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Trustworthy Information Systems Handbook: Appendix E, I.B.

Destruction of Records/Spoliation: Destruction After Commencement of Lawsuit

Once an organization knows, or has reason to know, of the relevance of documents or information, it has an affirmative duty to preserve such information. If an organization destroys or fails to retain documents or information which it knows, or has reason to know, will be relevant in a lawsuit, it may face sanctions (at the discretion of the Court) for spoliation of evidence ranging from fines and penalties to entry of a judgment against it. See Shepherd v. American Broadcasting Companies, 151 FRD 179 (DDC 1992).

In determining whether a court should exercise its authority to impose sanctions for spoliation, a threshold question is whether a party had any obligation to preserve the evidence. Sanctions may be imposed on a litigant who is on notice that documents and information in its possession are relevant to litigation, or potential litigation, or are reasonably calculated to lead to the discovery of admissible evidence, and who destroys such documents and information. While a litigant is under no duty to keep or retain every document in its possession once a complaint is filed, it is under a duty to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably likely to be requested during discovery, and/or is the subject of a pending request. Wm. T. Thompson Co. v. General Nutrition Corp., 593 F. Supp. 1443 (CD Cal 1984). Thus, no duty to preserve arises unless the party possessing the evidence has notice of its relevance. Danna v. New York Telephone Co., 752 F. Supp. 594 (SDNY 1990). Of course, a party is on notice once it has received a discovery request. Beyond that, the complaint itself may alert a party that certain information is relevant and likely to be sought in discovery. Computer Associates International, Inc. v. American Fundware, Inc. 133 FRD 166 (D CO 1990); Teletron Inc. v. Overhead Door Corp., 116 FRD 107 (SD FA 1987).

For example, in Applied Telematics, Inc. v. Sprint Communications (1996 US Dist Lexis 14053), Sprint failed to preserve backup tapes of a computer system that routes telephone calls after receiving a request for information in connection with a patent infringement lawsuit commenced by Applied Telematics. Applied Telematics argued that Sprint knew that such information was relevant when it received the request for information. Sprint responded that, pursuant to its normal operating procedures, the computer system is backed up and saved, replacing the prior week's backup. As a result, after one week the historical information is unavailable from the computer system.

The court found that Sprint did know, or should have known, that the backup files were relevant, and failed to take steps to prevent the routine deletion of the backup files. The fact that Applied Telematics failed to ask Sprint to save the files does not relieve Sprint of its affirmative duty to do so. The court went on to find that Sprint did not destroy the backup files fraudulently or with the intent to prevent Applied Telematics from obtaining the evidence, and Applied Telematics did not suffer substantial prejudice from Sprint's actions. As a result, the court awarded Applied Telematics monetary sanctions for the destruction of evidence. The prejudice was not substantial, in part because Applied Telematics failed to pursue other means to obtain the information. The court held that it has discretion to choose an appropriate sanction upon finding improper loss or destruction of evidence, based on the willfulness of the destructive act and the prejudice suffered by the requesting party. If the spoliation or destruction of evidence was intentional and indicates fraud and a desire to suppress the truth, rather than destruction that is a matter of routine with no fraudulent intent, a sanction that has a drastic result, such as entry of judgment, may be appropriate. See also Shepherd v. American Broadcasting Companies, 151 FRD 179 (DDC 1992).

Similarly, in Turner v. Hudson Transit Lines, Inc., 142 FRD 68 (SDNY 1991), the court imposed sanctions on the defendant because it destroyed maintenance records of a bus and as a result was unable to produce them in a lawsuit regarding an injury that took place on the bus. The defendant maintained records for one year, as required by the Federal Highway Administration regulations, then destroyed the maintenance records pursuant to its documentation retention policies. The lawsuit was filed in October 1986, and the document request for maintenance records of the bus was made December 29, 1989. The defendant destroyed the documents in December 1989 and therefore could not produce them. The court held that, at least by the time the complaint was served, the defendant was on notice that maintenance records should be preserved. Even though it did not intentionally destroy evidence, its reckless conduct did result in loss of the records. The corporate managers were responsible for conveying this information to relevant employees. The defendant's management did not advise its employees of the obligation to maintain relevant documents while litigation was pending. It had an obligation to preserve the maintenance records and it failed to do so.

It is no defense for an organization to suggest that particular employees were not on notice. To hold otherwise would permit an organization to shield itself from discovery obligations by keeping its employees ignorant. See also National Association of Radiation Survivors, 115 FRD at 557; Medical Billing, Inc v. Medical Management Sciences, Inc. v. Reich, 1996 WL 219657 (ND OH 1996).

Even though a party may have destroyed evidence prior to issuance of the discovery order and thus be unable to obey, sanctions may still be appropriate if the inability to produce the records was self-inflicted. See In re Air Crash Disaster near Chicago, Illinois on May 25, 1979, 90 FRD 613 (ND IL 1981). For example, in Computer Association v. International v. Americal Fundware, Inc., 133 FRD (D CO 1990), the defendants destroyed a version of source code at issue after a copyright infringement lawsuit was filed. The defendant was sanctioned by the court because it had an obligation to preserve the code because of its knowledge of plaintiff's claims. See also National Association of Radiation Survivors v. Turnage, 115 FRD 543 (ND CA 1987); ABC Home Health Services, Inc. v. International Business Machines Corp, 158 FRD 180 (SD GA 1994); General Environmental Science Corp. v. Horsfall, 141 FRD 443 (ND OH 1992); Hirsch v. General Motors Corp., 628 A2d 1108 (NJ Super 1993); Lexis-Nexis v. Beer, 41 F Supp2d 950 (D MN 1999); Pepsi Cola Bottling Co. of Olean v. Cargill Inc., Archer-Daniels Midland Co., 1995 WL 783610 (D MN 1995).

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Appendix E

TIS Handbook last updated July 2002, Version 4.