Electronic documents are an indispensible part of life in the twenty-first century. It should therefore come as no surprise that they play a pivotal role in litigation. Unfortunately, some people believe that deleting troublesome files will make a problem go away. In reality, the cover-up can be worse than the underlying offense. It’s not like the perpetrator in the movies who tells the detective, “nice theory, but you’ll never prove it.”
Last year, for example, the Recording Industry Association of America’s (RIAA) won a ruling on evidence spoliation in a case brought against a couple in 2006 that allegedly used Kazaa to make copyrighted files available for download. RIAA claimed the couple destroyed evidence on four different occasions after they were sued. A computer forensics expert confirmed that they had uninstalled Kazaa and reformatted their computer hard drive.
The Kazaa connection is important because the couple claimed there were merely making copies of CDs they already owned for personal use, not illegally downloading music through Kazaa. With their hard drive reformatted, it became impossible to verify the accuracy of their statement so the Court has allowed RIAA to draw a negative inference. In other words, they allowed RIAA to conclude that the evidence was deliberately destroyed because it supported RIAA’s case.
Now some folks might say that’s not fair. There are lots of reasons why a computer might need to be reformatted. RIAA should have gotten a search warrant and had the evidence before they sued and so forth.
But here’s a legal literacy reality check #1: Once a lawsuit has commenced OR if there even a threat of litigation or government investigation all evidence relating to the matter must be protected and preserved “as is.” No more maintenance, purging, clean-up, updating, or anything else. In a business setting it’s called a “litigation hold.” That means everything related to the suit, hard copy documents of any kind, and electronic documents, must be preserved in tact, unaltered.
There are plenty of famous names from the recent past that make clear how disastrous it is to do otherwise. Martha Stewart served jail time after being accused of changing documents related to communications with her broker in connection with an insider trading charge. Wall Street superstar, Frank Quattrone, was involved with a lengthy legal battle (and later acquitted) after sending an e-mail instructing his staff to “clean-up” files that may have been material to a subpoena received by his firm. Last, but not least, there’s the bankruptcy of Arthur Anderson in the wake of the Enron file shredding party. Enough said.
Destroying evidence is a very costly mistake. Courts really, really hate having their rules and orders violated. They can and will impose stiff financial sanctions and they can allow negative inferences to be drawn if the destruction was deliberate. Whether it is or not depends on the facts of each case. But let’s face it, evidence of the couple in the RIAA case doing abracadabra with the hard drive on four separate occasions doesn’t look good. Does it?
At a minimum, there will be sanctions. At a maximum, there will be sanctions plus the worst interpretation of the missing data you could imagine. If you don’t have the data to defend yourself with you’re really stuck. Thus the act of spoliation creates the ultimate smoking gun.
What about the 5th Amendment and the right against self incrimination you might say.
Well, here’s legal literacy reality check #2: Civil cases, like the RIAA case, are different from criminal cases. The 5th Amendment helps you in a criminal situation. No negative inferences can be drawn from pleading the 5th in a criminal case because you have the right against self incrimination. But in a civil case the exact opposite is true.
Why? The inference can be negative in a civil case because no one goes to jail. Civil liberty is not at stake. As a result, the burden of proof is lower, requiring only a reasonable showing, not evidence beyond a reasonable doubt. Remember the O.J. Simpson case? He was acquitted in the criminal case but found guilty in the civil case on the same set of facts. It was the standard of proof that was different.
Parties to civil cases are expected to follow the rules of discovery, to protect evidence and to produce it according to the discovery schedule. Destroying evidence is contrary to those rules and if it goes to the heart of the allegations could cost you the entire case.
Smart businesses don’t have to fall into the spoliation trap. You can protect yourself with good document management practices and an effective training program that lets employees know what to do.