Legal Trickery – Eric A. Parzianello

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“We Followed Our Data Destruction Policy; Why Are We Still In Trouble?”

Posted by Eric Parzianello on September 22, 2009

Your company has worked with its legal counsel to develop a formal document and electronic data retention policy. You’re notified of a threat of potential litigation but continue to delete data in compliance with your retention policy. Can you still be in hot water for destroying evidence even though a lawsuit has not yet been filed? Absolutely.

An article in Business Law Today, Know When To Hold ‘Em, provides a good summary of a company’s duty to preserve electronic evidence in the face of threatened litigation. The “trigger” for suspending a policy which would destroy relevant evidence typically arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation. As noted in the article, this “decision often requires analyzing overall claim risk, the scope of claim knowledge within your company, and the risk of data destruction” if the policy was not suspended.

That “trigger” then requires the company to “suspend its document retention policies to prevent discarding data” and to “notify employees to refrain from deleting e-mails or other computer documents.”

Earlier this year, the United States District Court for the Eastern District of Michigan issued an opinion with an extensive analysis regarding data destruction in the case of Forest Laboratories v. Caraco Pharmaceutical. The court found that the plaintiff’s obligation to preserve evidence began over three years before it ultimately filed its suit and ordered a hearing to determine “whether Plaintiffs acted with a culpable state of mind and whether the spoliated evidence is relevant.”

If a court finds that evidence was improperly destroyed, it may issue monetary sanctions or, even worse, may permit a jury to infer that the detroyed evidence was harmful to that party’s case.

Lesson: Even if you comply with a well-drafted data retention policy, you may be at risk if litigation is around the corner.

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