Although deleted data can be recovered – perhaps at significant cost – destroyed data is likely gone forever. Perhaps it is for this reason that a recent federal court was reluctant to apply a strict proportionality test to a preservation dispute.
In Pippins v. KPMG LLP, 2011 U.S. Dist. LEXIS 116427 (S.D.N.Y. Oct 7, 2011), the court denied the defendant’s request for a protective order to limit its preservation obligations. A group of plaintiff sued their former employer alleging that the employer deprived them of overtime pay by purposefully misclassifying them as exempt employees under federal and state employment laws. These plaintiffs moved for class certification, causing the court to stay discovery until it ruled on the certification question. This stay necessitated that the employer indefinitely preserve the hard drives of over 7,500 potential class members.
After racking up over $1,500,000 in preservation costs, the employer sought a protective order, arguing that the burden of preserving the hard drives was disproportionate to the benefit they might provide and that there were less burdensome methods of preserving any relevant information on the hard drives. While cautioning against the application of a proportionality test in preservation disputes, the court assessed three factors in evaluating the employer’s duty to preserve the drives.
First, the court looked to see if the material was relevant. The former employees believed that the drives contained information relevant to the dispute, such as job responsibilities and hours worked. The employer, on the other hand, argued that similar information was contained in sources such as human resources files and time records. It was not entirely clear exactly what information was on the drives, however, because the employer had not allowed anyone to inspect them. This uncertainty, along with the extremely broad concept of relevance, led the court to conclude that the employer could not establish that the material was not relevant.
Second, the court looked to see if the material on the hard drives was created by or for “key players,” namely, people likely to have relevant information. The employer argued that only the named plaintiffs were key players because they purported to represent the entire class. The court disagreed. It reasoned that not only was every former employee a potential plaintiff in the class action, but also that the employer was on notice that the hard drives could contain material relevant to future litigation even if the class was not certified and, thus, had a duty to preserve the hard drives in either situation.
Finally, the court considered whether the continuing preservation merely maintained information that was available from other, less burdensome, sources. The employer argued that the information was duplicative because it also was contained in a variety of other sources, and because the former employees could testify to their job responsibilities. Nevertheless, the court found that the unofficial information on the hard drives could supplement the official information in the employer’s records. As a result, the information on the hard drives was deemed to be not duplicative.
On balance, the court ruled that the employer had to continue to preserve the hard drives. In the end, there were too many unknowns, such as, the ultimate length and cost of preservation, the relevance of the information on the hard drives, and the outcome of the motion for class certification, for the court to weigh the benefits and burdens in a satisfactory manner. The finality of the destruction that would have accompanied the protective order likely led the court to err on the side of preservation.
Note that the duty to preserve potentially relevant information is much broader, and arises much earlier, than the duty to produce information that is relevant and responsive to discovery requests in pending litigation. The Pippins decision speaks only to the preservation phase of electronic discovery and does not address the scenario where additional potentially relevant information continues to be created and stored on various hard drives after initial preservation efforts are complete (or, stated another way, the issue of the ongoing creation and preservation of electronic data). Businesses may be able to avoid these costs and potential pitfalls by encouraging, if not requiring, employees to save data, not on their individual hard drives, but in a central location that is backed-up on a daily basis. In an ideal scenario, any potentially relevant information would be stored on a back-up and shared server and, at most, duplicate that which is contained on individual hard drives. This may eliminate, or provide strong arguments in favor of eliminating, the need to, and cost of, preserving multiple hard drives multiple times.