Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 22

The Duty to Preserve E-Evidence for Discovery
Today, less than 0.5 percent of new information is created on paper. Instead of sending letters and memos, people send e-mails and text messages, creating a massive amount of electronically stored information (ESI). The law requires parties to preserve ESI whenever there is a "reasonable anticipation of litigation."
Why Companies Fail to Preserve E-Evidence
Preserving e-evidence can be a challenge, though, particularly for large corporations that have electronic data scattered across multiple networks, servers, desktops, laptops, handheld devices, and even home computers. While many companies have policies regarding back-up of office e-mail and computer systems, these may cover only a fraction of the e-evidence requested in a lawsuit.
Technological advances further complicate the situation. Users of BlackBerrys, for example, can configure them so that messages are transmitted with limited or no archiving rather than going through a company's servers and being recorded. How can a company preserve e-evidence that is never on its servers? In one case, the court held that a company had a duty to preserve transitory "server log data," which exist only temporarily on a computer's memory.
Potential Sanctions and Malpractice Claims
A court may impose sanctions (such as fines) on a party that fails to preserve electronic evidence or to comply with e-discovery requests. A firm may be sanctioned if it provides e-mails without the attachments, does not produce all of the e-evidence requested, or fails to suspend its automatic e-mail deletion procedures. Nearly 25 percent of the reported opinions on e-discovery from 2008 involved sanctions for failure to preserve e-evidence. Attorneys who fail to properly advise their clients concerning the duty to preserve e-evidence also often face sanctions and malpractice claims.
Lessons from Intel
A party that fails to preserve e-evidence may even find itself at such a disadvantage that it will settle a dispute rather than continue litigation. For example, Advanced Micro Devices, Inc. (AMD), sued Intel Corporation, one of the world's largest microprocessor suppliers, for violating antitrust laws. Immediately after the lawsuit was filed, Intel began collecting and preserving the ESI on its servers. Although the company instructed its employees to retain documents and e-mails related to competition with AMD, many employees saved only copies of the e-mails that they had received and not e-mails that they had sent. In addition, Intel did not stop its automatic e-mail deletion system, causing other information to be lost. In the end, although Intel produced data that were equivalent to "somewhere in the neighborhood of a pile 137 miles high" in paper, its failure to preserve e-evidence led it to settle the dispute in 2008.
FOR CRITICAL ANALYSIS
How might a large company protect itself from allegations that it intentionally failed to preserve electronic data?