April 1, 2013
By Meredith A. Kapushion
Mine operators are familiar with their obligations to keep certain records as required by the Mine Act, but are often surprised to learn that they have additional obligations to preserve documents and the evidence. Whenever litigation is anticipated, an operator — and any other party involved — has an independent obligation to preserve relevant evidence. This can come into play whenever an operator chooses to contest a Mine Safety and Health Administration (MSHA) enforcement action or when an operator (or its individual employees) becomes involved in an MSHA investigation. Indeed, any time litigation is anticipated, the duty is triggered.
This is part of a broader duty to prevent the spoliation of evidence that arises any time litigation is anticipated, regardless of whether that litigation is with a federal agency or any other private or public party. The duty to preserve evidence is a duty owed to the court, and it attaches when a party knows or “should have known” that the evidence may be relevant to future litigation. A party must make sure that all sources of potentially relevant information are identified and a “hold” put into place to preserve the information.
A litigation hold is essential to satisfying the duty to preserve in modern day litigation. This is a basic notice that should issue from within a company (or at counsel’s request) to anyone involved with the dispute, directing them to preserve any evidence they may have or that they are aware of that is relevant to the dispute. This is not simply a directive to management — a litigation hold should issue to everyone who might have information about the dispute, including anyone from hourly employees, temporary workers, and even former employees, up to the highest levels of management. Anyone who may reasonably be anticipated to have relevant information must be put on notice that such evidence must be preserved.
In addition, any policies in place that result in the automatic deletion of material (for example, email mailbox size or date limitations) must be suspended. To make sure that the litigation hold is effective, the person or persons responsible for issuing the hold should follow up with the recipients to make sure that the scope of the hold is understood and that appropriate steps are taken. Because each operation or mine will have its own unique legal challenges, and its own peculiarities with respect to record-keeping, technology uses, and standard practices, implementing an effective legal hold will be different every time. It is also important to remember that “evidence” is not limited to documents, but may include anything from electronic files, pieces of equipment, photographs, audio and video recordings, and other types of objects and information.
Why is a litigation hold so important? Apart from satisfying obligations to the court and ethical duties of “fair play,” the penalties for failing to preserve relevant evidence can be severe. At the extreme end, the deliberate destruction of documents can mean sanctions in the form of monetary penalties, adverse inferences adopted by the court about what the missing documents contained, the loss of various defenses or claims, or even a default finding against the offending party, resulting in a complete loss of the case. In some instances, it may even mean criminal prosecution for obstructing justice. At the lesser end, it can mean increased litigation and discovery costs, wasted time spent hunting for evidence that may or may not exist, and derailing a case from proceeding on the merits to being mired in evidentiary battles.
A relatively recent decision in a contest proceeding highlights the importance of preservation. In Dynamic Energy, Inc., 33 FMSHRC 1998, 2006-07 (Aug. 31, 2011) (ALJ Paez), the Secretary successfully sought and obtained an adverse inference against the operator due to the failure of the operator to preserve preshift reports. The contest proceeding involved three alleged violations concerning equipment. Preshift reports were only retained for one of the three contested actions. The second contested action concerned a bus that had a broken exhaust, leaking oil, no brake fluid, loose steering, and a broken pedal. The third contested action concerned a Cat loader’s tire, steps, and engine doors. The Secretary requested the preshift inspection reports for the Cat loader and bus through discovery, but they had already been destroyed by Dynamic. The Secretary subsequently requested that an adverse inference be drawn against Dynamic on the issue of whether the Cat loader’s tire and the portal bus’ brake, steering, and exhaust systems were consistently listed in the preshift reports.
The Administrative Law Judge (ALJ) acknowledged that, because the Mine Act only requires operators to maintain records for 30 days, “[a]t first blush, Dynamic seems justified in having destroyed the preshift reports…” However, he rejected Dynamic’s argument based, in part, upon Dynamic’s selective retention of documents:
In this case, Dynamic curiously failed to preserve preshift reports for the Cat loader or portal bus, but did maintain preshift reports regarding the highwall driller that it believed supported its arguments… In light of Dynamic’s unexplained and questionable selective retention of records, I determine that, when Dynamic destroyed the preshift reports, it knew it had an obligation to preserve them in anticipation of litigation. I conclude, therefore, that the Secretary is entitled to an adverse inference against Dynamic. Because operators are required to maintain preshift report records for 30 days, I further conclude that such adverse inference may only extend to 30 days prior to the day the orders and citations in these cases were written. Id. at 2009-10.
Because the ALJ found that Dynamic knew that litigation was anticipated, the obligation to preserve extended beyond the bare 30-day requirement found in the Mine Act. Id. at 2009. (“Dynamic’s argument might be persuasive if it retained no preshift reports or other documents for longer than the 30-day requirement.”) Notably, the ALJ recognized that the duty to preserve extends beyond an operator’s obligations to keep preshift reports under the Mine Act. An operator cannot defend the deliberate destruction of evidence by simply claiming that retention of such evidence is not required under the Mine Act.
The Federal Mine Safety and Health Review Commission has also identified the importance of preserving preshift and on-shift exam reports when contesting a citation. IO Coal Co., Inc., 31 FMSHRC 1346, 1359 (Rev. Comm. Dec. 14, 2009). In that case, the Review Commission remanded the case to the ALJ for further determinations and specifically directed the ALJ to “consider that IO did not preserve the pre-shift and on-shift examination reports completed in the days prior to the issuance of the order in question” in evaluating the unwarrantable failure designation.
Destruction of documents may also lead to criminal or civil penalties. During the investigation of the Upper Big Branch explosion, Hughie Stover ordered the disposal of thousands of pages of documents stored at the mine. Despite being aware of a litigation hold on all of the documents related to the UBB explosion, Stover proceeded to destroy potentially relevant documents. He was subsequently convicted of “knowingly and willfully causing the concealment, cover up, mutilation, or destruction of documents with the intent to impede, obstruct, or influence an investigation, in violation of 18 U.S.C. §§ 2(b) and 1519.” U.S. v. Stover, 2012 WL 638787, *1 (S.D.W.Va. 2012).
While preserved evidence may or may not change the outcome of a case, the importance of preserving evidence to satisfy a party’s obligations to the court cannot be understated. If counsel has been retained to assist with a dispute, they should be informed of any efforts that have been made to preserve evidence and consulted early on about issuing and maintaining an effective litigation hold. An operator — and any other party for that matter — would much rather stand or fall on the merits of its claim rather than find itself in a losing position before it has even had a chance to present its side of the case.
Meredith A. Kapushion is an associate in Jackson Kelly PLLC’s Denver office, where she works with the firm’s Occupational Safety and Health Practice Group. She can be reached at 303-390-0520 or via email at firstname.lastname@example.org.