Preserving Evidence for Potential Litigation

Melinda A. Bialzik
mbialzik@kmksc.com
(414) 962-5110

Gathering and producing evidence is a fundamental aspect of the litigation process. When evidence is lost, intentionally or accidentally, the party who lost the evidence can be subject to significant penalties, including monetary penalties and even loss of their case. But when is a duty to preserve evidence triggered, what evidence needs to be preserved, and what steps are a company expected to take? All of these are fact-specific questions, but understanding the general principles can help a company and its attorneys determine when action needs to be taken.

When does the duty arise?

If you think the duty to preserve evidence arises only when you receive notice of an actual lawsuit, you could be unpleasantly surprised. Under both federal and Wisconsin law, the duty to preserve evidence is triggered as soon as a party reasonably should know that the evidence may be relevant to anticipated litigation, which could be long before a lawsuit is filed. Exactly when a company reasonably should know litigation may arise varies, depending on the facts. Sometimes there is an obvious event that could lead to litigation such as:

• A customer trips on broken floor tiles in your store and is injured;
• You receive notice that your product failed and caused damages; or
• A supplier refuses to honor its contract and provide you necessary raw materials.

Other times it is less clear, for example:

• A disagreement arises over what a contract requires, and negotiations start to fall apart – is someone eventually going to sue?
• An employee threatens to sue when he is terminated – is he just angry or does he actually intend to bring an action?

When in doubt, the safer practice is to preserve evidence. Once evidence is lost, a company is at the mercy of the Court as to whether the loss was reasonably preventable, and whether any penalty will be assessed against the company as a result of its loss of evidence.

What needs to be preserved?

Once you determine a duty may exist, the next question is: what needs to be preserved? While a company is under no duty to keep or retain every document in its possession, it is under a duty to preserve what it knows, or reasonably should know, will likely be requested in litigation. The duty applies to physical evidence (like the broken tile on which the customer tripped or hand-written notes documenting a meeting to try to negotiate a dispute), and electronic evidence (such as emails, digital photographs, or electronic databases). Electronic evidence can be particularly challenging to preserve, as it is often altered or deleted automatically over time and should be preserved in its original format.

What steps are necessary to satisfy your obligations to preserve?

The duty to preserve evidence includes an obligation to identify, locate, and maintain information that is relevant to specific, predictable, and identifiable litigation. There are two key steps a company can take to preserve evidence. First, a company can search for and collect key evidence and store it in a secure location. Second, a company can issue a litigation hold order. After determining which employees and agents may have relevant information, the litigation hold order will then instruct those employees and agents to preserve whatever evidence is in their custody or control. These orders must be carefully crafted to ensure they include all employees or agents who may have custody or control over evidence, sufficiently describe the evidence that must be retained, and instruct the recipients not to delete or destroy any such evidence.

It is important to consider document retention policies and procedures to make sure evidence is not accidentally altered or destroyed through existing protocols. Electronic evidence is particularly susceptible to alteration or deletion. Part of a litigation hold order may be instructions to an IT department that it halt any programs that could automatically delete data (such as a program that deletes all emails that reach a certain age on the server).

The duty to preserve evidence is neither absolute, nor intended to cripple organizations. A company need do only what is reasonable under the circumstances and proportionate to the needs of the case. Therefore, as with the determination of when a duty arises and what evidence must be preserved, the scope of a company’s obligation will depend on the specific facts and circumstances.

Even before the threat of litigation, it is a good idea for a company to have clear document retention policies in place. If you wish to discuss implementing such policies, or If you think your company may have a duty to preserve evidence because of the threat of litigation and would like to discuss a comprehensive evidence preservation plan, please contact KMK Attorney Melinda A. Bialzik at (414) 962-5110 or mbialzik@kmksc.com.