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SF Court Rejects eDiscovery Sanctions, Provides Guidance on Defensible Preservation

SF Court Rejects ESI Discovery Sanctions

One of the most compelling eDiscovery issues facing litigants and lawyers is the prospect of sanctions for failures to preserve relevant ESI. Under Federal Rule of Civil Procedure 37(e), sanctions may not issue unless the moving party can show that the preserving party lost relevant ESI after a duty to preserve attached. The movant must also demonstrate that the preserving party neglected to take “reasonable steps” to keep the ESI and that it “cannot be restored or replaced through additional discovery.”

While these criteria have all been the subject of motion practice, court decisions regarding the last element—the availability of replacement evidence for the lost ESI—are particularly important. Given the absence of specific direction from the Advisory Committee on this factor, cases that address what may be a sufficient replacement for “lost” ESI are instructive for courts, counsel, and clients.[1] This is especially the case for litigants who are looking for guidance on how to develop a defensible preservation strategy.

Oracle America, Inc. v. Hewlett-Packard Enterprise Company

One such case is Oracle America, Inc. v. Hewlett-Packard Enterprise Company, a recent decision from the U.S. District Court in San Francisco.[2] In Oracle America, defendant Hewlett-Packard (HP) argued that a permissive adverse inference sanction should issue to remediate harm caused by Oracle America’s CEO, Mark Hurd, who destroyed over 500 relevant electronic documents. Those documents included emails, attachments, reports, and other electronic information relating to the parties’ dispute.

The court rejected HP’s arguments, holding instead that HP had not established that the lost ESI “could not be restored or replaced through additional discovery.” The reports and other electronic information that Hurd destroyed had already been or would be produced from other Oracle America custodians. While the court did “not condone Hurd’s deletion of ESI,” the presence of the requested information from other custodians suggested that no “documents unique to Hurd [were] missing.” This belied HP’s assertions of prejudice and the need for sanctions to address the destruction. In summary, sanctions were not permissible since HP already had received (or would eventually receive) the information it sought in discovery (albeit from a different Oracle America source than Hurd).

eDiscovery Lessons from Oracle America

The reality that replacement evidence may rectify certain preservation failures like those from Oracle America should be significant for clients and counsel. While the case does not delineate the precise preservation steps Oracle America took, the opinion does suggest that the company’s preservation process ensured the retention of “unique” relevant information. By keeping such information, Oracle America’s process—while not perfect—was reasonable. Reasonableness is the touchstone of a defensible preservation strategy.

With that backdrop, Oracle America spotlights the importance of taking effective preservation measures in litigation. At a minimum, those measures should include a combination of the following:

  • A comprehensive and cogent litigation hold instruction to employees possessing relevant information;
  • Custodian interviews to identify the nature and sources of relevant information;
  • Follow up steps to ensure relevant information is collected and preserved; and
  • Supplementary measures to identify replacement evidence which can remediate the loss of relevant information.

Not every instance of evidence destruction will be so easily cured, particularly where senior executives are responsible for spoliation. Nevertheless, a faithfully observed process that follows these steps can provide reasonable assurance of compliance with a litigant’s duty to preserve unique sources of relevant information.

[1] Compare Eshelman v. Puma Biotechnology, Inc., 16-cv-0018, 2017 WL 2483800 (E.D.N.C. June 7, 2017) (holding that lost internet browser search history could be replaced by deposition testimony from employees who conducted particular searches) with McQueen v. Aramark Corp., 15–cv–0492, 2016 WL 6988820 (D. Utah Nov. 29, 2016) (reasoning that deposition testimony from witnesses with faulty memories could not adequately replace lost information).

[2] Oracle America, Inc. v. Hewlett-Packard Enter. Co., 16-cv-01393 (N.D. Cal. Aug. 17, 2018).

Philip Favro
Philip Favro
Philip Favro acts as a trusted advisor to organizations and law firms on issues surrounding discovery and information governance. Phil provides guidance on data preservation practices, litigation holds, data collection strategies, and ESI search methodologies. In addition, he offers direction to organizations on records retention policies and the need to manage dynamic sources of information found on smartphones, cloud applications, and social networks. Phil is available to serve as a special master on issues related to electronic discovery. Phil is a nationally recognized thought leader and legal scholar on issues relating to the discovery process. His articles have been published in leading industry publications and academic journals and he is frequently in demand as a speaker for eDiscovery education programs. Phil is a member of the Utah and California bars. He actively contributes to Working Group 1 of The Sedona Conference where he leads drafting teams and serves as the Steering Committee project manager. Prior to joining Driven, Phil practiced law in Northern California where he advised a variety of clients regarding business disputes and complex discovery issues. He also served as a Judge Pro Tempore for the Santa Clara County Superior Court based in Santa Clara, California.