BEST PRACTICES with ELECTRONIC DEVICES and DISCOVERY

1. BEST PRACTICES withELECTRONIC DEVICES andDISCOVERY

2. Thomas L. Oliver, II, Founding ShareholderCARR ALLISON Tom Oliver practices in Carr Allison’s Birmingham, Alabama office. He is a trial attorney specializing in complex matters involving employment, professional and transportation litigation. He has been named a Super Lawyer in the state of Alabama, Top Lawyer by Corporate Counsel, and Best Lawyer in America. Mr. Oliver developed the firm’s “go team” and coordinates catastrophic accident investigations for various transportation clients. He assisted in the national coordinating counsel program for transportation claims for one of the nation’s largest insurers. Additionally, Mr. Oliver was designated as regional and statewide counsel for numerous companies and their insurers.

3. After attending this session you should be able to understand and comply with the best practices for electronic data in your transportation fleet!

4. BEST PRACTICES

5. Section One – Spoliation • What is Spoliation? • Spoliation is the “destruction or material alteration of evidence or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Ashton v. Knight Transp. Inc., 772 F. Supp. 2d 772, 806. (N.D. Tex., 2011).

6. Destroying or altering documents is not automatically sanctionable. Margaret M. Koesel & Tracey L. Turnbull, American Bar Association Spoliation of Evidence ch.1 (2006). • Generally, there must be a duty to preserve evidence in order for spoliation to be sanctionable. • Whether spoliation of evidence is sanctionable depends on whether there is a duty to preserve evidence, and the scope of that duty.

7. 1.1 When is there a Duty to Preserve Evidence? • Generally, there is no duty to preserve evidence before litigation is filed, threatened or reasonably foreseeable unless such duty is imposed by special circumstances.

8. A duty to preserve generally arises under two circumstances: • 1) litigation or reasonably foreseeable litigation and • 2) independent of litigation based on special circumstances. • Absent notice of litigation or another source of a duty to preserve, a company may dispose of documents and other tangible objects as they see fit without liability.

9. A. Duty Arising Under Litigation or Reasonably Foreseeable Litigation: • A duty to preserve potentially relevant and relevant evidence arises at the onset of litigation.

10. A duty to preserve may also arise before the commencement of a lawsuit if the lawsuit is reasonably foreseeable. Stated another way, whether a duty to preserve exists depends on whether the litigation was reasonably foreseeable at the time the discoverable document(s) were destroyed.

11. For example, a duty to preserve likely exists if a potential defendant receives a demand letter, knows a former employee is seriously considering litigation, or another event or circumstance has transpired that would reasonably put a company, or individual, on notice that a lawsuit is imminent.

12. B. Duty Arising Independently of Litigation: • A duty to preserve may also arise independently of litigation from (a) a contract, (b) a statute or regulation, (c) a document retention policy, or (d) other special duties. • Many state and federal statutes require companies to retain certain types of documents for specific periods of time.

13. Some of these statutes and regulations also specify the required sanction for destruction of documents that violate the law. • The sanction most imposed by statute is an adverse inference, which will later be discussed in detail. Therefore, it is very important to know any state and federal statutes or regulations that may apply to your line of business.

14. Failure to follow a document retention policy set forth by the company could later result in substantial sanctions. • Destruction of documents or tangible property outside the specified period could be construed as intentional destruction of evidence. Other special duties may impose additional sanctions for involvement in spoliation of evidence.

15. For example, attorneys may be sanctioned under the ethical code for involvement in spoliation of evidence. Otherwise, absent notice of litigation or another source of a duty to preserve, a company may dispose of documents and other tangible objects as they see fit without liability.

16. 1.2 Scope of Duty to Preserve – What Evidence Must be Preserved? • A. Evidence in a Party’s Possession • Documents and tangible items that are or are potentially “relevant” must be preserved. • The test is essentially whether the threatened person would reasonably believe that the evidence in its possession is relevant.

17. Under the Federal Rules of Evidence and Federal Rules of Civil Procedures “relevance” is given a very broad scope. Therefore, it is advisable to err on the side of caution when deciding whether to preserve a particular document or item of evidence.

18. Though parties are required to take reasonable steps to preserve evidence, they are not required to make extraordinary efforts to retain evidence. Therefore, courts will weigh factors such as safety, expense, and the cumbersomeness of retaining the evidence against the duty to preserve such evidence. For example, in Conderman v. Rochester Gas & Electric Corp., 262 A.2d 1068 (N.Y. 1999).

19. A utility pole fell on the plaintiffs’ pick-up truck. The power lines injured the plaintiffs while they were driving. The defendant utility company sent an emergency crew to the scene, who cut the poles into four-foot lengths and removed them to a landfill. The plaintiff’s later filed for summary judgment on spoliation of evidence.

20. The trial court granted the plaintiff’s motion but the appellate court reversed holding that because the defendant company was responding to an emergency situation and it would be unreasonable to impose a duty to preserve the downed poles as evidence in the given circumstances.

21. B. Evidence in a Third-Party’s Possession • Generally, there is no duty to retain evidence to aid in future litigation against a third party. Margaret M. Koesel & Tracey L. Turnbull, American Bar Association Spoliation of Evidence ch.1 (2006).

22. However, a duty to preserve can arise by reason of agreement, contract, statute, or other special circumstance. • A duty to preserve evidence may extend beyond the parties involved and include evidence entrusted to their agents, insurers, experts, etc. In this instance a party may be held liable for spoliation of evidence it entrusted to a third party who destroyed that evidence.

23. Other ways to lower risk of spoliation sanctions include the following: • ·If personal injury litigation seems likely, preserve evidence as if a preservation letter has been issued even if it has not. • ·Offer others involved in the accident a pre-repair inspection opportunity before repairing the vehicle.

24. · Make sure to document repairs made to the damaged vehicle. • · Carefully answer interrogatory and deposition questions about when the company anticipated litigation. • · Preserve all replaced or removed parts.

25. 2. How to Avoid Spoliation - Have and Follow a Retention Policy • Most documents should be kept for a specific period of time and then disposed of because retaining all documents for an infinite amount of time can be problematic and expensive. Margaret M. Koesel & Tracey L. Turnbull, American Bar Association Spoliation of Evidence ch.2 (2006).

26. There are four prevailing reasons to implement and follow a document retention program. These include (1) the expense of storing documents, (2) the ability to locate documents efficiently, (3) the desire to avoid sanctions for the improper destruction of documents, and (4) the consequences in litigation of retaining documents that should not have been subject to retention.

27. Following a document retention policy does not prevent spoliation sanctions if the destruction of evidence occurs after a duty to preserve arises. Stated another way, one may not use a document retention policy to obstruct justice laws.

28. However a well-designed document retention policy can help prevent spoliation sanctions. For the retention policy to work smoothly in conjunction with litigation, document destruction must be suspended upon the start of litigation, an official investigation into the company, or when the company should have reason to know that litigation is imminent.

29. A. What to Consider When Designing a Document Retention Program • A document retention program should be tailored to fit the needs of the particular company.

30. Most importantly the document retention program should involve and revolve around a legitimate business purpose. Therefore, when determining whether a document or tangible item should be destroyed or preserved the purpose for discarding the document or item should be a business purpose. • The program should be suspended or changed when there is potential litigation or at the commencement of litigation in order to avoid accusations of motive behind destruction of documents or tangible items.

31. The company should also educate and remind its employees of the document retention policy and its importance. • Where the employee is uncertain about whether the document should be destroyed or retained they should first consult with a higher authority or counsel.

32. Following the retention policy regularly is pertinent. Otherwise, the company is open to charges that it only follows its document retention policy when beneficial to destroy evidence of wrongdoing. If possible, someone should be in charge of monitoring and handling the document retention policy.

33. B. Document Retention Requirements • Generally a company may decide what the appropriate time period is for retaining non-permanent records unless there is an applicable state or federal statute or regulation that dictates an appropriate retention period. • Therefore, the company should familiarize itself with any state or federal record keeping requirements.

34. C. Suspension of Document Retention Policies • As stated earlier, it is very important to suspend any document retention policies as soon as the company has notice of a lawsuit or reason to know of a potential lawsuit. The company must take the necessary steps to preserve potential evidence, which includes suspending the document retention policy in regard to documents relevant to that litigation.

35. Failing to suspend document destruction when a company is aware of threatened or pending litigation may result in sanctions. See, Reingold v. Wet ‘N Wild Nevada Inc., 944 P.2d 800 (Nev. 1997) (holding the water park’s deliberate destruction of the first-aid logs, before the statute of limitations had run, amounted to a suppression of evidence).

36. D. Electronic Records and Documents • Electronic documents and records are just as discoverable as hard copy evidence. Therefore, a company’s data retention policy must also address electronic data including emails and other electronic documents. Margaret M. Koesel & Tracey L. Turnbull, American Bar Association Spoliation of Evidence ch.2 (2006).

37. Sometimes the form produced in litigation (electronic vs. hardcopy) can also be important. If the hard copy evidence contains the same information but in a form that is not equally accessible the court may find that the document has lost its value in the hard copy form. • Therefore, it is important to consider the nature of the documentation and its accessibility when producing it in litigation.

38. 3. Sanctions for Spoliation of Evidence • A. Sources for Sanctions • Sanctions may be imposed under both federal and state rules of civil procedure that regulate discovery procedures. Margaret M. Koesel & Tracey L. Turnbull, American Bar Association Spoliation of Evidence ch.3 (2006).

39. These sanctions are limited because they can only reach acts of spoliation that occur during the lawsuit or following a court order. • This could encourage parties to destroy evidence before the onset of litigation to avoid sanctions. However, the court’s inherent authority provides a source of imposing sanctions for acts of spoliation outside of the scope of civil procedure sanctions. • The court’s inherent power allows it to provide appropriate remedy or sanctions for acts that obstruct justice.

40. B. Factors Courts Consider when Imposing Sanctions • Courts have significant leeway in deciding what sanction is appropriate to impose on the spoliator.

41. Some factors that are often considered by courts include: 1) the culpability of the spoliating party, 2) the prejudice to the non-offending party, 3) the degree of interference with the judicial process, 4) whether lesser sanctions will remedy any harm and deter future acts of spoliation, 5) whether evidence has been irretrievably lost, and 6) whether sanctions will unfairly punish a party for misconduct by the attorney.

42. These factors do not make up a rigid test adhered to by all courts, however, they do shed light on what courts consider when determining which sanction to impose if any at all.

43. C. Sanctions • i. Adverse Inference • Sometimes the court will impose an adverse inference against the spoliating party. • The adverse inference sanction to spoliation of evidence dates back at least to Armory v. Delamirie, 93 Eng. Rep. 664 (K.B. 1722).

44. The adverse inference instruction operates on the assumption that deliberate destruction of evidence suggests consciousness of guilt. Margaret M. Koesel & Tracey L. Turnbull, American Bar Association Spoliation of Evidence ch.3 (2006). • The rationales for imposing an adverse inference include deterrence, remediation and punishment.

45. ii. Exclusion of Evidence or Expert Testimony • Courts often consider exclusion of evidence as an alternative sanction to dismissal or entry of a default judgment. • This often results in the spoliator’s inability to introduce expert testimony on the missing evidence or any other witness testimony on the missing evidence. In these cases it’s not uncommon for the court to award summary judgment because the spoliating party is unable to prove its case without the excluded evidence.

46. There are two main factors that courts consider when determining whether to include or exclude the spoliator’s evidence. Some courts focus on the probative value of the destroyed evidence to the non-spoliating party, while others focus on the prejudice to the non-spoliating party resulting from the lost evidence.

47. iii. Dismissal and Default Judgment • Dismissal and default judgment are rarely imposed for spoliation because they are the harshest sanctions available. These sanctions are usually imposed when there is a showing of bad-faith spoliation or in cases where the prejudice is so severe to the non-spoliating party that no other remedy is justifiable.

48. iv. Other Potential Civil Sanctions • Other potential sanctions include attorney’s fees, fines, and punitive damages. Some courts find that to impose monetary sanctions the spoliator must have acted intentionally or in bad faith. Others do not require a finding of bad faith or intentional conduct.

49. v. Criminal Sanctions • There are federal statutes enacted that create criminal penalties for the destruction of evidence. Margaret M. Koesel & Tracey L. Turnbull, American Bar Association Spoliation of Evidence ch. 5 (2006). • For example, Congress passed the Sarbanes-Oxley Act of 2002, which created new criminal laws and penalties in addition to amending existing criminal laws and penalties for the destruction of evidence.

50. There is considerable variation from state to state as to the scope criminal statutes play in providing penalties for the destruction of evidence. • Theoretically, criminal sanctions are available for the destruction and concealment of evidence during civil litigation; however, no criminal convictions have ever been reported for spoliation during civil litigation.