Don’t Erase That File!

Deleting Information from a Computer Can Have Serious Consequences

Last week’s decision by the Ninth Circuit in Leon v. IDX Systems Corporation is interesting for several reasons. After an employee made a complaint about a violation of the Sarbanes-Oxley Act, the employer placed the employee on an unpaid leave. The employer then brought an action for declaratory relief, seeking to establish that it could terminate the employee without violating the law. This is an interesting move because most employers wait to be sued, and then defend the action on the merits. Instead, IDX took the initiative and sought a court ruling regarding the legality of terminating the employee.

Leon v. IDX Systems Corporation is most notable for the severe sanctions imposed against the employee because the employee deleted information from a company-provided laptop and created a program to erase any trace of the deleted information. While on leave, IDX asked Leon to return the company-owned laptop. Leon asked to retain the laptop pending the investigation into Leon’s Sarbanes-Oxley complaint. IDX allowed Leon to retain the laptop, but warned him to “ensure no data on the laptop is lost or corrupted so as to avoid any possible depsoliation of evidence.” After receiving permission to retain the laptop, Leon initiated a whistleblower and discrimination suit against IDX.

When IDX finally received the laptop, a forensic analysis revealed that more than 2,200 files had been deleted. IDX moved for dismissal of Leon’s claims based on his spoliation of evidence and sought sanctions for the destruction of evidence. In an evidentiary hearing, Leon admitted he deleted “personal” files and created a software program that prevented recovery of the deleted files.

The court deemed Leon’s conduct “very egregious” and dismissed Leon’s action. Relying on the court’s inherent powers, it sanctioned Leon $65,000.00: the cost of pursuing the spoliation claim. The Ninth Circuit upheld the lower court’s decision stating “A party’s destruction of evidence qualifies as willful spoliation if the party has ‘some notice that the documents were potentially relevant ot the litigation before they were destroyed.’”

Leon stands as a warning to employees and employers: Do not destroy or delete files when there is a potential for litigation. More than ever, employers should establish and follow a proper document retention policy.

The Law Office of Phillip J. Griego
95 South Market Street, Suite 520
San Jose, CA 95113
Tel. 408-293-6341
 
Original article by Robert E. Nuddleman, former associate of The Law Office of Phillip J. Griego.
 

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