There is no defense for sticking your head in the sand, hoping that because you are a small business, that complex rules of litigation will not be applied to your organization. Whether you consider it to be fair or not, the same complex rules that surround electronically stored information (ESI) for large companies with thousands of employees involved in complex litigation involving hundreds of millions in damages also apply to small companies. It is up to counsel to inform clients of the responsibility to preserve ESI before the need arises.
Perez v. Vezer Industrial Professionals, Inc. 2011 WL 5975854 (E.D. Cal. 2011) was at its core, a relatively straight forward truck accident liability case. However, pointing to productions made by third parties, the plaintiffs sought a default judgment against the defendants for failure to preserve electronically stored information. In depositions, one key employee admitted that he no longer had relevant electronic data due to computer crashes, upgrades, or handover of computers to employees who subsequently left the company. A second employee acknowledged that he had never searched for electronic data before leaving the company and failed to back up his electronic data. This fact was particularly damaging, as the employee left seven months after the company was served with the Complaint. The defendant’s position was that the company was small and most of the communication about the key events occurred by telephone.
The court found that the defendant had breached EDiscovery obligations. The court addressed several issues which define conditions that clearly could be applied to more than the defendant in this litigation.
1. Two defendant executives, including the owner, admitted that they had made no effort to retrieve potentially relevant ESI from company computers. (They did not even attempt to “self–collect” data, which is also fraught with problems).
2. The defendant argued the following conditions regarding their company:
• that it was a “small company”
• that the case was not document intensive
• and that the most relevant communications took place by phone or in person, and not with generally accepted forms of ESI.
The court rejected each of this arguments and further said that these facts were not valid explanations for the “minimal to no effort” made by the company or its representatives to preserve relevant ESI, including documents sent, received, or created by key players.
3. The court further stated that the fact that one of the key players’ computer crashed was “no excuse” given that the witness admitted he did not backup any of his ESI. The court then reiterated the following warning to all practicing attorneys: “Defense counsel's apparent failure, in this electronic age, to verify with appropriate representatives of their client whether there was an e-mail backup system, cannot be countenanced.”
4. The court determined that the company had “proceeded with business as usual, without making any special effort to retain ESI relevant to this litigation.”
The Takeaway
In this case, the court did conclude that the death penalty (a default judgment) was inappropriate in this case. However the court did award monetary sanctions based on the behavior of the defendants. The court’s ruling regarding ESI is a warning shot to all practicing attorneys on behalf of their clients, regardless of their size. Even small companies are required to pay attention to their ESI preservation obligations once they are triggered, or pay the penalty. If this type of expertise is not part of your legal background, you should contact a consultant to help you put together an education program that can be distributed to all your clients. They will thank you in the long run for your forsight. Studeo Legal can assist in this endeavor.
Comments