Spoliation of E-Mail Evidence: Proposed Intranet Policies and a Framework for Analysis

Introduction

Electronic discovery potentially imposes substantial burdens on large organizations. Intranet, extranet and general electronic communication policies may mitigate the costs and litigation risks associated with the discovery of e-mail and other forms of electronic evidence. However, companies which adopt inadequate policies.or which fail to properly implement their policies.could exacerbate their problems by exposing themselves unnecessarily to discovery or evidentiary sanctions under the spoliation of evidence doctrine. When, and under what circumstances, the spoliation of evidence doctrine should be applied to electronic communications has not been thoroughly analyzed by any court. A suggested framework for analysis is set forth below.

Burden Imposed by Electronic Discovery

E-mail is a hybrid form of communication. E-mail affords employees the opportunity to communicate casually, as they would in a typical conversation, even though a permanent record may be created. People frequently take less care in composing e-mail messages than they do when writing formal letters or memoranda, which may create potential problems in litigation. Employees also use e-mail for a host of communications unrelated to their direct job-related responsibilities. The volume of irrelevant e-mail therefore typically is staggering for most companies.

Although data mining software is making it somewhat easier to search for records when responding to discovery requests, the burdens and costs associated with electronic discovery may be quite high for most companies. E-mail may reside in multiple different locations within an organization, including on a network server, the hard drives of office computers assigned to both the sender and recipient of a message, back-up tapes, home or portable computers where e-mail may be accessed remotely, and in hard-copy form (when messages are printed). A single message also may appear as multiple separate documents, if it has been forwarded to third parties.

Large companies bear disproportionate risks and burdens, in part because of the greater volume of e-mail they generate. In addition, burdensome e-mail discovery requests most frequently are propounded in securities fraud, tort and employment cases or in other lawsuits where individuals or small companies have sued a large entity. When big companies face each other in litigation, such requests are less commonly propounded or reasonable restrictions may be agreed upon by opposing counsel because both sides in the litigation face equivalent burdens in responding to electronic discovery requests.

Liability Risks Imposed by Electronic Discovery

E-Mail Is Discoverable

Whether a company intends to do so or not, its employees may be creating an invisible, digital paper trail that can be used against the company in court. E-mail, when printed in hard copy or stored electronically, is usually recognized as equivalent to a document. Rule 34 of the Federal Rules of Civil Procedure expressly provides that any party can request documents, such as "other data compilations from which information can be obtained, translated, if necessary, by the respondent through detection devices into reasonably usable form." E-mail therefore generally is discoverable.

E-Mail May Be Used Against a Company

Federal Rule of Evidence 1001 treats e-mail and other computer generated data as writings and recordings. Employee e-mail frequently may be used against a company as a party admission. By contrast, depending on its internal policies, a company may not be able to introduce a comparable message if the e-mail communication fails to satisfy the requirements for a "business record."[1] Companies that adopt specific policies on e-mail retention, however, should be able to establish that particular e-mail messages were generated and retained in the ordinary course of business, which therefore should be admissible.

Potentially Prejudicial Effect of E-Mail Evidence

When used in litigation, an e-mail message may create a false.and potentially unduly prejudicial.impression of a company's business practices. A hard copy printout of an e-mail message may not accurately convey the tone, impression or level of care actually associated with its creation. Even when it does, it is not always apparent that the author of an e-mail message was an authorized speaker, or "speaking agent," for a corporate employer.

Although prejudicial, employee e-mail may be admissible. Evidence may be excluded in federal court when its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues or misleading the jury.[2] As a practical matter, a court has wide discretion in determining whether otherwise admissible evidence should nonetheless be excluded on this basis. For example, in Kelley v. Airborne Freight Corp.,[3] the First Circuit explained that, in reviewing a trial court's decision under Rule 403 for abuse of discretion, "[o]nly rarely.and in extraordinarily compelling circumstances.will [this court], from the vista of a cold appellate record, reverse a district court's on-the-spot judgment concerning the relative weighing of probative value and unfair effect."[4]

By far the largest number of cases in which e-mail evidence has been introduced have involved employment-related disputes, including wrongful termination, employment discrimination and sexual harassment suits. A well thought out e-mail policy and employee education may reduce the creation of needlessly harmful e-mail evidence and reduce employee friction.

The Law of Document Retention

E-Mail Deletion as Spoliation of Evidence

E-mail messages are routinely received, stored, copied and deleted by companies on a daily basis. Under the spoliation of evidence doctrine, when evidence is allowed to spoil or be destroyed, or is simply not retained, an adverse party may be entitled to a jury instruction, or in extreme cases the entry of judgment, based on a presumption that the evidence was not preserved because it was not favorable to the party's position.

Spoliation has been described as "the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence, in pending or future litigation."[5] Where the doctrine is recognized, spoliation of evidence may result in the entry of judgment, an adverse inference or merely an award of attorneys' fees, depending on the severity and significance of the destruction to the case at bar and the destroying party's intent.

A court may enter a range of sanctions, leading up to and including entry of default judgment, for a party's failure to comply with a discovery request and/or subsequent court order compelling discovery.[6] Sanctions may be imposed under Federal Rule 37(b) even where evidence was destroyed prior to the entry of a discovery order.[7]

Sanctions for document destruction also may be imposed for violations of a pre-trial scheduling order if the order specifically addressed the preservation of evidence.[8] Courts likewise have inherent authority to sanction litigants when a party has engaged in conduct which abuses the judicial process.[9] Where a discovery response fails to acknowledge spoliation of evidence because of a party's failure to make reasonable inquiry, sanctions may also be imposed pursuant to Rule 26(g).[10]

In evaluating whether to impose the most extreme sanction of a default judgment as a discovery sanction, the court in Telectron, Inc. v. Overhead Door Corp.,[11] held that it first had to find that: (1) the defendant acted willfully or in bad faith; (2) plaintiff was prejudiced by defendant's conduct; and (3) lesser sanctions would not serve the objectives of punishment and deterrence. Where a party is subject to a court order to preserve documents or compelling their production, and thereafter destroys documents subject to the order, more extreme sanctions are likely to be imposed.[12] In California, knowing spoliation of material "about to be produced in evidence" may even constitute a misdemeanor.[13]

A small number of states (including Alaska, Florida and Kansas) have also recognized torts for intentional or negligent spoliation of evidence, while others (such as California, Georgia, the District of Columbia, Maryland, Missouri and New York) have declined to do so.[14] Although the specific elements of the tort vary from state to state and in some cases are not well defined, common elements include: (1) pending or probable civil litigation, (2) defendant's knowledge that litigation is pending or probable; (3) willful destruction of evidence; (4) intent to interfere with plaintiff's prospective civil suit; (5) a causal relationship between the evidence destruction and the inability to prove the lawsuit; and (6) damages.[15]

The only reported decision to date that specifically addresses a request for sanctions based on spoliation of e-mail evidence is Procter & Gamble Co. v. Haugen,[16] in which the court did not consider whether e-mail evidence should be treated differently from paper documents. In that case, the court imposed $10,000 in monetary sanctions on plaintiff Procter & Gamble for failing to search for or preserve the e-mail communications of five individuals who the plaintiff itself had identified as having relevant information, but deferred for later consideration the question of whether its failure to search for or preserve other e-mail communications constituted bad faith. Defendant Amway had argued that bad faith could be inferred from the fact that the plaintiff understood it was under a duty to preserve e-mail, as evidenced by its

The court, however, emphasized that while the duty to preserve evidence exists independently of a court order, an order "would have delineated the scope of P&G's duties, provided clear evidence that P&G was on notice of the relevance of the e-mail communications, and furnished a standard by which this court could judge the adequacy of P&G's production efforts."[18]

On balance, the Proctor & Gamble decision provides little guidance on e-mail spoliation (as distinct from the destruction of any other form of documentary evidence). There are sound reasons, however, for treating e-mail differently.

Whether the deletion of e-mail should be deemed to constitute the destruction of evidence, entitling other parties in litigation to certain evidentiary presumptions, should depend on whether a message was deleted (1) pursuant to a company's consistently, and uniformly enforced policy on retention and destruction of e-mail messages, or (2) before a specific discovery request was propounded or the party could reasonably have expected, based on the nature of the actual or reasonably anticipated litigation, that the message in question would be subject to discovery.

The Significance of Document Retention Policies

The existence of a document policy may, under certain circumstances, be deemed a mitigating factor in litigation when documents are destroyed pursuant to it, while a company's failure to have a coherent policy may be an aggravating factor.[19]

In evaluating whether a company's destruction of documents pursuant to a document retention policy should give rise to a negative evidentiary presumption, the Eighth Circuit, in Lewy v. Remington Arms Co.,[20] suggested that courts consider three factors:

1. Whether a record retention policy is reasonable considering the facts and circumstances surrounding the relevant documents.[21]
2. Whether the policy was adopted in bad faith.
3. Whether lawsuits have been filed or complaints made that would suggest that certain categories of documents should be retained. In making this determination, courts should consider the magnitude and frequency of such complaints.

As a general rule, when a party destroys documents pursuant to routine procedures, no evidentiary presumption should be drawn about the destruction (assuming that the retention period is otherwise reasonable).[22] Likewise, no evidentiary presumption may be appropriate when documents are destroyed after a period of years.[23] Although there is no magic number, the term of retention should be at least as long as any applicable statute of limitations or regulatory review period.

Case law suggests that any document retention policy, in addition to being neutral, should be adjusted over time. Counsel may need to override a document destruction policy when lawsuits are filed or appear likely to be filed, and should periodically revise the policy when new case law or statutes impose additional record retention requirements, or when a category of documents relates to matters which have been the subject of significant or repeated non-frivolous complaints by customers or other third parties.

Whether given documents need to be retained longer than the ordinary retention period because of the existence of actual or potential litigation may be a difficult judgment call, especially for a large corporation that may generate millions of documents at multiple locations around the world. The allegations of a complaint and specific document requests will be looked at most closely in evaluating whether a party was on notice, and therefore had a duty.notwithstanding the terms of its document retention policy.to retain specific material for use in litigation. Communications threatening litigation may also place a party on notice that it should retain certain documents.

On the other hand, even where a company has notice of an impending lawsuit, it may not have notice that certain categories of documents may be relevant. As explained in cases from the Southern District of New York, "no duty to preserve arises unless the party possessing the evidence has notice of its relevance."[24]

As stated by one court:

Electronic Record Retention

E-mail, although classified as a document under the Federal Rules of Civil Procedure and Federal Rules of Evidence, should not be treated exactly the same way as a paper document for purposes of discovery. By its very nature, e-mail is more ephemeral than formal written memoranda. As a hybrid form of communication, e-mail messages frequently are more like telephone or face-to-face communications than official corporate documents. An order mandating preservation of all internal e-mail communications during the course of a lawsuit thus would not be that different (in terms of burden and intrusiveness) from an order mandating that a corporation tape record and transcribe telephone conversations and live meetings. At the very least, a ruling compelling preservation of e-mail could have a stultifying effect on business and is not warranted under case law intended to preserve.rather than mandate the affirmative creation of.documentary evidence.

E-mail also should be treated differently because otherwise a company's burden in litigation may arbitrarily be determined by the particular technology used by the company. Businesses that use UNIX-based e-mail systems, which automatically purge messages once they have been read (unless a recipient affirmatively stores the communication), could have much lighter discovery burdens than comparably sized businesses that employ Apple or Windows-based systems, which automatically store e-mail unless it is affirmatively deleted. It would be fundamentally unfair if the discovery system imposed wildly disproportionate burdens on individual litigants based solely on the particular software each runs.

Rules applicable to destruction of paper documents likewise should not be applied uncritically to all forms of electronic records. For example, a large percentage of corporate e-mail should not be considered evidence "reasonably available" to a producing party, such that a party's failure to mandate retention of it (even though such e-mail would not otherwise be reasonably available to the adverse party), may, because the e-mail system is under a company's control, create an inference "that the evidence is unfavorable to the party who could have produced it and did not."[26] While e-mail generally will be deemed to be under a company's control (unless its e-mail policy grants employees ownership rights in messages sought in discovery), the overwhelming burden on a company to retain copies of all e-mail messages as they are generated (in contrast to providing whatever historic e-mail may exist in company files, for a given time period) is such that e-mail generated on an ongoing basis should not be considered reasonably available to the producing party.

To reduce the risk of being subject to adverse rulings based on electronic document management, businesses should adopt e-mail retention and destruction systems.

Theory of an E-Mail Retention and Destruction System

Companies should adopt an e-mail system, rather than merely a policy. A policy involves user discretion and is appropriate for document retention, as well as for delineating when e-mail should be stored or filed. A system implies the use of technology to automatically purge all historic e-mail (other than official communications which, pursuant to company policy, should be retained). A system also implies that a company's policy is merely one component of its overall strategy for managing electronic records, which should also include employee education to ensure that any policies are implemented routinely and systematically.

Policies Should Distinguish Official from Unofficial E-Mail

To minimize the risk of being subject to unreasonably broad court orders or retention obligations, companies should adopt e-mail policies intended to delineate official company e-mail, which should be treated as a paper document and subject to regular document retention policies, and personal or unofficial e-mail, which should be routinely deleted. Although somewhat cumbersome, it is advisable to mandate that official e-mail messages be printed in hard copy and filed, or stored electronically in special locations, within a reasonable time after a message is sent or received. Depending on the business and volume of e-mail, that time period could be as short as a few weeks or as long as a few months. At regular intervals.such as every Friday evening or every third Saturday.e-mail in all company in-boxes and out-boxes sent earlier than a pre-determined period of time (such as 60 or 90 days) should then be automatically purged. Because official e-mail would be retained, a company adopting such a policy should not be subject to exposure for spoliation of evidence. By defining and distinguishing between official and unofficial e-mail, companies also may minimize the risk that unauthorized communications among employees may later be used against a company in litigation.

In lieu of designating e-mail as official or unofficial, which may place an unreasonable administrative burden on employees, some companies assign employees two separate e-mail accounts.one for official business and another for personal and/or administrative communications. This arrangement is easier to implement than a policy requiring employees to delineate between official and unofficial e-mail. However, a company that formally designates a given e-mail account as a business account may have some obligation to retain e-mail messages sent to or from that account, if messages are automatically stored electronically. Even if it establishes separate accounts, a company therefore may still find it advantageous to adopt a policy requiring employees to save or print and file certain categories of e-mail communications.

An e-mail retention system which provides that only official e-mail will be retained also improves a company's chances of being able to use e-mail evidence offensively in litigation.as a business record.rather than being limited to having e-mail used only against it. Without a system in place ensuring that e-mail records are generated and retained in the ordinary course of business, such communications may be used against a company, but not by it, in litigation.

Historic E-Mail Should Be Automatically Purged

E-mail inverts the normal pattern of document retention. Paper records traditionally have been saved or thrown out on a daily basis by employees who make judgment calls about the lasting significance of documents generated or received that day, such as scribbled notes about a meeting, a joke circulated by an office-mate or an advertisement distributed by an employee selling Amway products. A similar filtering process may not normally take place with respect to e-mail unless a company uses a UNIX-based system that requires recipients to affirmatively save an e-mail message in order to avoid its automatic deletion once the message is read.

Most e-mail programs used by large corporations provide that e-mail messages remain in an employee's in-box unless affirmatively deleted. These messages typically are either stored on a user's hard drive or on network servers. Whereas with paper documents an employee must make an affirmative decision to file.and hence retain.a given piece of paper, most e-mail systems will automatically store all communications that are not affirmatively deleted. Thus, meaningless, trivial and potentially unimportant e-mail piles up on individual hard drives or on network servers (and potentially in storage drives or backup tapes), creating a potential nightmare when, as a result of litigation, someone is forced to sift through all of the historic e-mail.

An important component of a company e-mail policy therefore should be the requirement that.in addition to regular purges of old e-mail.historic e-mail records not be retained on backup tapes. While a company's e-mail system may be routinely backed up to protect data in case of a network crash or other malfunction, historical backup tapes should not be retained. If a business routinely backs up its entire network.including its e-mail system.and retains back up tapes in the same way that it retains documents for a period of years, it potentially exposes itself to horrendous burdens in discovery when it is sued. Thus, where practicable, backup tapes should regularly be overwritten so that at any given moment a company only has records of e-mail for the preceding week or two.

The specific policy suggested here may not be practical for all companies.[27] A business that fails to implement an adequate policy, however, may find itself unnecessarily reviewing millions of e-mail messages. This is especially true where attorney-client communications occur by e-mail, since a company producing e-mail backup tapes could risk waiving the attorney-client privilege if it inadvertently produces privileged e-mail messages interspersed among millions of more routine communications. The risk of this type of inadvertent disclosure is substantial and courts are divided on the issue of whether an inadvertent disclosure waives the privilege.[28]

Conclusion

The retention time for e-mail legitimately should be much shorter than for other forms of documentary evidence (especially if a company adopts a specific policy requiring that "official" communications be separately retained). The speed with which e-mail is communicated, the nature of such communications (which often address immediate needs, which are meaningless days or even hours later) and the tremendous volume that is generated in many companies, all justify a shorter time period within which e-mail must either be saved as "official" or automatically deleted. This form of e-mail deletion should not be treated as equivalent to document destruction. Rather, it merely corrects for the inversion of employee document retention patterns caused by most non-UNIX-based e-mail programs and systemizes what most people naturally do every day with tangible communications.

Footnotes

1. See, e.g., Monotype Corp. PLC v. International Typeface Corp., 43 F.3d 443, 450 (9th Cir. 1994).

2. Fed. R. Evid. 403.

3. 140 F.3d 335, 346 (1st Cir.), cert. denied, 119 S. Ct. 341 (1998).

4. 140 F.3d at 346, quoting Freeman v. Package Machinery Co., 865 F.2d 1331, 1340 (1st Cir. 1988).

5. Willard v. Caterpillar, Inc., 40 Cal. App. 4th 892, 907, 48 Cal. Rptr. 2d 607, 616 (1995) (citing other sources).

6. See Fed. R. Civ. P. 37(b); see also, e.g., Telectron, Inc. v. Overhead Door Corp., 116 F.R.D. 107 (S.D. Fla. 1987) (default judgment entered where relevant documents were destroyed at counsel's direction on the day he was served with the complaint and a request for production of documents); see generally Insurance Corp. of Ireland v. Compagnie des Bauxities de Guinea, 456 U.S. 694 (1982) (upholding the constitutionality of entering a default judgment as a discovery sanction).

7. See, e.g., Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 72 (S.D.N.Y. 1991); In re Air Crash Disaster near Chicago, Illinois on May 25, 1979, 90 F.R.D. 613, 620-21 (N.D. Ill. 1981). But see Brandt v. Vulcan, 30 F.3d 752, 756 (7th Cir. 1994).

8. See Fed. R. Civ. P. 16(f); In re The Prudential Insurance Co. Sales Practices Litigation, 169 F.R.D. 598 (D.N.J. 1996).

9. Chambers v. Nasco, 501 U.S. 32, 43 (1991) (recognizing the inherent power of courts to impose sanctions because courts, in order to achieve the orderly and expeditious disposition of cases, must have the control necessary to manage their own affairs); Procter & Gamble Co. v. Haugen, 179 F.R.D. 622, 631 (D. Utah 1998) (e-mail spoliation); Turner v. Hudson Transit Lines, Inc., supra, 142 F.R.D. at 72 (acknowledging the court's inherent power to sanction a party for spoliation of evidence); Capellupo v. FMC Corp., 126 F.R.D. 545, 550-51 & n.14 (D. Minn. 1989) (sanctions for document destruction should be imposed pursuant to a court's inherent power, rather than under Rule 37).

10. Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 72 (S.D.N.Y. 1991), citing National Ass.n of Radiation Survivors v. Turnage, 115 F.R.D. 543, 554-55 (N.D. Cal. 1987).

11. 116 F.R.D. 107, 130 (S.D. Fla. 1987).

12. See, e.g., In re The Prudential Insurance Co. Sales Practices Litigation, 169 F.R.D. 598 (D.N.J. 1996).

13. Cal. Penal Code ' 135.

14. See Willard v. Caterpillar, Inc., 40 Cal. App. 4th 892, 48 Cal. Rptr. 2d 607 (1995) (surveying and summarizing the law in other jurisdictions as of 1995), citing Nolte, "The Spoliation Tort: An Approach to Underlying Principles," 26 St. Mary's L.J. 351 (1995); Cedars-Sinai Medical Center v. Superior Court, 18 Cal. 4th 1, 74 Cal. Rptr. 2d. 248 (1998) (rejecting the tort).

15. See, e.g., Foster v. Lawrence Mem. Hospital, 809 F. Supp. 831, 836 (D. Kan. 1992); Smith v. Howard Johnson Co., 67 Ohio St. 3d 28, 615 N.E.2d 1037, 1038 (1993).

16. 179 F.R.D. 622 (D. Utah 1998).

17. Id. at 631.

18. Id.

19. Compare Willard v. Caterpillar, Inc., 40 Cal. App. 4th 892, 921, 48 Cal. Rptr. 2d 607, 625 (1995) ("good faith disposal pursuant to a bona fide consistent and reasonable document retention policy could justify a failure to produce documents in discovery."), citing Carlucci v. Piper Aircraft Corp., 102 F.R.D. 472, 481-82 (S.D. Fla. 1984); Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 76 (S.D.N.Y. 1991) (destruction pursuant to a document policy evidenced negligence, rather than intentional conduct); with Telectron, Inc. v. Overhead Door Corp., 116 F.R.D. 107, 123 (S.D. Fla. 1987) ("The absence of a coherent document retention policy during the pendency of this lawsuit" was cited as leading to "possibly damaging document destruction occurring in both routine and non-routine manners . . .").

20. 836 F.2d 1104, 1112 (8th Cir. 1987).

21. Courts may assess the reasonableness of both the general retention period and categories of documents subject to destruction, as well as considering whether a longer retention period should apply for certain specific categories of documents.

22. See Smith v. Uniroyal, Inc., 420 F.2d 438, 442-43 (7th Cir. 1970).

23. See Vick v. Texas Employment Comm.n, 514 F.2d 734, 737 (5th Cir. 1975).

24. Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 72-73 (S.D.N.Y. 1991), citing Danna v. New York Telephone Co., 752 F. Supp. 594, 616 n.9 (S.D.N.Y. 1990).

25. William T. Thompson Co. v. General Nutrition Corp., 593 F. Supp. 1443, 1455 (C.D. Cal. 1984) (citations omitted), cited with approval in Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 73 (S.D.N.Y. 1991).

26. See Lewy v. Remington Arms Co., 839 F.2d 1104, 1111 (8th Cir. 1987) (setting forth the test for finding spoliation of evidence), quoting E. Devitt, C. Blackmor & M. Wolff, 3 Federal Jury Practice and Instructions ' 72.16 (4th ed. 1987).

27. For example, U.S. government regulations may compel more stringent retention policies for certain government contractors.

28. Compare, e.g., Genentech, Inc. v. International Trade Comm.n, 122 F.3d 1409 (Fed. Cir. 1997) (inadvertent disclosure of 12,000 pages of documents was found to have been the result of inadequate procedures and therefore held to have effected a general waiver of the attorney-client privilege and work product doctrine with respect to those documents); with Redland Soccer Club, Inc. v. Department of the Army, 55 F.3d 827, 856 (3d Cir. 1995) (inadvertent production of five documents did not effect a waiver of the deliberative privilege because the disclosure was not voluntary); Alldread v. City of Grenada, 988 F.2d 1425, 1434 (5th Cir. 1983); KL Group v. Case, Kay & Lynch, 829 F.2d 909, 919 (9th Cir. 1987) (no waiver when disclosure is inadvertent); and In re Sealed Case, 877 F.2d 976, 980 (D.C. Cir. 1989); Texaco Puerto Rico v. Dept. of Consumer Affairs, 60 F.3d 867 (1st Cir. 1995); In re Grand Jury Proceedings, 727 F.2d 1352, 1356 (4th Cir. 1984) (even an unintentional or inadvertent disclosure waives the privilege).