United States District Judge Shira Scheindlin in Manhattan's federal court has been as one of the leading lights in the federal judiciary in the field of electronic discovery since her landmark Zubulake v. UBS decisions in 2003 and 2004. This year, six years after her Zubulake decision about attorneys' affirmative duty to monitor compliance with the eDiscovery rules, Judge Scheindlin issued another opinion that may have a similar impact on eDiscovery practice in federal courts around the country. On January 15, 2010, Judge Scheindlin issued an opinion in The Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, No. 05 Civ. 9016 (SAS) (S.D.N.Y. Jan. 15, 2010), which she entitled "Zubulake Revisited: Six Years Later." Her opinion provides useful guidance to attorneys and electronic discovery professionals in their efforts to make sure their clients preserve relevant evidence for use in litigation and avoid sanctions. Click here for a copy of the judge's amended opinion and order in the case.
The case concerns two hedge funds that ended up in liquidation. The plaintiffs in the case were investors that allegedly lost $550 million when the hedge funds failed. The plaintiffs sued the funds' former directors, administrators, auditor, broker, and fund custodian under federal and state securities laws.
I am sure I will be writing more about this important decision in the future, but wanted to introduce it to you by providing some highlights from it and setting the stage for further articles. At the outset, Judge Scheindlin states that "the courts have a right to expect that litigants and counsel will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated, and that such records are collected, reviewed, and produced to the opposing party." When a party fails to preserve evidence, the party's conduct may amount to negligence, gross negligence, or willfulness. The judge's opinion defines these concepts. She also discusses when sanctions are appropriate. She then applies the law as stated to the facts of the case and ends up sanctioning the plaintiffs for negligent or gross negligent conduct in failing to preserve evidence.
If you are concerned about avoiding eDiscovery sanctions, I recommend reading the opinion, especially the portions of the opinion focusing on the duties that parties and their professional advisors have for ensuring compliance with the discovery rules. One of the key takeaways from the decision is that attorneys have a duty to supervise the eDiscovery process. It is not good enough to place the burden on individual employees to search their own files and determine what is relevant, without attorney supervision. Instead, counsel must (1) ensure that employees are instructed to preserve evidence, (2) make sure that the client has a mechanism to collect the evidence, (3) ensure that the client arranges for a search of the collected evidence by someone other than the custodian employee, and (4) supervise the entire process as it is occurring.
Partner, Cooke Kobrick & Wu LLP