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W. Lawrence Wescott II: Backup tapes in electronic discovery, Part II

My previous column in this series discussed how organizations use backup tapes, and some implications for electronic discovery. This column will look at some representative decisions involving backup tapes in e-discovery.

As I mentioned last month, many firms use backup tapes as an inexpensive means of archiving data. Backup tapes used purely for disaster recovery should be as recent as possible. Using tapes more than a few days old to restore a crashed hard drive could result in significant losses of data for servers used actively in business. The prospect of losing one or two days’ worth of information has led many firms to abandon backup tapes in favor of more reliable and robust data archiving methods.

Nevertheless, tapes remain a popular medium for backing up data, and are involved in a significant number of discovery disputes. A LEXIS® search for “backup tape” along with forms of the word “discover” yielded more than 425 hits.

Failure to preserve tapes

In The Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F. Supp. 2d 456 (S.D.N.Y. 2010), Judge Shira Scheindlin, author of the landmark Zubulake decisions, examined various aspects of the law of spoliation.

Once the duty to preserve information attaches, Scheindlin said, the failure to preserve backup tapes containing data of key players constitutes gross negligence. Id. at 465. Similarly, where such backup tapes are the “sole source of relevant information,” the failure to preserve them is also gross negligence. Id. at 471. However, if the same information is available from more accessible data sources, “there is no need to save or search backup tapes.” Id. at 479, n99.

Firms have realized the implications of retaining large numbers of backup tapes. In Micron Technology Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011), Rambus, a firm that developed and licensed computer random access memory technology, had developed an approach in connection with competing RAM technologies to demand license fees and prosecute infringement suits if necessary.

In 1997, Rambus hired a new VP of intellectual property, Joel Karp, and in 1998, directed Karp to develop a licensing and litigation strategy. Karp stated “that Rambus needed to get ‘battle-ready’ by which he meant that Rambus needed to be ready for litigation. [Daniel Johnson, litigation partner at Rambus’ outside counsel] also advised putting into place a document retention policy.” Id. at 1317.

Backup tapes were part of this “document retention/destruction policy.” An internal email referred to a “growing worry” about backup tapes, and a tape retention period of greater than three months was “shot down” by outside counsel. In 1998, Rambus erased “all but 1 of the 1,269 tapes storing its email backups for the previous several years.” Id. at 1317-18.

Did the destruction of these tapes constitute spoliation? The court stated that “where a party has a long-standing policy of destruction of documents on a regular schedule, with that policy motivated by general business needs, which may include a general concern for the possibility of litigation, destruction that occurs in line with the policy is relatively unlikely to be seen as spoliation.”

This case was different: “Here, however, it was not clear error for the district court to conclude that the raison d’etre for Rambus’s document retention policy was to further Rambus’s litigation strategy by frustrating the fact-finding efforts of parties adverse to Rambus.” Id. at 1322.

Defendants’ choice

Inartful draftsmanship resulted in disaster for the government in In re: Fannie Mae Securities Litigation, 552 F.3d 814 (D.C. App.2009). Executives of Fannie Mae and Freddie Mac had subpoenaed documents from the Office of Federal Housing Enterprise Oversight (OFHEO), which regulated the two entities. After OFHEO represented that it had searched all of its electronically stored information, the defendants learned that OFHEO had not searched its offsite backup tapes. Defendants moved to hold OFHEO in contempt, but the parties entered into an order which would hold the contempt motions in abeyance, requiring OFHEO to search the tapes.

The order specified that “OFHEO will work with the Individual Defendants to provide the necessary information (without individual document review) to develop appropriate search terms. By October 19, 2007, the Individual Defendants will specify the search terms to be used.” Id. at 817.

The defendants submitted more than 400 search terms, resulting in the recovery of about 660,000 documents. OFHEO objected that the order limited requestors to “appropriate” search terms, but the district court found that the order gave the requestors sole discretion to specify the terms. OFHEO hired over 50 contract attorneys to review the documents, and spent more than $9 million to comply — an amount representing more than 9% of the agency’s budget. However, because OFHEO could not meet the agreed-upon deadlines, the district court granted the defendants’ motion for contempt, which was upheld by the Court of Appeals.

Monetary sanctions

Failure to take action to preserve backup tapes contributed to sanctions in Acorn v. County of Nassau, 2009 U.S. Dist. LEXIS 19459 (E.D.N.Y. Mar. 9, 2009). The county argued that suspending the recycling of backup tapes “would entail putting a halt to the entire Countywide I.T. policy of re-using electronic tapes to store data.” Nevertheless, the court noted that the county made no attempt to pinpoint tapes which might contain relevant data.

The county’s inaction regarding backup tapes (and to otherwise implement a litigation hold) constituted gross negligence. Although the county was able to avoid an adverse inference instruction because plaintiffs were unable to demonstrate that any of the lost materials were favorable to their case, the court found that monetary sanctions were appropriate.

Are tapes necessary?

The above cases demonstrate that litigants who ignore backup tapes when preserving information for trial do so at their peril. Counsel should take a step back, and consider how backup tapes are used in the organization. While the Micron Technology case demonstrates how not to implement a document retention policy, the Fannie Mae case shows how costly backup tape discovery can be. What tapes are really needed to run the business? When was the last time your IT folks had to restore one of those weekly tapes? Just backing everything up indiscriminately can potentially result in large discovery costs.

While it may never be necessary to search tapes for relevant information, counsel is well-advised to ask clients about their means of backing up their electronic information, and determining whether tapes covering the relevant period (particularly of key custodians) exist. Putting those tapes aside can be a relatively inexpensive insurance policy against a possible spoliation claim.

W. Lawrence Wescott II, Esq., a former IT manager and database development manager, is an e-discovery consultant. He is currently chair of the Technology Committee of the Maryland State Bar Association’s Litigation Section. He can be reached at [email protected]