Delaware Court of Chancery Issues Guidelines for Preservation of Electronically Stored Information

January 19, 2011
By Maribeth Minella on January 19, 2011 4:42 PM |

chancerylogo60 Disputes involving non-compete agreements more often than not become dependent upon information that is or was stored electronically. It is not, therefore, surprising that Delaware’s Court of Chancery, the trial court where most disputes involving non-compete agreements are filed, posted important Guidelines for Preservation of Electronically Stored Information on its website yesterday. (See www.courts.delaware.gov/Chancery.) Anyone involved in a matter before Delaware’s Court of Chancery must pay particular attention to the Court’s guidelines.

It is clear from the guidelines that the Court considers the preservation of electronically stored information (“ESI”) a very important task that, if performed incorrectly, will have consequences. The first paragraph of the guidelines reminds “all counsel (including Delaware counsel) appearing in any case before the Court of their common law duty to their clients and the Court with respect to the preservation of electronically stored information.” (emphasis added.) Specifically, “a party to litigation must take reasonable steps to preserve information, including ESI, that is potentially relevant to the litigation and that is within the party’s possession, custody, or control.” If a party has not made a good-faith effort to preserve ESI, it is likely that the Court will issue sanctions.

Despite the use of the term “litigant” throughout the guidelines, the guidelines impose particular responsibilities upon counsel that should not be ignored. According to the guidelines, “at the very minimum,” counsel’s common law duty to take reasonable steps to preserve ESI includes but is not limited to developing and overseeing a preservation process that includes the dissemination of a litigation hold notice to custodians of potentially relevant ESI.

Counsel is strongly encouraged to: take a collaborative approach to the process, develop written instructions for the preservation of ESI, and document the steps taken to preserve ESI. Counsel is also advised to pay close attention to preserving ESI from laptop computers, home/personal computers (desktop or laptop), external and internal (and certainly portable) storage devices (e.g., USB/flash drives) and personal electronic mail accounts.

The Court’s approach to the issue of e-discovery is not unexpected. Vice Chancellor Laster’s bench ruling on a discovery dispute in Roffe v. Eagle Rock Energy GP, et al., C.A. No. 5258-VCL (Del. Ch. Apr. 8, 2010) has been the subject of much discussion within the Delaware Bar. During that conference, Vice Chancellor Laster told the litigants before him that “First of all, you do not rely on a defendant to search their own e-mail system…There needs to be a lawyer who goes and makes sure that the collection is done properly.” Vice Chancellor Laster went on to question whether the ESI had been adequately preserved, protected, and produced. For this case, he believed that a proper collection of ESI could be accomplished within thirty days, “based upon the assumption that there had been appropriate litigation holds put in place when this action was filed, that there would be responsive efforts made by the defendants to get this stuff done.”

The bottom line for litigants, and particularly attorneys practicing in Delaware’s Court of Chancery, is that the Court is taking a party’s duty to preserve ESI very seriously. Indeed, the guidelines specifically state, “While the development and implementation of a preservation process after litigation has commenced may not be sufficient by itself to avoid the imposition of sanctions by the Court if potentially relevant ESI is lost or destroyed, the Court will consider the good-faith preservation efforts of a party and its counsel.” (emphasis added.) Finally, the Court leaves counsel with an important reminder: the duty to preserve ESI starts when litigation is “reasonably anticipated, which could occur before litigation is filed.”