The value of records management
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The value of records management

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A short list of sample cases demonstrating the potential legal ramifications of not having an adequate records management program in place.

A short list of sample cases demonstrating the potential legal ramifications of not having an adequate records management program in place.

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    The value of records management The value of records management Presentation Transcript

    • Philo Janus, BSEE JD Senior SharePoint Architect
    • Sarbanes Oxley SEC Regulations IRS Regulations Attorney-Client Privilege Health Insurance Portability and Accountability Act (HIPAA) OSHA Contractual obligations
    •  In re Pradaxa The court found the defendants’ discovery failure to preserve and produce documents amounted to bad faith violations of its discovery obligations as well as the court’s orders. In addition to requiring the defendants to pay the plaintiffs’ costs and fees in pursuing the discovery motions, it also imposed a fine of $931,500, the equivalent of $500 per case, jointly and severally against the defendants and left room for additional future sanctions.  Sony Computer Entertainment Am., Inc. v. Filipiak, The court found that the defendant intentionally and in bad faith violated the terms of the consent judgment, as well as his discovery obligations under Rule 26, and awarded the plaintiff more than $6 million in damages.  Microsoft v. z4 Technologies: Microsoft ordered to pay $25M plus $2M in attorney’s fees for failure to disclose an email.  Apple Computer sued over patent infringement in 2008. Documents delivered included an email from Steve Jobs that said, about the software at issue: “Please check out this software ASAP,” he wrote. “It may be something for our future, and we may want to secure a license ASAP.” Jury verdict: $625 million.  Coleman (Parent) Holdings Inc. v. Morgan Stanley & Co., Inc. A Florida court issued an adverse inference instruction against Morgan Stanley for overwriting e-mails, failing to timely process hundreds of back-up tapes, and failing to produce relevant e-mails and their attachments. Relying in large part on that instruction, the jury returned a $1.45 billion award against Morgan Stanley.
    •  Zubulake v. UBS Warburg. Backup tapes containing emails of key players were lost and emails were deleted. Adverse jury instruction resulted in finding for plaintiff $9.1 million in compensatory damages and $20.2 million in punitive damages.  United States v. Philip Morris USA, Inc., A district court found that the corporation had failed to abide by a court order designed to ensure preservation of computer e-mails. The court imposed sanctions that precluded the company from calling a key employee at trial, and it ordered the corporation to pay spoliation costs and $2.75 million in monetary sanctions.  Jones v. Goodyear Tire and Rubber Co., Default judgment for negligent destruction of key physical evidence.  DuPont v. Kolon Industries. Kolon produced to DuPont nearly 1.2 million pages of discovery. During its review of the production, DuPont discovered hard copies of a series of screenshots taken of their personal email accounts with instructions such as "Delete," "Need to Delete,“ "Remove All, " and "Get Rid Of." Verdict: $920 million. Sanction awarded: $4.5 million  Gutman v. Klein, the defendant searched for and downloaded software to wipe his hard drive of evidence relevant to the case. Instead of using the data wiping software, the defendant manually deleted files. Based on this spoliation, the magistrate judge recommended a sanction of default judgment against the defendant and a sanction of attorneys fees related to the discovery.  Victor Stanley, Inc. v. Creative Pipe, Inc. The court also painstakingly detailed its various options when imposing sanctions. Sanctions: Two years imprisonment for contempt (subsequently overturned on appeal)  Qualcomm, Inc. v. Broadcom Corp. San Diego Federal Magistrate Judge Barbara L. Major sanctioned Qualcomm for withholding “tens of thousands of e- mails” in a lawsuit it brought against Broadcom Corp. and ordered Qualcomm to pay Broadcom’s legal bills, which total more than $8.568 million.  Genger v. TR Investors, LLC. A $3.2 million sanction for "wiping" unallocated space after a status quo order directed the parties to refrain from destroying or in any way disposing of relevant records was affirmed. The wiping was done furtively rather than as part of a data retention policy.  Rosenthal Collins Group, LLC v. Trading Technologies International, Inc. Bad faith and willful disregard for the rules of discovery and court orders by plaintiff and its counsel in a patent infringement action resulted in a default judgment for defendant, striking of plaintiff’s defenses to defendant’s counterclaim, a $1 million sanction against plaintiff, and an obligation of plaintiff’s counsel to pay defendant’s costs and attorney fees in litigating its motion for sanctions.  TR Investors v. Genger. Sanctions against defendant of $750,000 for plaintiffs' attorney fees and costs for "wiping" unallocated space on his company's server.  Quintus Corp. v. Avaya, Inc. A bankruptcy trustee obtained a $1.88 million judgment as a spoliation sanction against the purchaser of a debtor's assets. The asset purchaser's destruction of electronic records to free up computer space despite a contractual obligation to maintain the records was deliberate, and the destroyed documents went to the heart of the trustee's case.  Oved & Associates Construction Services, Inc. v. Los Angeles County Metropolitan Transportation Authority. Entry of default judgments for $5.2 million and $978,958 against a party that violated discovery orders and destroyed the integrity of its financial data by accessing and emptying documents from a computer hard drive was affirmed.  Electronic Funds Solutions v. Murphy. A $24 million default judgment entered as a discovery sanction against defendants who "wiped" clean a computer hard drive just prior to turning the drive over for plaintiff's inspection. (Later reversed on appeal)  Whitehall Specialties, Inc. v. Delaportas. Defendant's discovery misconduct displayed "willfulness, bad faith and fault," according to the court in entering a default judgment for $2.2 million
    •  Imposing sanctions against the company’s senior management has become more widely accepted as courts have become more familiar with electronic documents and discovery.  See Danis v. USN Communications, Inc., No. 98- 7482, 2000 WL 1694325, at *14 (N.D. Ill. Oct. 20, 2000) (imposing sanctions against the CEO of the defendant organization for failing to consult with outside law firm regarding a suitable document retention policy for a major securities lawsuit).
    •  By now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records – paper or electronic – and to search in the right places for those records, will inevitably result in the spoliation of evidence.  Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a “litigation hold” to ensure the preservation of relevant documents.  Parties need to anticipate and undertake document preservation with the most serious and thorough care, if for no other reason than to avoid the detour of sanctions.  The failure to collect records – either paper or electronic – from key players constitutes gross negligence or willfulness as does the destruction of email or certain backup tapes after the duty to preserve has attached.  Spoliation sanctions “from least harsh to most harsh [include] further discovery, cost- shifting, fines, special jury instructions, preclusion, and the entry of default judgment or dismissal (terminating sanctions).