Jeane A. Thomas

It can be difficult to identify the point at which the duty to preserve relevant information for litigation is triggered. What is often more difficult, however, is defining the scope of what must be preserved after the duty has been triggered. Given the vast (and growing) volume of electronically stored information (ESI) typically maintained, organizations must have information governance policies and practices in place that routinely destroy ESI that is no longer needed for business purposes. Those policies and practices must be suspended with respect to ESI that is subject to a legal duty to preserve, but defining the scope of what must be retained can be challenging, particularly at the early stages when litigation is reasonably anticipated or a complaint has just been filed, which is when these decisions are made.

Courts that have addressed the issue of the scope of the duty to preserve, which typically arises when spoliation claims are made, have taken different approaches. Fortunately, there is a growing trend of courts recognizing that perfection is not the standard, particularly when viewed from hindsight. Add to this chorus the voice of Magistrate Judge Grewal (N.D.Cal.), who applied his “reasonable” approach in a recent order denying sanctions in AMC Technology v. Cisco Systems, Inc., 2013 WL 3733390 (July 15, 2013).

In that case, AMC Technology filed suit against Cisco alleging breach of contract relating to the licensing and commercialization of certain software products. One of Cisco’s employees, McKeon, was not on the Cisco team that negotiated the agreement, however he did provide some ordinary course of business sales data to the team leader who used it in a royalty payment schedule that AMC Technology alleged was relevant to its damages claim. McKeon retired from Cisco on July 7, 2011 and AMC Technology filed its complaint four days later on July 11, 2011. Pursuant to Cisco’s standard procedures, McKeon’s laptop and email were deleted 30 days after his departure. Because Cisco was not able to produce the deleted information, AMC Technology brought a motion for sanctions seeking an adverse inference instruction establishing Cisco’s liability for what AMC Technology characterized as “reckless destruction of documents created by a key decisionmaker.”

On the question of when the duty to preserve was triggered, Judge Grewal held that Cisco had a general duty to preserve when it received notice of the suit even before the complaint was filed. However, “the scope of this duty is not limitless.”

It is critical to underscore that the scope of this duty is confined to what is reasonably foreseeable to be relevant to the action. Requiring a litigant to preserve all documents, regardless of their relevance, would cripple parties who are often involved in litigation or are under the threat of litigation.

(Emphasis added.) The Court went on to find that McKeon was not a key player and the sales data he provided for the royalty analysis “are only tangentially related” to the issue of damages. Accordingly, “Cisco could not reasonably have known that McKeon’s documents would be at all relevant to the litigation when those documents were destroyed,” and thus Cisco had no duty to preserve them.

The issue of whether companies engage in “over-preservation” due to the risk of case-determinative spoliation sanctions has been hotly debated in recent discussions over whether the Federal Rules of Civil Procedure should be amended to address this concern. In my experience, there is no question that companies err on the side of over-preserving, often at great cost and burden, because of the risk of sanctions. Many voices in that debate advocate for a “reasonableness” standard to judging the scope of preservation, taking into account the facts and circumstances known to the preserving party at the time decisions are made. Judge Grewal’s opinion in the AMC Technology case is right in line with that approach. Companies that make good-faith, reasonable efforts to meet their preservation obligations should not later be punished in a game of “gotcha” by adversarial parties that later make wild claims about the prejudice they suffer from the routine destruction of tangentially-related ESI which could not at the time have been reasonably foreseen as relevant.