You don’t often hear plaintiffs lawyers kvetching about the burdens associated with e-discovery, and for good reason. Their cases typically depend on what corporate defendants produce in the way of e-mails and computer data, so they’re usually the ones complaining to judges about defense failures to preserve electronic records.
But a recent decision by the federal judiciary’s doyenne of e-discovery—Manhattan federal district court judge Shira Scheindlin–is a reminder that plaintiffs shouldn’t get too cocky about their own e-discovery obligations. As first reported by the New York Law Journal, Judge Scheindlin sanctioned 13 plaintiffs in a case involving the collapse of two hedge funds, finding that “most plaintiffs conducted discovery in an ignorant and indifferent fashion.”
The underlying case was brought in 2004 by investors who lost $550 million in the liquidation of two British Virgin Islands hedge funds, Lancer Offshore and OmniFund. Some defendants settled, but Citgo Fund Services, which was hired by the funds to perform certain administrative tasks, decided to fight on. After the close of discovery in 2008, Citgo’s lawyers at Gilbride, Heller & Brown and Curtis, Mallet-Prevost, Colt & Mosle moved for sanctions against the plaintiffs for failing to preserve and produce documents.
Judge Scheindlin, who previously authored an influential opinion on e-discovery in Zubulake v. UBS Warburg, subtitled her 87-page opinion (yep, 87 pages) in the hedge fund case, “Zubulake Revisited: Six Years Later.”
“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,” wrote Judge Scheindlin. “All of the plaintiffs in this motion failed to do so and have been sanctioned accordingly.”
The judge also ruled that she would issue an adverse inference against the plaintiffs if the case against Citgo goes to a jury. Nonetheless, lead plaintiffs lawyer Scott Berman of Friedman Kaplan Seiler & Adelman told the New York Law Journal that the investors would move forward with the case. “We respect the court’s decision but believe that clients and counsel did what was required by existing law, custom, and practice,” Berman said. “In prior decisions the court has denied Citgo’s motions to dismiss and for summary judgment. Other defendants have settled with plaintiffs, and we look forward to trying the merits of the case against Citgo.”
via When It Comes to E-Discovery Sanctions, Be Afraid. Be Very, Very Afraid.
