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Court Orders Monetary Sanctions for Production Delay Resulting from Counsel’s Failure to Become Familiar with Plaintiff’s Retention Policies and Systems : Electronic Discovery Law

April 14, 2010 By Leave a Comment
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In re A&M Fla. Props. II, LLC, 2010 WL 1418861 (Bankr. S.D.N.Y. Apr. 7, 2010)

Where plaintiff’s counsel “failed in his obligation to locate and produce all relevant documents in a timely manner” by failing to gain a sufficient understanding of plaintiff’s computer systems resulting in significantly delayed production of relevant documents, the court declined to impose terminating sanctions or an adverse inference but ordered monetary sanctions against plaintiff and counsel in an amount to be determined.

Upon plaintiff’s production of requested discovery, defendant was surprised by the lack of internal emails produced.  Thereafter, plaintiff retained new counsel who, in an effort to settle the issue, ordered plaintiff to perform a “company-wide” search for responsive information.  The search was conducted under the direction of Deborah Garfinkle, plaintiff’s Chief Technology Officer.  Unfortunately, counsel was “uninformed on the detailed workings of [plaintiff’s] computer system and email retention policies.”  Specifically, counsel was unaware of the existence of archive folders to which employees regularly moved emails.  The archive folders were therefore not searched.

Eventually, defendant brought the lack of email production to the court’s attention.  The parties thereafter agreed to jointly retain a forensic expert to search plaintiff’s computer system.  Because plaintiff’s counsel remained unaware of the archive folders, the forensic search did not include them.  When certain emails were not found in the forensic search, defendant suspected intentional spoliation.

Responding to the accusation of spoliation, Garfinkle informed defendant’s counsel of the existence of archive folders.  Upon plaintiff’s own subsequent search of those folders, additional responsive emails were found.  Plaintiff argued that the situation could have been avoided had defendant included archives in its search request.  Defendant argued that plaintiff should have known to search the archives.  Both sides agreed to a second search by the forensic expert, including the archives.

Following the second forensic examination, plaintiff’s counsel’s “mistaken impression” regarding the methodology for production of the recovered ESI resulted in a two-month delay in the production of certain responsive emails to defendant.

via Court Orders Monetary Sanctions for Production Delay Resulting from Counsel’s Failure to Become Familiar with Plaintiff’s Retention Policies and Systems : Electronic Discovery Law.

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Revisiting ‘Zubulake’ Six Years Later | Law.com

March 27, 2010 By

In January, Judge Shira Scheindlin of the Southern District of New York, who authored the landmark electronic discovery decisions in Zubulake v. UBS Warburg LLC, issued an opinion that she titled “Zubulake Revisited: Six Years Later.” See Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of America Sec. LLC, No. 05 Civ. 9016, 2010 WL 184312, at *1 (S.D.N.Y. Jan. 15, 2010).

Although the case did not present any “egregious examples of litigants purposefully destroying evidence,” 13 plaintiffs were sanctioned — seven for negligence and six for gross negligence — due to their lackluster preservation, collection, search, and production efforts. Id. at *10, *15-*27. All of those plaintiffs were subject to monetary sanctions, two were to provide additional discovery, and the grossly negligent plaintiffs were subject to a carefully tailored, rebuttable spoliation instruction.

In Montreal Pension, the court analyzes levels of unacceptable discovery conduct and differing burdens of proof in establishing sanctions and potential sanctions. The case provides guidance to courts and practitioners and is likely to be widely cited in the future.

The plaintiffs in the case were investors suing to recover $550 million in losses due to the liquidation of two British Virgin Island hedge funds.

via Revisiting ‘Zubulake’ Six Years Later.

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Court Provides Detailed Analysis of Law of Spoliation, Orders Adverse Inference Instruction, Monetary Sanctions for Intentional Spoliation of ESI : Electronic Discovery Law

March 8, 2010 By Leave a Comment

Rimkus Consulting Group, Inc. v. Cammarata, 2010 WL 645253 (S.D. Tex. Feb. 19, 2010)

For intentional spoliation, the court declined to order terminating sanctions but ordered an adverse inference instruction and for defendants to pay plaintiff’s attorneys fees and costs.

In this litigation arising from accusations of misappropriation of trade secrets, violation of non-compete agreements, and related claims, plaintiff accused defendants of spoliating relevant evidence, including electronically stored information (“ESI”).  The court found that defendants had indeed participated in intentional spoliation of evidence, including failing to preserve relevant ESI, manually deleting ESI, and destroying or giving away laptops containing relevant ESI, among other things.  The court nonetheless declined to grant plaintiff’s request for terminating sanctions because plaintiff was unable to show a sufficiently high degree of resulting prejudice.  Specifically, the court found that because defendants had produced a large volume of evidence despite their spoliation of other ESI, because plaintiff had obtained some of the deleted evidence from other sources, and because evidence revealed that some of the deleted records would have been favorable to defendants, the resulting prejudice was “far from irreparable” – the necessary showing to justify terminating sanctions:  “The sanction of dismissal or default judgment is appropriate only if the spoliation or destruction of evidence resulted in “irreparable prejudice” and no lesser sanction would suffice.” [Citation omitted.]

Accordingly, the court ordered an adverse inference instruction to be given to the jury.  The instruction would allow the jury to determine whether the destruction was intended to prevent the use of the destroyed evidence at trial and, if so, would allow the jury to further determine whether to infer that the content of the deleted evidence would have been unfavorable to the defendants.  The court also ordered monetary sanctions and ordered defendants to pay plaintiff’s reasonable costs and attorney’ fees “required to identify and respond to the spoliation.”

via Court Provides Detailed Analysis of Law of Spoliation, Orders Adverse Inference Instruction, Monetary Sanctions for Intentional Spoliation of ESI : Electronic Discovery Law.

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Plaintiffs Sanctioned for Failure to Produce Electronic Files in Hedge Fund Suit

January 18, 2010 By Leave a Comment

A federal judge has sanctioned 13 plaintiffs suing two collapsed hedge funds for negligence and gross negligence for their failure to preserve electronic files in discovery.

Saying “most plaintiffs conducted discovery in an ignorant and indifferent fashion,” Southern District Judge Shira A. Scheindlin will assess monetary sanctions against all 13 plaintiffs and give an adverse jury instruction for six of the worst offenders in The Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities LLC, 05 Civ. 9016.

“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,” Schiendlin said in her 87-page opinion. “All of the plaintiffs in this motion failed to do so and have been sanctioned accordingly.”

The lawsuit was brought by investors who sought to recover losses of $550 million following the liquidation of two hedge funds based in the British Virgin Islands. Banc of America and other defendants have already settled the case, which involves a total of 96 plaintiffs.

The chief defendant remaining is Citgo Fund Services, which was hired by the two hedge funds to perform certain administrative services.

t was Citgo that brought the sanctions motion, and it is Citgo that will be compensated, with a yet-to-be-determined amount, in the form of costs and attorney’s fees, including fees and expenses associated with filing sanctions motions, reviewing declarations and deposing declarants.

Citgo, its parent company and two directors will also benefit in the adverse jury instruction with respect to six plaintiffs. Scheindlin said she will tell the jury that relevant evidence was destroyed after the duty to preserve arose and that the plaintiffs were grossly negligent. It would then be up to the jury to decide whether the evidence was relevant.

The six plaintiffs who will get the adverse instruction, including the Morton Meyerson Family Foundation and the Defined Benefit Plan for Hunnicutt & Co., she said, conducted “severely deficient” searches in response to document requests in 2003 and 2004.

The judge criticized the six plaintiffs for:

• failure “to institute a timely written litigation hold” — a communication to employees to stop the routine and legitimate destruction of data in anticipation of commercial litigation or a civil enforcement action;

• failure “to collect or preserve anyelectronic documents prior to 2007;

• continued deletion of electronic documents after the duty to preserve arose;

• failure to request documents from key players;

• delegation of search efforts without supervision from management: and

• destruction of backup data potentially containing responsive documents of key players and/or submitted misleading or inaccurate declarations.

via Law.com – Plaintiffs Sanctioned for Failure to Produce Electronic Files in Hedge Fund Suit.

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