This is the second in a series of guest blogs on Judge Shira A. Scheindlin’s landmark decision, Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F.Supp.2d 456, 465 (S.D.N.Y.2010). The articles were all originally published together as a white paper in the Legal Hold Pro™ Signature Series, Pension Committee Revisited: One Year Later, edited by Brad Harris and Ron Hedges. The first blog in this series introduced the paper and reprinted the lead article by Craig D. Ball. This second reproduces the next three articles by more top experts: Kevin F. Brady, William P. Butterfield, and Maura R. Grossman. There are six more articles yet to come in future blogs by Browning Marean, Jonathan Redgrave, Paul Weiner, John Jablonski, Denise Talbert, and, oh yeah, me.
This is an outstanding series of articles and I suggest you study each one carefully. This series not only facilitates an in-depth understanding of Pension Committee, but also provides an interesting glimpse into the many attitudes, styles, and points of view of leaders in this dynamic area of the law.
Rekindling the National Debate on Preservation Best Practices
By Kevin F. Brady
The legacy of Judge Scheindlin‘s decision in Pension Committee will not be the substance of what is contained in the 88-page scholarly analysis on issues about whether there should be a bright line test for negligence, gross negligence or bad faith behavior or whether there should be a requirement for written legal holds. Instead, Pension Committee will be seen as the spark that reignited a national debate regarding best practices for handling ESI and refocused the attention of the legal community on the issue of preservation and the need for effective policies and procedures for preserving ESI irrespective of the circuit where the lawsuit is pending.
Judge Scheindlin‘s decisions in Zubulake starting in 2003 are largely credited with launching the discussion about the best practices for handling ESI. Her Zubulake decisions are still regarded as the seminal decisions on many of those topics. Indeed, the 2006 changes to the Federal Rules of Civil Procedure track in large part or are significantly influenced by those decisions. But after seven years of judicial decisions as well as federal and state rule changes, the landscape of electronic discovery is best described as the land of confusion.
I recently heard one state court judge, from a very sophisticated business court, say that the majority of the lawyers who appear before him are not competent when it comes to preservation and ESI. That speaks volumes as to the scope of the problem that still exists. Lawyers who once feared the phrase electronic discovery now openly admit that they don‘t know very much about e-discovery and they are not interested or motivated to learn about it. We are in a slow-moving state of transition but unfortunately it is not clear where we are, how far we have come or how far we have to go. Thankfully Pension Committee came along and the debate has begun anew with judicial heavyweights like Judges Rosenthal, Facciola, Grimm and Francis all weighing in on the subject in 2010.
Old favorites like preservation, legal holds and spoliation continue to garner much of the attention in the judicial decisions, however, new topics like transparency, cooperation and proportionality are helping to sharpen and refine the debate. Now the discussion includes questions like Should there be a federal (or state) rule of procedure regarding preservation? Is self-collection or self-preservation ever a reasonable approach to handling ESI? and Does a company set its policies and procedures regarding retention and preservation of ESI to meet the standard of a certain circuit?
While much work still needs to be done to educate the lawyers, clients and judges in order to reduce the uncertainty and ambiguity regarding ESI, the movement to effectuate change is now back in full swing due in large part to Pension Committee.
Judge Scheindlin Upholds Fairness to Non-Spoliating Parties
By William P. Butterfield
I have a question for those who complain about Judge Scheindlin‘s decision in Pension Committee. Have you ever tried to prove that your client was adversely impacted by the loss of evidence that clearly should have been preserved by the opposing party? I have. Without knowing the content of the information that has been lost, how do you establish that it would have helped you prove your case? How do you respond to the other side‘s typical defense of a spoliation claim (“So what? No litigation hold program is perfect. Show us how our loss of evidence prejudiced your client.”)? Isn‘t discovery supposed to be about finding the truth? And, as Judge Grimm notes in Victor Stanley II, “The truth cannot be uncovered if information is not preserved.” Victor Stanley II at 56.
In my opinion, the most important objective Judge Scheindlin sought to achieve in Pension Committee was simply fairness to the nonspoliating party. She recognized the unfairness of requiring the innocent party to show how it was impacted by the loss of evidence, when the very evidence that would facilitate that proof is gone:
It is often impossible to know what lost documents would have contained. At best, their content can be inferred from existing documents or recalled during depositions. But this is not always possible. Who then should bear the burden of establishing the relevance of evidence that can no longer be found? And, an even more difficult question is who should be required to prove that the absence of the missing material has caused prejudice to the innocent party.
Pension Committee at 466-7.
Judge Scheindlin‘s decision in Pension Committee does two important things to restore fairness:
1) it provides a roadmap of the actions required of a preserving party and attempts to link the failure to carry out defined litigation hold tasks (written hold notice, identification and notification of key players, follow-up, adequate collection, etc.) with concepts of negligence and gross negligence;
2) where the spoliation results from bad faith or gross negligence, it provides a rebuttable presumption that the innocent party was prejudiced.
Reasonable people can differ about where the lines should be drawn between conduct that is acceptable, negligent or grossly negligent (and the debate on that issue is far from over), but where spoliation occurs because a preserving party‘s conduct so greatly departs from the ordinary care expected, it seems eminently fair that the innocent party should not be required to take on the difficult – if not impossible – task of proving that it was prejudiced.
Some judicial thought-leaders take the position that in determining sanctions, the court should look to the degree of prejudice to the innocent party, rather than the degree of fault by the spoliating party. See, e.g., Orbit One at 11, Victor Stanley II, 269 F.R.D. at 526. In other words, they ask whether the material that was lost was relevant, and whether that information would have assisted the non-spoliating party in proving its claims. While that approach seems logical, here is the problem: if there has been complete spoliation (i.e., there are no duplicate records or no other way to tell what information has been lost), it is difficult, if not impossible, for the innocent party to prove that the lost information was relevant or would have favorably assisted its cause. For that reason, I believe that Judge Scheindlin got it right. If the conduct of the spoliating party was in bad faith or grossly negligent, the inference is that lost information was relevant, and there is a rebuttable presumption that the innocent party was adversely affected. Note that the presumption is rebuttable. If the spoliating party can show that the innocent party was not prejudiced by the absence of the missing information, then severe sanctions can be avoided. Pension Committee at 468-9.
There is much merit to the call for nationwide litigation hold standards and there are many issues yet to be determined. But even if you disagree with where Judge Scheindlin draws the lines, she deserves much credit for starting the debate in Zubulake, and refining it in Pension Committee.
Pension Committee: A Catalyst for a Change in the Federal Rules?
By Maura R. Grossman
Before the opinion in Pension Committee was issued, it was sometimes a challenge to convince attorneys, or their clients, that preservation obligations – which can be onerous and costly at times – were serious business. No longer is that the case. The shift in attitude has been noticeable. Since January 2010, the legal community has been placing a far greater emphasis on preservation activities.
The question no longer is, “Should we send out a legal hold?” Now, litigants are asking, “Have we sent out the hold yet?” Judge Francis recently took the position in Orbit One that a written legal hold may not be necessary in every case. While there can be exceptions to the general rule, in the vast majority of civil litigation, a corporate litigant would likely be hard pressed to walk into a federal court today and state that it was unaware that it had an obligation to implement a legal hold when it reasonably anticipated litigation.
Pension Committee may have dictated the standards applicable to legal holds for much, if not all of the U.S., because most corporations operate in multiple jurisdictions and do not typically know in advance where they will be sued, so the safest course may be to apply the strictest standard, which is the standard in the Southern District of New York. Moreover, Judge Scheindlin is a highly prominent and influential jurist in the area of e-discovery and courts in other jurisdictions have looked to her for leadership in this area.
One of the things we observed in 2010 is that the Circuits were all over the map on the applicable standard for the imposition of sanctions, a point that was brought home in Judge Grimm‘s Victor Stanley II opinion. Similar to the preservation context, the impact on a multi-jurisdictional company is often that it is impossible to know in advance exactly which standard will apply. As a practitioner, it is challenging to know how to advise a client when you don‘t know where the litigation may end up.
It seems fairly obvious at this point that the most likely consequence of this inconsistency and uncertainty is that there will be some changes to the Federal Rules, most likely to Federal Rule of Civil Procedure 37. What the revised rule will say, however, and how far it will go remains to be seen, but there is clearly a growing cry for movement in the direction of uniformity, driven by the desire for greater predictability. This will take time because the rules process requires careful consideration and the opportunity for dialogue and feedback. It would probably be fair to say that Pension Committee and its progeny – particularly, Rimkus and Victor Stanley II – have served as the catalyst for this change.
The continuum of views on the necessity of prejudice to the requesting party in spoliation opinions by lower courts, even in the same jurisdiction, has ranged from Judge Scheindlin‘s rejection of the “pure heart, empty head” defense, to the “no harm, no foul” approach taken by Judge Francis in Orbit One. These cases are obviously very fact-dependent, and naturally, the law can vary by jurisdiction, but all of this variability has led some lawyers (and their clients) to throw up their hands in frustration. One option in situations where there has been a willful effort to destroy evidence, but where has not been prejudice to the requesting party, would be to shift the punitive consequence away from spoliation sanctions, per se, towards contempt. That way, the courts can differentiate the “mistake-makers,” where case management may be the more appropriate response, from the “wrongdoers,” where a more punitive and deterrent approach may be warranted.
Regardless of how the judiciary or Rules Committee chooses to resolve these thorny issues, the impact today is that expectations – and those actions that constitute basic competence – have irrevocably changed. Until any revision to the Federal Rules is made, organizations and their outside counsel need to take a hard look at preservation issues because the stakes are much higher than they were merely a year ago.