July 2013

By: James B. Sherman, Esq.

A federal court in Chicago has severely sanctioned a defendant employer for failing to prevent relevant computer data from being lost before trial. Pillay v. Millard Refrigerated Services, Inc. involved a claim of retaliatory discharge under the Americans with Disabilities Act (ADA). The plaintiff alleged he was discharged for opposing the prior termination of a different employee whom the employer “regarded as” disabled. In denying these allegations the employer claimed it had a legitimate, non-discriminatory reason for terminating the employee – low productivity ratings. Questioning the company’s underlying data used to generate the productivity rating, the plaintiff’s lawyer sent a standard “litigation hold” letter well before this lawsuit was brought in court. The letter demanded that the company preserve underlying data used for its productivity rating, including what is commonly referred to in court as electronically stored information, or “ESI.” However, the ESI was lost as the case made its way toward trial – a process that typically takes two or more years in federal court. What makes this case extremely instructive for employers is that the data was not deleted through some sinister plan to destroy evidence; rather, it was automatically deleted after one year pursuant to the company’s computerized document retention policy. The fact that the information may have been unintentionally destroyed made no difference to the court. Instead, Judge Joan Lefkow ruled that the jury deciding the case would be instructed that it could draw “adverse inferences” against the employer and in favor of the plaintiff employee as to the content of documents that were destroyed and therefore unavailable at trial.

The severity of this sanction may not be fully appreciated by anyone other than trial lawyers. In effect, at trial the jury in this case will be instructed that it is free to assume documents no longer in existence would have supported the plaintiff’s claims and/or undermined the employer’s defense for its decision to terminate based on productivity. In an ADA retaliation case such as this the likely result could serve as a death sentence to the employer’s case.

The lessons of this case are many and they are serious:

• Employers have a legal obligation to preserve ESI and other data relevant to employment claims whenever it is reasonably foreseeable;
• This obligation may arise even before any litigation or administrative claims are initiated;
• The obligation to preserve ESI and other evidence may last many years, which often times is far longer than an employer’s standard record retention policy;
• An employer that receives a so-called “litigation hold” letter from an employee or employee’s attorney must recognize that its obligation to preserve information, data and documents has definitely been triggered regardless of whether any litigation or claims have been brought;
• A litigation hold letter is not always needed to trigger the obligation to preserve relevant evidence; the obligation to preserve evidence may be triggered whenever a claim is reasonably foreseeable;
• The obligation to preserve relevant evidence, once triggered, requires more than merely refraining from destroying it, as the court in this case imposed on the employer a duty to take affirmative steps to override its computerized document retention program to prevent the automatic deletion of evidence after one year and preserve ESI and other data relevant to the case.

As this case demonstrates, even the innocent loss of evidence important to the outcome of a case can have catastrophic results for employers in workplace litigation. More often than not employment lawsuits turn on evidence that is electronically stored; i.e. ESI. Proving discrimination, retaliation and other forms of wrongful discharge, as well as defending against such claims, often requires highly relevant information found in e-mails, memos and other electronic communications and data. So what should management do when they know or have reason to know that an employee or former employee is asserting or is likely to assert a legal claim? At a minimum, it is essential that the following actions be taken without delay:

• Preserve all relevant information, including taking affirmative steps to prevent the automatic destruction of evidence through existing document retention/destruction practices.
• This includes overriding computer programs designed to automatically delete or destroy files or other electronically stored information, for instance after a certain amount of time has elapsed.
• Do not wait until being served with a complaint or EEOC or other administrative charge before acting. Again, whenever it is apparent legal claims may be asserted it is best to take action to preserve relevant information.
• Making paper copies or simply refraining from destroying ESI is not good enough. Not only must the electronic version of information be preserved, it must be preserved in an unaltered state. E-mails, memos and other computer files that are overwritten by normal use of computers may ruin evidence just as surely as if it is erased.
• Typically, properly preserving ESI evidence requires creating a forensic image of the information in its preserved state and removing that image from any computer that is in use. Internal or external IT expertise is necessary.

Although it is impossible to tell from the Court’s decision, in Pillay v. Millard Refrigerated Services, Inc., the allegation that the plaintiff was fired for opposing the termination of another employee who allegedly was regarded by the employer as being disabled under the ADA sounds fairly far-fetched. Certainly under normal circumstances this plaintiff would have an uphill climb convincing a jury of this theory, not to mention overcoming the employer’s defense that he failed to meet objective performance criteria. It would be very unfortunate indeed for the employer in this case to lose at trial not because it violated the law, but because it failed to act to preserve computer data essential to its defense. Let this be a lesson to all.

To consult with knowledgeable legal counsel on the interplay of record retention policies and employment litigation, for help with crafting such policies, or to determine whether a “litigation hold” obligation has been triggered and, if so, what must be done to comply, contact Attorneys James Sherman or Phoebe Taurick at (952) 746-1700, or email jukruse@wesselssherman.com.