Judge Lee H. Rosenthal, the current chair of the Federal Judicial Conference Advisory Committee for Federal Rules of Civil Procedure, recently authored an important opinion on sanctions. Rimkus v Cammarata, 2010 WL 645253 (S.D. Tex. Feb. 19, 2010). Rimkus comments extensively on Judge Scheindlin’s Pension Committee. Many commentators are spinning Judge Rosenthal’s opinion as critical of Judge Scheindlin’s work and suggest that a high level intellectual duel is going on here. Some even suggest that the two opinions are contra and reflect a divergence in attitude between two luminaries in our world of e-discovery.
I disagree. There is no battle here. If I were to write the Shepard’s comments on these two cases, I would state that Rimkus analyzes, discusses, and explains Pension Committee. I would not say that it criticizes or disagrees. The differences in these two opinions arise from the different laws in their respective Circuits and the different facts underlying the opinions. In Rimkus intentional destruction of evidence was proven. There was no finding of intent or bad faith in Pension Committee, but the facts did establish a whole lot of half-hearted, grossly negligent actions by a plaintiff that bordered on bad faith.
There is no real conflict in these opinions or between these two learned judges. The two opinions are consistent and reflect the same Sedona influenced judicial attitude on e-discovery practices. The differences in their opinions are better explained by the different case facts and jurisdictions. Judge Scheindlin is in New York federal court, which is governed by the laws of the Second Circuit. Judge Rosenthal sits in Texas governed by the laws of the Fifth Circuit. All practicing attorneys understand that this means there will necessarily be divergences in their development of the law. In the Fifth Circuit, which follows the majority rule, intentional destruction of evidence, or bad faith, must be proven before an adverse inference instruction sanction may be imposed. According to Judge Rosenthal, the Seventh, Eighth, Tenth, Eleventh, and D.C. Circuits follow essentially the same rule. In the Second Circuit, gross negligence alone, without proof of intent or bad faith, may suffice for the entry of this sanction. The Third Circuit has a kind of hybrid standard where you “balance the degree of fault and prejudice.” Id. at *7. “The First, Fourth, and Ninth Circuits hold that bad faith is not essential to imposing severe sanctions if there is severe prejudice, although the cases often emphasize the presence of bad faith.” Id.
Judge Rosenthal goes on to opine that:
The circuit differences in the level of culpability necessary for an adverse inference instruction limit the applicability of the Pension Committee approach. And to the extent sanctions are based on inherent power, the Supreme Court’s decision in Chambers may also require a degree of culpability greater than negligence.
Id. at *7.
I doubt Judge Scheindlin would disagree with this commonsense jurisdictional limitation of her holding in Pension Committee. This is a result of a split in the circuits on the issue of spoliation, and until resolved by the Supreme Court, there will always be some differences in the holdings of the various district courts. The lower courts are bound by the opinions of their Circuit Court of Appeal. A district court judge has no discretion or right to depart from clearly articulated legal standards created by their Circuit Court. So the kind of differences we see in Pension Committee and Rimkus are quite standard and normal. It is part of the common law tradition, where many differences in law by geographical areas are routine. This tolerance of diversity allows the law to slowly grow and, at the same time, evolve creatively to fit the times.
That is all that is going on here in these two so-called “dueling opinions.” I see no quarrel between the judges. I see no divergence of approach where one is more corporate-friendly than another. Both judges understand that perfection is impossible. Both are thus human-friendly. Mistakes will be made and evidence will be lost or destroyed. It is inevitable in large-scale ESI preservation and discovery. No humans are perfect, regardless of whether they work alone or in a large corporation.
It appears to me that both judges understand that reasonability of effort is the proper legal standard for litigants and their attorneys. Both understand that evidence, especially ESI, will sometimes be lost, and that severe sanctions are not appropriate if reasonable efforts have been made. See my prior lengthy blog on Pension Committee entitled Raising the Bar – Judge Scheindlin Defines Gross Negligence in Spoliation which discusses this point at greater length.
This is a hard concept for some lawyers and judges to understand, and it does seem to stand law’s august reasonable man on his head. In the world of paper discovery, if reasonable efforts were made, paper documents would not be lost or destroyed. Period. End of story. The loss of evidence was synonymous with a breach of duty to act reasonably. In other words, if evidence was destroyed, then this was per se negligence. It is an example of that famous old tort doctrine: res ipsa loquitur (the thing speaks for itself).
It is my contention, and I believe that both Judge Rosenthal and Scheindlin would agree, that in the new world of ESI discovery, this doctrine and old common sense view of spoliation no longer apply. In today’s terabyte-world, you can be making reasonable efforts, and still lose or destroy evidence. The loss of ESI is not per se negligence. If you have trouble with that mental judo, then look at it another way. If the loss or destruction of ESI must always be negligence, must always be a result of an unreasonable action, a mistake, then the reasonable efforts made to try to avoid this negligence outweigh and supersede the one act of negligence. A series of reasonable acts countermine and negate one unreasonable act. Now you could argue this is what is meant by good faith negligence, or at least the absence of bad faith. But I contend the words are wrong, that in the ESI-world, evidence can be lost or destroyed by the reasonable man with no breach of duty at all. If that stands the reasonable man doctrine in spoliation on its head, well, so be it. That is the reality of large-scale electronic discovery today.
The differences in the law of the Circuits highlighted by the Rimkus and Pension Committee opinions are subtle and limited. They pertain to the degree of proof required to impose the most severe of sanctions. It does not apply to the best practices underlying reasonability of effort. I assume, although Rimkus does not expressly say so, that Judge Rosenthal would also find the reliance on mere verbal preservation notice alone, not accompanied by written notice, to be gross negligence. It is just that the severity of sanction permitted in the Fifth Circuit for gross negligence based spoliation is less that than in the Second Circuit.
Judge Rosenthal did every lawyer and judge a favor by preparing the Rimkus opinion. This 59-page decision is an excellent work of scholarship. If Pension Committee is the bookend to Zubulake, which it most certainly is, then Rimkus is the must-read second volume to Pension Committee, the one that examines the laws of all of the Circuits on spoliation and sanctions. It puts Pension Committee in perspective and reminds us that the e-discovery world extends beyond New York. Judge Scheindlin’s Pension Committee primarily discussed the law of New York district courts and the Second Circuit. Judge Rosenthal not only discussed the law of her Fifth Circuit, but went on the examine the laws of spoliation in all circuits. When read together, Pension Committee and Rimkus provide the Bar with a good overview of the current law of sanctions in this country. Both are likely to become widely cited. I leave you with a few of my favorite quotes from Rimkus v Cammarata, 2010 WL 645253 (S.D. Tex. Feb. 19, 2010) and urge you to read the rest for yourself:
*1Spoliation of evidence–particularly of electronically stored information–has assumed a level of importance in litigation that raises grave concerns. Spoliation allegations and sanctions motions distract from the merits of a case, add costs to discovery, and delay resolution. The frequency of spoliation allegations may lead to decisions about preservation based more on fear of potential future sanctions than on reasonable need for information. Much of the recent case law on sanctions for spoliation has focused on failures by litigants and their lawyers to take adequate steps to preserve and collect information in discovery. [FN1] The spoliation allegations in the present case are different. They are allegations of willful misconduct: the intentional destruction of emails and other electronic information at a time when they were known to be relevant to anticipated or pending litigation. FN1. See, e.g., Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, No. 05 Civ. 9016, 2010 WL 184312 (S.D.N.Y. Jan.15, 2010). …
These general rules [of spoliation] are not controversial. But applying them to determine when a duty to preserve arises in a particular case and the extent of that duty requires careful analysis of the specific facts and circumstances. It can be difficult to draw bright-line distinctions between acceptable and unacceptable conduct in preserving information and in conducting discovery, either prospectively or with the benefit (and distortion) of hindsight. Whether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done–or not done–was proportional to that case and consistent with clearly established applicable standards. [FN8] As Judge Scheindlin pointed out in Pension Committee, that analysis depends heavily on the facts and circumstances of each case and cannot be reduced to a generalized checklist of what is acceptable or unacceptable. [FN9] FN8. See THE SEDONA PRINCIPLES: SECOND EDITION, BEST PRACTICES RECOMMENDATIONS & PRINCIPLES FOR ADDRESSING ELECTRONIC DOCUMENT PRODUCTION 17 cmt. 2.b. (2007) (“Electronic discovery burdens should be proportional to the amount in controversy and the nature of the case. Otherwise, transaction costs due to electronic discovery will overwhelm the ability to resolve disputes fairly in litigation.”). FN9. Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, No. 05 Civ. 9016, 2010 WL 184312, at *3 (S.D.N.Y. Jan.15, 2010). For example, the reasonableness of discovery burdens in a $550 million case arising out of the liquidation of hedge funds, as in Pension Committee, will be different than the reasonableness of discovery burdens in a suit to enforce noncompetition agreements and related issues, as in the present case.
Applying a categorical approach to sanctions issues is also difficult, for similar reasons. Determining whether sanctions are warranted and, if so, what they should include, requires a court to consider both the spoliating party’s culpability and the level of prejudice to the party seeking discovery. Culpability can range along a continuum from destruction intended to make evidence unavailable in litigation to inadvertent loss of information for reasons unrelated to the litigation. Prejudice can range along a continuum from an inability to prove claims or defenses to little or no impact on the presentation of proof. A court’s response to the loss of evidence depends on both the degree of culpability and the extent of prejudice. Even if there is intentional destruction of potentially relevant evidence, if there is no prejudice to the opposing party, that influences the sanctions consequence. And even if there is an inadvertent loss of evidence but severe prejudice to the opposing party, that too will influence the appropriate response, recognizing that sanctions (as opposed to other remedial steps) require some degree of culpability.