Troutman Sanders LLP: Do You Have Control? - Document Preservation Obligations

We all know that litigants or potential litigants have an obligation to preserve potentially relevant and discoverable evidence, under certain circumstances, when litigation is reasonably forseeable. But what are your obligations when a third-party controls your documents? And what are your preservation obligations if you are a non-party to the suit? Preservation is a very fact-specific obligation that requires analysis of the unique facts of each matter.

Rule 34 of the Federal Rules of Civil Procedure requires parties to produce responsive documents that are in their "possession, custody or control." The Rules, however, do not define "control," and courts have applied a varying range of definitions of the word "control" in the document preservation context.

In a recent case, a Court held that a litigant had "practical control" of missing data where it was obvious that a third party would have complied with a timely request to preserve its information. Based on this conclusion, the court held that the litigant had a duty to preserve the third party materials as the litigant might ordinarily have been required to preserve its own documents. In essence, the Court found that the litigant (not the third party) had the obligation to ensure that the materials were adequately preserved - which could possibly have been accomplished by sending a preservation notice to the third party. Indeed, the Sedona Conference Guidelines provide that "the duty to preserve involves reasonable and good faith efforts, taken as soon as is practicable and applied proportionately, to identify and, as necessary, notify persons likely to have relevant information to preserve the information."

What happens, then, when the third party receives a preservation demand? What are the third-party's preservation obligations? To put it simply, a non-party's obligations are significantly more limited than a party's obligations, but the precise scope of the obligations is unclear. That is not to say, however, that a non-party can or should ignore a preservation obligation. Very few (if any) courts have actually addressed this issue head on, but the analysis generally turns on who has "control" of the documents. In all preservation questions, the key inquiry relates to the reasonableness of the preservation. A complete lack of any preservation is risky whether you are a party or non-party.

If presented with a preservation notice, the third-party is not likely to get off scot-free. It is likely, however, the a court would impose at least some level of duty upon a third-party who has been put on notice of preservation obligations, possibly even discovery sanctions for failing to preserve. A subpoena is another, stronger creature. If the non-party receives a subpoena, under the Federal Rules, its failure to produce or spoliation of evidence may subject it to sanctions, including holding the non-party in contempt. Finally, in addition to sanctions from the Court, the non-party may likely have to answer to the party for which it was managing data. For example, if a non-party data management company had a contractual agreement with a company who then became involved in litigation, and the data management company did not preserve documents despite being served with a preservation notice, the party to the litigation may well have an independent breach of contract claim against the data management company - depending on the terms of the original contract.

So when you use a third-party for data management or storage, it is important to ensure that the service agreement and contract address issues associtaed with preserving, searching, and retrieving relevant data in a timely manner. Also, be prepared on the front end to address the cost of retrieval that a third-party data management or storage company might charge at a later date. On the flip side, data management companies should be wary of agreements that bind them to future costly discovery obligations. The difficulties presented by these preservation issues underscore the need to consider such issues when outsourcing data management or storage. You cannot control how a Court will view preservation duties in hindsight, but you can control the development of a proactive plan for how these issues will be handled - before the preservation obligation arises.

For more information, contact Puja Patel , John Hutchins, or Alison Grounds.

­­­­­­­­­­­­­­­­­­­­About Troutman Sanders

Troutman Sanders is an international law firm with offices in North America, Europe and Asia. Founded in 1897, the firm's heritage of extensive experience, exceptional responsiveness and an unwavering commitment to service has garnered strong, long-standing relationships with clients across the globe. These clients range from multinational corporations to individual entrepreneurs, federal and state agencies to foreign governments, and non-profit organizations to businesses representing virtually every sector and industry.

Troutman Sanders lawyers provide counsel and advice in practically every aspect of civil and commercial law related to the firm's core practice areas: Corporate, Finance, Litigation, Public Law and Real Estate. With more than 50 practice groups focused on specific aspects of these areas, the firm is defined by its considerable knowledge base and proactive approach to addressing legal and business challenges.

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