Companies Planning To Sue Have Duty To Preserve ESI

Posted by Gregg Mayer on Monday, March 17th, 2008   

Litigation holds , or the duty to preserve, are often discussed in the context of a company that has been sued, triggering a duty to preserve relevant evidence.

However, the duty to preserve evidence applies to both sides of litigation. When a company reasonably anticipates it is about to sue another party, then that company has a duty to preserve relevant electronically stored information (“ESI”) and other evidence. This duty is illustrated by the case of Samsung Electronics Co. v. Rambus Inc., one of several lawsuits involving Rambus.

In this case, Rambus filed a patent infringement lawsuit against Samsung. Samsung quickly filed its own declaratory judgment action against Rambus in a different court. Basically, a declaratory judgment action asks a court to declare a party’s legal rights.  Samsung asked the court to rule that Samsung did not infringe on Rambus’ patents.

As part of the declaratory judgment litigation, Samsung requested the court enter spoliation sanctions against Rambus for destroying ESI and other evidence.

Samsung argued that Rambus’ document retention policy – including so-called “shred days” – destroyed relevant evidence in 1998, 1999 and 2000. Samsung argued that Rambus should have modified its retention policy by 1998 since Rambus reasonably anticipated a lawsuit with Samsung at that time. The court noted Rambus destroyed millions of pages of documents.

The court explained:

[T]he record clearly establishes that Rambus’ document retention policy actually targeted discoverable documents, including email messages, files on individual computers, network servers or floppy disks, corporate databases, backup tapes, system records and logs, and computers and disks.…

A number of Rambus’ witnesses testified that the reason for adopting the document retention policy was to get rid of discoverable documents. Of particular concern were emails which were described as potentially quite harmful in litigation. Accordingly, email backup tapes were eliminated and employees were told to purge their own individual email files unless it was necessary to keep an email for some purpose and then it should be saved to a particular file or reduced to hard copy.

Rambus countered that it destroyed the documents as part of its routine retention policy. As a result, even if the ESI would have been relevant to future litigation with Samsung, at the time it was destroyed there was no pending lawsuit with Samsung.

The court rejected Rambus’ argument. Since Rambus did reasonably anticipate litigation with Samsung, the court said Rambus had a duty to preserve the ESI.

[A] company can modify its policy to preserve documents reasonably thought relevant to the actual or anticipated litigation. To accomplish that, however, the company must inform its officers and employees of the actual or anticipated litigation, and identify for them the kinds of documents that are thought to be relevant to it. Other mechanisms, such as collecting the relevant documents and segregating them, may accomplish the same result.

Consequently, Rambus was found to be a spoliator, generally the worst thing that can happy to a party in a lawsuit. (In this case, Rambus had already dropped its claims against Samsung by the time the spoliation hearing before the court, so all that Samsung could seek were attorney fees, which were denied for reasons unrelated to the spoliation.)

CIOs and their e-Discovery teams need to know that if a company is planning a lawsuit, then the same duty to preserve ESI applies. It is improper to destroy relevant ESI once a company reasonably anticipates litigation, regardless of whether the company is being sued or is planning to sue.

Leave a Reply

You must be logged in to post a comment.