Document Retention Policies and Spoliation of Evidence

In a recent case, a court found the implementation of a document retention policy to amount to the spoliation of evidence and imposed the “nuclear” sanction of declaring the suit unenforceable.

In the case of Micron Tech. v. Rambus in the U.S. District Court for Delware, Judge Sue Robinson was addressing the effect of Rambus’ document retention policy on the availability of evidence for the case. Rambus had brought suit against Micron Technology Inc. to enforce a patent held by Rambus on dynamic random access memory.

According to the opinion, Rambus took several months to ramp up for its litigation strategy to enforce its patent portfolio. At the same time, Rambus designed and implemented a document retention policy and began destroying company documents until a time just prior to when it filed the suit.

The case does not invalidate document retention policies. It seems from the facts in the case that Rambus purposefully destroyed records as part of its litigation strategy.

Judge Robinson points out:

“42.  A duty to preserve evidence arises when there is a knowledge of potential claim. Winters v. Textron, Inc. 187 FRD 518( M.D. Pa. 1999). A potential claim is generally deemed cognizable in this regard when litigation is pending or imminent, or when there is a reasonable belief that litigation is foreseeable. . . . As soon as a potential claim is thus identified, a party is under a duty to preserve evidence which it knows, or reasonably should know, is relevant to the future litigation. Nat’l Ass’n of Radiation Survivors v. Turnage, 115 FRD 543, 556-57 (N.D. Cal 1987)”

If a company has a records retention policy it is appropriate for a court to determine if it was instituted in bad faith.

In this case, the Judge found that destroyed documents were discoverable and could have played a role in Micron’s defenses of patent misuse, violation of antitrust and unfair competition laws and inequitable conduct. This evidence would only exist in internal Rambus documents.

The court concluded that “the showing of bad faith is so clear and convincing” and the “very integrity of the litigation process has been impugned.”

To me the key in this case is that Rambus initiated the suit and implemented the document retention policy. You can compare this with Arthur Andersen v. US, 544 U.S. 696 where Arthur Andersen thought it would be subpoenaed but continued shredding documents right up until the time the subpoena was served.  Rambus, as the initiator of the suit knew well ahead of time that litigation was foreseeable.

It is important to consider putting a litigation hold in place before litigation has actually commenced.

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One Response to Document Retention Policies and Spoliation of Evidence

  1. Harjit Singh July 22, 2009 at 7:17 pm #

    “When does a duty to preserve a document, relavent to future litigation, arise” is the main controversial issue in this case. Rambus contended that when it destroyed the documents under its retention policy, any future litigation relating to those documents was niether imminent nor probable. It was very remotely possible as an alternative in case its licensing negotiation with othe DRAM manufacures fails. A cause of action for an alternative action/relief is deemed to have occured at the very moment of its contemplation though its seeking is kept in abeyance pending the main action. The main thing under the new rules is that once litigation is “reasonably contemplated,” an obligation to preserve evidence automatically arises. Litigation may be “reasonably contemplated” well before the company is served with a complaint or notice from opposing counsel. The issue of determining the birth of reasonable perception of litigation hinges upon a good faith and reasonable evaluation of the information and circumstances as are known to the company at a particular time. The available information may not be of such level at a certain point to cross over the bar of reasonable anticipation but may later on cross that level with the new incoming information. Such information should be monitored and evaluated regularly to determine its level of going up or down of the crossing bar. New information can bring the level down enabling a company to revisit the triggering issue to find out that it should no longer reasonably anticipate a particular litigation and consequently should not keep the holding out of the documents. Some courts have held that litigation can be reasonably contemplated when an employee first complains about harassment or when the company first learns about a problem with one of its products. The duty to hold also includes an obligation to specify, locate, and retain, document that is relevant or material to the reasonably predictable litigation. This duty triggers at that moment when intention to sue or be sued is credibly manifested.