A recent decision in Orlando imposed sanctions against in-house counsel for failure to preserve evidence, including email and laptops. Swofford v. Eslinger, Case. No.6:08-cv-Orl-35DAB (FL.M.D. Sept. 28, 2009). Many courts have imposed monetary sanctions against outside counsel of record for their negligence in working with their clients to preserve evidence. See eg., Green v. McClendon, 2009 WL 2496275 (S.D.N.Y. Aug. 13, 2009) (discussed before in Mathematical Formula for Justice Proves the Importance of ESI in Civil Litigation). But this decision goes a step further and reaches behind the curtain to impose sanctions against in-house counsel. This was not your typical in-house counsel situation either. It was not a remote in-house attorney representing a large corporation. The attorney sanctioned was the general counsel for a local governmental entity, the Seminole County Sheriff’s Department.
This District Court opinion has not been published yet, but I expect it will be soon. It is, as far as I know, the first in the country to impose a monetary sanction against an in-house counsel who was not an attorney of record and was not a named party. The amount of the sanction has not yet been determined by the District Court judge who entered the order, but it will be substantial. The plaintiff incurred costs and attorney fees in excess of $300,000 to bring and prove the sanctions motion. The case reminds me of Danis v. USN Communications, Inc., 2000 WL 1694325 (N.D. Ill. 2000) where the defendant’s CEO, also not a party, was personally sanctioned for spoliation. But that case was only a $10,000 sanction.
I am afraid to tell my friends who are in-house attorneys that the spell has been broken. They too are now at risk for sanctions, not just attorneys who make an appearance. The Swofford opinion acts like Toto and pulls aside the curtain. The desperate plea of Professor Marvel in L. Frank Baum’s Wizard of Oz has never worked: “Pay no attention to that man behind the curtain! The Great Oz has spoken!” Judges from now on may not be satisfied with the Wizard attorney of record, they may look for the “man behind the curtain,” the in-house counsel pulling all the levers. If they do, and this hidden Wizard is at fault, he may be sanctioned despite the curtain, the non-appearance in court.
Warning to In-house Counsel Everywhere
Although this may be the first opinion to sanction in-house counsel for spoliation, it certainly will not be the last. As I have said many times before, judges are fed up with e-discovery spoliation. They have had enough with attorney incompetence and lackadaisical attitudes to preservation responsibilities. If the failure to preserve is the fault of in-house counsel, the courts can and will sanction in-house counsel alone, and not also sanction outside counsel. This is what happened here. The defendants themselves were sanctioned, along with their general counsel, but their outside counsel were not sanctioned. In other circumstances, where outside counsel is involved, courts may well sanction everybody, the parties, their in-house counsel and their outside counsel too. I am reminded of the words of the Wicked Witch of the West: “I’ll get you my pretty… and your little dog too!”
The outside counsel in Swofford was a law firm selected by the Sheriff Department’s insurance company to represent the Sheriff and his deputies in this negligence claim. This same law firm represents the Sheriff in all claims. But they were not formally retained for this particular claim until after suit was filed, many months after preservation letters had been sent and a duty to preserve was clearly triggered. In-house counsel did not consult with these attorneys upon receiving the preservation demands. He acted on his own. Well, if you want to call it that. As the opinion explains, his actions were woefully inadequate.
After hearing testimony on these issues, District Court Judge Mary S. Scriven decided that the only attorney who should be sanctioned for the destruction of evidence was the defendant’s in-house counsel. He had been the general counsel for the Sheriff’s Department since 2006. He had not appeared of record in the case. He remained behind the curtain. But he did attend the spoliation hearing and Judge Mary Scriven on her own decided to ask him questions about what happened.
In-house counsel went on the stand and was sworn in. His testimony established that he alone responded to the preservation letters and outside counsel was not involved. His testimony, along with that of the other witnesses, showed that the spoliation occurred before suit was filed and before outside counsel was formally retained for this particular claim. Judge Scriven held that because in-house counsel was in charge of preservation, not outside counsel, that he should be the only attorney sanctioned.
If It Can Happen in Orlando, It Can Happen Anywhere
If it can happen to the general counsel of a defendant sued Orlando, it can happen to a general counsel sued in any court in the country. Orlando, much like Kansas, is a very friendly place. When you walk downtown perfect strangers will smile at you and some will even say hello. Incredibly, it is not the start of a con-game or panhandle routine. People are just friendly. As Dorothy in the Wizard of Oz often chanted, “there’s no place like home.”
Although we are not exactly the Emerald City, the greater Orlando area is now a Million people strong and yet has somehow maintained a tradition of open hospitality. It is not too surprising when you consider that our largest employer is Disney World, where everybody is paid to smile and convinced they are party of a reality TV show. Yes, Florida has technology companies and the Space Coast, but we are still primarily a tourism-based economy. As a native Floridian I can tell you that we are all trained from childhood to be nice to tourists and give good directions. We know not to bite the hand that pumps money into our economy.
Our judges grew up in the same atmosphere and our court rooms also tend to be friendly, tolerant places. Over the years I have seen judges put up with blunders by attorneys that you would not believe. So when a Orlando, Florida judge decides to reach in within a company to sanction in-house counsel for e-discovery blunders, it is a big deal. It means there is a sea-change happening throughout the country. Judges have had it with all of the preservation mistakes, the incompetence, and lack of diligence. After years of tolerating mistakes, they are now ready to sanction the attorneys of record who appear before them AND the attorneys behind the scenes.
The message is clear. If it can happen in my home-town of Orlando, it can happen anywhere. In-house counsel should beware. They are not safe behind the curtain of non-appearance. They too are exposed to sanctions, just like their counsel of record, if they are not diligent in the responsibilities they assume. They must take preservation obligations very seriously. If they do not, like the obviously clueless general counsel in this case, they can and will be sanctioned. Mind you, the screw-ups will have to be pretty bad for this to happen, at least in Orlando, but no one wants to find out where the sanctions line will be drawn. All the courts want, no demand, is reasonable diligence in preserving evidence, not perfection. They are entitled to that. So are the clients.
How “Lucky Swofford” Came to Sue the Sheriff
The underlying facts of Swofford v. Eslinger are really very interesting. The plaintiff, Robert Swofford (shown right), is quite a lucky guy; well, in a strange way. Swofford is a retired Army Captain. He settled down in a rural part of Florida, Seminole County, just north of Orlando. Then he got really lucky. He won the Florida Lottery! Got over Sixty Million Dollars! Of course, he was then sued by his two ex-wives, who are sisters. They wanted some of the money, but eventually he prevailed. He stayed in his home in Seminole County, even though everybody now knew Swofford as the lotto winner.
One night, quite late, the lucky lotto winner heard some noises in his backyard. It sounded like there were intruders. So ex-Army Swofford went out to investigate with a loaded gun in his hand. Here is where Swofford’s luck nearly ran out. It turns out that the intruders in his backyard were two Sheriff deputies and a police dog in hot pursuit of a burglary suspect. They had been chasing this guy all over and had just hopped the fence into Swofford’s yard to follow him. That is where the deputies ran into lucky Swofford, gun drawn, protecting his home and his millions.
At this point, the story of what happened diverges dramatically between Swofford and the deputies. The police claim that they identified themselves and told Swofford to drop his gun. Swofford says they just opened fire. It is undisputed that Swofford was shot seven times, and the police, not at all. I say Swofford should still be called lucky because he somehow survived being shot seven times. With his life and Sixty Million in tact, lucky Swofford sued the Sheriff and his deputies, claiming negligence and demanding more millions.
Lucky Swofford’s Lawyer Demands That Evidence Be Preserved
Swofford’s attorney, whom I know pretty well, is a good trial lawyer, but does not really know e-discovery. Still, he knows enough to write a pre-suit preservation demand letter to the Sheriff’s Department, asking that they preserve all evidence related to the shooting. Email and other computer stuff were not specified in that first letter. But he wrote a second preservation demand letter a few months later, again before filing suit, that was slightly more specific. The second letter requested preservation of related “firearms, clips and ammunition, training records, and electronic evidence.” Yes. The “e-word” – electronic – was mentioned. And a good thing too, for this made it hard for the Sheriff to later argue – which he did anyway, but, it was harder and did not work – that he did not know this applied to e-mail. Swofford’s lawyer also made several pre-suit public records requests asking for particular information, including all e-mail communications related to the shooting investigation. He did not get any of course; either pre-suit under the public records requests, or during suit under a request for production. To understand why, we have to understand exactly what the general counsel did in response to the preservation demand letters.
In-house counsel received the pre-suit letters from Swofford’s lawyer and gave them to his paralegal. She then actually read the demands and responded by sending copies of the letters to the Sheriff himself, Donald Eslinger (shown right), and five senior employees. The Sheriff and his senior staff then responded to the letters by doing nothing, nada. Even though one of these senior execs was the father of one of the two dupities who shot Swofford, he claims he did not tell his son, or anyone else, about the preservation demands.
The five senior employees copied with the letters did not include the deputies who actually shot lucky Swofford seven times. The two deputies later testified that they did not know anything about the letters or even about evidence preservation. They claimed to have no idea they were doing anything wrong when they later deleted all emails and asked for new laptops, which of course resulted in the destruction of all ESI on their old laptops. Same story regarding their request for new guns, new police radios, uniforms, etc. This was all just normal, routine recycling according to their testimony. It was all done in blissful ignorance of any preservation demand letters or so-called duty to preserve evidence of the shooting of the famous lucky-lotto guy. The deputies testified that no one ever told them to do anything.
The in-house general counsel admitted that all he did in response to the preservation letters was forward the notice to key officers. He considered that sufficient. He made no follow-up efforts whatsoever to be sure the evidence was preserved. He did not talk to them about it or talk to the IT people. No one else did anything either. As a consequence, most of the evidence that Swofford wanted preserved was destroyed.
All the emails were lost at least, along with the deputies’ laptops. But one piece of ESI evidence survived. It turns out the instant messages for the Sheriff’s Department were kept on a server different from the email server and it was not wiped. Also, it turns out that at least one instant message was produced to lucky Swofford in the lawsuit. The instant message uncovered was from another police officer in a nearby municipality to one of the deputies who shot Swofford. The message referred to the deputy as the “Lotto Killa.” That later proved to be an exaggeration as somehow lucky Swofford survived the shooting, but at the time of the “incident” and sending these IMs, that was still very much in doubt. The lotto winner, had, after all, just been shot seven times and lay near death in the local hospital.
The Seminole County Sheriff deputy replied to this IM by messaging back: “I need to go to the sign shop and have them put that name on the side of the car.” Very funny indeed. Lucky that Swofford found this one bit of evidence. It gave him strong grounds to argue that the destroyed emails would have been detrimental to the Sheriff. Everyone knows it was probably filled with such tidbits of sick humor. Just how sick and how many we will never know.
Judge Scriven’s Opinion
When lucky Swofford’s lawyer began to suspect that key evidence had been destroyed after he sent his letters, he began a $300,000 effort to have sanctions entered against the defendants. This effort ended in a lengthy evidentiary hearing before Judge Scriven. Although new to the bench as a District Court Judge, Mary S. Scriven has many years of prior experience as a United States Magistrate Judge as was quite familiar with these issues.
Judge Scriven starts her opinion by an expression of her obvious frustration with the defendants in this case: “That we are here on this issue is inexplicable and inexcusable.” It is kind of like flying monkeys.
Judge Scriven did not take well to in-house counsel’s mea culpas and profession just he was just acting in ignorance, not bad faith. The in-house attorney testified that he thought it was sufficient to just send copies of the preservation letters to the senior employees. It is interesting to note that Swofford’s lawyer did not call upon the in-house attorney to testify. He rested his case without ever calling him. The defense did not call him either. Judge Scriven on her own initiative made him a witness and asked him questions at the end of the hearing. After the judge asked her questions, none of the attorneys asked him anything on cross. Frankly, his answers were so dumbfounding, there was little left for anyone to say.
Judge Scriven asked the in-house counsel questions so that she could evaluate the merits of the spoliation defense and his role in it. Defendants were arguing that the destruction was mere negligence, not bad faith, so sanctions were not appropriate. At pages 8-9 of the opinion Judge Scriven’s responds to the defense in general and to in-house counsel’s testimony:
SCSO’s in-house counsel, Lane, failed to ensure that evidence be preserved. “It is not sufficient to notify employees of a litigation hold and expect that the [employee] will then retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched [and in this case, preserved].” Zubulake, 229 F.R.D. at 432. Nothing of the sort was done in this case. In fact, Lane professed not to have ever read the Federal Rules of Civil Procedure to ascertain on even a rudimentary level what his and his client’s obligations were in this regard, and, not surprisingly, nothing was done in this regard. But Lane is clearly not the only individual at fault for the spoliation. The senior SCSO officials who received the letters, including the Sheriff himself, completely disregarded the letters and their resultant legal obligations.
Judge Scriven, like every other federal judge I have seen, here endorses what I call the Zubulake Duty – the duty of counsel to take reasonable steps and efforts to preserve evidence. In Zubulake Judge Scheindlin imposed this duty on the outside defense counsel. In Swofford, Judge Scriven imposes this same duty on in-house counsel. This is as it should be. Everyone knows that they have a duty not to destroy evidence, especially lawyers, even if they have never actually read the rules.
Moreover, lawyers representing private or public entities, both in-side and outside, have a duty to advise their clients and help them to preserve evidence. As this case shows, there are often circumstances where the preservation efforts are controlled by the in-house counsel, not the outside counsel of record. Under these circumstances, where outside counsel has done no wrong, the blame properly falls on the lawyer who was asleep at the wheel, the in-house lawyer, and not just on the parties themselves, here the Sheriff and the accused deputies.
Unlike the defendant Sheriff, who admitted to receiving the preservation letters, the two deputies defendants who actually destroyed the evidence denied any notice of the preservation letters. No one every told them. They claimed not to know they should preserve their emails, computers, guns, etc. They thus argued that the sanctions requested of an adverse inference instruction and monetary awards should not be entered, or if entered, should not be against them. Judge Scriven did not accept this defense holding at pages 6 and 14:
However, as the Court explained in Turner v. Hudson Transit Lines, Inc.,
[i]t is no defense to suggest, as the defendant[s] attempt[], that employees were not on notice. To hold otherwise would permit an agency, corporate officer, or legal department to shield itself from discovery obligations by keeping its employees ignorant. The obligation to retain discoverable materials is an affirmative one; it requires that the agency or corporate officers having notice of discovery obligations communicate those obligations to employees in possession of discoverable materials.
142 F.R.D. 68, 73 (S.D.N.Y. 1991)(citation omitted).
Further, the Court questions the veracity of Defendants’ testimony in this case. Both suggested as law enforcement officers and as potential defendants that they were not aware of the need to preserve relevant evidence. The Court finds this testimony lacks credibility.
In view of the circumstances of this case, Judge Scriven had no trouble determining that the loss of evidence here constituted bad faith.
In light of both Defendants’ blatant disregard of their obligation to preserve electronic information and Remus’s “Lotto killa” conversation over instant message, the Court can surmise that emails deleted by Morris and Remus, and perhaps other SCSO officers, contained content detrimental to Defendants’ case. Accordingly, the Court finds that an adverse inference should be imposed against all Defendants for the destruction of emails from April 20, 2006 to April 2007. The jury shall be instructed that it may infer that emails deleted from April 20, 2006, to April 30, 2007, contained information detrimental to all Defendants in this case.
Id. at pg. 17.
Judge Scriven then considered the issue of imposition of monetary sanctions. At this point she made history by not only sanctioning the defendants, but also the defendants’ in-house counsel:
The Court finds appropriate the imposition of fees and costs against Mr. Lane in light of his complete failure to fulfill his duty, both in his official capacity as General Counsel for the SCSO and as initial counsel for all Defendants in this case, to take affirmative steps to monitor compliance so that all relevant, discoverable information is identified, retained and produced.8 In re: Seroqual Products Liability Litigation, 244 F.R.D. 650, 663 (M.D. Fla. 2007)(citing Zubulake, 229 F.R.D. at 432). Therefore, the award of fees and costs9 will be imposed jointly and severally against each of the three Defendants and Mr. Lane, each in his official capacity.10
8 The Court imposes sanctions against Mr. Lane pursuant to both the Court’s inherent authority and 28 U.S.C. §1927. See Amlong & Amlong, P.A., 500 F.3d at 1239.
9 The amount of fees and costs awarded will be determined by separate order.
10 The Court does not impose fees and costs against outside counsel because there is no evidence to establish that any outside counsel contributed to or failed to prevent the spoliation of evidence at issue in the Motion.
Id. at pg. 22.
It is interesting to note that Swofford had also asked the court to specifically “impose the burden of paying fees and costs on the Defendants themselves and [to] forbid them from passing that expense through their insurer.” Judge Scriven declined to do so, but only because she considered “issues concerning Defendants’ insurance coverage for matters arising out of this litigation are outside the purview of this Court.” Id. at pg. 23. In any event, it will be interesting to see if insurance companies will cover bad faith spoliation. They may look for grounds in the policy and law to decline.
Sanctions Against In-House Attorneys
Judge Scriven in Swofford entered two sanctions: an adverse inference instruction against the defendants on the spoliated evidence; and, a monetary sanction, a fee and cost award in an amount to be determined, against the defendants and the in-house attorney. The adverse inference sanction under Eleventh Circuit law required a finding of bad faith, which Judge Scriven easily found in these circumstances. Not all Circuits require bad faith as precondition for an adverse inference. In some, negligence will suffice. Even in the Eleventh Circuit, a finding of bad faith is not necessary to impose the lesser spoliation sanction of taxation of attorney fees and costs against a party or their legal counsel of record. Usually mere negligence or rule violation alone is sufficient for such a fee award sanction.
A finding of bad faith is also probably not necessary to look behind the curtain and impose a fee sanction against an in-house counsel who has not appeared of record. But this question is left unanswered for now, since bad faith was shown and the issue was not commented upon in Swofford. Future cases will address this issue I am sure, and perhaps also the other issues left unanswered by Swofford: should in-house be personally liable to pay the sanction or should the insurer or corporation pay. I suspect that future cases will also answer the question of the court’s jurisdiction to impose sanctions against an in-house attorney who is not a named party to the case and has not filed an appearance.
In the meantime, one thing is clear. All attorneys, both outside counsel and in-house counsel, must act with diligence in the preservation of evidence, especially electronic evidence. As judge Scheindlin said, counsel are required
to make certain that all potentially relevant information are identified and placed on hold. This will invariably involve speaking with information technology personnel, who can explain system-wide backup procedures and the actual (as opposed to theoretical) implementation of the firm’s recycling policy. It will also involve communicating with the ‘key players’ in the litigation, in order to understand how they stored information.
Zubulake v. UBS, 229 F.R.D. 422 (S.D.N.Y. 2004). Judge Scriven has now clarified that “counsel”not only means the outside counsel, but also in-house counsel. This is not a scrivener’s error. This is a legal imperative and an ethical imperative. ABA Model Rule 1.3 states:
Diligence: A lawyer shall act with reasonable diligence and promptness in representing a client.
Diligence in the preservation of evidence is a core obligation of all attorneys involved in litigation, both in-house and outside counsel. If in-house counsel assumes responsibility for the task, rather than outside counsel, and fails to do it properly, then Swofford shows that they can and will be held accountable.
Conclusion
In Swofford in-house counsel was sanctioned, not outside counsel, because the spoliation occurred before outside counsel was retained and consulted. It was clear who was to blame largely because of the time factor involved. But other scenarios are also possible and will I predict come up in future legal opinions. The duty to preserve may be triggered upon filing of the suit and retention of counsel or otherwise be a duty that runs to both in-house and outside counsel. What happens in that common situation when in-house counsel takes sole responsibility for preservation, and tells outside counsel that they will handle it? What if outside counsel is expressly instructed not to spend time or incur fees “to make certain that all potentially relevant information are identified and placed on hold” because these obligations are being handled in-house? What if outside counsel is not allowed by in-house counsel to speak with information technology personnel? What if they are not allowed to speak with key players regarding how they store information? What should outside counsel do when receiving such instructions? May the attorneys of record in the case safely rely on their client to fulfill the Zubulake duties?
These are critical questions now facing our profession. Like most critical questions they are ethical in nature. They not only test the application of our duty of diligence, but also our duties of competence (ABA Model Rule 1.1), candor toward the tribunal (ABA Model Rule 3.3), and, fairness to the opposing party and counsel (ABA Model Rule 4-3.4).
Although we may still be a long way from home, and there are obviously many struggles left to resolve these questions, I think that Swofford helps us along. Clients should, if they wish, be able to handle evidence preservation on their own, especially if they have their own in-house legal counsel. If they have another attorney advising them, then they should be able to instruct their outside counsel to let them do it, to let the in-house counsel “make certain that all potentially relevant information are identified and placed on hold.” Outside counsel should be able to rely on that, and not face sanctions if it turns out that the in-house botches the job. Outside counsel should not be required to indemnify the work of in-house lawyers or their clients.
If a court decides that sanctions are appropriate, then the sanctions should run against the in-house counsel that made the mistake. It should not also run against the outside counsel who relied on in-house counsel and followed the client’s instructions. Of course, there may be exceptions to that in extreme facts, such as when it is obvious to outside counsel, or should be, that mistakes are being made or fraud is occurring by in-house counsel. The outside counsel then has a duty to protect their client by pointing out the mistakes or trying to stop the fraud. Failing that, as the Qualcomm case shows, outside counsel may have no choice but to fire the client and withdraw or face severe sanctions themselves.
The question is different for situations where the client does not have in-house counsel or other attorneys to advise them. The Zubulake duty is a legal duty that requires an attorney to fulfill or at least supervise, preferably one who has actually read the rules.
If a party to litigation, one who does have any attorney other than you, in effect tells you to but-out, we will not pay for that, we will handle it ourselves, then you have a serious problem. I doubt that you can just say yes to that kind of client reaction and turn your back on what they do or do not do. In the context of litigation, I doubt that courts will tolerate such laissez faire delegation by the attorneys of record. Courts will insist that our system of justice be protected by some kind of lawyer supervision of the client’s preservation efforts. If a client refuses reasonable supervision, or hides their hold efforts, then you proceed as their attorney at your own risk. In other words, if a client in litigation, or contemplating litigation, refuses all attorney involvement concerning litigation holds, then if spoliation occurs a sanction against the attorney of record is probably fair.
The client’s refusal to cooperate or disclose litigation hold efforts is a big red flag. In many circumstances it may prompt a motion to withdraw by defense counsel if an appearance has already been made. For plaintiff’s counsel, it should prompt a declination to file the case to begin with. The plaintiff’s duty to preserve and initiate a proper litigation hold will always begin before the suit is filed. If counsel for a would-be plaintiff has an uncooperative client who will not receive preservation help, they should decline the representation. If they proceed anyway, they are fair game for personal sanctions, especially if they never even tried to counsel the client. If an attorney for a would-be plaintiff sees evidence that the plaintiff has already fraudulently destroyed or hidden evidence in anticipation of litigation, they must decline representation. They should never proceed anyway and hide the fraud. To knowingly continue would be to join in a fraud of the court.
Our way forward is clear. An attorney must be minding the store and following the wise dictates of Judge Scheindlin, Judge Scriven, and many others, to “take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched [and in this case, preserved].” As the Munchkins said: Just follow the Yellow Brick Road. Exactly what affirmative steps are reasonable in any particular case depends upon the facts, but we have a guiding principle, a Yellow Brick Road. There needs to be an attorney who monitors compliance. Who employs that attorney is not the critical question. Inside or outside counsel, we are all on the road together.
Thanks for this excellent post Ralph. As one of Mr. Swofford’s former cousel in this dust-up (along with another former H&K attorney, Mike Colitz, who deserves a lot of credit for pushing this motion), I was very gratified by the Court’s reaction to the SCSO’s behavior.
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In-house Local Government Counsel Sanctioned for Spoliation Courts seem more assertive in punishing electronic spoliation than they historically were in punishing the spoliation of paper documents. Many veteran lawyers will be astonished to hear that a…
Great post Ralph.
Boy, how many times do we come across counsel with the same attitude as Lane? “I thought that was sufficient.” Or, “We’re not there, yet” when advised of preservation duties and the steps for preserving properly. Guess, what? You’re “there” sooner than you think and now a judge has essentially said that you are responsible sooner than you think.
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