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Guidance from the Court: How to Adequately Preserve, Search, Collect Potentially Relevant ESI

Created on December 15, 2011

Vice President, E-Discovery

Five years after the 2006 FRCP changes, the e-discovery world is still awaiting a concrete answer on when and how to defensibly preserve potentially relevant electronically stored information (ESI). E-discovery blogs, magazines and websites have all debated whether the FRCP should be modified to clarify when the duty to preserve is triggered and what really constitutes a reasonable preservation process. However without these changes, people should look for guidance from the courts to help answer their outstanding preservation questions/concerns. In Naaco Materials Handling Group, Inc. v. Lilly Co. (W.D. Tenn. Nov. 2011), the District Court in Tennessee has provided some clarity around what a reasonable preservation process might comprise.

In this case, the court ruled that the defendant, Lilly, “failed to take reasonable steps to preserve, search for, and collect" ESI, which may have resulted in the spoliation of relevant evidence. Monetary sanctions for additional discovery were imposed against the defendant.

The case arises from the plaintiff, Naaco, and its claim that the defendant improperly accessed their password-protected dealer website over 40,000 times without the plaintiff's permission. Based on the defendant's conduct within discovery, the plaintiff motioned the court to prevent the defendant from further spoliation of evidence and for monetary sanctions. In order for the court to impose sanctions against the defendant, the court conducted an in-depth analysis of whether the defendant failed to adequately preserve evidence, particularly if the defendant's preservation and collection were sufficient.

Within the court's analysis, the judge broke down the duty to preserve into a two step process: (1) Preservation and (2) Collection and review.

1. Preservation:

Once the duty to preserve was triggered, the court found that the defendant did not take any immediate actions to preserve data. To preserve data, the court referenced three steps:

  • (A) Sending out a preservation letter to all key players who might hold potentially relevant evidence,
  • (B) Suspending the company's document retention policy of such evidence, and
  • (C) “Taking steps to preserve active data stored or found on servers, backup tapes, or other media."

In this case, the defendant failed to issue a companywide litigation hold. Only seven employees were notified of the hold, even though the defendant knew there were additional “key players" within the case. The court also noted that the defendant did not suspend its document retention policy, which would have prevented emails and backup tapes from being deleted or overwritten.

2. Collection and Review:

Parties need “to timely and effectively collect ESI" after preservation. As the court stated, “Lilly took no steps, of which the court is aware, to collect evidence from key players or to search key players' computers to see if ESI existed or had been deleted." Here is a summary of the lack of effort by Lilly to collect or review evidence:

  • After being served with the complaint, the defendant took nearly three months to search and identify potentially relevant documents.
  • Collection efforts were left solely to employees without any supervision from management.
  • No follow up was conducted with employees to identify if the preservation guidelines were being followed or if relevant documents were collected.
  • Search and collection efforts were not documented or tracked.

What does the Naaco case teach us? It should serve as a reminder that demonstrating a legally defensible preservation process requires all involved to understand best practices for information governance and build repeatable processes that are easy to understand and implement. To learn more about defensible preservation and collection processes, click here.

Mike Hamilton, J.D. is the E-Discovery Market Analyst at Exterro, Inc. Hamilton works in a product management and marketing role to ensure Exterro's Fusion e-discovery applications closely reflect the needs of legal teams. Within the complex e-discovery world, Hamilton's knowledge, legal acumen and experience give him a valuable perspective on bridging the gap between IT and legal teams.