On the tail of clear divergence among courts on the issue of the required showing for the imposition of spoliation sanctions (compare Orbit One Communications, Inc. v. Numerex Corp., 2010 WL 4615547 [S.D.N.Y. Oct. 26, 2010] and Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F. Supp.2d 456, 465 (S.D.N.Y. 2010); see also the recent eDiscovery Insight posting “The Culture of Sanctions”) , two more courts dovetailed recently on another central e-discovery issue, this time surrounding when the duty to preserve arises.
In a debate dating back to 2006, federal courts in Delaware and California heard two, near-identical cases involving the claimed patents of technology licensing company Rambus, Inc. (See Hynix Semiconductor Inc. v. Rambus, Inc., 591 F. Supp. 2d 1038 [N.D. Cal. 2006] and Micron Tech., Inc. v. Rambus, Inc., 255 F.R.D. 135 (D. Del. 2009). Each court addressed the question of whether Rambus committed spoliation by failing to preserve early enough in anticipation of litigation; in the end, each court issued a determination in direct contradiction to the other.
An abbreviated version of the story goes something like this: Rambus patented DRAM (dynamic random access memory) technology in 1990. By 1992, the company had implemented a two-part strategy to defend that patent against companies claiming similar technologies, including (1) the licensing of Rambus DRAM-supported chips and (2) a fee structure and infringement lawsuit preparation to address manufacturers who adopted competitive technologies for their chips. By 1998, the “licensing and litigation strategy” had really taken form and included a document retention policy formalizing company sponsored “Shred Days.” Two particular Shred Days in 1998 and 1999 resulted in the destruction of most of Rambus’s backup data, along with about 700 boxes of paper documents (estimates vary). Rambus began initiating patent infringement suits the following year, in 2000.
Defendants Hynix and Micron both argued that the above facts triggered a duty to preserve relevant documents in anticipation of litigation. Rambus’s licensing and litigation strategy points to a clear contemplation of litigation, and its policy of holding Shred Days shows intentional spoliation of data after that point in time.
Finding the volume of shredded materials to be “unexceptional” and noting the content-neutral wording of the document retention policy, the California court in Hynix declined to issue sanctions, reasoning in significant part that “the path to litigation was neither clear nor immediate.” The Delaware court, on the other hand, cited a similar chronology of Rambus’s actions to arrive at the opposite conclusion: that litigation was reasonably foreseeable no later than the 1998 formalization of a licensing and litigation strategy, and that Rambus “knew or should have known” that documents destroyed under the retention policy would become material. With its finding of intentional, bad faith spoliation, the Delaware court held Rambus’s patents unenforceable against Micron.
What is the upside to this story now 21 years in the making? The Federal Circuit published its review of the conflicting opinions just last month, treating the ediscovery world to the rare gratification of an undisputed standard. Reversing the California court and remanding both decisions for further assessment (the Delaware court requiring greater analysis on the existence of bad faith to justify the choice of sanction), the Circuit court clarified that reasonably foreseeable litigation need not be “‘imminent or probable without significant contingencies,’” as the Hynix decision claimed. The court went on to hold that while the determination of when the preservation duty arises is “flexible” and “fact-specific,” the California court’s requirement of “immediate or certain” litigation created too narrow a standard.
So after two decades of protracted disagreement, the ediscovery community can celebrate a single, articulated standard to follow on at least one issue…until, that is, the next Rambus hits the docket.