Recent Decision Defines Standards of Care for Preserving Electronically Stored Information
The above quote from U.S. District Judge Shira Scheindlin’s decision in Pension Committee of the University of Montreal Pension Plan et al. v. Banc of America Securities LLC 1 is a warning to all parties involved in litigation and their counsel. The decision will provide a reference point for evaluating whether parties were reasonable in the steps they took to preserve evidence at the onset of litigation. Lawyers, compliance officers and litigation decision makers must understand the implications of this ruling. Judge Scheindlin states ignorance is not an excuse for negligent loss of data.
Key take-away points
First, a party should issue written instructions to preserve documents and electronically stored information as soon as it anticipates litigation. Second, the individuals accountable for implementing the litigation hold should have sufficient personal knowledge of the technical processes to determine whether they are appropriate, and truly likely, to capture all relevant information.
Significance of Pension Committee
Judge Scheindlin is the author of the standard-setting Zubulake decisions2 that established and defined the duty to preserve electronically stored information. In the Pension Committee decision she expands on the electronic discovery case law that has developed in the past five years, and sets out in detail the legal requirements for findings of different levels of culpability for spoliation.
What happened – the facts and the decision
Pension Committee involves the claims of securities fraud by multiple investors against a group of funds. Judge Scheindlin found that many of the plaintiffs had been aware of the likelihood of litigation, yet failed to issue written litigation holds or take practical steps to preserve documents, and failed to produce numerous relevant documents. This was not a case where the parties were accused of misconduct, but merely carelessness. However, the court found that the plaintiffs had been grossly negligent in failing to implement preservation procedures correctly, and e-mail had actually been deleted and lost. Circumstances warranted a finding that the lost documents would have been relevant.
Judge Scheindlin outlines the standards for finding negligence, gross negligence and willfulness, as those terms are used with respect to spoliation of evidence. She also discusses, both generally and specifically with respect to the actions of the plaintiffs, what conduct falls in each of these categories. She follows with a survey of the law regarding imposition of discovery sanctions, including several key recent electronic discovery decisions.
The judge found that several of the plaintiffs had not issued written preservation instructions until well after the litigation had commenced. Also, the processes that the plaintiffs followed to collect documents were inconsistent and unreliable, resulting in failure to identify and collect relevant e-mail. Some of these failures were a result of allowing business people to decide individually what information might be relevant, and some resulted from the data collection being overseen by people who had little knowledge of the parties' IT infrastructure or the steps necessary for proper collection.
Ultimately a number of plaintiffs were sanctioned for spoliation in the form of a jury instruction stating, "I instruct you, as a matter of law, that each of these plaintiffs failed to preserve evidence after its duty to preserve arose. This failure resulted from their gross negligence in performing their discovery obligations. As a result, you may presume, if you so choose, that such lost evidence was relevant, and that it would have been favorable to the Citco Defendants. In deciding whether to adopt this presumption, you may take into account the egregiousness of the plaintiffs' conduct in failing to preserve the evidence."
The opinion begins, "Courts cannot and do not expect that any party can meet a standard of perfection,” but concludes, "While litigants are not required to execute document productions with absolute precision, at a minimum they must act diligently and search thoroughly at the time they reasonably anticipate litigation. All of the plaintiffs in this motion failed to do so and have been sanctioned accordingly."
Pension Committee states that "diligence" and "thoroughness" involve certain objective standards of conduct and even unintentional deviations from those standards may cause a court to impose sanctions.
1 Amended Opinion and Order January 15, 2010, Case No. 05 Civ. 9016 (SAS), 2010 WL 184312 (S.D.N.Y).
2 See Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (“Zubulake I”); 220 F.R.D. 212 (S.D.N.Y. 2003) (“Zubulake IV”) (ordering sanctions against UBS for violating its duty to preserve evidence); 229 F.R.D. 422 (S.D.N.Y. 2004) (“Zubulake V”) (discussing implementation of the duty to preserve).