The new decade has begun with conflicting and complementary opinions from Judge Rosenthal of Texas and Judge Scheindlin of New York. These opinions, penned by United States District Court judges, will frame the behavior and motion practice around federal e-discovery sanctions into the near future.
Before the ink was dry on Judge Scheindlin’s groundbreaking “no written legal hold = gross negligence” opinion in The Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities, et al., 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) (Amended Order), subtitled “Zubulake Revisited: Six Years Later,” Judge Rosenthal, in Rimkus v. Cammarata, 07-cv-00405 (S.D. Tex. Feb. 19, 2010) drew careful lines around the court’s inherent power to sanction, even in the face of bad faith, and introduced the concept of preservation proportionality. Both opinions are available at the end of this article.
Both judges left it to the jury to determine whether to consider lost/destroyed evidence as being detrimental to the alleged spoliator. It is their analysis that causes Craig Ball to sound like Paul Revere , John Jablonski to describe the opinions in prizefighting metaphors and Ralph Losey to allude repeatedly to pole vaulting to underscore the extent to which the bar has been raised.
Judge Scheindlin put forth the following framework to determine whether sanctions attach:
The question, then, is whether plaintiffs’ conduct requires this Court to impose a sanction for the spoliation of evidence. To answer this question, there are several concepts that must be carefully reviewed and analyzed. The first is plaintiffs’ level of culpability – that is, was their conduct of discovery acceptable or was it negligent, grossly negligent, or willful. The second is the interplay between the duty to preserve evidence and the spoliation of evidence. The third is which party should bear the burden of proving that evidence has been lost or destroyed and the consequences resulting from that loss. And the fourth is the appropriate remedy for the harm caused by the spoliation.
In short, the innocent party must prove the following three elements: that the spoliating party (1) had control over the evidence and an obligation to preserve it at the time of destruction or loss; (2) acted with a culpable state of mind upon destroying or losing the evidence; and that (3) the missing evidence is relevant to the innocent party’s claim or defense.
Relevance and prejudice may be presumed when the spoliating party acted in bad faith or in a grossly negligent manner….
Per Judge Scheindlin, the court should…
…always impose the least harsh sanction that can provide an adequate remedy. The choices include – from least harsh to most harsh – further discovery, cost-shifting, fines, special jury instructions, preclusion, and the entry of default judgment or dismissal (terminating sanctions). The selection of the appropriate remedy is a delicate matter requiring a great deal of time and attention by a court.
Judge Scheindlin provides guidance for proactive practice in monitoring preservation reminiscent of In re Intel Corp. Microprocessor Antitrust Litig., 2008 WL 2310288 (D. Del. June 4, 2008), although in that case Intel lost their privilege due to counsel’s assertions, not as a fait accompli. Judge Scheindlin indicates topics “reasonably within the scope of inquiry” are:
Which files were searched, how the search was conducted, who was asked to search, what they were told, and the extent of any supervision.
Judge Scheindlin highlights the need for litigants to issue written legal hold notices or face “gross negligence” consequences for spoliation purposes in her court. In addition to the judge’s mandate of a written legal hold, Craig Ball notices that the:
…written hold notice had better be a strong, unambiguous directive to find, preserve and collect, coupled with close supervision of the effort. Total reliance on an employee to search and select won’t cut it in Judge Scheindlin’s court.
Many recent sanctions cases revolved around the “honor system” of employee self-collection or the practice of preserving in place. This case will revive the older practice of preemptive collections for preservation purposes, with a data reduction exercise before review.
The Pension Committee opinion drew gasps of horror from those reading it when it was first published because Judge Scheindlin mandated saving backup tapes for key custodians, something the 2006 Amendments to the FRCP and more sophisticated practice had relegated to the scrap heap of “overdoing it.” Within hours, she issued a corrected opinion, provided as breaking news on EDD Update, clarifying that tapes were to be kept for key custodians when the data was not obtainable from “readily accessible sources” and the tapes were the sole source of the key custodian data, and when it has been shown that relevant material existed and was not produced or should have existed and was not produced.
This correction opinion is very interesting to read in its entirety as it backs off the tape issue; it also modifies the “gotcha game” line with some burden-of-proof shifting. Judge Scheindlin also softens a firm line around attorney supervision of collection and search, allowing a case-by-case determination, but laying the groundwork for examining the oversight of the process in light of the ability to review it, sample it or spot-check the “collection efforts.”
One can only imagine that the e-discovery community provided Judge Scheindlin and her overworked staff with feedback. It is an unusual example of collaboration from a sitting judge that she reworked her opinion to reduce the burden of her opinion.
Judge Scheindlin also defines various e-discovery failings as gross negligence or simple negligence.
Thus, after the final relevant Zubulake opinion in July, 2004, the following failures support a finding of gross negligence, when the duty to preserve has attached: to issue a written litigation hold, to identify the key players and to ensure that their electronic and paper records are preserved, to cease the deletion of email or to preserve the records of former employees that are in a party’s possession, custody, or control, and to preserve backup 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.
Judge Rosenthal’s opinion in Rimkus, described as a victory for the corporate bar, is a hollow victory, in my opinion. Finding that evidence was proffered on both sides of the prejudice issue and the culpability issue, Judge Rosenthal declined the harshest sanction in favor of the same sanction Judge Scheindlin ordered. The jury instruction was simplified in the Rosenthal court, bypassing the technically elegant but lengthy and confusing burden-shifting and presumption-overcoming offered by Judge Scheindlin. Rosenthal put it in plain language:
…the jury will not be instructed that the defendants engaged in intentional misconduct. Instead, the instruction will ask the jury to decide whether the defendants intentionally deleted emails and attachments to prevent their use in litigation. If the jury finds such misconduct, the jury must then decide, considering all the evidence, whether to infer that the lost information would have been unfavorable to the defendants. Rather than instruct the jury on the rebuttable presumption steps, it is sufficient to present the ultimate issue: whether, if the jury has found bad-faith destruction, the jury will then decide to draw the inference that the lost information would have been unfavorable to the defendants.
Judge Scheindlin believes that gross negligence can exist with a pure heart and an empty mind. As noted by Jablonski, Judge Rosenthal also believes that absent clear evidence of “bad faith” a party should not be subject to harsh sanctions:
…The circuit differences in the level of culpability necessary for an adverse inference instruction limit the applicability of the Pension Committee approach. And to the extent sanctions are based on inherent power, the Supreme Court’s decision in Chambers may also require a degree of culpability greater than negligence.
Judge Rosenthal introduces the concept of proportionality to preservation and discovery conduct. See The Sedona Conference® publication on preservation of not reasonably accessible information. Rimkus is the first judicial notice of preservation proportionality of which I am aware.
In his own commentary on Judge Rosenthal’s opinion, Jablonski cites this excerpt, highlighting in bold type the key passage about proportionality:
These general rules are not controversial. But applying them to determine when a duty to preserve arises in a particular case and the extent of that duty requires careful analysis of the specific facts and circumstances. It can be difficult to draw bright-line distinctions between acceptable and unacceptable conduct in preserving information and in conducting discovery, either prospectively or with the benefit (and distortion) of hindsight. Whether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done–or not done–was proportional to that case and consistent with clearly established applicable standards. As Judge Scheindlin pointed out in Pension Committee, that analysis depends heavily on the facts and circumstances of each case and cannot be reduced to a generalized checklist of what is acceptable or unacceptable.
Judge Rosenthal is no pushover when it comes to delineating conduct. In fact, she rivals Magistrate Judge Barbara Major of Qualcomm fame in setting forth a bill of particulars. Rosenthal notices, for example, that a native email had attachments while the non-native version made no mention of them and that only one side of a double-sided sheet of paper was produced.
What’s the impact of all of cases to date?
- Plaintiffs are on notice to preserve quickly or face adverse inference sanctions.
- The Southern District of New York, where many of the financial crisis cases will be heard, will expect foreign plaintiffs to meet preservation obligations.
- When similar litigation or litigation with the same parties occurs, the preservation obligation can spill over to subsequent litigation.
- To avoid motion practice, corners should not be cut when validating preservation, collection, reduction and production.
- Insurance coverage for litigation should be reviewed in light of the new negligence and gross negligence standards articulated by both judges.
- Legal holds and collection documentation should be court-consumable (facts rather than opinions or strategy).
- The 2010 Conference on Civil Litigation on May 10–11, 2010, at the Duke University School of Law will be quite lively, as both jurists are on panels.
Full text of the opinions is available via the following links from our friends (with many thanks):