By Thomas L. Schober & Kathy L. Nusslock
A recent Supreme Court order, effective January 1, 2011, amended some of the rules for the discovery of electronically stored information in state court actions.
These changes make it clear a party is required to retain electronically stored information for discovery in subsequent litigation; however, the response to any request to produce electronically stored information is only as good as the steps taken by the client to properly preserve this information. The purpose of this memo is to alert all clients to the duty to preserve electronic records that may originate long before the commencement of litigation.
Under federal law going back several years, the courts have imposed a duty to protect electronic records from destruction. This duty to preserve arises when the client becomes aware litigation may result from a particular event, such as the firing of an employee, the receipt of a complaint letter from a customer, or any number of situations that should alert the client to the possibility of future claims (by or against the client). Once the client is alerted to the potential for future litigation, a duty is imposed to preserve all records that might become relevant in the future litigation. Twenty years ago, this meant making sure copies of all paper files were stored in a safe place or copied so no one could remove materials from the file that might be needed in the future. Since the advent of the electronic era, and the corresponding decrease in paper records, all forms of electronic recordkeeping often become the source of intense disputes among litigating parties. As a result, the courts have imposed a very broad duty to preserve records, a duty which includes not just the actual records themselves but all deleted emails, file materials, storage tapes, drafts, calendars, logs, and anything else that might become pertinent to future litigation. In other words, the client has a very broad duty to “hold” all materials pending future litigation.
Many companies and lawyers who have been involved in recent federal litigation are familiar with the term “litigation hold,” a procedure by which the company directs its key employees, particularly the information technology staff, to freeze all records concerning a particular problem and anything related to it. State courts, however, are only beginning to deal with the problems of electronic data retrieval and discovery, and the new rules will greatly increase state court discovery orders relating to electronically stored information. Discovery demands for electronically stored information will become common in areas that previously featured demands for “hard copy” materials, such as worker’s compensation claims, real estate transactions, shareholder and corporate disputes in closely held corporations, and estate disputes.
There is an added concern (and expense) for clients who have never dealt with e-discovery. The courts will be given the power to require that parties meet and discuss how to manage the discovery, including costs, methods of production and similar issues. The court and the parties will need to address the problem of documents that cannot be produced and whether those documents have been intentionally destroyed or carelessly discarded. The penalties can be quite severe. The rules will permit a court that finds documents have not been properly preserved to award actual attorneys’ fees, costs of production incurred by the requesting party and similar sanctions permitted by court rules.
The worst sanction, however, is not monetary. In some federal cases judges have determined documents were intentionally destroyed and as a result have issued an “adverse inference instruction” to the jury. This instruction informs jurors they may assume if the documents were under the control of a particular party who cannot produce them, the documents contained information that was adverse to the interests of the party. This is similar to the instruction concerning a “missing witness,” which informs the jury that if a party had control of a particular witness and does not produce the witness at trial, the jury may infer the witness’s testimony would be adverse to the client. An adverse inference instruction concerning electronically stored information could be devastating to the presentation of a case because it suggests a party manipulated electronic data and carelessly or purposely disposed of it.
The rules do provide one saving clause that would prevent a court from imposing sanctions on a party that failed to provide electronically stored information “lost as the result of the routine, good-faith operation of an electronic information system,” if, but only if, the deletion/destruction occurred before the party became aware of the potential for litigation. Wis. Stat. §804.12(4)(m). There will be many court battles over whether the loss of a requested electronic record was due to “spoliation” (intentional destruction) or due to “good-faith operation of an electronic information system” which could include routine destruction of emails after thirty (30) days, or similar policies uniformly applied. Rather than be involved in a fight over whether the loss of the documents was permitted by the rule, the electronic data should be preserved for production in accordance with a detailed litigation hold issued to employees and other related personnel.
You may never have problems that appear to be headed for litigation; however, if problems do arise, remember you must issue a litigation hold and take steps to preserve all records, particularly electronic records, for future production. If something appears to be headed toward litigation, the duty to preserve arises at that time, not later when a lawsuit is actually filed. We cannot provide a list of all the possible areas where these problems will develop, but only a general warning to be on the alert. If you have a question regarding the duty to preserve information, we strongly recommend that you contact If you have a question regarding the duty to preserve information, we strongly recommend that you contact Thomas L. Schober at firstname.lastname@example.org or 920.431.2229 or Kathy L. Nusslock at email@example.com or 414.225.1447 or your Davis & Kuelthau attorney.