Talk about being ahead of his time. Most of us thought Kenny Rogers was just an average, run-of-the-mill singer, songwriter, actor, photographer, producer, writer, and member of the Country Music Hall of Fame. In other words – boring. But now, thanks to my diligent efforts, a secret that has been kept for 35 years will be revealed and Mr. Rogers will finally gain the respect and recognition he deserves. That secret, my friends, is that Kenny Rogers understood the concept of a ‘legal’ or ‘litigation’ hold long before the terms became common lawyer parlance. Need proof? I present to you Exhibit A, straight from the lyrics to The Gambler:
Now Ev’ry gambler knows that the secret to survivin’
Is knowin’ what to throw away and knowing what to keep.
Ain’t that the truth, Kenny. We all [hopefully] know that a party embroiled in litigation has a “duty to preserve” (+1 lawyer term), meaning that the good, bad, and ugly indifferent documents (and by “documents” we’re talking paper, emails, PDFs, voicemails, Facebook posts, and everything else a lawyer likes to lump into one definition) with any relevance to the dispute must not be deleted/destroyed (which, for the avoidance of doubt, includes paper shredders, suspicious warehouse fires, and ‘the dog ate my hard drive’ excuses). But you may not necessarily know precisely when that duty arises, what documents you actually need to keep, and what processes you should have in place to make sure those documents are not deleted.
Books could be written on these topics (and they probably already have), but alas I am a simple man and this is but a simple blog. As such, today’s lecture blog is limited to helping you identify the precise month, day, and second that the “duty to preserve” arises. It’s a good starting point because you can implement a preservation policy of such beauty that it belongs in the Guggenheim, but if you start preserving six months too late, you may find yourself writing a check to an opposing party/the court in an amount large enough to buy yourself something on display at the Guggenheim. So, without further ado, here is the answer to the age old question, when precisely does the duty to preserve arise?
It depends. Seriously? That’s almost as lame as learning that the entire 9th season of Dallas was just a dream – here’s to hoping that’s not a spoiler for anyone reading. Surely there must be some clarity in predicting when this mysterious duty kicks in, right? Well… sort of. Here’s the boring answer – in federal courts throughout the United States (including here in Florida), the duty to preserve relevant information arises once a party reasonably anticipates litigation. What does that mean? Well, it means that if you’re the one getting ready to hire an attorney to crawl out from his sunless cave and drain the blood of your enemies file a lawsuit against someone else, the duty has most certainly already arisen by the time you pick up the phone to call that attorney.
Think about that for a second – you, as a non-lawyer, are expected by the federal courts to know this legal principle and comply with its requirements before you even hire an attorney. Try explaining to a federal judge that you, the plaintiff, did not “reasonably anticipate” litigation until after your lawyer filed the lawsuit. Make sure you bring your checkbook.
Ok – duty to preserve arises before the litigation is filed, assuming I’m a plaintiff and we’re filing our case in federal court. Next logical question – how many months, days, and minutes before the lawsuit am I obligated to start preserving relevant documents? Again – it depends. It could be the date you discover your business partner has been ‘relieving’ the company of its operating account, it could be the day you realized your eventual opponent was not going to live up to its contractual obligations, and it could be the day you hire an attorney to investigate potential claims against someone. In short, the duty to preserve is like hard-core pornography – a federal judge will know it when he/she sees it (got you interested for a second there, didn’t I?). This is somewhat uncomforting because, until judges are ultimately replaced with our new robot overlords, they are still individuals. What constitutes reasonable anticipation of litigation to one judge may not constitute the same to another.
Afraid yet? As Master Yoda says, you will be… you will be (it’s ok to admit that you read that to yourself in Yoda’s voice). Now we’re getting to the fun material. What if you’re the defendant in a federal lawsuit (I know – a ridiculous lawsuit that should never have been filed by that scumbag on the other side)? When does the duty to preserve arise for you? Easy answer is that if it hasn’t already, it certainly arises upon your receipt of the lawsuit. If you try arguing to a federal judge that you did not reasonably anticipate litigation after you were already sued, please remember to bring your checkbook.
Pre-litigation presents a more interesting question as to when the duty to preserve arises. What if you receive a phone call from the other side threatening to sue you? What if the call is from his attorney? What if it’s not a call, but rather a demand letter threatening to sue you absent your payment of some disputed sum? Even scarier – what if you’re one of six companies nationwide utilizing a particular patent, and you know four of the others have already been sued by some patent troll for infringement? Can your duty to preserve arise based solely on your knowledge of lawsuits against others similarly situated? The answer to all of these questions is “Yes,” the duty to preserve may arise in those circumstances. Will it definitely? No, because it will ultimately depend on whichever judge is overseeing your case.
The astute readers will notice that I bolded “federal” above in two separate paragraphs. I bet you’re thinking there’s some import to that. And you’d be right… maybe. Clearly, not all lawsuits take place in federal court. State courts are where the majority of lawsuits ultimately take place, and they are not bound by the federal courts’ ‘reasonable anticipation’ standard (although many do follow this standard). What does that mean for us here in Florida? Trouble. Why? Because I said so – stop interrupting me.
Believe it or not, the duty to preserve in Florida is even less clearly defined than it is in the federal courts. The limited guidance we have tells us that a duty to preserve must originate in a statute (for example, contractors, condos, and SEC broker-dealers are all required by statute/regulation to preserve certain documents), contract, or discovery request (pre-litigation letter from your opposing party or his lawyer demanding that you preserve all documents). Seems simple, but this guidance generally comes to us from personal injury cases dealing with the preservation of physical items like a ladder or Coke bottle. This guidance has, as far as I know, not been applied to the evolving electronic world (though it was recently applied in a case involving surveillance tapes), and therefore it is unclear as to when the duty to preserve e-mails and other electronic documents truly arises in Florida state courts. The duty certainly arises for both parties once the lawsuit is filed, but whether it can arise pre-suit when a party reasonably anticipates litigation or some other standard is an open question in Florida.
Now for the really fun part. Assuming the standards are different between Florida federal and state courts, do you have a crystal ball telling you which court system the forthcoming lawsuit is ultimately going to be filed in (and if you are, please ask it for this week’s Powerball numbers and kindly forward the answer to me)? If you’re not, then how do you safeguard yourself from the possibility of sanctions down the road? It is a difficult question for sure, and one that places a tremendous risk on those preparing for the onset of litigation. You may believe your claim is being filed in state court, but at the last minute your attorney decides to file the case in federal court. Now what? You can’t go back in time and start preserving documents under the reasonable anticipation standard. Same quandary if you’re the defendant. Many times you can’t even predict you’re actually going to get sued, let alone which court system you’re going to be sued in. How do you protect yourself if the standards to be applied to preservation are different from court to court?
The safest answer I can give you is that you should assume the worst or, with respect to the duty to preserve, the standard that requires you do more. It’s much safer to preserve documents and later find out that you were not under a duty to do so than it is for the opposite to be true. No one is going to fault you for beginning to preserve documents before the duty actually arises. Cavalierly deleting documents under the assumption that the duty has not yet arisen, however, could have less than favorable consequences. Of course, hoarding preserving documents to the point of paranoia can have negative consequences too. You simply can’t keep every piece of paper/electronic record that your organization generates under the paranoiac fear that you may one day find yourself involved in litigation. The trick is finding a happy medium between paranoia and preparedness, and hopefully this blog was a good first step in you doing so. If I’ve left you tired, confused, and scared, my mission is accomplished.
Although not for today, I plan to cover the ‘what to preserve’ and ‘how to effectuate preservation’ topics in the near future. Until then, I’ll leave you with these parting words of wisdom from one of the greatest legal thinkers of our era:
You got to know when to hold ‘em, know when to fold ‘em, Know when to walk away and know when to run.
Good luck getting the song out of your head now.