ESI Preservation 2010 Case Law Update Contents TITLE PAGE & INTRODUCTION 1 THE THREE SEMINAL ESI CASES OF 2010 2 ADDITIONAL SELECTED CASES OF 2010 6 CONCLUSION 10 COMPLETE OPINIONS 11 OFFICE LocATIONS 551 1 2010 ESI Preservation Case Law Update uring the past decade the obligation to In selecting ESI-related opinions to address we have preserve electronically stored information deliberately steered away from many cases with (ESI) has continued to be shaped and defined egregious fact patterns where imposition of a severe Dby case law across the United States. 2010 sanction was never in doubt. The use of programs named was no different in this regard. For your review, we “File Shredder” and “Privacy Eraser Pro” to deliberately provide summaries of what we think were 2010’s most destroy ESI on the eve of an inspection makes for noteworthy cases in the area of ESI preservation. interesting reading.1 However, opinions pertaining to such behavior are not particularly instructive relative to You are likely already well-familiar with spoliation methods by which a litigant can comply with preservation in general and the sanctions a court can impose for obligations. Therefore, we have instead focused primarily a litigant’s failure to properly preserve evidence, on cases in which better preservation practices, policies including ESI. This letter focuses primarily on the and procedures at an organization-wide level could have obligations that arise, and the potential sanctions that prevented spoliation of ESI. can be imposed, once a reasonable anticipation of litigation (or an investigation) has triggered the duty For many potential litigants, ESI preservation issues are to preserve. There is no question that certain severe treated as secondary in importance to the underlying sanctions can be a death sentence in litigation, including substantive issues. The Rimkus opinion responds to such the preclusion of evidence, an adverse inference treatment as follows: instruction to a jury, and obviously a dispositive sanction such as a default judgment or a dismissal. “Spoliation of evidence--particularly of electronically Although the federal circuits have slightly varying stored information--has assumed a level of importance standards, all federal courts consider the spoliating in litigation that raises grave concerns. Spoliation party’s degree of culpability, the relevance of the lost allegations and sanctions motions distract from the merits evidence, and the resulting prejudice on the innocent of a case, add costs to discovery, and delay resolution. party when determining whether to impose a sanction The frequency of spoliation allegations may lead to and the severity of the sanction. decisions about preservation based more on fear of potential future sanctions than on reasonable need for Provided below is a review of eight relevant cases, information. Much of the recent case law on sanctions including what we have deemed the three seminal ESI for spoliation has focused on failures by litigants and their cases from the past year: Pension Committee, Rimkus, lawyers to take adequate steps to preserve and collect and Victor Stanley II. Although the three opinions differ information in discovery.”2 in many regards, they each remain consistent with several basic trends we have observed during the past year: Certainly we all have a natural inclination to focus on the merits of a case rather than the preservation of ESI. ► courts continue to display less tolerance for However, we believe that the implementation of a legal preservation errors; hold policy and associated set of procedures, along with a general understanding of e-Discovery case law, will ► Preservation errors often have a major impact on the help prevent spoliation allegations and sanctions motions litigation even when not fatal; and which “distract from the merits of a case, add costs to ► Preservation errors are less likely to occur when a discovery, and delay resolution.” litigant follows reasonable and appropriate steps, including the issuance of a legal hold plus follow-up 1 supervision and monitoring of the hold. See Peal v. Lee, 403 Ill. App. 3d 197 (Ill. App. Ct. 1st Dist. 2010). 2 Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 607 (S.D. Tex. 2010). 2 The Three Seminal ESI Cases of 2010 Pension Committee v. Banc of America negligent manner. Where a party destroys evidence Southern District of New York, in bad faith, that bad faith alone is sufficient January 15, 2010 circumstantial evidence from which a reasonable With little doubt, the most discussed legal opinion of fact finder could conclude that the missing evidence 2010 pertaining to e-Discovery and ESI is Pension was unfavorable to that party. Committee v. Banc of America.3 You may recall that we distributed an update on this case last year. ► Although many courts in this district presume This opinion, authored by Judge Shira Scheindlin relevance where there is a finding of gross of Zubulake fame, clarified numerous preservation negligence, application of the presumption is not responsibilities of litigants. In fact, the court held required. However, when the spoliating party was that certain failures in the preservation of ESI can be merely negligent, the innocent party must prove deemed gross negligence, thereby permitting a court both relevance and prejudice in order to justify the to impose sanctions based on the culpability of the imposition of a severe sanction. The innocent party spoliating party. Specifically, the court identified the may do so by adducing sufficient evidence from following examples of gross negligence in the context which a reasonable trier of fact could infer that the of ESI preservation: destroyed or unavailable evidence would have been of the nature alleged by the party affected by its ► Failure to issue a written litigation hold; destruction. In other words, the innocent party must ► Failure to cease routine deletion of e-mail; present extrinsic evidence tending to show that the destroyed e-mails would have been favorable to its ► Failure to collect ESI from key players; case. ► Failure to collect ESI from retained files of former ► Courts must take care not to hold the prejudiced employees; and, party to too strict a standard of proof regarding ► Failure to preserve backup tapes if sole source of the likely contents of the destroyed or unavailable relevant info. evidence, because doing so would allow parties who have destroyed evidence to profit from that In addition to providing bright-line rules for which ESI destruction. preservation failures constitute gross negligence, Judge Based upon the loss of ESI caused by the preservation Scheindlin explained when a court should presume failures of many plaintiffs in the underlying that lost evidence was relevant to the litigation and that litigation, Judge Scheindlin presumed relevance the loss was prejudicial to the requesting party4: and prejudice and ruled that at trial the jury would ► Relevance and prejudice may be presumed when receive an adverse inference instruction. This sanction the spoliating party acted in bad faith or in a grossly effectively destroyed the plaintiffs’ case. Notably, an important take-away from this case stems from Judge 3 Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Scheindlin’s bold announcement that her Zubulake Secs, LLC, 2010 U.S. Dist. LEXIS 4546 (S.D.N.Y. Jan. 15, 2010). 4 Bulleted quotations paraphrased from Pension Committee [internal series of opinions from 2003 to 2006 had placed quotations omitted]. 3 litigants on notice of ESI preservation obligations, destroyed evidence that was subject to the duty to including the requirement to issue a legal hold. This preserve. However, under the Fifth Circuit’s standards, indicates the clear trend in this area of law that in the court did not issue a dispositive sanction, as recent years courts have had significantly reduced requested by the non-spoliating party. Instead of tolerance for ESI preservation failures.. focusing on the spoliating party’s failures, the Rimkus court highlighted the absence of prejudice due to Rimkus Consulting Group v. Cammarata the availability of extensive remaining evidence Southern District of Texas, which supported both the employer’s counter claims February 19, 2010 and its defenses to the claims brought by its former This opinion, by Judge Lee Rosenthal of the Southern employees. As a result, the court held only that the District of Texas, received extensive publicity jury could hear evidence of the employees’ deletion during the first half of 2010 as it was issued in the of e-mails and could infer that the destroyed evidence wake of Pension Committee and is viewed by many would have been favorable to the employer if it commentators as a response to the harsh sanctions believed that the employees committed intentional imposed by Judge Scheindlin. However, despite an spoliation. Additionally, the employees were ordered apparent surface-level conflict between these two to pay fees and costs associated with the litigation as it seminal cases, the analysis of sanctions in Rimkus pertained to the spoliation issue. was based on Fifth Circuit case law rather than Second Circuit case law as in Pension Committee. Despite a seemingly conflicting result withPension Nevertheless, many e-Discovery commentators have Committee, upon close analysis the Rimkus decision considered these two cases to be dueling opinions was based largely on its facts and on a different due to the difference in the severity