp., 2:07-cv-182, 2009 U.S. Dist. LEXIS 116789 (ND Miss. Nov. 24, 2009) is a straightforward caution to corporations to make sure that litigation hold procedures are transparent and communicated to the court as early as possible.  Here, a U.S. Magistrate Judge for the Northern District of Mississippi, openly suspicious of defendants' lack of evidence, orders defendant to pay for the services of a third-party e-discovery expert to answer some very basic questions posed by the court.    Procedurally, the court was entertaining plaintiffs' motions to strike and for sanctions.  The court declined to order sanctions, but nevertheless takes defendant to task for failing to come forward with what exactly was done to preserve ESI and search ESI in response to plaintiffs' discovery demands. The lack of specificity before the court on the exact efforts used to search ESI lead the court to write:

In this case, the defendants have produced information and affidavits and have stated at the hearing on these motions that they have searched for documents and information responsive to the plaintiffs' discovery requests and produced all information responsive to those requests. Nevertheless, despite the court's direct order that "all defendants . . . search any available databases for responsive information and produce it to the plaintiffs. . . , " the defendants are un-able to describe the databases searched, the search terms, methods or parameters used to search the databases or provide any expert information confirming that there are no documents, electronically stored information or other information responsive to plaintiffs' discovery requests. Docket 177, p. 13. Further, the defendants have not provided any concrete reason or rationale for the numerous discrepancies within their discovery responses and the deposition testimony of their own employees. Nor has defendant articulated a satisfactory response to the court's doubts expressed at the hearing that corporations as large and sophisticated as the defendants, which operate numerous gaming facilities across the country with various operations centers, do not have either paper files, electronic files or information or -- even in light of Hurricane Katrina -- backup measures and files for at least some of the information requested by plaintiffs.

This begins defendants slide down a slippery slope. 

Preservation of Not Reasonably Accessible Disaster Recovery Back Up Tapes?

As a reader of this blog may understand, there is not a lot of guidance on whether back up tapes should be preserved when implementing a Legal Hold.  It is important to note that the Federal Rules of Civil Procedure are silent on whether back up tapes need to be preserved.  What we know, however, is that all relevant ESI must be preserved.  Relevant ESI can be contained on back up tapes that a party may deem as not reasonably accessible.  Assuming that back up tapes were preserved and identified as not reasonably accessible on the basis that they are for disaster recovery purposes only, will the tapes ever be subject to discovery?  In short, the answer is yes as demonstrated by Kilpatrick v. Breg, Inc., 2009 WL 1764829 (S.D. Fla. June 22, 2009).

In Kilpatrick the court did not address the question of preservation directly, but the case stands as a warning.  Here defendant repeatedly represented that additional relevant ESI might be contained on back up tapes, that are not reasonably accessible because the tapes are maintained for disaster recovery purposes only.  Defendant also represented that active sources should contain sufficient relevant ESI.  Nevertheless, plaintiff moved to compel production of the back up tapes.  The court agreed with plaintiff that the ESI produced from active sources seemed to demonstrate that some ESI may be missing.

Seeking to balance the potential relevance of the discovery with the burden and cost of production to the defendant, the court concluded that plaintiff “may, but is not required to, hire an outside vendor for the purposes of confirming the completeness of [defendant’s] production, at its own expense” and subject to the following conditions established by the court:

1. Plaintiff's search may encompass, at most, five of Breg's back-up tapes. Plaintiff shall provide Breg with a single list of those tapes that it wishes to search, to avoid unnecessarily burdening Breg with the responsibility to make multiple trips to its off-site storage facility.

2. Breg must be provided with the results of the search no later than June 26, 2009; and, Breg must review those documents and deliver all discoverable materials to Plaintiff's counsel no later than July 1, 2009.

3. The search shall encompass the email archives of the seven Breg employees identified by the parties as having participated in potentially relevant communications.

4. The search shall be constrained to prevent interfering with Breg's preparation for trial; and, therefore, the search shall include a limited number of search terms, including the word "chondrolysis." [Footnote omitted.]

5. The documents resulting from the search shall be segregated based on whether the document resulted from a search of the word "chondrolysis," as opposed to another keyword.

6. Because the backup tapes contain confidential data and are preserved by Breg for disaster recovery purposes, the search shall be subject to the terms of a confidentiality agreement; and, the tapes shall be returned to Breg in the same condition that they were received.

Here the back up tapes appear to have been preserved and plaintiff was free to conduct a very limited search at its own expense.  From a legal hold perspective, what would have happened if the disaster recovery tapes were not preserved?  We can only speculate, but the result may not have been good.

To read more about the discovery of back up tapes as ordered in Kilpatrick and to obtain a copy of the decision, click here:  http://tiny.cc/zL4Se.

Court Orders Hearing to Determine Whether an Organization Has a Duty To Preserve Disaster Recovery Back Up Tapes Pursuant to The Zubulake Exception

Forest Laboratories, Inc. v. Caraco Pharmaceutical Laboratories, Ltd. et al., 2009 WL 998402 (ED Mich. 4/14/09) (failure to preserve backup tapes post trigger event causes court to hold a hearing to determine if sanctions should be issued) (sanction decision reserved pending results of hearing.)

This is a patent infringement lawsuit. The parties are engaged in a small handful of patent lawsuits in various jurisdictions. This case relates to Caraco’s alleged infringement of a patent for escitalopram oxalate drug.

This is a must read decision. The court’s decision specifically analyzes the duty to preserve back up tapes, trigger events, the scope of the duty to preserve, accessible v. inaccessible data, whether “disaster recovery” back up tapes should be preserved, and circumstances requiring the preservation of disaster recovery back up tapes. Also of interest, testimony was submitted from defendants’ “spoliation expert.” Ultimately the court ruled that a hearing will be held to determine specifically whether: “(1) ‘the information contained on [the back up] tapes’ is ‘otherwise available,’ (2) the alleged spoliator can ‘identify where particular employee documents are stored on [the] backup tapes,’ and (3) the tapes ‘stor[e] the documents of ‘key players' to the ... litigation.’” If the moving party is able to establish these three elements, then the court will continue the hearing in a second phase to determine culpability and relevance.

The court first held that spoliation sanctions are appropriate if the moving party can establish 1) a duty to preserve evidence existed, 2) that records were destroyed with a “culpable state of mind” and 3) that the destroyed evidence was relevant. It is important to point out that the court held that the negligent destruction of evidence may provide the requisite culpable state of mind to permit spoliation sanctions.

Following the elements of spoliation the court first analyzed the duty to preserve. A party can not be sanctioned for spoliation if no duty to preserve exists at the time of destruction. The court held, therefore, that the “first step in the analysis is to determine the ‘trigger date’ or the ‘the date a party is put on notice that it has a duty to preserve evidence. Any destruction of potentially relevant evidence that occurs before the trigger date would be harmless, since the party was unaware of a need to safeguard evidence. The destruction of documents and evidence after the trigger date, however, is not allowed.” (Citations omitted).

Defendants argued that plaintiff in this case should have known that litigation was inevitable in the early 1990s. Defendants, however, failed to submit evidence showing that plaintiff knew or should have known that litigation was anticipated. Plaintiff acknowledged that the latest date triggering the duty to preserve was in September of 2003. Defendants also argued that the latest date triggering the duty to preserve was in September of 2003. 

Despite this apparent agreement on the latest date of the trigger event, the court held that the duty to preserve evidence was triggered in August of 2003, when a competing patent application was filed. “It was at this time that plaintiffs had a duty to preserve all relevant evidence concerning the patent for use in imminent litigation with a competitor and in any ‘anticipated litigation’ such as the present patent infringement case. As a result, the court held that any pre-August of 2003 destruction of relevant evidence was harmless and not subject to sanctions. Post-August of 2003 destruction, however, is potentially sanctionable. In an important footnote (no. 2) the court said that a rule requiring large corporations to preserve evidence when litigation was merely possible would be crippling.

Plaintiffs admitted that they did not halt all recycling of back up tapes until May 2005 (nearly two years after the trigger event). Because of the failure to preserve back up tapes the court continued its analysis.

Without describing its reasoning the court held that potentially relevant evidence was destroyed. The court next relied on the now famous Zubulake v. UBS Warburg decision to analyze whether allegedly inaccessible back up tapes are of a class of evidence that must be preserved pursuant to a litigation hold. In Zubulake, the court held that “[a]s a general rule [a] litigation hold does not apply to inaccessible back up tapes (e.g., those typically maintained solely for the purpose of disaster recovery), which may continue to be recycled on the schedule set forth in the company’s policy. On the other hand, if back up tapes are accessible (i.e. actively used for information retrieval), then such tapes would likely be subject to a litigation hold.”

Plaintiff argued that the back up tapes were, in fact, used solely by the corporation for disaster recovery, citing to testimony from its vice president of information technology. Plaintiff’s also argued that defendants’ “spoliation expert” testified to a definition of disaster recovery back up tapes consistent with plaintiff’s definition. In response defendants failed to offer any evidence that plaintiff was accessing its back up tapes. As a result the court held that the back up tapes that were destroyed were inaccessible. 

The court’s finding that the back up tapes were inaccessible did not end its analysis. The court went on to describe the “Zubulake exception.” The court held that the Zubulake exception requires preservation of all back up tapes storing documents of “key players" to the litigation or anticipated litigation, if a company can identify where particular employee documents are stored on back up tapes and the information on the back up tapes is not otherwise available.

The court fashioned a three part test for the Zubulake exception: “First, the alleged spoliator must be able to ‘identify where particular employee documents are stored on [the] backup tapes.’ Second, the tapes must ‘stor[e] the documents of ‘key players' to the ... litigation.’ Third, ‘the information contained on [the] tapes’ must not be ‘otherwise available.’  The court concluded that this test was not sufficiently addressed by the parties and therefore ordered a hearing where both sides are to present evidence on the Zubulake exception.

Next the court tackled the second spoliation element: “culpable state of mind.” The court held that a spoliator can be sanctioned for merely failing to preserve evidence, because once the duty to preserve attaches any destruction of evidence is, at a minimum, negligence. Spoliation sanctions are appropriate for negligent destruction if the moving party can demonstrate that the evidence destroyed was relevant to the litigation. The court also held that the moving party need not prove relevance, if the destruction involved bad faith (i.e. intentional destruction) or gross negligence. The court held that it will hear evidence of culpable state of mind only if the three elements of the Zubulake exception are demonstrated at the hearing.

Rounding out its analysis, the court addressed relevance. The court held that “some evidence” of negligence must be introduced by defendants.  Defendants must show that the evidence destroyed was of the type that would have naturally been introduced into evidence. The court noted that defendants should not be held to too strict a standard, “because doing so would subvert the... purposes of the adverse inference, and would allow parties who have... destroyed evidence to profit from that destruction.

We will keep an eye out for the results of the hearing.  To download a copy of the decision click here: Download Forest Laboratories v. Caraco Pharmaceutical laboratories 4-14-09