Shredding Before Suing? Think Twice (Update)

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Parties that are considering filing suit are now on notice from at least one federal Court of Appeals: shredding relevant documents after identifying litigation targets can lead to spoliation sanctions, even if the destruction occurred before litigation was “imminent” or “probable without significant contingencies.” The same court also approved piercing the attorney-client privilege to provide key evidence of the party’s knowledge and intentions before it filed suit. The privilege was pierced based on the crime-fraud exception, citing a state penal statute prohibiting willful destruction of any document knowing that the document “is about to be produced in evidence,” with the intent “to prevent it from being produced.” Although this decision arose in patent litigation, the spoliation principles appear to have wide application outside the patent arena.

In a prior Sutherland Legal Alert, we reported that Rambus Inc. lost the right to assert its patents against Micron Technology, Inc., after a federal judge concluded that Rambus intentionally destroyed numerous relevant documents in preparation for enforcing its patent portfolio. That spoliation finding has been affirmed on appeal, because litigation was “reasonably foreseeable” when Rambus destroyed relevant documents. The sanction rendering the Rambus patents unenforceable was reversed, however, based upon inadequate factual findings of bad faith and prejudice.

This decision may not provide businesses with a bright-line rule—the Court of Appeals for the Federal Circuit emphasized that the standard is “flexible [and] fact-specific”—but potential plaintiffs now are on notice that document destruction occurring after they identify litigation targets will, at the very least, raise a strong presumption that spoliation has occurred.1 In a companion case, the Federal Circuit reversed a California federal court ruling that sided with Rambus.2 The Federal Circuit remanded both cases for further proceedings.3

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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