|
 | |
| |
Federal Judge Spells Out Electronic Discovery Failings that Warrant Sanctions
|
|
|
|
|
|
April 19, 2010
By John Foust
More than six years ago, a federal judge handed down a series of influential opinions that outlined the parameters of litigants’ obligation to preserve and collect electronically-stored evidence. The case was called Zubulake v. USB Warburg. 1/ The opinions – which became something of a watershed in the evolution of electronic discovery law – held, among other things, that litigants must take appropriate measures to preserve electronically stored evidence or risk serious sanctions for spoliation of evidence.
Now, the judge who wrote the opinions in the Zubulake case has issued an opinion ordering sanctions against 13 parties for conduct that ranged from negligence to gross negligence. The judge titled her opinion “Zubulake Revisited: Six Years Later.” 2/
The new case involved a group of investors in a British Virgin Islands hedge fund that brought an action against the fund administrators to recover claimed losses of $550 million. During document discovery, defendant Citco Fund Services noticed substantial gaps in the documents produced by the plaintiffs, including gaps in electronic documents such as e-mail. The court ordered each of the plaintiffs to provide written declarations describing their efforts to preserve and produce documents.
After reviewing the written declarations, the court determined that all 13 plaintiffs were negligent in preserving and collecting electronically-stored evidence and that this negligence had led to the loss or destruction (i.e., spoliation) of relevant evidence. Accordingly, the court imposed monetary sanctions on all 13 plaintiffs.
In addition, the court found that 6 of the 13 plaintiffs were not merely negligent but were grossly negligent in failing to satisfy their electronic discovery obligations. The court issued a harsh sanction against these plaintiffs in the form of a jury charge that informed the jurors of the plaintiffs’ discovery abuses and invited the jurors to presume that any missing evidence would have been adverse to the grossly negligent plaintiffs.
By far the most instructive part of the 87-page opinion is the court’s discussion of the types of conduct that can amount to negligence and gross negligence once the duty to preserve has attached. The court explained that the duty to preserve attaches “when a party reasonably anticipates litigation,” which often is before litigation commences, particularly in the case of plaintiffs that have some control over the timing of litigation. Once the duty to preserve has attached, the following failures support the finding of gross negligence (at least before this judge and possibly others):
|  | Failure to issue a written litigation hold.
|
| | Failure “to identify all of the key players and to ensure that their electronic and paper records are preserved.”
|
| | Failure “to cease the deletion of e-mail and collect information from the files of former employees that are in a party’s possession, custody, or control.”
|
| | Failure “to preserve back-up tapes when they are the sole source of relevant information or when they relate to key players if the relevant information maintained by those players is not obtainable from readily accessible sources.” 3/
|
The court also identified certain discovery failures that were negligent but did not rise to the level of gross negligence. These lesser failures, which warranted less harsh penalties, such as momentary sanctions, included:
| | Failure to obtain records from employees who had some involvement with the issues in the litigation but who were not key players.
|
| | Failure to properly assess the accuracy and validity of search terms used to electronically search for relevant files and emails.
|
| | Failure to effectively supervise and oversee the preservation and production of evidence resulting in inadequate preservation.
|
It is unclear whether the new opinion will have the kind of far-reaching influence that the Zubulake opinions have had and whether it will be followed by courts outside the Southern District of New York. It is equally unclear whether the guidelines set forth in the opinion will prove to be practical in the real world of electronic discovery practice.
What is clear is that this opinion serves as a warning that litigants must take their duty to preserve and collect electronically-stored evidence seriously. Thus, questions about when to issue a written discovery hold and when to preserve back-up data should be addressed early to avoid the risk of serious sanctions later.
If you would like to receive legal reports and updates by e-mail, click here and fill out the mailing list form. If you would like to subscribe to our RSS feeds or learn more about RSS, click here.
ENDNOTES
| 1/ | Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309 (S.D.N.Y. 2003); 216 F.R.D. 280 (S.D.N.Y. 2003); 220 F.R.D. 212 (S.D.N.Y. 2003); 229 F.R.D. 422 (S.D.N.Y. 2003); 2004 WL 1620866 (S.D.N.Y. July 20, 2004).
|
| 2/ | The Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 2010 WL 184312 (S.D.N.Y., Jan. 11, 2010, modified on Jan. 14, 2010).
|
| 3/ | This part of the opinion was modified by the court four days after the initial opinion was issued. The initial opinion suggested that parties were required to preserve all back-up tapes relating to key players even when the information stored on the tapes was more readily available from other sources. (See, Opinion and Order, Jan. 15, 2010.)
|
©2010 ConstructionWebLinks, Inc.
|
|
|
