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A Failure to Preserve: Why Do E-Discovery Sanctions Still Happen?

Sunday, August 21, 2016   (0 Comments)
Posted by: Jason Krause
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One of the founding principles of e-discovery practice is that parties have a duty to preserve evidence as soon as litigation is anticipated. The law was clear even before 2004, when U.S. District Judge Shira A. Scheindlin wrote a series of influential opinions in Zubulake v. UBS Warburg outlining that duty. 

Despite this clarity, lawyers and their clients continue to be sanctioned for a failure to preserve electronic records. For example, Farrell Fritz’s blog All About E-Discovery highlights two cases from New York State issued just this summer in which parties were penalized for failing to fulfill their duty to preserve evidence.  

In the matter Arbor Realty Funding, LLC v Herrick, Feinstein LLP 2016 NY Slip Op 05065 [140 AD3d 607] June 28, 2016 the court says, “It is undisputed that Arbor's obligation to preserve evidence arose at least as early as June 2008, when Arbor retained counsel in connection with its claims against Herrick. However, Arbor did not issue a formal litigation hold until May 2010.” 

In that case, the plaintiff retained counsel in June 2008 related to claims against Herrick following a series of construction accidents. As the court noted, the plaintiffs should have reasonably anticipated litigation and ended record destruction policies. Instead, they continued recycling of backup tapes, deleting emails, erasing hard drives and deleting email accounts of departing employees until May 2010.  

Meanwhile, in the Southern District, Judge Karas imposed an adverse inference and more than $40,000 in attorneys’ fees for another failure to issue a litigation hold. That case, Congregation Rabbinical College of Tartikov, Inc., v. Village of Pomona, involves a contested land use application for a rabbinical college.  The sanctions that were imposed by the Court for its failure to preserve angry Facebook posts by one of the Village of Pomona Trustees related to the matter. This occured despite the fact the lawsuit was commenced in 2007, 6 years before the Trustee’s Facebook posting. 

No Excuses 

The law is clear. In the case University of Montreal Pension Plan v. Bank of America Securities, LLC, 685 F. Supp. 2d 456 (S.D.N.Y. 2010), Judge Scheindlin issued sanctions because parties had neglected their duty to preserve evidence. She said at the time that she was frustrated to find that parties in that case seemed not to have learned to properly handle electronically stored information since she had last issued e-discovery sanctions in Zubulake six years earlier. 

Twelve years later, the problem still arises. Tom O’Connor, Senior E-Discovery Consultant with
Advanced Discovery says the problem is a fundamental disconnect between lawyers and their clients.“I think that litigators don’t know how to communicate with their clients the way a transactional attorney does,” says O’Connor. “Litigators are reactive and, except for their biggest clients, they are probably not talking to them on an ongoing basis.” 

Helen Bergman Moure is the Principal with Lex Aperta, where she consults with clients involved in e-discovery disputes. She also presents ACEDS’ CEDS Preparation course for students looking to become Certified E-Discovery Specialists. Though she says while it is impossible to know exactly what went wrong in a specific case based only on the court filings and opinions, the most common culprits are often basic errors.

These include lawyers failing to properly instruct a client regarding the duty of preservation; clients failing to adequately implement a comprehensive litigation hold (or, a failure by the lawyer to properly oversee that process); poor communication within large organizations and the lack of a single point of contact; and lack of organization and record-keeping by whoever is charged with the preservation process. “These cases show that despite more than a decade of focus on spoliation of electronically stored information and the need to take proactive steps to preserve, lawyers and clients are still not always getting it right,” she says. 

Who’s Watching the Watchers? 

Oversight of the litigation hold process seems to be a common breaking point for the litigation hold process. In many cases, a well-crafted and well-intentioned litigation hold order is issued but clients fail to follow through or implement the whole order. “You see a lot of times a lawyer does the right thing and sends a good litigation hold order, but then they do no monitoring or follow-up,” says O’Connor. “A litigation hold is not a one-and-done kind of thing. It takes work and follow-through.” 

Another fundamental breaking point is that it is not always clear to a party then is a litigation hold triggered. For example, O’Connor says that in an employment dispute there may be many trigger points. “Does it begin when an employee files a complaint with the human resources department? Makes a complaint to their union? Or is it when your company receives a letter from the EEOC (Equal Employment Opportunity Commission)?” he says. “Some of those are obvious, but in some cases it’s not clear when the exact trigger point is. Unless you pin that down the scope of your preservation could be inadequate.”   

However, not all failures can be pinned on simple oversight, but may be due to a more complete failure under the law. In the recent case Fulton v. Livingston Fin., LLC, (W.D. Wash. July 25, 2016) the court found attorneys had misrepresented law and fact, including citations to case law that were no longer valid following the December 2015 amendments to the Federal Rules of Civil Procedure. The court said counsel’s reliance on case law applying outdated standards “inexplicable” and “inexcusable” where the “December 1, 2015 amendments to Federal Rule of Civil Procedure 26(b)(1) ‘dramatically changed’ what information is discoverable.” 

Fixing the Gap 

Both Moure and O’Connor agree that education is necessary to help close this gap. O’Connor laments that basic preservation tactics and litigation hold policies are not taught in enough law schools, particularly in Civil Procedure classes. “To my knowledge, it is very rare that this issue is taught even tangentially in most law schools today,” he says. “It’s no surprise that many attorneys today have no idea how to talk to their clients about litigation holds.” 

However, there is good news that under amended Federal Rule of Civil Procedure 37(e), the Rules have replaced the old “safe harbor” provision and now hold that if lost Electronically Stored Information (ESI) can be replaced or restored no sanction will be imposed. If ESI cannot be replaced and if the requesting party is prejudiced, court may order sanctions “no greater than necessary to cure that prejudice.” 

But the bottom line remains in place- lawyers need to communicate with clients about their duty to preserve before litigation happens. In Moure’s CEDS Prep course, she teaches litigation support professionals to have policy in place which identify personnel and assign responsibilities throughout the process. Parties must have written policy and forms available, and have tracking procedures in place. 

A written notice should include description of subject matter list examples of ESI storage locations, provide clear instructions, and identify a point person to answer questions, and help with problems. “The fact that we are still seeing serious sanctions as a result of spoliation indicates the further need for education and implementation of basic, defensible, and repeatable processes by litigators of all kinds,” says Moure. “The good news is that getting it right isn’t rocket science.  It involves basic common sense, proper planning, good communication, and meticulous organization and record-keeping.”

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