The Evolving Law ofE-Discovery

Joseph J. Ortego, Esq.Nixon Peabody LLP

New York, NYJericho, NY

Ever-Growing Amounts of ESI

• Employment discrimination suit in which defendant failed to preserve relevant e-mails after the point at which litigation was reasonably anticipated

• Judge Shira Scheindlin found that the destruction was willful and sanctioned defendants with an adverse inference jury instruction

• Established the scope of ESI subject to discovery and the extent of a party’s duty to preserve ESI once litigation is reasonably anticipated.

Zubulake v. UBS Warburg LLC

Federal Rules Governing E-Discovery• 16(b): Provisions for e-discovery added to scheduling order.

• 26(a): ESI added to the list of required initial disclosures.

• 26(b): Scope & limitations of e-discovery defined.

• 26(f): ESI should be discussed during discovery-planning conference.

• 33(d): ESI added to the “option to produce business records.”

• 34: ESI added as a separate category of document production.

• 37: Creates an e-discovery safe harbor.

• 45: Technical requirements for issuing a subpoena amended to conform to new e-discovery rules.

• Form 35: Form revised to reflect Rule 26 amendment.

Judge Scheindlin’s 10 Steps To Avoid E-Discovery Sanctions

1) Ensure that there is a well thought out records retention policy in place for business purposes that takes into account any statutory/regulatory obligations.

2) Make sure there is someone in charge of records retention and that he/she knows what he/she is doing. That person probably should not be the head of the IT Department.

3) Establish a records retention committee that meets regularly. The committee should include general counsel, a senior executive, the head of IT, and the records retention manager.

4) Disseminate the records retention policy to all company employees andcontinually monitor whether the employees have understood and implemented the policy.

5) Set up a response team every time there is a litigation-based need to preserve documents.

6) Be sure to consult outside counsel regarding the retention policy and obtain their recommendations on responding to anticipated or actual litigation.

7) Retain an outside vendor, if the case warrants it, to assist in organizing any litigation holds.

8) Encourage outside counsel to raise the cost of preservation issues at the earliest time.

9) General counsel should be educated about the company’s records, available technology, accessibility of stored records, cost of storage, and cost of retrieving documents from that type of storage.

10) Be particularly careful to avoid the destruction of documents and issue litigation holds once a duty to preserve has attached.

THE LATEST BOMBSHELL:

Pension Committee of the University of Montreal

Pension Plan v.

Banc of America Securities, LLC

2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) (J. Scheindlin)

What sanctions are appropriate for

spoliation of ESI?

Spectrum of Culpability

Negligence GrossNegligence Willful

Least severe Most severe sanctions sanctions

• Failure to issue a written litigation hold = Gross Negligence

• Failure to collect ESI from key players = Gross Negligence or Willfulness (depending on surrounding circumstances)

• Destruction of e-mail or certain backup tapes (those that are the sole source of relevant information) after the duty to preserve has attached = Gross Negligence or Willfulness (depending on surrounding circumstances)

• Failure to obtain records from employees who only had a passing encounter with issues relevant to the litigation = Negligence

Relevance

&Prejudice

Required Elements for Imposition of Sanctions

• Control over evidence after obligation to preserve attaches

• Culpable state of mind

• Relevance and prejudice

Who bears the burden of establishing relevance and prejudice?

• Willful = presumption of relevance and prejudice

• Grossly negligent = within court’s discretion whether or not to presume relevance and prejudice

• Negligent = no presumption of relevance and prejudice

• Spoliating party always has opportunity to rebut presumption.

Appropriate sanctions should:

• Deter future spoliation

• Place the risk of erroneous judgment on spoliator

• Restore prejudiced party to position it would have been in if not for the spoliation

• Further Discovery

• Cost-shifting

• Fines

• Special Jury Instructions

• Preclusion

• Dismissal

Least Harsh

Most Harsh

Is Is Pension Pension CommitteeCommittee practical?practical?

A More Reasonable Approach:Rimkus Consulting Group, Inc. v. Cammarata

2010 WL 645253 (S.D. Tex. Feb. 19, 2010) (J. Rosenthal)

Two Important Distinctions from Pension Committee:

• Severe sanctions require a showing of bad faith.

• Regardless of the spoliating party’s culpability, relevance and prejudice of the missing evidence cannot be presumed.

• Pension Committee makes it clear that sanctions are possible whenever relevant information is lost and that such sanctions can be extremely damaging to a party’s case.

• While Judge Scheindlin’s steps require the use of a significant amount of resources, they should be followed to decrease the possibility of sanctions in future litigation.