V&E Electronic Discovery Update E-communication, February 15, 2010
By Erica Krennerich and Jessica Mederson
In The Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010), Judge Shira Scheindlin, author of the original landmark Zubulake opinions, addressed the proper framework for assessing a party’s failure to properly preserve and collect documents when no “egregious examples” of destruction of evidence occurred. To the contrary, as Judge Scheindlin noted, this case involved the “failure to timely institute written litigation holds” and “careless and indifferent collection efforts after the duty to preserve arose.” The court found there was little doubt that those failures caused some documents to be lost or destroyed and, therefore, sanctions were appropriate.
Although acknowledging that perfection is neither possible nor expected, Judge Scheindlin declared that “courts have a right to expect that litigants and counsel will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated, and that such records are collected, reviewed, and produced to the opposing party.” Failure to do so harms “the integrity of the judicial process” and “the courts are required to fashion a remedy.”
Judge Scheindlin advised that courts conduct a four-step inquiry before imposing a remedy for failure to adequately preserve and collect documents: - Analyze the level of culpability (e.g., negligence, gross negligence, or willful misconduct);
- Determine that the failure to preserve evidence justifies a sanction;
- Decide which party should bear the burden of proving that evidence has been lost or destroyed and the consequences arising from that loss; and
- Fashion an appropriate remedy for the harm caused by the spoliation.
Assess the Spoliating Party’s Level of Culpability
Different levels of potential culpability exist for discovery failures — negligence, gross negligence, and willful conduct. Most notably, the court stressed that a party may be negligent even if it has a “pure heart, empty head.” In other words, ignorance — of the law, of the client’s IT systems, of the processes and procedures used by the client’s IT group or discovery vendor during collection, processing, review, and production — is not a defense to negligence in the discovery context. To that end, a failure to preserve evidence resulting in the loss or destruction of relevant information is — at a minimum — negligent since there are several clearly established guidelines regarding parties’ discovery obligations. For example, gross negligence exists, by definition, when a party fails to issue a written litigation hold, “because that failure is likely to result in the destruction of relevant information.” Moreover, willfulness exists when an intentional destruction of relevant records occurs after the duty to preserve has attached.
In the context of collecting and reviewing documents, failing to collect records from all relevant employees is likely negligent. Failure to collect documents from key players, however, will typically constitute gross negligence or willful conduct — as will the failure to collect information from the files of former employees that remain in a party’s possession, custody, or control after the duty to preserve arises.Yet the failure to assess the accuracy and validity of selected search terms constitutes negligence, not gross negligence. In short, the court refused to apply any rigid test, noting that “[e]ach case turns on its own facts and the varieties of efforts and failures is infinite.”
Violation of the Duty to Preserve Relevant Evidence Justifies Spoliation Sanctions
The duty to preserve evidence arises when a party reasonably anticipates litigation. Accordingly, once that reasonable anticipation exists, a party must suspend its routine document retention/destruction policies and institute a litigation hold to ensure the preservation of relevant documents. A plaintiff’s duty to preserve will often be triggered before litigation commences because plaintiffs control the timing of litigation. Breaching the duty to preserve, and the resulting spoliation of evidence, justifies the imposition of sanctions to ensure that the judicial process is not compromised or abused.
Evaluate the Burden of Proof
The third prong of Judge Scheindlin’s analytical framework involves evaluating what burden of proof attaches when documents that should have been preserved are no longer available. Here, the court considered two related questions: (1) who should bear the burden of establishing the relevance of lost evidence; and (2) who should be required to prove that the missing material prejudiced the innocent party. The court decided that the burden of proof depends on the severity of the sanction to be imposed. For less severe sanctions (e.g., fines, cost-shifting), the inquiry should focus on the conduct of the spoliating party rather than on the issue of whether documents were lost and, if so, the relevance and prejudicial nature of the lost documents. For more severe sanctions (e.g., dismissal, adverse inferences), both the conduct of the spoliating party and the relevance/prejudicial nature of the lost documents must be considered.
Proof of relevance or the “responsiveness to a document request,” however, does not necessarily equal proof of prejudice. To show prejudice, the innocent party must show that “the evidence would have been helpful in proving its claims or defenses.” In short, the innocent party must show that the spoliating party (1) had control over the evidence and an obligation to preserve it at the time it was destroyed or lost; (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.
If the spoliating party was grossly negligent or willful in destroying the evidence at issue, relevance and prejudice may be presumed. When a party was only negligent, however, the innocent party must prove both relevance and prejudice before a severe sanction may be imposed. To do so, the innocent party must present extrinsic evidence that tends to show the destroyed documents would have been favorable to its case.
Regardless of the culpability found, the court noted that any presumption is rebuttable and the spoliating party should have an opportunity to show that the innocent party is not prejudiced by the absence of the missing evidence. If the innocent party did not have any obligation to make a showing of relevance and, eventually, prejudice, litigation could become a “‘gotcha’ game rather than a full and fair opportunity to air the merits of a dispute.”
Fashion a Remedy
Finally, for discovery conduct that merits a sanction, the choice of an appropriate remedy should accomplish several related goals: (1) deter the parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore the prejudiced party to the same position it would have been in absent the wrongful destruction of evidence by the opposing party. Courts should impose the least harsh sanction that can provide an adequate remedy. The potential array of sanctions range from — least to most hard — further discovery, cost-shifting, fines, special jury instructions, preclusion, default judgment, and dismissal.
The most extreme sanction — dismissal — is only warranted in the most egregious cases — those involving perjury, evidence tampering, or intentionally destroying evidence by burning, shredding, or wiping out computer hard drives. Harsh jury instructions, such as adverse inferences or instructions deeming certain facts admitted, are appropriate when a spoliating party has acted willfully or in bad faith. At the next level, when a party has acted willfully or recklessly, a court may impose a less harsh instruction in the form of a mandatory presumption that is rebuttable. In its least harsh form, a jury is permitted, but not required, to presume that the lost evidence is both relevant and favorable to the innocent party, but the jury must consider the spoliating party’s rebuttal evidence.
Conclusion
Banc of America should be mandatory reading for anyone responsible for the preservation and collection of electronic discovery. Written litigation hold notices are required and parties should err on the side of caution when deciding which custodians’ information must be preserved and collected. The four-step framework presented by Judge Scheindlin will likely be employed by many courts when they are faced with assessing the culpability of discovery violations and the appropriate sanction to be applied. Judge Scheindlin confirms that courts will expect a high level of e-discovery competence from counsel as they plan for and create litigation compliance programs and manage electronic discovery through the life of a case. Both in-house and outside counsel should study the decision closely.
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