Does a Third Party Have a Duty to Preserve ESI?
July 23, 2024
We all are aware of or have been involved with discovery of electronically stored information (“ESI”) and/or the obligation to preserve ESI and other evidence. If one fails to preserve such information when one has an obligation to do so, it can constitute spoliation and lead to various sanctions, damages or other impacts including dismissal of claims or imposition of adverse inferences. This blog post will focus in on a narrow aspect of this general issue – the obligations of a third party to preserve and protect ESI. I have a matter where the surety was not a party to the pending litigation, but one of the parties sent a preservation/litigation hold letter to the surety. The surety’s response was essentially – go pound sand! This is because the general rule is that a disinterested third party has no obligation to preserve ESI.
First, a general overview. Spoliation is the destruction or material alteration of evidence or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation. Silvestri v. General Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001) (citing West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)). To determine whether spoliation occurred, the following factors are generally considered: (1) the party having control over the evidence had an obligation to preserve it when it was destroyed or altered; (2) the destruction or loss was accompanied by a culpable state of mind; and (3) the evidence that was destroyed or altered was relevant to the claims or defenses of the party that sought the discovery of the spoliated evidence, to the extent that a reasonable factfinder could conclude that the lost evidence would have supported the claims or defenses of the party that sought it. Callahan v. Toys “R” US-Delaware, Inc., 2017 WL 2191578, at *4 (D. Md. May 18, 2017) (citing Charter Oak Fire Ins. Co. v. Marlow Liquors, LLC, 908 F. Supp. 2d 673, 678 (D. Md. 2012)). “Any fault—be it bad faith, willfulness, gross negligence, or ordinary negligence—is a sufficiently culpable mindset.” Collins v. Tri-State Zoological Park of W. Maryland, Inc., No. 1:20-CV-01225-PX, 2021 WL 5416533, at *4 (D. Md. Nov. 19, 2021)(citing Charter Oak Fire Ins. Co., 908 F. Supp. 2d at 680. In Silvestri, supra. the Fourth Circuit noted that the duty to preserve material evidence “extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.” Rule 34 of the Federal Rules of Civil Procedure requires a party to produce those documents that are within the party’s “possession, custody, or control.” Fed.R.Civ.P. 34(a)(1). “Rule 34 ‘control’ does not require a party to have legal ownership or actual physical possession of any [of the] documents at issue.” Goodman v. Praxair Servs., Inc., 632 F.Supp.2d 494, 515 (D. Md. 2009) (citation omitted). Instead, “documents are considered to be under a party’s control when that party has the right, authority, or practical ability to obtain the documents from a non-party.” Id.; Steele Software Sys., Corp. v. DataQuick Info. Sys., Inc., 237 F.R.D. 561, 563–65 (D. Md. 2006). But, these Rules and obligations are owed by “parties” to the litigation. What about third parties.
The influential Sedona Conference commentary dealing with preservation states that a letter or similar request for the preservation of evidence generally does not create a non-party preservation obligation. The Sedona Conference Commentary on Rule 45 Subpoenas to Non-Parties, Second Edition A Project of the Sedona Conference Working Group on Electronic Document Retention and Production (Wg1), 22 Sedona Conf. J. 1, 7–8 (2021). In Fletcher v. Dorchester Mut. Ins. Co., 437 Mass. 544, 548–51, 773 N.E.2d 420, 424–26 (2002) the court observed that “[p]ersons who are not themselves parties to litigation do not have a duty to preserve evidence for use by others. Nonparty witnesses may have evidence relevant to a case—documents, photographs, tape recordings, equipment parts, or any other tangible objects—and may know of its relevance, but that knowledge, by itself, does not give rise to a duty to cooperate with litigants.” A nonparty witness is not required to preserve and store information merely because that item may be of use to others in pending or anticipated litigation. Id.; see also Agility Pub. Warehousing Co. K.S.C. v. Dep’t of Def., No. CV 14-1064 (JDB), 2017 WL 1214424, at *2 (D.D.C. Mar. 30, 2017); Linlor v. Polson, No. 1:17CV0013 (AJT/JFA), 2017 WL 7310076, at *2 (E.D. Va. Dec. 6, 2017), report and recommendation adopted, No. 117CV0013AJT/JFA, 2018 WL 661486 (E.D. Va. Feb. 1, 2018), aff’d, 738 F. App’x 167 (4th Cir. 2018); Austin v. Consolidation Coal Co., 256 Va. 78, 83, 501 S.E.2d 161, 163 (1998); Bass v. E.I. Dupont De Nemours & Co., 28 F. App’x 201, 206 (4th Cir. 2002); Bolling v. Montgomery Ward & Co., Inc., 930 F. Supp. 234, 238 (W.D. Va. 1996) (observing that “the spoliation doctrine applies only to misbehavior by parties”); Wilson v. Beloit Corp., 921 F.2d 765, 767 (8th Cir. 1990)(“[T]he general rule is that there is no duty to preserve possible evidence for another party to aid that other party in some future legal action against a third party.”); Encompass Ins. Co. v. AMCO Ins. Co., No. CV-19-05198-PHX-DLR, 2020 WL 2395164, at *2 n. 2 (D. Ariz. May 12, 2020)(“the duty to preserve evidence applies to litigants, not to non -parties”); Stupka v. Peoples Cab Co., 437 Pa. 509, 264 A.2d 373 (1970); Parker v. Thyssen Mining Construction, Inc., 428 So.2d 615 (Ala.1983); Panich v. Iron Wood Prod. Corp., 179 Mich. App. 136, 140, 445 N.W.2d 795, 797 (1989)( there is no common-law duty owed by an employer to preserve evidence for an employee’s potential third-party action.)
While a duty to preserve evidence does not arise automatically from a nonparty’s mere knowledge, however, there are ways that that duty may be imposed on a nonparty. Of course, third parties may be required to produce particular items by way of a subpoena duces tecum, as long as the item is still in the third party’s possession, custody, or control at the time the subpoena is served. The third party may not destroy the item after having been served with the subpoena, but, by definition, anything already destroyed prior to service is no longer within the witness’s possession, custody, or control. Fletcher, supra. Thus, the duty imposed by a subpoena attaches at the time the subpoena is served, not before. Id. A third party may also agree to preserve an item of evidence and thereby enter into an enforceable contract. See Koplin v. Rosel Well Perforators, Inc., 241 Kan. 206, 208, 215, 734 P.2d 1177 (1987).
In Mazloum v. D.C. Metro. Police Dep’t, 522 F. Supp. 2d 24, 55–57 (D.D.C. 2007) a plaintiff sued a third party arguing that the entity had a duty to preserve certain videotape evidence that captured an altercation between plaintiff and another person at the third party’s night club. The court rejected the claim because plaintiff could not establish that the third party had any duty to preserve the videotape in question. The D.C. Court of Appeals has explained that “[t]here is no general duty in the common law to preserve evidence in a third-party spoliation situation.” Holmes v. Amerex Rent–A–Car, 710 A.2d 846, 849 (D.C. 1998). The Mazloum court held that for plaintiff’s claim to succeed the plaintiff must establish the existence of a “special relationship” that creates a duty to preserve the evidence for use in the future litigation. Id. That special relationship can arise by agreement, contract, statute, or other special circumstance. Id. (quoting Koplin, supra. 734 P.2d at 1179); Channey v. Marriott Int’l, Inc., No. 116CV2213EGSRMM, 2021 WL 4935544, at *6–7 (D.D.C. July 21, 2021), report and recommendation adopted, No. CV 16-2213 (EGS/RMM), 2021 WL 5755154 (D.D.C. Dec. 3, 2021). The “special relationship” requirement is not consistent or well defined. See Aikens v. Debow, 541 S.E.2d 576, 589 (W. Va. 2000) (“The existence of a special relationship will be determined largely by the extent to which a particular plaintiff is affected differently from society in general.”); Blahd v. Richard B. Smith, Inc., 108 P.3d 996, 1001 (Idaho 2005) (special relationship may arise where a defendant “knowingly induces reliance on its performance of [a specialized] function”); Conway v. Pac. Univ., 924 P.2d 818, 824 (Or. 1996) (special relationship exists where “one party has authorized the other to exercise independent judgment in his or her behalf, and consequently, the party who owes the duty has a special responsibility to administer, oversee, or otherwise take care of certain affairs belonging to the other party”).
Finally, a third party may have an obligation to preserve ESI when that party should reasonably expect to be added as a party to the litigation or become involved in litigation relating to the ESI. Bass, 28 F. App’x at 206.
The takeaway is that when the surety gets hit with a preservation letter or litigation hold letter as a third party, it should be aware that it may not in fact have a duty or obligation to preserve or implement a litigation hold. However, it should determine whether through agreement, contract, statute, or other “special circumstance” a duty might be imposed or whether it might become a party to the litigation.
If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (410-659-1321/mstover@wcslaw.com) or any member of the Surety and Fidelity Practice Group.
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