Litigation Hold and Electronic Discovery Update


In 2003 Judge Shira A. Scheindlin of the United States District Court for the Southern District of New York set the standard for the preservation and production of electronic data and evidence by issuing the first of several now famous Zubulake opinions.[1] Earlier this year, Judge Scheindlin issued another opinion regarding these same issues and aptly titled her opinion "Zubulake Revisited: Six Years Later."

In Pension Committee of the Univ. of Montreal Pension Plan v. Banc of America Securities, LLC, et al., Judge Scheindlin makes several important statements that are critical to ensuring every parties' compliance with their obligations to preserve and produce electronic data. Initially, she reaffirms that the duty to preserve electronic data and documents arises when a party reasonably anticipates litigation. Thus, this obligation may arise well in advance of an actual lawsuit.

The Pension Committee opinion states that the party seeking imposition of a discovery sanction has the burden of proof. For less severe sanctions, such as cost shifting and fines, the court's inquiry is on the conduct of the spoliating party - not on whether documents lost were relevant to the case. For more severe sanctions, such as dismissal, evidence preclusion, or imposition of an adverse inference, the party seeking the sanction must prove that:

1. The opposing party had control and an obligation to preserve;

2. The opposing party acted with culpable state of mind with respect to the destruction and loss of evidence; and,

3. Missing evidence is relevant to claim or defense.

Relevance and prejudice is presumed if the spoliating party acted in bad faith or was grossly negligent. If the conduct is simply negligent, no presumption arises. If the court finds the imposition of a presumption is appropriate or that a jury should be permitted to make a presumption of relevance or prejudice, the burden shifts to the spoliating party to rebut the presumption.

Judge Scheindlin describes at great length specific actions that are simply negligent or rise to the level of gross negligence. She states that a party is grossly negligent from July 2004 forward if it fails to take the following steps related to discovery:

1. Issue a written litigation hold - this MUST direct preservation and create a mechanism for collection of relevant documents and ESI;

2. Identify key players and ensure that electronic and paper records are preserved;

3. Cease deletion of email and preserve records of former employees in your possession; and,

4. Preserve back up tapes when they are the sole source of relevant information or if they relate to key players.

Judge Scheindlin's opinion states that failure to collect relevant documents from ALL employees is likely negligence. Likewise, failure to take appropriate measures to preserve relevant electronically stored information (ESI) is negligent. She also states that failure to assess the accuracy and validity of selected search terms for ESI is negligence.

She states that directing employees to search their own computers without supervision from counsel or management is negligence. Finally, Judge Scheindlin states that employees inexperienced with litigation hold matters directed to oversee such efforts must be trained and must be in constant contact with counsel and management.

Judge Scheindlin makes it clear that in her court these obligations are ongoing and employees must be reminded of these obligations until the litigation is finally resolved. While the Pension Committee opinion is not controlling in Tennessee courts, Judge Scheindlin is widely viewed as the leading judicial authority on these issues and it will be very risky for any party to ignore her opinions. Similarly, compliance with her directives on electronic discovery will most likely provide a party with significant protection against unwarranted claims of spoliation of evidence.

For more information on electronic discovery or the Pension Committee opinion, please contact any member of Waller Lansden's Trial and Appellate Litigation practice at 800-487-6380.

[1] Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309 (S.D.N.Y. 2003).

The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations.  As always, readers should consult a qualified attorney for specific legal guidance.