This is the last in a series of four 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. The second reproduced the next three articles by Kevin F. Brady, William P. Butterfield, and Maura R. Grossman. The third in the series presented the articles by John J. Jablonski, Browning E. Marean, and me. This final blog in the series presents the articles of Jonathan Redgrave, Paul Weiner, and Denise Talbert.
As I said before, this is a pretty good set of articles that not only facilitate in-depth understanding of Pension Committee, but also provide an interesting glimpse into the many attitudes, styles, and points of view of leaders in this dynamic area of the law.
Pension Committee Renews Focus on Education and Execution
By Jonathan Redgrave
When Judge Shira Scheindlin issued her decision in Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, in January of 2010, many observers (including me) predicted that the case would be widely-cited. That prediction has proven true, with multiple citations in cases, briefs and articles in the past twelve months. Each of those citations have their own story for why and how they refer to the Pension Committee decision and certainly some take issue with parts of the opinion while others cite it as governing authority.
Stepping away from the specific facts and holdings of the case, the Pension Committee decision is perhaps most notable for the way in which it has galvanized dialogue on three core issues that impact cases across the country in different Circuits and in state courts:
(1) the criteria for evaluating whether certain discovery failings constitute harmless conduct, negligence, gross negligence or willfulness;
(2) the interplay between any prejudice suffered by a requesting party and the applicable burden of proof necessary to establish the basis for any sanctions; and
(3) identifying the possible sanction remedies appropriate and proportional to the demonstrated culpability and the actual prejudice suffered.
The ensuing discussion of these issues in academic literature and in 2010 decisions such as Rimkus, Victor Stanley and Orbit One confirms that the law remains unsettled in many respects and that variation between federal Circuits on spoliation issues is significant. Importantly, however, Judge Scheindlin‘s Pension Committee opinion has once again (like the Zubulake progeny) helped frame the debate across the board.
In terms of immediate impact, Judge Scheindlin‘s opinion in Pension Committee made clear that, at the end of the day, litigants in other cases must realize that they will need to think through and be prepared to explain why the efforts in their cases were reasonable, appropriate and in accordance with accepted practices at the time those efforts were undertaken. Significantly, even with the guidance provided in the Pension Committee opinion and in other cases, this reckoning does not look to a talismanic checklist because, in Judge Scheindlin‘s words, “[e]ach case will turn on its own facts and the varieties of efforts and failures is infinite.” Moreover, Judge Scheindlin explicitly (and correctly in my view) recognized that “[c]ourts cannot and do not expect that any party can meet a standard of perfection.”
Thus, the Pension Committee opinion hammered home the fact that parties and counsel have to exercise reasonable, good faith judgments in discovery matters and, not surprisingly, be able to defend that exercise of judgment down the road. Indeed, Judge Scheindlin described her after-the-fact role as making “a judgment call” where the court will employ “‘a gut reaction‘ based on years of experience as to whether a litigant has complied with its discovery obligations and how hard it worked to comply.” While perhaps stating the obvious, Judge Scheindlin‘s description of her role has renewed the focus of parties and counsel on the need for education, execution and documentation with respect to acceptable and defensible practices for discovery matters, which is a benefit for all.
The Importance of Being Transparent
By Denise J. Talbert
I have a confession: When I first read Pension Committee, I was taken aback. As someone who spends most of the day partnering with clients to ensure compliance with document preservation, collection and production obligations, it was bracing to me because of the potential implications it had on me and my clients. I can‘t say that I agree with all of the positions that Judge Scheindlin wrote in her opinion, but after I had time to digest it, I have been able to identify some helpful practical implications.
It‘s interesting to reflect back on the last year. Pension Committee didn‘t really prompt a lot of changes in how I counseled my clients from the standpoint of understanding all discovery-related actions would be judged in the rear-view mirror and the importance of documentation, documentation, documentation. But I believe Pension Committee has provided the catalyst for proactive discussions with some clients about why legal holds and the whole preservation process continues to be so very important and more complicated than it would seem at first blush. Following Pension Committee, more and more clients are receptive to having a dialogue around legal hold practices that includes, for instance, a representative from the IT department, a representative from human resources, etc. As a result, we have more of an “interdisciplinary” group of individuals working together to avoid some of the really bad things that could happen.
I think a second outcome from Pension Committee is reinforcing the import of mutual transparency. The old school of keeping your cards close to the vest when it comes to data preservation, collection and production efforts just won‘t cut it. The value of cooperation, collaboration and communication with both opposing counsel and the courts is clear. This requires greater documentation – keeping track of every interaction and each decision along the way to both manage expectations and create that all-important audit trail for defensibility. By doing so, we‘ve overcome spoliation motions or avoided them altogether. It‘s not perfection, but good faith, reasonableness and proactive steps that are the standard (and, hopefully, Judge Scheindlin would agree).
As an aside, I‘ve also seen success in using cases like Pension Committee and its progeny to help inside counsel make the business case for investing the time and money in records management process improvement and other information management initiatives. The business team can better understand the value, and the real consequences of failing to act.
I do have concerns. The lack of uniformity across jurisdictions that requires responding to the harshest standards in multi-jurisdictional litigation. The rather cavalier attitude that comes across in some of these opinions when looking at our actions through the benefit of hindsight. The uncertainty of self-collection as a reasonable and proportional response to many litigation claims. Seeming to equate preservation with collection and not allowing parties to “preserve in place.” But in the end, when faced with opinions like Pension Committee, we need to counsel our clients to adopt consistent and defensible procedures and remain actively engaged, ask more questions, validate the outcomes, and document the steps along the way. We also become stronger advocates for the adoption of practical, reasonable and proportional e-discovery rules. And that‘s a good thing.
E-Discovery Is Here to Stay!
By Paul D. Weiner
Once again, the Legal Community owes Judge Scheindlin a debt of gratitude for issuing a landmark opinion on e-discovery. Just like the Zubulake line of cases that laid the groundwork for what has become a multibillion-dollar-a-year subspecialty of the law, Pension Committee once again establishes a baseline set of contemporary standards for the preservation, collection, review and production of electronically stored information (“ESI”) in litigation. The impact of this decision is felt most strongly in three key areas:
1. E-Discovery is not a paper tiger
There is no question that we live in a digital world and the volume of ESI is staggering. By way of example only: billions of e-mails are sent and received by U.S. businesses everyday; a single laptop computer can store the equivalent of 40 million typewritten pages of paper documents; Facebook users collectively spend 6 billion minutes a day on Facebook; in the United States alone, 3.5 billion cell phone text messages are sent everyday; there are about 50 million “tweets” on Twitter everyday; and over 1.5 billion people use the Internet worldwide. Amazingly, however, some clients, lawyers and judges still do not view e-discovery as a serious issue in litigation or view it as something that “other parties in other cases” have to deal with.
The Zubulake cases served as a proverbial wake-up call that squarely put “parties and their counsel . . . fully on notice of their responsibility to preserve and produce [ESI],” in accordance with “rapidly evolving” guidance and developing standards. Pension Committee had the same awakening effect. It made clear that 6 years later, at least in the Second Circuit, certain duties are so well established that they have become the contemporary standards of the day, and failure to follow those standards – even if not done willfully or in bad faith – will result in serious consequences, including an adverse inference instruction. (It should be no surprise to anyone that shortly after the adverse inference rulings were issued in Pension Committee, the case promptly settled.)
Thus, Pension Committee reinforces that, in today‘s digital world, when a duty to preserve has been triggered, activities like issuing written litigation holds, identifying key players and preserving their electronic and paper records, and preserving the records of former employees, especially in the Second Circuit, are not optional. While this may not seem like an eye-opening proposition to those of us who “live and breathe” e-discovery, it is often difficult medicine to swallow for clients and counsel that are not familiar with those processes, especially when coupled with challenging (and often time consuming, disruptive to day-to-day business, and expensive) recommendations about what needs to be done to properly meet e-discovery obligations in complex cases.
2. E-Discovery is a two-way street
Simply stated, e-discovery is a two-way street. Preservation, search, and production burdens, as well as sanctions for improper conduct, apply to plaintiffs as strongly as defendants, even in asymmetrical (e.g., single plaintiff v. corporation) cases. See, e.g., Leon v. IDX Sys. Corp., 2006 WL 2684512 (9th Cir. Sept. 20, 2006) (affirming spoliation sanction and dismissal of plaintiff‘s ADA/discrimination lawsuit because plaintiff wiped the unallocated space on his laptop‘s hard drive before turning it over to defendant‘s expert for examination); Kvitka v. Puffin Co., LLC, 2009 WL 385582 (M.D.Pa. Feb. 13, 2009) (dismissing plaintiff‘s lawsuit because plaintiff threw away “old” laptop upon purchasing a new one, after the duty to preserve had been triggered).
Yet, in my experience, there is still a perception among litigants, counsel and some judges that e-discovery obligations somehow apply only or with greater force to defendants. Pension Committee makes clear that all parties on each side of the “versus” in a lawsuit have duties and responsibilities with respect to e-discovery, and that failure to abide by them could have serious consequences. Indeed, in Pension Committee, Judge Scheindlin not only sanctioned the plaintiffs for e-discovery misconduct, but she also instructed that: “[a] plaintiff‘s duty is more often triggered before litigation commences, in large part, because plaintiffs control the timing of litigation.” See also, Rimkus v. Cammarata (“The alleged spoliators are the plaintiffs in an earlier-filed, related case.”)
This issue is particularly important as the sources of ESI that plaintiffs control, e.g., home/personal e-mails and computers, text messages, social networking communications, blog postings, “tweets,” etc., continue to emerge as technology develops and expands.
3. Defining the contours for potential national standards
Finally, decisions like Pension Committee and its progeny define the contours of the many unsettled questions that still remain in the ediscovery world, and set the stage for discussions around whether national standards are warranted, and if so, what those standards should be. See, e.g., Rimkus v. Cammarata (noting that unlike the Second Circuit where Pension Committee was decided, the First, Third, Fourth, Fifth, Seventh, Eighth, Ninth, Tenth, Eleventh and D.C. Circuits all require some showing of “bad faith,” severe prejudice or intentional misconduct before severe sanctions like an adverse inference instruction may be imposed); Victor Stanley II, “Spoliation Sanctions by Circuit” Chart/Appendix (column 1, addressing the “Scope of Duty to Preserve,” and noting while some jurisdictions require actual “control” over data for preservation/sanctions purposes, others jurisdictions expand the duty to non-party data over which a party has the “right, authority or practical ability” to obtain); Is It Time For a Federal Rule on Preservation, Litigation News, Aug. 1, 2010.