A recent Cnet article and the comments posted to it illustrate a mistaken belief some people hold with respect to their role in preserving electronic evidence in lawsuits.  The comments also highlight misunderstanding about some key differences between civil and criminal cases. 

Here’s the situation. Cnet reported on the Recording Industry Association of America’s (RIAA) recent win concerning evidence spoliation in a case brought against a couple in 2006 who allegedly used Kazaa to make copyrighted files available for download. RIAA claims the couple destroyed evidence on four different occasions after they were sued. A computer forensics expert was able to confirm that they uninstalled Kazaa and reformatted their computer hard drive. 

The Kazaa connection is important because the couple claims there were merely making copies of CDs they already owned for personal use, not downloading music through Kazaa.  With their hard drive reformatted, it is now impossible to verify the accuracy of their statement so the Court has allowed RIAA to draw a negative inference.  In other words, they will allow RIAA to conclude that the evidence was deliberately destroyed because it supported RIAA’s case.

The majority of the comments to the Cnet story cried foul. How could that be? There are lots of reasons why a computer needs to be reformatted they say. RIAA should have gotten a search warrant and had the evidence before they sued, yada, yada, yada. 

But here’s a legal literacy reality check #1: Once a lawsuit has commenced OR if there even a threat of litigation or government investigation all evidence relating to the matter must be protected and preserved “as is.”  No more maintenance, purging, clean-up, updating, or anything else.  In a business setting it’s called a “litigation hold.”  That means all of it, hard copy documents of any kind, and electronic. 

There are plenty of famous names from the recent past that make clear how disastrous it is to do otherwise. Martha Stewart served jail time after being accused of changing documents related to communications with her broker in connection with an insider trading charge. Wall Street superstar, Frank Quattrone, was involved with a lengthy legal battle (and later acquitted) after sending an e-mail instructing his staff to “clean-up” files that may have been material to a subpoena received by his firm. Last, but not least, there’s the bankruptcy of Arthur Anderson in the wake of the Enron file shredding party. Enough said. 

Destroying evidence is a very costly mistake.  Courts really, really hate having their orders violated.  They can and will impose stiff financial sanctions and they can allow negative inferences to be drawn if the destruction was deliberate.  Whether it is or not depends on the facts of each case.  In the RIAA case, evidence of the couple doing abracadabra with the hard drive on four separate occasions doesn’t look good.

At a minimum, there will be sanctions. At a maximum, there will be sanctions plus the worst interpretation of the missing data you could imagine. Since the couple will no longer have the data to defend themselves with they’re really stuck. The act of spoliation creates the ultimate smoking gun. 

What about the 5^th Amendment and the right against self incrimination some of the comment posters say? 

Here’s legal literacy reality check #2: Civil cases, like the RIAA case, are different from criminal cases. The 5^th Amendment helps you in a criminal situation. No negative inferences can be drawn from pleading the 5^th in a criminal case because you have the right against self incrimination. That’s true. In a civil case the result is the exact opposite.

Why?  The inference can be negative in a civil case because no one goes to jail. Civil liberty is not at stake.  As a result, the burden of proof is also lower, requiring only a reasonable showing, not evidence beyond a reasonable doubt.  Remember the O.J. Simpson case?  He was acquited in the criminal case but found guilty in the civil case.  He’s still on the golf course looking for his ex-wife’s killer. 

While it’s true that RIAA has the burden of proving the couple did what they’re being accused of, the RIAA could not have obtained a search warrant as one Cnet comment suggests. Search warrants apply to criminal cases and they are available to the government on a showing of probable cause because criminals are expected to destroy evidence. You might say it’s the flip side of the right against self incrimination.  You don’t have to give up the evidence, but the government can come in and seize it. 

Parties to civil cases are expected to follow the rules of discovery, to protect evidence and to produce it according to the discovery schedule.  Destroying evidence is contrary to those rules and because the Kazaa evidence goes to the heart of the allegations, not playing by the rules might cost them the entire case.  Time will tell.

Smart businesses don’t have to fall into the spoliation trap.  They can protect themselves with good document management practices.  

This entry was posted on Friday, August 29th, 2008 at 9:30 am and is filed under Business Blind Spots, Costs, Ethics, Smoking Guns. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.