Google has come under scrutiny in the last few years over collecting information from users’ email accounts to provide targeted advertising for its paid clients. In a 2013 case filed in the Northern District of California, Keith Dunbar filed a class action lawsuit against the internet behemoth, alleging that Google had unlawfully and intentionally intercepted and used electronic communications to display advertisements in violation of the Electronic Communications Privacy Act, 18 U.S.C. §§ 2510 et. seq. During the discovery phase Dunbar requested that Google produce certain documents, including a description and diagram of Google’s method of data collection.
Dunbar filed suit in 2010, and Google produced the requested documents in 2011. However, the documents produced by Google in 2011 had been altered since Dunbar had requested them. Dunbar cried foul, arguing that Google was required to produce every iteration of the documents ever since Google had reasonably anticipated litigation. In response, Google argued that the documents were “living documents” under Federal Rule of Civil Procedure 37(e), which states that “[a]bsent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” Because the documents were altered in the ordinary course of business, Google asserted that it had no obligation to retain the previous versions.
Although the Court agreed that sanctions were not warranted, it noted that even after litigation commenced Google appeared “to have failed to take steps to preserve documents that could have been discoverable in this case.” Citing the previous cases of In re Napster and Judge Scheindlin’s Zublake decisions, the court held that Google did in fact have an obligation to preserve each iteration of the requested documents “as soon as [the] potential claim was identified.” Because the documents were not preserved, even after litigation had commenced, Google was in violation of California’s document preservation laws.
The court noted, however, that Google did not possess a “culpable state of mind” that would have supported a finding of spoliation. Nevertheless, the court ordered Google to produce the previous versions of the documents which had been “routinely sent to various employees” and which the court believed would be preserved in their email accounts. It is important to note that although the court in Dunbar found that Google did not possess a “culpable state of mind,” such a finding is not universally required – see our previous posts on the Sekisui and Zest IP Holdings, LLC cases.
Although Rule 37(e) provides a safeguard against sanctions for failure to preserve a “living document,” intentional or negligent spoliation may be one of the “exceptional circumstances” that warrants sanctions under the statute. At the absolute minimum institutions must institute a litigation hold on all versions of a “living document” once litigation commences, and ideally when there is a reasonable anticipation of such litigation.
So what is the takeaway for financial and insurance institutions? When the duty to preserve arises, every document – or version thereof – must be preserved by the potential party to the litigation.