Introduction

Judge Shira A. Scheindlin of the Southern District of New York has issued a noteworthy opinion in the area of electronic discovery following on her landmark decisions in Zubulake v. UBS Warburg. Judge Scheindlin, a recognized thought leader in the field, dubs her opinion: “Zubulake Revisited: Six Years Later.” The case is Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities LLC, et al., 2010WL 184312 (S.D.N.Y. Jan. 15, 2010) (hereinafter “Montreal Pension”).

Montreal Pension addresses in great detail how a court evaluates the degree of culpability — negligence, gross negligence, or willfulness — that can be ascribed to a party when it fails to implement a proper litigation hold or conduct a proper collection of paper and electronic documents, as well as the appropriate sanctions for such failures. From the outset, the opinion notes that “[t]his case does not present any egregious examples of litigants purposefully destroying evidence.” Id. at *2. Nevertheless, Judge Scheindlin finds that certain of the plaintiffs in this class action securities litigation acted in a grossly negligent manner— justifying a rebuttable adverse inference instruction and monetary fines— and that others acted negligently, warranting monetary sanctions.

This decision provides important guidance on litigants’ electronic discovery obligations. As an initial matter, Judge Scheindlin cautions that a plaintiff ’s duty of preservation “is more often triggered before litigation commences, in large part because plaintiffs control the timing of litigation.” Id. at *4 (emphasis added). Once that duty is triggered, Montreal Pension sets out some examples of failures that would — at least since July 2004, the time of Judge Scheindlin’s “final relevant Zubulake opinion” — “support a finding of gross negligence.” Id. at *7. These include:

  • the failure to issue a written litigation hold;  
  • the failure to identify key players and to ensure that their electronic and paper records are preserved;  
  • the failure to cease the deletion of email or to preserve the records of former employees that are in a party’s possession, custody or control; and  
  • the failure “to preserve backup tapes when they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those players is not obtainable from readily accessible sources.”

In a subsequent order clarifying her Montreal Pension slip opinion, Judge Scheindlin took care to further explicate on preservation obligations with respect to backup tapes, observing that “[a] cautionary note with respect to backup tapes is warranted.” Id. at *12 n. 99. Specifically, Judge Scheindlin emphasized that not all backup tapes are required to be preserved — only those that are “the sole source of relevant information.” Id. Moreover, Judge Scheindlin instructed, “while routine searches of backup tapes are not required, they should be searched when it has been shown that relevant material existed but was not produced, or relevant material should have existed but was not produced.” Id.

Montreal Pension also makes clear that, at least under some circumstances, placing “total reliance on [an] employee to search and select what that employee believed to be responsive records without supervision from counsel” can amount to gross negligence. Id. at *8. In her clarifying order, Judge Scheindlin explained that the attorney’s role in preservation is not absolute, adding a footnote to her slip opinion to explain:

[N]ot every employee will require hands-on supervision from an attorney. However, attorney oversight of the process, including the ability to review, sample, or spot-check the collection efforts is important. The adequacy of each search must be evaluated on a case by case basis.

Id. at *8 n. 67.

Montreal Pension also provides guidance on the allocation of the burden of proof in the spoliation context. Judge Scheindlin explains that the burden of proving spoliation shifts according to the degree of culpability attributed to the spoliating party. When the spoliating party acts negligently, the innocent party must prove both relevance and prejudice in order for the court to impose a sanction. Id. at *5. Judge Scheindlin observed that “while requiring the innocent party to demonstrate the relevance of information that it can never review may seem unfair, the party seeking relief has some obligation to make a showing of relevance and eventually prejudice, lest litigation become a ‘gotcha’ game rather than a full and fair opportunity to air the merits of a dispute.” Id. When the spoliating party acts in bad faith or in a grossly negligent manner, the decision notes that relevance and prejudice may be presumed. Id. However, “no matter what level of culpability found,” the opinion emphasizes that “the spoliating party should have the opportunity to demonstrate that the innocent party has not been prejudiced by the degree of missing information.” Id. The Montreal Pension decision sets forth a spoliation jury charge (id. at *23), which is sure to serve as a model for other courts.

Montreal Pension stands as a stark reminder that litigants should exercise their e-discovery preservation obligations with care and as a wakeup call for companies to develop an e-discovery preparedness plan, including a written model litigation hold notice, well before they are embroiled in the heat of litigation.