Diamond Post

Preserve Relevant Records - Don't Say You Haven't Been Warned

Shira Scheindlin, U.S. District Judge for the Southern District of New York, became famous in legal circles for the seminal electronic discovery opinions she authored in Zubulake v. UBS Warburg.  The Zubulake opinions sought to define the parameters of what electronic information is discoverable in litigation, and set the precedent for stiff monetary and procedural sanctions

for parties who failed top reserve

appropriate electronically stored information. 

 

Six years later, Judge Scheindlin has reinforced Zubulake in Pension Committee of University of Montreal Pension Plan v. Banc of America Securities, LLC, --- F.Supp.2d ---, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010), an opinion she titled "Zubulake Revisited: Six Years Later."  She took the opportunity Pension Committee presented to revisit Zubulake's central themes, which she stated from the outset should be self-evident six years later.  While Judge Scheindlin acknowledged "Courts cannot and do not expect that any party can meet a standard of perfection" in the complex world of electronic discovery, she stated "[b]y now, it should be abundantly clear that the duty to preserve records-paper or electronic-and to search in the right places for those records, will inevitably result in the spoliation of evidence."  Unsaid, but implicit in that sentence, is that spoliation leads to monetary and procedural sanctions against the offending party.

 

The opinion itself is extensive, focusing largely on case-specific facts and details. In short, however, Judge Scheindlin found that "plaintiffs failed to timely institute written litigation holds and engaged in careless and indifferent collection efforts after the duty to preserve arose."  Under the "abundantly clear" standard of Zubulake, it logically followed that she sanctioned the plaintiffs, granting the moving defendants "reasonable costs and attorneys' fees."  In addition, she charged the jury on spoliation, allowing the jury to presume the lost evidence was relevant and would have been favorable to the defendants.  Cautioning against rote application of her holding to any case, however, she noted "at the end of the day the judgment call of whether to award sanctions is inherently subjective. A court has a "gut reaction"...as to whether a litigant has complied with its discovery obligations and how hard it worked to comply."  Despite this admonition, Judge Scheindlin illuminated a specific analytical framework to govern future electronic discovery disputes.

 

Having determined documents were lost or destroyed, Judge Scheindlin set forth a four-step analysis for whether she would impose sanctions, and what the sanctions would be.  First, she analyzed the plaintiff's level of culpability in every phase of discovery: were they negligent, grossly negligent or willful in failing to preserve documents? Second, she looked at the interplay between the duty to preserve and the spoliation of evidence.  Third, she developed a burden-shifting paradigm when a party's failure to preserve documents is particularly egregious.  Fourth, she determined the remedy in light of the harm caused.

 

While the framework she set forth is significant and useful in predicting courts' behavior in refereeing electronic discovery disputes, what is most striking is her delineation of what is, in her estimation, de facto gross negligence.  She began by stating what should be obvious: intentional destruction of relevant records, emails, or backup tapes after the duty to preserve has attached is willful, and therefore subject to a stiff sanction up to and including dismissal. She then set forth a laundry list of other failures she found constituted gross negligence, which she defined as failure to use that care which even a careless person would use, once the duty to preserve attached.  Her list of actions that were grossly negligent included failure: to identify key players and preserve and collect their records; to issue a written litigation hold; to cease deletion of email; to preserve records of former employees; and to preserve backup tapes that are the sole source of relevant information. 

 

In addition to this list of grossly negligent actions, Judge Scheindlin also noted actions that were merely negligent.  As a starting premise Judge Scheindlin held that a failure to preserve evidence resulting in the loss of relevant information "is surely negligent..." Judge Scheindlin specifically identified as negligent the failure to obtain records from all employees (some of whom may have had only a passing encounter with the issues in the litigation), failure to take all appropriate measures to preserve electronically stored information and failure to assess the accuracy and validity of selected search terms. Of course, even simple negligence could carry sanctions under the Judge's analytical framework.

 

What emerges from "Zubulake Revisited," then, is a check list of activities companies and their attorneys should likely undertake once the duty to preserve documents attaches; i.e. once litigation is reasonably anticipated. First, litigation holds are mandatory. The hold should include a mandate to immediately suspend all routine document destruction practices. Second, identify and preserve records from all employees (including key employees) who may have even had a passing encounter with the issues in the litigation. Third, take all appropriate steps to preserve sources of electronically stored information.  All of these steps have been part of the electronic discovery checklist, or should have been part of that checklist, for at least six years.  But, just in case there was any lingering doubt, Judge Scheindlin has concretely set it aside.

 

While Pension Committee is not law in every jurisdiction, Judge Scheindlin's opinions have historically been carefully considered by most federal courts and are instructive as guidelines for electronic discovery disputes. Since this opinion unequivocally mandates that failure to preserve relevant evidence is negligence and may rise to grossly negligent or willful conduct, businesses should work proactively with their counsel to check off each of the above steps, at a minimum, to avoid monetary and procedural sanctions.

 

Getting Ahead of the eDiscovery Curve

GWB Shareholder Chris Kelly attended the Fourth Annual Sedona Conference Institute Program on Getting Ahead of the eDiscovery Curve in Philadelphia, PA from March 25-26, 2010.  GWB is committed to insuring that its lawyers are involved in tracking and assessing the development of the law in the fields in which they concentrate and continuing education is a vital component of that process.  The Sedona Conference organizers did a fantastic job with informative sessions ranging from a case law update, discussions on how to achieve proportional discovery, negotiating reasonable search protocols, best practices in preservation and a panel that explored the in-house counsel perspective.  The materials from this conference will be a valuable resource for GWB as it looks to better serve its clients.