Judge Scheindlin Amends Pension Committee: Clarifying the Bar for Negligence, Sort Of…
Complete Discovery Source, Inc.
Matthew F. Knouff
New York, NY – June 1, 2010 – On May 28th Judge Scheindlin amended her recent opinion in Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities, LLC, et al. for a second time:
At page 10, lines 7-10 replace [By contrast, the failure to obtain records from all employees (some of whom may have had only a passing encounter with the issued in the litigation), as opposed to key players, likely constitutes negligence as opposed to a higher degree of culpability.] with [By contrast, the failure to obtain records from all those employees who had any involvement with the issues raised in the litigation or anticipated litigation, as opposed to key players, could constitute negligence.]1
With these changes, Scheindlin attempts to clarify the measures that litigants must take to satisfy their preservation obligations and conduct defensible collections efforts. By changing “all employees” to “all those employees who had any involvement with the issues,” Scheindlin reigns in what could easily be construed as an overly broad standard for avoiding negligence claims.
Scheindlin also addresses the standard of negligence under Pension Committee by changing the word “likely” to “could”. The importance of this change is that conduct that once swayed toward an assumption that negligence took place, will now fall into a more central position on the scales of culpability.
It is important that parties keep in mind that rulings made pursuant to the standard set forth in Pension Committee are still very fact specific. Definitive best practices have yet to be etched in marble. Essentially, the status quo remains: you must always act in a reasonable manner, make informed proportionality determinations, document your processes and, when in doubt, preserve and collect.
For the full text of the Amended Order click HERE
1 Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities, LLC, et al., Case No. 05 Civ. 9016 (S.D.N.Y. January 15, 2010)
Avoiding Discovery Related Sanctions: Pension Committee and the Shadow of Zubulake
Complete Discovery Source, Inc.
Matthew F. Knouff
New York, NY – February 10, 2010 – At a time when both eDiscovery best-practices and sanctions abound, the recent decision in Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities, LLC, et al., Case No. 05 Civ. 9016 (S.D.N.Y. January 15, 2010) offers practical guidance for the preservation and collection of potentially relevant data upon reasonable anticipation of litigation.
Background Summary & Holding
In Pension Committee a group of 96 investors brought an action to recover approximately $550 million lost from the liquidation of two hedge funds based in the VIrgin Islands: Lancer Offshore, Inc. and OmniFund Ltd. During discovery, certain defendants claimed that substantial gaps were present in the plaintiffs’ document productions. This led to discovery-related declarations and depositions. Following this process, these defendants moved for sanctions claiming that each plaintiff failed to satisfy their preservation and production obligations. The defendants claimed that these failure were compounded by plaintiffs also submitting false claims regarding their methods of collection and preservation.
Judge Shira A. Scheindlin, echoing her discussion in Zubulake six years earlier, underscored the importance of the preservation obligation to the “integrity of the judicial process”. Pension Committee at 2. Judge Scheindlin went on to highlight that the duty of preservation has been well established, stating “by now it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records – paper or electronic – and to search in the right places for those records, will inevitably result in the spoliation of evidence”. Id. At 2.
Judge Scheindlin ultimately held that 13 of the 96 plaintiffs “were either negligent or grossly negligent in meeting their discovery obligations” and that “sanctions are required”. Id. at 5. After a lengthy opinion itemizing the behavior of each of the 13 plaintiffs, the Court issued various sanctions including adverse instructions, further discovery, and monetary awards.
Four Highlights & Lessons Learned
1. Plaintiffs Must Be Aware of Their Preservation Obligations. Often times we are focused on the defendant satisfying their discovery obligations in litigation. In Pension Committee the court ordered sanctions against the plaintiffs in the case noting that, since plaintiff’s control the time at which an action commences, their reservation duties are often triggered prior to litigation.
2. The Test for Shifting the Burden of Proof. For sanctions on the lesser end of the severity spectrum the focus is “more on the conduct of the spoliating party than on whether documents where lost, and, if so, whether those documents were relevant and resulted in prejudice to the to the innocent party”. Id. at 14. In order for the Court to consider more severe sanctions the innocent party must show that the spoliating party:
a. had control over the evidence and an obligation to preserve it at the time of destruction or loss;
b. acted with a culpable state of mind upon destroying or losing the evidence, and that
c. the missing evidence is relevant to the innocent party’s claim or defense. Id at 15.
When the spoliating party has acted in bad faith or in a grossly negligent manner, both relevance and prejudice may be presumed. However, when the spoliating party’s conduct constitutes mere negligence, the burden shifts to the innocent party to prove relevance and prejudice to warrant severe sanctions. There are obvious difficulties for an innocent party in trying to prove that certain unavailable documents are, in fact, relevant. This seemingly daunting burden must be tempered by the fact that “if a presumption of relevance and prejudice were awarded to every party who can show that an adversary failed to produce any document, even if such failure is completely inadvertent, the incentive to find such error and capitalize on it would be overwhelming. This would not be a good thing.” Id. at 18.
Judge Scheindlin went on to use the following burden shifting test: Once the innocent party proves that the spoliating party acted in bad faith or in a grossly negligent manner such that prejudice can be presumed the burden shifts to the spoliating party to rebut the presumption. If the spoliating party is successful in rebutting the presumption then “no jury instruction would be warranted, although a lesser sanction might still be required.” Id.
3. Intent is Not a Factor When Evaluating the Standard of Acceptable Conduct in Discovery. Parties to litigation can suffer discovery-related sanctions as a result of conduct that is both negligent and grossly negligent, in additional to willful conduct. The degree to which a party acted negligently is evaluated on a case-by-case basis based on the “totality of the circumstances”. Id. at 66.
4. Certain Behavior Constitutes Gross Negligence. Highlighting the Zubulake opinions, and noting that “standards have been set by years of judicial decisions” [Id at. 7] the court evaluated the conduct of each of the plaintiffs and determined certain acts that constituted gross negligence:
a. The failure to issue a written legal hold;
b. The failure to identify key players and preserve and collect their documents;
c. The failure to cease the deletion of emails or other routine destruction of data;
d. The failure to collect records from current employees as well as those of former employees in the party’s possession;
e. The failure to segregate and preserve backup tapes that are the sole source of relevant data.
Concepts and Practical Techniques to Consider
1. Understand When Your Duty to Preserve is Triggered. It isn’t necessary for either a complaint to have been filed, or that a request for discovery be made for the duty to preserve to attach. The duty attaches at the time that litigation is reasonably anticipated.
2. Form a Cross-Functional Litigation Response Team. In order to make sure that your approach to a particular matter is a comprehensive as possible you should develop a team to craft a concerted response to litigation. This team will involve members of your client’s general counsel office, attorneys from your firm, corporate IT personnel, and potentially, outside consultants and/or vendors. This team will be responsible for:
a. assessing the current techniques used to respond to litigation;
b. fully understand the information ecosystem of the client, including how data is backed-up and stored;
c. determine how best to meet legal obligations;
d. understanding and controlling the costs of discovery;
e. building upon existing methodologies to ensure that discovery is carrying out in a defensible manner, this will include overseeing all aspects of the litigation hold.
3. Issue an Effective Litigation Hold. Once you have established that a duty to preserve exists you need to issue an effective litigation hold. Such a hold will:
a. Identify those who are likely to have relevant information;
b. communicates the hold to those identified individuals;
c. is written;
d. defines what data needs to be preserved;
e. is frequently reviewed and reissued if necessary.
Many of these issues can be addressed with opposing counsel early on during the 26(f) pretrial conference to avoid costly mistakes later down the road.
4. Ensure that all Preservation and Collection Efforts are Tracked Properly and Monitored by Qualified Individuals. One of the major issues in Pension Plan was that the plaintiff’s submitted false and misleading declarations once their discovery efforts were challenged. You must meet with your client as soon as possible to ensure that discovery efforts are being carried out by those with sufficient technological expertise. In addition, as counsel, you want to make sure that you implement, monitor, supplement, and quality control all the preservation and collection of potentially relevant data to ensure defensible practices.
Matthew Knouff is an eDiscovery Attorney and Litigation Best Practices Consultant with Complete Discovery Source. He serves as a subject matter expert and advises clients on eDiscovery best-practices and defensible techniques. Matthew has been a practicing attorney for over 5 years with expertise in eDiscovery, IP, and Litigation. An avid participant in the New York legal community, Matthew currently serves as the Chairman of the New York County Lawyers’ Association Sub-Committee on eDiscovery. Matthew holds a B.A. in both History and Communications from The University of North Carolina at Chapel Hill as well as a J.D. from The University of North Carolina School of Law.
back to newsComplete Document Source (CDS) Opens New Office in Times Square - New York, NY
New York, NY - September 23, 2009 - Complete Document Source, one of the fastest growing providers of eDiscovery and litigation support services, today announced it has opened an additional Midtown, New York location. This strategic location, the expansion of their in-house processing/hosting capacity, and the addition of several new project managers, customer service representatives, and other staff will allow CDS to better serve local, regional, and global clients.
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The new 8000 sq/ft location adds to CDS’ existing biometrically secured 20,000 sq/ft processing/hosting facility at 345 Park Avenue, New York, NY, offering increased capacity on the company’s multiple EMC storage devices. The Premium Relativity Partner/Clearwell Gold Partner will continue to leverage the new space by adding additional top-tier project managers to their team throughout 2009.
CDS’ new office is located at 115 W. 45th Street, New York, NY.
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