March 02, 2010

LeClairRyan attorney Bill Belt says discovery battles could become game of “gotcha”

RICHMOND, Va. (2/1/10) – An opinion issued by Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York in January appears to mark an important milestone in the development of litigants’ duties to preserve and produce electronic evidence and counsel’s obligation to understand those duties, according to Bill Belt, a shareholder in LeClairRyan’s Richmond-based Discovery Solutions Practice Group.

“In the opinion given in Pension Committee of the University of Montreal Pension Plan, et al., v Banc of America Securities, LLC, et al., Judge Scheindlin--the author of a series of influential opinions (the Zubulake decisions) on this matter and a 2000 Law Review article that helped trigger the changes in electronic discovery--purports to expand upon those guidelines with a discussion of sanctions,” he says. “The decision strongly suggests that counsel now has an obligation to understand the electronic discovery rules and to advise clients on how to follow them.”

Early in the 87-page decision, Judge Scheindlin states, “By now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records – paper or electronic – and to search in the right places for those records, will inevitably result in the spoliation of evidence.” (A spoliation charge given by a judge to a jury allows it to consider presuming that lost data would have been helpful to the requesting party.) She goes on to list specific failures that support a finding of gross negligence when the duty to preserve has attached.

“The decision’s focus on procedural missteps may encourage greater focus in discovery battles on technical processes and turn discovery into extended games of ‘gotcha,’” Belt cautions. He singles out several areas where the opinion encourages counsel to redouble their efforts to meet the demands of electronic discovery rules, including a stronger focus on procedural requirements:

• Litigation holds. Written litigation holds as soon as litigation is “reasonably anticipated.”
• Record retention. Cessation of the routine deletion of records.
• Identification of “Key Employees” – those likely to have relevant documents. Key player identification and analysis must include current and former employees, and also include consideration of tangential employees and custodians.
• Collection process. Litigants must use reliable technology and ensure adequate instruction and supervision of custodians to identify, collect and preserve relevant evidence.
• Data preservation. Parties must take reasonable steps to preserve backup tapes when they are the sole source of potentially relevant information.
• Expert preparation. There may now be a need to explain the electronic discovery protocol and the technology used in greater detail.

Belt notes that the opinion characterizes innocent mistakes like the failure to collect documents from tangential players as “negligent,” thus appearing to heighten the standard of care followed in cases between the Zubulake opinions and Pension Committee. The decision sets out specific examples of conduct that the court believes would constitute willful, negligent or grossly negligent conduct, and applies a burden shifting analysis on the prejudice element of a spoliation charge, Belt observes.

“Moreover, ‘reasonableness’ and ‘proportionality’ limitations are not directly addressed in the opinion,” he continues. “In some earlier cases, there appeared to be an attempt to balance the scope of a litigant’s preservation and production efforts during discovery against the magnitude of the claim. This decision does not directly address the same balancing test in the context of the litigants’ duties.”

In the areas of attorney-client privilege and work product protections, he says the Court now expects that knowledgeable witnesses be prepared to testify about “[w]hich files were searched, how the search was conducted, who was asked to search, what they were told, and the extent of any supervision…,” according to the decision.

Additionally, in the wake of the ruling, “the requesting (’innocent’) party has little incentive to cooperate with producing (’spoliating’) parties on protocols for key person identification, culling procedures and production format,” Belt says. “It is also now unclear how far a party must go to preserve inaccessible ESI (electronically stored information), including backup tapes. In the past, ‘reasonableness’ was a consideration in any given case, but in this opinion the main consideration is whether the tapes contain relevant information that cannot be collected from another, more accessible source. Back-up tapes have long posed difficult questions to litigants and their counsel. They will continue to face difficult decisions following this ruling.”