Both companies and individuals accountable for electronic stored information
This summer, Plantronics received a $3 million fine, based on a recently amended rule governing company failures to preserve electronically stored information (ESI). Under Federal Rule of Civil Procedure 37(e), the court found that Plantronics did not take sufficiently reasonable steps to preserve ESI and was responsible for the behavior of a top-level executive who deleted emails before and during litigation by GN Netcom with the intent to impair GN Netcom’s ability to present its case. The individual involved was fined $1 million.
Organizations can take several steps to prevent such a situation. Frank Nolan, an attorney at Sutherland Asbill & Brennan, stresses the importance of employee training and education ‘from the lowest-level employee all the way up.’ Companies can use the Plantronics case as a basis on which to train employees, and awareness of the penalties imposed for non-compliance can be a deterrent. Fines for individual as well as corporate behavior can be levied, holding individuals as well as companies accountable for failure to follow Rule 37(e).
Understanding the rule is crucial. ‘Sanctions can be imposed even if prejudice resulted but there was no intent to deprive,’ explains Nolan. ‘Sanctions can also be imposed if there was intent to deprive: bad faith.’ The court found that Plantronics had acted in bad faith with the intent to impair GN Netcom’s ability to present its case.
Employees need to understand that this kind of behavior can be damaging to the company and affect the brand. Bad publicity hurts the organization and can influence how a court views a company. It can also affect the organization’s ability to negotiate. Some courts will hold corporations to a high standard when it comes to preserving ESI.
‘The [fine] is only the tip of the iceberg,’ Nolan says. ‘The Plantronics case shows that one rogue employee can do damage. Everyone, top to bottom, including the board, should be aware of Rule 37(e).’
Everyone in an organization should be concerned with preserving ESI: outside counsel, in-house counsel, executives, managers and employees. ‘Responsibility should not fall to one single individual or one single position,’ Nolan adds. Even when a company makes its best effort to preserve ESI, it can still be held accountable for the behavior of individual employees.