Jason Walker, VP of Business Development — LSP Data Solutions, LLC

I. Introduction

Over the course of my career, working alongside legal teams in matters ranging from single-custodian employment disputes to sprawling multi-party commercial litigation, I have observed the same inflection point arise with striking regularity. A dispute surfaces, litigation becomes a certainty, and somewhere in the early scramble — retaining counsel, briefing the client, setting strategy — no one pauses to ask the most consequential question of the entire proceeding: where is the data, and is still intact?

That question, left unasked in the earliest days of a matter, has a way of becoming the most expensive question in the case. The legal profession has had decades to grapple with the digital transformation of business communications. And yet, courts continue to impose significant sanctions on parties — represented by otherwise competent counsel — who failed to treat electronically stored information (ESI) with the seriousness the rules demand. This article examines why e-discovery has become not merely a procedural obligation but a strategic imperative, and what recent case law reveals about the costs of getting it wrong.  

II. The Governing Framework: Rule 37(e) and the Duty to Preserve

In 2015,significantly affected how people handle electronic information in lawsuits. One of the main changes was to Rule 37(e), which is now a standard rule across the country for handling electronic information that should have been preserved but wasn’t. This rule has two main parts, depending on the severity of the mistake. 

When a party doesn’t take reasonable steps to preserve electronically stored information, or ESI, and it’s lost for good, the court can step in. When this happens, the court may order some measures to fix the problem, but only if they’re necessary to make things fair. This is under Rule 37(e)(1). On the other hand, if the court thinks a party intentionally got rid of information to hurt the other party’s case, things can get more serious. According to Rule 37(e)(2), the court can then assume the lost information was bad for the party that got rid of it. The court might even tell the jury about this, or it could impose a severe penalty, such as dismissing the case or entering a default judgment against the party. The goal is to make sure everyone plays fair in court.

The duty to preserve ESI is triggered not at the filing of a complaint, but at the moment litigation is reasonably anticipated. This distinction carries enormous practical significance. A party that receives a demand letter threatening litigation, or whose internal communications reflect an awareness that legal proceedings are likely, is obligated to issue a litigation hold at that point — regardless of whether a lawsuit has been filed. Courts have been unambiguous on this point, and the consequences of delay can be severe.  

III. The Price of Inaction: Lessons from Recent Case Law 

Recent decisions make clear that courts are not sympathetic to parties who treat their preservation obligations as an afterthought, even when the loss of ESI appears inadvertent. 

In a recent case, Goldstein v. Denner, the Delaware Court of Chancery made a significant decision. The court found that the defendants had failed to properly preserve important text messages, a significant mistake in a lawsuit. Vice Chancellor Laster, who oversaw the case, used a step-by-step approach to figure out what had gone wrong. He discovered that the defendants hadn’t taken reasonable steps to identify and preserve evidence, and their lawyers hadn’t been proactive in fulfilling their discovery obligations. The court was particularly concerned that the defense team’s lack of transparency had damaged their credibility. As Vice Chancellor Laster put it, problems like this can “rapidly fester” and cause big issues in a case. Instead of dismissing the case, the court raised the standard of proof for the defendants on certain issues. This means they’ll have to provide more convincing evidence to support their claims. The court also awarded the plaintiff attorneys’ fees and expenses incurred in connection with the motion regarding the destroyed evidence. This decision highlights the importance of properly preserving evidence and being transparent during the discovery process. Lawyers have a responsibility to be proactive and fulfill their obligations rather than merely react to the other side’s inquiries. By failing to do so, the defendants in this case faced serious consequences, including a higher standard of proof and financial penalties. The court’s decision serves as a reminder to lawyers and parties involved in lawsuits to take their discovery obligations seriously and avoid actions that can undermine the integrity of the legal process.

A court in New York made a major decision in 2024 about the importance of quickly identifying the right people to save information from. This decision concerned a defendant who didn’t adequately preserve emails from two employees, Wendy Ackerman and Amy Morgan. When the lawsuit started, the defendant told some employees to save their emails, but they didn’t tell Wendy and Amy until 93 days later. By then, the company’s system had already deleted its emails because it kept them for only 90 days. The court was not happy with the defendant because they should have started saving the emails earlier, after receiving a letter requesting information, before the lawsuit was even filed. The court said the defendant didn’t do enough to preserve the information and was too slow, resulting in consequences.

A court case in Ohio, Safelite Group, Inc. v. Lockridge, highlights the importance of properly preserving evidence during a lawsuit. The defendant, Lockridge, failed to save text messages on his phone, which were automatically deleted. The court was not happy with this and found that Lockridge’s lawyer had not done enough to prevent the messages from being deleted. As a result, the court allowed the other side to present the missing messages to the jury and also ordered Lockridge to pay some of the other side’s legal fees. This case shows that simply telling someone to preserve evidence, without taking concrete steps to ensure it is done, is not enough. Even a written plan to preserve evidence is not sufficient if it does not address how to handle automatic deletion settings on devices like phones. The court’s decision emphasizes the need for parties in a lawsuit to take active and effective measures to preserve evidence, as required by the rules of civil procedure.

Courts in 2024 have also signaled a significant shift in the discoverability of litigation hold notices. In EEOC v. Formel D USA, Inc., 2024 WL 4172527 (E.D. Mich. Sept. 12, 2024), the court required production of litigation hold notices after finding that mobile device data had been deleted, rejecting the defendant’s privilege claims. Similarly, in FTC v. Amazon, the court granted a 30(b)(6) deposition on Amazon’s preservation policies, reinforcing that corporate defendants must be prepared to explain — not merely assert — that ESI was properly preserved. The era in which a litigation hold letter was treated as presumptively privileged and beyond scrutiny is ending.  

IV. E-Discovery as Strategy, Not Compliance 

The court cases we’ve looked at send a clear message to lawyers: handling electronic evidence is not just a minor task that can be passed off to others and ignored until deadlines are near. It’s a key part of the litigation process that can affect the outcome from the very start. 

The decisions made in the first seventy-two hours of a dispute — what data exists, which custodians hold relevant information, what systems need to be preserved, and whether auto-delete settings are running — determine everything that follows. A litigation hold issued a week too late can render months of case preparation irrelevant. A failure to advise a client about device preservation can hand opposing counsel a weapon far more powerful than any substantive argument.

To succeed in this area, law firms and lawyers need to treat e-discovery as a key part of their plan from the start. They should ask tough questions right away, work with experts in discovery, and realize that taking care of electronic information proactively is not just a cost but a way to get ahead of the competition. By doing things this way, they can manage the process effectively and make it work to their advantage. This approach helps them stay on top of things and make the most of the situation, rather than just cutting costs.

V. Conclusion

The courts have made it clear what’s expected when handling electronic information in a lawsuit. They’ve created a set of rules, with Rule 37(e) being the main guide. Over time, judges have added more detail to these rules through their decisions, and the consequences for noncompliance are severe. If important text messages are lost or if someone responsible for keeping records isn’t careful enough, they might face penalties. They might even have to prove something in court that would be hard to prove, or answer questions during a deposition about how they handled the records. In some cases, the court might even tell the jury to assume something negative about the person or company that lost the information, just because they didn’t take good care of it. These aren’t just punishments for people who intentionally try to hide or destroy evidence; they can happen to anyone who’s just careless or doesn’t understand how important it is to keep digital records safe. In fact, these digital records can often be more important than what any witness says.

For lawyers, the main point is simple: electronic discovery should be considered from the very start of a case. The lawyers who do this are not only helping their clients avoid penalties but also building stronger cases that are less likely to fail.

Article by Jason Walker, VP of Business Development — LSP Data Solutions LLC | 202.560.7717 | www.lspdata.com