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You Got To Know When To Hold ‘Em: Preserving Documents and Electronically Stored Information (ESI) in Class and Collective Actions

By J. Stan Hill and Nancy Rafuse

Timely preservation of documents and electronically stored information can be costly and challenging to implement, particularly when defending collective and class actions under the Fair Labor Standards Act and state wage & hour laws. The preservation duty evolves with each technological innovation integrated into the workplace. With advancing technology, more data relating to the manner of performance, frequency, and duration of disputed job duties is generated than ever. Drawing your preservation road map before litigation is imminent may minimize costs and reduce the risks of data spoliation.

The preservation obligation is triggered when litigation is reasonably anticipated, which may pre-date the filing and service of a lawsuit, typically when an employee or counsel threatens to initiate a lawsuit. Once the preservation obligation is triggered, it is critical to define the appropriate scope of preservation of ESI. Failure to preserve sufficient information may result in a finding of spoliation, resulting in legal sanctions, adverse inferences, and potential forfeiture of legal defenses. On the other hand, over-preservation of ESI may unnecessarily divert company resources and disrupt business operations. The margins of error are often magnified in statewide class and nationwide collective actions, which can involve thousands (or more) of employees.

There is little case law defining the appropriate scope of preservation in class and collective actions. General guideposts are provided by the maxims of proportionality and undue burden under Federal Rule of Civil Procedure 26 and the watershed Zubulake admonishment to preserve “what [a party] knows, or reasonably should know, is relevant to the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003). These principles, however, do not define the extent to which the preservation obligation extends to pled, but as yet uncertified, class and collective action allegations. Cf. Tracy v. NVR, Inc., No. 04-CV-6541L, 2012 WL 1067889, at *9 (W.D.N.Y. Mar. 26, 2012). This critical gap in the law requires employers to carefully consider any decision not to preserve data that may relate to a potential class member or opt-in plaintiff, and the data that may be overwritten in the ordinary course of business prior to a class or conditional certification motion or ruling.

Arguably, preserving data for hundreds or thousands of employees who may potentially join a putative class or collective action is not proportional to the litigation value of such data until the plaintiff takes some action toward moving for class certification or joining putative opt-in plaintiffs in the lawsuit. However, a party’s unilateral assessment that preservation of data is not proportional to its probative value or poses an undue burden is not a sufficient justification to avoid preservation. One reported federal court decision counsels against using the “highly elastic concept” of proportionality as a shield to preservation in the absence of opposing counsel’s agreement on the scope of preservation or a court’s protective order.  Pippins v. KPMG LLP, 279 F.R.D. 245, 255 (S.D.N.Y. 2012). 

Given the potentially substantial consequences of a wrongful failure to preserve, in the absence of definitive guidance, employers should address the preservation of documents and data consistent with the scope of class and collective allegations at the outset of a case, even where the plaintiff has not moved to certify those allegations. First, employers should identify the sources of potentially relevant ESI, which may require an iterative process of interviewing internal database custodians. Database custodians should also be consulted at the outset to determine whether any data readily preserved may nevertheless be unduly burdensome to produce for all members of the class and/or collective, due to the manner in which it is stored or other factors.    

As sources of potentially relevant ESI are identified, employers may avail themselves of several strategies to limit the scope of such ESI to preserve. Employers may seek opposing counsel’s consent on the scope of preservation, which may be defined in whole or part by any number of objective criteria, including a date range, office locations, a particular supervisor, or a random sample, among others. If consent is refused for ESI that is particularly burdensome to preserve, the employer may propose shifting the cost of preservation to plaintiff’s counsel. If cost shifting is refused, the employer may move for a protective order limiting the scope of preservation, even prior to any motion for certification of the putative collective or class action. Addressing these issues early in litigation may, no matter the outcome of the issue, pay dividends later in litigation, as the risk of spoliation may be greatly reduced through an agreement, stipulation, or court order on the scope of the employer’s duty to preserve. In the absence of such protective measures, employers will most likely bear the risk of not preserving data later requested in discovery and deemed discoverable (i.e., reasonably calculated to lead to the discovery of admissible information).

As the scope of preservation is defined, the employer should expediently issue and enforce proper litigation hold memoranda and suspend procedures and processes that overwrite data to be preserved in the ordinary course of business. The litigation hold should be sent not only to “key players” with physical possession of potentially discoverable documents and information, but also to the custodians of databases containing potentially discoverable information. Early and detailed discussions with database custodians are essential in cases where the timing and duration of tasks on computers is at issue, as such data tends to be transient and, in some cases, difficult to extract from the aggregate data gathered by a computer system in the ordinary course of business.

In summary, proactively tackling ESI preservation at the outset of a case generally pays dividends for employers, particularly employers facing class and collective action claims of statewide or nationwide scope. Given the legal tools at an employer’s disposal to limit the scope of preservation where a dispute arises, courts generally have little sympathy for employers that fail or delay to take steps to preserve discoverable data at the outset of a case. Experienced counsel can help to navigate these issues and pose solutions that minimize spoliation risks and burdens to businesses’ operations and bottom line.