Samsung Electronics and its electronic information retention practices received a strong rebuke this week in Apple v. Samsung Electronics. In this hotly contested patent dispute involving smartphones and tablet computers, the court issued an adverse inference jury instruction to sanction Samsung for the “conscious disregard” of its obligation to retain relevant emails. In so doing, the court emphasized three “golden rules” of eDiscovery that Samsung failed to observe: 1) issue a timely and comprehensive litigation hold; 2) suspend aspects of information retention policies; and 3) manage all stages of the document collection/preservation process.
With respect to the litigation hold, the court faulted Samsung for failing to circulate a comprehensive instruction when it first anticipated litigation. The litigation hold itself was timely, issued a few weeks after Apple apprised Samsung of its infringement claims against particular Samsung products. The instruction, however, was sent to only 27 employees. The court contrasted that initial distribution to subsequent holds, which were circulated to over 2,700 employees after Apple filed suit. Despite the thoroughness of its later legal hold efforts, the court could not excuse Samsung’s earlier mistakes: “Samsung cannot on the one hand tout its prudence and responsibility in regards to its post-complaint preservation efforts, and simultaneously argue that it was ignorant of the possibility of litigation pre-complaint.”
Even more troubling to the court, however, was Samsung’s decision not to suspend or modify its proprietary 14-day email retention policy. Such a policy, which automatically deleted all emails not specifically saved by employees, was instituted for confidentiality and cost reasons (a two-week retention policy is “cheaper than using a 30-day retention period”). Given that this policy would operate to destroy relevant emails, the court repeatedly expressed its astonishment that Samsung took no action to modify it, particularly since the same conduct resulted in similar sanctions several years earlier:
Samsung’s auto-delete email function is no stranger to the federal courts. Over seven years ago, in Mosaid v. Samsung, the District of New Jersey addressed the “rolling basis” by which Samsung email was deleted or otherwise rendered inaccessible. Mosaid also addressed Samsung’s decision not to flip an “off-switch” even after litigation began . . . Mosaid affirmed the imposition of both an adverse inference and monetary sanctions.
The last straw for the court was Samsung’s apparent failure to conduct any type of audit to determine whether its employees were actually saving “relevant emails” as permitted under its retention policy and as required by the litigation hold instruction. Time and again, the court observed that Samsung “did nothing” to confirm that its employees were in compliance.” Such inaction, coupled with its other mistakes, led to the inescapable conclusion that “Samsung ‘consciously disregarded’ its obligation to preserve evidence.”
The Apple case underscores the importance of observing certain golden rules of eDiscovery. First, organizations should issue a timely and comprehensive litigation hold notice. This means identifying all of the key players and data sources that may have relevant information and immediately distributing an intelligible litigation hold instruction. Next, organizations should suspend aspects of their document retention policies when required to preserve electronically stored information (ESI). By modifying retention policies when so required, an organization can develop a defensible retention procedure and be protected from court sanctions. Finally, organizations should make sure that their legal department actively supervises rank and file employees as they identify, preserve and collect relevant information. Allowing employees to do so without sufficient direction and oversight from legal – so-called self-collections of documents – is generally a recipe for disaster.
By following these golden rules from the Apple decision, organizations can build a defensible eDiscovery process, thereby reducing both litigation risks and costs.