© 2009 hogan & hartson llp. all rights reserved. pension committee v. banc of america secs.,...

© 2009 Hogan & Hartson LLP. All rights reserved.

PENSION COMMITTEE v. BANC OF AMERICA SECS., LLC

Diving Deeper Into the Zubulake

Alvin F. Lindsay

24 February 2010

2© 2009 Hogan & Hartson LLP. All rights reserved.

Pension Committee v. Banc of America Secs., LLC, __ F.R.D. __, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010)

“Zubulake Revisited: Six Years Later”


Why the title?

“Those who cannot remember the past are condemned to repeat it.”

George Santayana, Reason in Common Sense, Vol. 1 of The Life of Reason (1905) (Prometheus Books 1998 at 82).


The Zubulake Opinions

Zubulake I: To what extent is inaccessible data discoverable, and who should pay?

May 2003 July 2003 Oct. 2003 July 2004

Zubulake III: Balances and allocates discovery costs for inaccessible data

Zubulake IV: Duty to preserve when litigation reasonably anticipated.

Zubulake V: Spoliation adverse inference instruction.


Pension Committee

Zubulake I: To what extent is inaccessible data discoverable, and who should pay?

May 2003 July 2003 Oct. 2003 July 2004

Zubulake III: Balances and allocates discovery costs for inaccessible data

Zubulake IV: Duty to preserve when litigation reasonably anticipated.

Zubulake V: Spoliation adverse inference instruction.

Pension Committee Complaint filed in S.D. Fla.

Feb. 2004

Funds placed into receivership in S.D. Fla.


Case transferred to S.D.N.Y

The Pension Committee Chronology

2007 Oct. 2007 June 2008

Citco Defendants identify “gaps” in Plaintiffs’ production - 311 documents not produced

PSLRA STAY OF DISCOVERY

DEPOSITIONS &DECLARATIONS

2004 Oct. 2005


What’s So New?

Discovery failures now linked to concepts of tort


Tort Concepts

“Negligence” is conduct that:

• Falls below the standard established by law for the protection of others;

• Caused by heedlessness or inadvertence, by which the negligent party is unaware of the results;

• May also arise where possible consequences carefully considered and best judgment used.


Tort Concepts

“Gross negligence” is conduct that:

• Fails to exercise even that care that a careless person would use

• Differs from ordinary negligence in degree only, not in kind.


Tort Concepts

“Willful, Wanton and Reckless” conduct:

• Is unreasonable and intentionally done;

• In disregard of a known or obvious risk;

• Highly probable to cause harm;

• Conscious indifference to consequences.


The Pension Committee Holdings

• No willful misconduct

• Six plaintiffs grossly negligent

– No collection until 2007

– Failure to collect from key players

– Failure to preserve back-up tapes

– Failure to supervise collection

– False and misleading declarations

• Spoliation instruction, costs and fees awarded

• Seven plaintiffs negligent

– Untimely litigation holds

– Insufficient custodian searches

– Failure to supervise collection

– Failure to search in appropriate places

• Costs, fees and further discovery awarded


The Pension Committee Continuum

Negligence

Gross Negligence

Willful/W

anton

Bad Faith

} Failure to obtain records from all employees



Negligence

Gross Negligence

Willful/W

anton

Bad Faith

} Failure to take “all appropriate measures” to preserve ESI



Negligence

Gross Negligence

Willful/W

anton

Bad Faith

}Failure to issue written litigation hold



Negligence

Gross Negligence

Willful/W

anton

Bad Faith

}Failure to collect information from files of former employees



Negligence

Gross Negligence

Willful/W

anton

Bad Faith

Failure to preserve evidence resulting in loss or destruction of relevant information.

}



Negligence

Gross Negligence

Willful/W

anton

Bad Faith

}Failure to collect records from key players



Negligence

Gross Negligence

Willful/W

anton

Bad Faith}“burning, shredding, wiping hard drives”


Possible Sanctions

• Terminating sanctions (default or dismissal)

• Preclusion of evidence (issue/claim preclusion)

• Adverse-inference instruction

• Fines

• Cost shifting

• Additional discovery


Adverse Inference Instructions

1. Issue Preclusion:

Directs jury to deem certain facts admitted.

2. Direction to Presume:

Directs jury to presume (subject to rebuttal) that missing evidence would have been favorable to innocent party (relevance and prejudice).

3. “Spoliation Charge”:

Permits (but does not require) a jury to presume the lost evidence is both relevant and favorable to the innocent party (relevance and prejudice).



Negligence

Gross Negligence

Willful/W

anton

Bad Faith

Relevance & Prejudice



Negligence

Gross Negligence

Willful/W

anton

Bad Faith

Burden onInnocent Party


“May seem unfair”but prevents “gotcha”litigation game.



Negligence

Gross Negligence

Willful/W

anton

Bad Faith

Rebuttable Presumption


Permitte

d-Imposed


Zubulake IV, 220 F.R.D. 212, 219-20 (S.D.N.Y. 2004)

“In practice, an adverse inference instruction often ends litigation – it is too difficult a hurdle for the spoliator to overcome. The in terrorem effect of an adverse inference is obvious. . . . Accordingly, the adverse inference instruction is an extreme sanction and should not be given lightly.”


A Very Adverse Instruction . . .

“I instruct you, as a matter of law, that each of these plaintiffs failed to preserve evidence after its duty to preserve arose. This failure resulted from their gross negligence in performing their discovery obligations. As a result, you may presume, if you so choose, that such lost evidence was relevant, and that it would have been favorable to the Citco Defendants.”


Key Considerations Resulting from Pension Committee:


Preservation Duty

• Applies to plaintiffs too!

• Existed since 1985 (Roe and Bills)

• Here, duty triggered in April 2003 when,– Fund filed bankruptcy

– Complaint filed with BVI Financial Services Commission

– Certain plaintiffs had retained counsel

– Communication initiated with other plaintiffs


Litigation Hold

• Must be in writing

• Instruction to “collect” not a litigation hold:– No direction to preserve all relevant records

– No mechanism for collecting records for search by someone other than employee

• Plaintiff’s must issue before filing


Supervision of Collection

• Self collection insufficient (in this case)

• Bad when collector– “had no experience conducting searches”

– “received no instruction on how to do so”

– “had no supervision during collection”

– “had no contact with Counsel during the search”

• Should have– “been taught proper search methods”

– “remained in constant contact with Counsel”

– “been monitored by management”


Consider What Should Exist

• Plaintiffs had a “fiduciary duty” to conduct due diligence, thus

– “Surely records must have existed”

– “The paucity of records produced . . . and the admitted failure to preserve . . . leads inexorably to the conclusion that relevant records have been lost or destroyed.”


Custodians

• Failure to collect from key players – gross negligence

• Failure to collect from “all employees” – negligence

• Former employees?

• Evaluate early and often


Address Other Possible Sources

• “[P]ersonal computers outside of . . . office”

• Palm Pilot

• Other offices

• Other servers


Stay of Discovery

•PSLRA (or other) stay of discovery does not justify:

– Failure to preserve

– Failure to issue litigation hold

– Failure to “focus efforts” on discovery


Declarations

•Court emphasized importance of declarations’ accuracy, but

– 4 had to be amended

– 1 included information not previously revealed

– “most” were “false and misleading”

– and/or issued without personal knowledge

•Memorialize preservation and collection efforts!!


Memorialize

• What files were searched?

• How search was conducted?

• Who was asked to search?

• What they were told?

• Extent of any supervision?


Backup Tapes – Preservation

• No requirement “all” backup tapes preserved.

• Preserve “if such tapes are the sole source of relevant information”

• For example, “if active files of key players are no longer available”


Backup Tapes – Search

•Routine searches not required except:

– Relevant material existed but was not produced;

– Or, when relevant material should have existed but was not produced.


Not Addressed In Pension Committee

•Proportionality (Rule 26(b)(2)(C)(iii))

•Early attention (Rule 26(f))


Final Thoughts . . .

• Pension Committee resulted from “ignorant” or “indifferent” practices.

• “While litigants are not required to execute document productions with absolute precision, at a minimum they must act diligently and search thoroughly at the time they reasonably anticipate litigation.”

• Observe the Rule of Reason.


Lagniappe

www.TechnologyInLitigation.com


Today’s Presenter: Alvin F. Lindsay

Mr. Lindsay is a partner at Hogan & Hartson LLP where he specializes in complex commercial litigation and arbitration. He is the author of a book and DVD titled Technology In Litigation published by the National Institute for Trial Advocacy (NITA). The Associated Press calls Mr. Lindsay “an expert in technology and litigation,” and The Wall Street Journal quoted him extensively in explaining the December 2006 revisions to the Federal Rules of Civil Procedure to encompass electronically stored information.

Mr. Lindsay hosts the website TechnologyInLitigation.com, and can be reached at [email protected].


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© 2009 hogan & hartson llp. all rights reserved. pension committee v. banc of america secs.,...

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