Steps for Avoiding Sanctions
California Lawyer

Steps for Avoiding Sanctions

October 2010


Earlier this year, federal Judge Shira Scheindlin - arguably the nation's most influential e-discovery jurist - imposed sanctions on 13 plaintiffs in a securities case because of what she deemed sloppy and inattentive document preservation and collection.

Gaps in document production had become evident when the defendants began taking depositions, and the court ordered the plaintiffs to provide declarations about their efforts to preserve and collect relevant files. In a closely watched opinion (Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F. Supp. 2d 456, (S.D.N.Y. 2010)), Judge Scheindlin described the plaintiffs' conduct as "either grossly negligent or negligent because they failed to execute a comprehensive search for documents and/or failed to sufficiently supervise or monitor their employees' document collection." (685 F. Supp. 2d at 477.) Some of the Pension Committee plaintiffs were sanctioned both financially and with an adverse inference jury instruction.

The case underscores the need for litigants to take their preservation and discovery obligations seriously, and the decision could serve as a road map for determining when certain e-discovery oversights are considered sanctionable. Judge Scheindlin, acknowledging that discovery conduct generally requires a case-by-case analysis, nonetheless offers clear guidance in Pension Committee. According to her opinion, once a "duty to discovery has been established, the failure to adhere to contemporary standards" - as outlined in the Zubulake opinions - can be considered gross negligence, a finding that is supported if litigants do not:

- issue a written litigation hold;

- identify the key players so that their records can be preserved;

- cease the destruction of electronically stored information (ESI), including data from former employees, that is in the litigant's possession, custody, or control; and

- preserve backup tapes of ESI if they are the sole source of relevant information.

The decision is already proving influential. A few weeks after Pension Committee, Judge Lee Rosenthal, another prominent e-discovery jurist, cited the opinion extensively when she issued a sanctions order in Rimkus Consulting Group, Inc. v. Cammarata (688 F. Supp. 2d 598 (S.D. Tex. 2010)). Though Rimkus adopted a more flexible approach to sanctions, it didn't question the basic tenets of Pension Committee. In fact, Judge Rosenthal praised Judge Scheindlin for having "done the courts a great service by laying out a careful analysis of spoliation and sanctions issues in electronic discovery." (688 F. Supp. 2d at 611.)

Still, the level of culpability required for imposing sanctions can vary. Rimkus was decided in the Fifth Circuit, where sanctions can be imposed only for "bad faith" destruction of evidence. In the Second Circuit, where Pension Committee was decided, sanctions also can be imposed for both negligent and grossly negligent spoliation. Similarly, in the Ninth Circuit, bad faith is not a prerequisite for sanctions (although courts in the Ninth Circuit tend to emphasize the presence of bad faith; see Glover v. The BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993)). California district and state court judges will likely look to Pension Committee for guidance regarding e-discovery and spoliation.

Gone are the days when discovery involved a few informal discussions with clients about saving and gathering documents for trial. But in the age of ESI, neither should it become an unmanageable process. As Judge Rosenthal noted in Rimkus, the adequacy of a party's efforts to preserve and collect relevant documents ultimately "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." (688 F. Supp. 2d at 613.)

Tony Schoenberg is a complex litigation partner at Farella Braun + Martel in San Francisco. He is the founding member and chair of the firm's E-Discovery Task Force.


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