Litigation is expensive. That is a given. Electronic discovery (or e-discovery) makes it even more costly, especially for employers involved in Title VII and similar cases. Why? The plaintiff (usually an employee) has almost no e-discovery to produce. On the other hand, the defendant employer, even if it is a small business, will certainly have some type of computer system with thousands of e-mails and megabytes (or even gigabytes) of data stored, backed up and distributed on PCs, laptops, servers, archival systems and so on. Managing this electronic data is difficult enough. Retrieving it for litigation can be a nightmare.

One thing that smart businesses do is prepare, implement and follow reasonable document retention policies that cover electronic data. This helps organize the information and eliminates clutter, as well as potentially misleading and outdated information. It also aids the company in retrieving the truly relevant information when litigation arises. But there is a catch.

When a dispute arises and it becomes obvious that certain data could become evidence, there is a legal duty to preserve that information—document retention policy or not. Although it can be difficult to determine exactly when that duty arises, it unquestionably arises when the claimant's attorney sends a letter putting the employer on notice to preserve all relevant information, including e-mails and other electronic data. At that point, the company clearly has a duty not only to preserve the information but also to discontinue the provisions of its document retention policy that would automatically destroy documents, delete e-mails or otherwise discard relevant information and potential evidence.

So how does an employer respond to a document preservation letter? The company should start by preserving all potentially relevant information. But that can lead to a huge reservoir of information that can be very expensive, costing up to (and often exceeding) seven figures, to produce! As an alternative, companies sometimes try to decide internally who would most likely have information that would be relevant to the litigation. Then they limit the preservation—and later the search—to only those sources. The good news is that this approach can save a significant amount of money. The bad news, as a company recently learned in a federal case in the Northern District of Illinois, is that such unilateral decision-making can amount to being a penny wise and a dollar foolish.

In fact, such conduct can very well be sanctionable. In Jones v. Bremen High School District 228, a racial discrimination and retaliation case decided in May 2010, the defendant chose to preserve e-mails for just three employees involved in the case, rather than all of its employees who had any dealings with the plaintiff. There was nothing in the court record to indicate that the high school district acted maliciously or in bad faith, or that it was intentionally trying to hide evidence. Nevertheless, the court found that the defendant should be sanctioned for its conduct.

Because the court did not actually find bad faith, the sanction was somewhat limited, requiring the defendant to pay the plaintiff's fees for filing the motion and for certain follow-up discovery. On this aspect of the ruling, the employer was fortunate. The court, however, also prohibited the defendant from arguing that the absence of discriminatory statements in the three employees' e-mails during the period in question constituted evidence that no such statements had been made. Finally, and perhaps most importantly, the court instructed the jury that the defendant had a duty to preserve certain e-mails but failed to do so. In the hands of a good plaintiff's lawyer, that instruction alone could be devastating.

What is the moral of the story? As painful and expensive as electronic discovery can be, avoiding your obligations can be even more harmful to your case. Although you should have a well-written document retention policy in place and make sure to follow it, you should also have the ability to suspend its application when necessary. If litigation arises and you need to preserve records, especially e-mails, make sure you do so. In that regard, you will likely need guidance from your attorneys. Unlike the defendant in the Jones case, do not try to take matters into your own hands and save a few pennies on the front end. It will likely cost you many more dollars in the long run.

For more information about electronic discovery and the potential risks of avoiding your obligations when litigation arises, contact an attorney.