In the last installment of this six-part series, we discussed the circumstances under which a court might find that there are sufficient “indicia of control” to warrant requiring the company to preserve and produce documents in the possession of a third party. This segment explores ways to minimize the company’s discovery obligations when the business units have outsourced certain functions to third party vendors or consultants.
When engaging a vendor or consultant it is worth thinking — at least in passing — about the risk of litigation and to what extent the company will be required to preserve and potentially produce documents in the hands of the third party. The following precautions may, together or in isolation, reduce the chance that a court will find sufficient indicia present to conclude that the company is “in control” of the third party’s documents. Of course, depending on the jurisdiction and the judge, none of these suggestions is foolproof.
Define the third party’s role narrowly
In the same vein, you want to avoid the appearance that the third party’s status is that of a “de facto employee” in light of his or her role at the company. This can be avoided by defining the third party’s role very narrowly either in the agreement itself or in practice. Note, however, that doing so might prevent the company from taking advantage of favorable precedent regarding the attorney client privilege. In In re Copper Market Antitrust Litig., the U.S. District Court for the Southern District of New York ruled that communications with third party public relations firm was privileged where the PR consultant was the“[f]unctional equivalent of an employee.”