Wm. T. Thompson Co. v. General Nutrition Corporation, Inc., 593 F.Supp. 1443, 1455 (C.D.Cal. 1984)(emphasis added); see also, Gorelick, Marzen and Solum, Destruction of Evidence § 3.11, p. 93 (Supp. 2002)(citing numerous cases). The question then arises, what must be preserved? Wm. T. Thompson held:

While a litigant is under no duty to keep or retain every document in its possession once a complaint is filed, it is under a duty to preserve what it knows or reasonably should know is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery, and/or is the subject of a pending discovery request.

Id. (emphasis added). Thus, a litigant's duty to preserve evidence arises early and is broad, encompassing what the party knows or should know.

One of the most significant cases on this issue is Computer Associates International, Inc. v. American Fundware, Inc., 133 F.R.D. 166 (D.Colo. 1990). There, the plaintiff claimed that the defendant had improperly copied its computer code. Id. at 168. The plaintiff voiced these concerns to the defendant first in October of 1986, then in a meeting on December 4, 1986. Id. The complaint was served on December 23, 1986. Id. The defendant had a practice of saving only the current version of its computer code; previous versions were deleted, a practice that the Court found to be legitimate under normal circumstances. Id. The court held, however, that once the defendant was on notice of the dispute, it had a duty to stop the process of erasing previous codes. Id. The court found it "inconceivable that after the October 1986 meeting, [the defendant] did not realize that the software in its possession would be sought through discovery." Id. at 169. The court granted default judgment in favor of the plaintiff. It should be noted, however, that the defendant continued its practice of deleting prior versions of the code, even after service of the complaint, discovery requests, and filing of a motion to compel. Id. Had the destruction occurred only prior to service of the complaint, the court may have imposed lesser sanctions (see discussion below).

Courts have held it to be improper for a plaintiff to destroy documents before it files suit, but after the decision to sue has been made. See, Struthers Patent Corporation v. Nestle Co., 558 F.Supp. 747, 758-59, 765 (D.N.J. 1981). It may seem obvious that if one is contemplating a lawsuit, one must preserve the relevant documents. However, the danger of inadvertently destroying documents in this situation may not be as obvious as it seems. If a corporate plaintiff has a well-established document retention and destruction policy, it would be easy to overlook the fact that documents are being destroyed in the course of daily operations. Cases such as Struthers make it clear that corporate managers need to review and if necessary interrupt a standard procedure of document destruction when they begin to contemplate filing a lawsuit. The decision cannot wait until the complaint is filed and certainly not until requests for production are received.

Courts have also found that the duty to preserve evidence is triggered prior to service of the complaint in situations such as: employee's statements that she was going to file an employment discrimination case, see, Capellupo v. FMC Corporation, 126 F.R.D. 545 (D.Minn. 1989); reports from paid informants within the plaintiff's organization that that suit was going to be filed, see, Alliance to End Repression v. Rochford, 75 F.R.D. 438 (N.D.Ill. 1976); and other litigation on similar subjects, see, Shaffer v. RWP Group, Inc., 169 F.R.D. 19 (E.D.N.Y. 1996).

There is a limit to exposure. In Bowmar Instrument Corporation v. Texas Instruments, Inc., 1977 U.S. Dist. LEXIS 16078 (N.D.Ind. 1977), the court declined to impose sanctions on the basis of a rumor that circulated through the defendant's offices that a lawsuit would be filed. Also, Hansen v. Dean Witter Reynolds, Inc., 887 F.Supp. 669 (S.D.N.Y. 1995), refused to impose sanctions because, even though the duty to preserve documents had attached, it was not clear enough that the specific documents destroyed were relevant to give the defendant notice that they needed to be preserved. Id. at 676.

Although many of these cases involved intentional destruction of evidence, many courts have held that negligence is enough to support sanctions. For example, Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68 (S.D.N.Y. 1991), imposed sanctions even though there was insufficient evidence to prove that the defendant had intentionally destroyed the documents at issue. Id. at 76. Rather, the documents were purged pursuant to a document retention policy. Id. In light of this, the court imposed monetary sanctions instead of harsher penalties. Id. at 77-78.

Courts have even imposed sanctions where a third party destroyed the documents. In Shamis v. Ambassador Factors Corporation, 34 F.Supp.2d 879 (S.D.N.Y. 1999), the court imposed sanctions where the defendant's official receiver in Hong Kong destroyed relevant documents with the defendant's knowledge. Prior to the destruction, the receiver notified the defendant that the destruction was planned and gave it an opportunity to review and copy the documents. Id. at 888. The defendant, in fact, copied some documents for its own use. Id. However, it failed to notify the plaintiff or the court of the situation. Id. Though finding that the defendant was not "as fully accountable as if he destroyed the documents himself," the court held that "[the defendant] is not without accountability here." Id. at 889. By failing to notify the plaintiff and court that the destruction would occur, thus providing the plaintiff with the same opportunity the defendant had to review and copy the documents, the defendant violated its duty to preserve. See also, Federal Insurance Co. v. Allister Manufacturing Co., 622 So.2d 1348, 1352 (Fla.App. 1993)(holding "[w]here one of two innocent parties must suffer for the negligence of a third party, the loss falls on the party who enabled the third party to cause it").

Retention Policies
Many corporations have formal policies delineating how long documents will be retained and how they will be disposed of after the retention period expires. Although such policies are helpful, if reasonable, in avoiding sanctions for document destruction, they will not necessarily eliminate exposure. Cases such as Fundware have imposed sanctions even while admitting that the document retention policy was legitimate under normal circumstances. It was the defendant's responsibility to interrupt the retention policy if it would result in destruction of relevant documents. Fundware, at 169.

Lewy v. Remington Arms Co., Inc., 836 F.2d 1104 (8th Cir. 1988), used a test of reasonableness to analyze a situation where relevant documents had been destroyed pursuant to a retention policy. The court held that the following factors should be considered: (1) whether the retention policy is reasonable in light of surrounding circumstances; (2) whether other lawsuits have been filed concerning the type of documents, the frequency of such suits, and their magnitude; and (3) whether the retention program was instituted in bad faith (e.g., to limit the evidence available to potential plaintiffs). Id. at 1112. Even if the retention policy passes muster under this test, the court held that sanctions would still be appropriate if the party knew or should have known that the documents would be relevant to litigation, but allowed them to be destroyed pursuant to the policy. Id.

Many retention policies mirror the mandatory retention periods imposed by government regulations. See, Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 73 (S.D.N.Y. 1991); Hansen v. Dean Witter Reynolds, Inc., 887 F.Supp. 669, 675 (S.D.N.Y. 1995). The fact that regulations allow records to be destroyed after a certain amount of time, however, does not mean that the party is free to destroy them where they are relevant to litigation. Again, if the party knew or should have known that the documents would be reasonably calculated to lead to evidence relevant to litigation, the court may impose sanctions. Id.

Under some circumstances, an established retention policy can be harmful. In Carlucci v. Piper Aircraft Corporation, 102 F.R.D. 472 (S.D.Fla. 1984), one of the express purposes of the policy was to eliminate documents that were potentially damaging to the company. Id. at 481. In addition, the company failed to follow its own procedures. Id. at 485. The court found the policy to be a "sham" and imposed sanctions. Id. at 485, 489.

The retention policy should also preserve all relevant aspects of the document. In Armstrong v. Executive Office of the President, 1 F.3d 1274 (D.C. Cir. 1993), reversed on other grounds, 90 F.3d 553 (D.C.Cir. 1996), the court held that, under the Federal Records Act, printing out and storing hard copies of e-mails and other electronic documents was insufficient because the hard copies did not preserve such relevant information as addressees and the time of receipt. Though this case does not deal with destruction of documents in the litigation context, the analogy is compelling. If the practice of printing out e-mails does not preserve all "fundamental pieces of information" for purposes of the Federal Records Act, it seems likely that a court would hold it insufficient for litigation. Certainly an opposing party would want such information as the identity of the recipient and the time of receipt. The issue is even more significant in light of the widespread practice of converting records to other forms, such as microfiche, to facilitate efficient storage. If such methods are used, they should preserve all essential characteristics of the documents.

Possible Sanctions
Courts have imposed a wide range of sanctions for improper destruction of documents. Sanctions are likely to be less severe where the duty is less clear. Barsoum v. NYC Housing Authority , 202 F.R.D. 396, 400 (S.D.N.Y. 2001)(holding "[t]he level of intentionality goes directly to the degree of severity of any sanction that may be awarded"). Default is usually reserved for intentional conduct. See, e.g., Fundware, supra, at 170. Criminal laws also apply to the willful destruction of evidence. See, e.g., 18 U.S.C. § 1503. Another well-established sanction is an evidentiary presumption that the destroyed document would have helped prove the other party's case. See, e.g., Shamis, supra, at 890. The offending party may also be precluded from introducing testimony based on the destroyed evidence, such as expert testimony. See, e.g., Dillon v. Nissan Motor Co., 986 F.2d 263, 268 (8th Cir. 1993). For the least serious cases, courts tend to impose monetary sanctions, such as ordering the offending party to pay the other's costs and attorneys' fees. See, e.g., Turner v. Hudson Transit Lines, supra , at 77-78. A number of states have also recognized a civil cause of action for intentional destruction of evidence and even negligent destruction of evidence. See, e.g., Hirsch v. General Motors Corporation, 628 A.2d 1108 (N.J.Super. 1993)(citing cases).

Conclusion
Corporations must pay close attention to the duty to preserve evidence when the possibility of litigation arises. Legitimate document retention polices and other bona fide business reasons for purging documents will not excuse improper destruction of documents. The potential consequences for such a failure can be serious. Awareness and well-developed procedures will help to minimize exposure to sanctions.