The Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities, et al., Amended Order, Case No. 05 9016 (SDNY Jan. 15, 2010)

Take Away: The author of the highly influential Zubulake decisions has written a new opinion, which seeks to define “contemporary standards” for conduct involving electronic discovery. In this article we will summarize Judge Scheindlin’s comments on adequate preservation, search, and production measures. Subsequent articles will discuss her recommended process of defining the culpable state of mind for a spoliator, burden of proof issues, and sanctions.

Why This Decision Is Important To All Potential Litigants

For parties before the Southern District of New York, Univ. of Montreal Pension Plan has the obvious and immediate impact of being controlling precedent. For the rest of the country, this is a major decision by a rock-star judge in the E-Discovery area and it is bound to be read and applied by judges and lawyers whenever spoliation rears its ugly head. It will not be a welcome decision for many. The central message of Univ. of Montreal Pension Plan is that the age of innocence for E-Discovery missteps is officially over. The “pure heart, empty head” defense, while never very compelling, will now be rejected out of hand by judges who agree with the reasoning in Montreal Pension Plan. Perfection is still not required. However, as others have noted, the bar has been raised.

The author of this decision, U.S. District Judge Shira A. Scheindlin, also wrote the Zubulake series of decisions, which greatly influenced the 2006 Amendments to the Federal Rules and continue to guide the developing case law on electronic discovery. Like the Zubulake decisions, Univ. of Montreal Pension Plan is thorough, well-reasoned, and chalk-full of advice for practitioners and parties.

Important Qualification for the Guidance in Montreal Pension Plan

Univ. of Montreal Pension Plan clarifies some complex issues and provides numerous examples to illustrate the court’s reasoning. As with Zubulake, literalists will look for and will find in this decision bright line tests for establishing improper conduct. No doubt, clarifying a basic standard of conduct was an important aim of Judge Scheindlin’s. However, the decision expressly limits its applicability and discourages over simplification: “Each case will turn on its own facts and the varieties of efforts and failures is infinite.” Also, “while it would be helpful to develop a list of relevant criteria a court should review in evaluating discovery conduct, these inquiries are inherently fact intensive and must be reviewed case by case.”

It is also important to note that Univ. of Montreal Pension Plan is a huge case, with a lot at stake (half a billion), many, many parties, and lots of electronically stored information. This is another reason why it should not be read as an instruction manual for all cases, including those that are much smaller in scope. The amount at stake and other factors such as the benefit and the burden of certain preservation efforts continue to be valid considerations guiding a party’s actions. As is conceded in the first two sentences of Montreal Pension Plan, E-Discovery has become an “increasingly complex and expensive” endeavor. “Courts cannot and do not expect that any party can meet a standard of perfection.”

Early cooperative discussions with opposing counsel can take some of the guess work out of where the line should be drawn in a given case. Where an agreement is not practical, an early motion for protective order can serve the same purpose.

E-Discovery Obligations for Parties in 2010, in Judge Scheindlin’s Own Words

With the foregoing context and qualifications dually noted, below are some of the key take-always from Univ. of Montreal Pension Plan for satisfying one’s discovery obligations:

On Triggering the Duty to Preserve Evidence

  • “‘[O]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.’“ (quoting Treppel, blogged here).
  • “A plaintiff’s duty is more often triggered before litigation commences, in large part because plaintiffs control the timing of litigation.”

On Contemporary Standards For Preservation

  • “After a discovery duty is well established, the failure to adhere to contemporary standards can be considered gross negligence. Thus, after the final relevant Zubulake opinion in July, 2004, the following failures support a finding of gross negligence, when the duty to preserve has attached:
  • to issue a written litigation hold,
  • to identify the key players and to ensure that their electronic and paper records are preserved,
  • 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
  • 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.”

On Litigation Holds

  • “[T]he failure to issue a written litigation hold constitutes gross negligence because that failure is likely to result in the destruction of relevant information.” (relying on Treppel, among other authorities).
  • Litigation holds must provide clear instruction to employees and may not rely upon operations-level employees to decide what information is relevant. Citing Adams (blogged here) and Zubulake V (“[I]t is not sufficient to notify all employees of a litigation hold and expect that the party will then retain and produce all relevant information.”)
  • Facts of Montreal Pension Plan: “Shortly after its retention in October or November, 2003, Counsel contacted plaintiffs to begin document collection and preservation. Counsel telephoned and emailed plaintiffs and distributed memoranda instructing plaintiffs to be over, rather than under, inclusive, and noting that emails and electronic documents should be included in the production. Counsel indicated that the documents were necessary to draft the complaint, although they did not expressly direct that the search be limited to those documents.
  •  Holding: “This instruction does not meet the standard for a litigation hold. It does not direct employees to preserve all relevant records -- both paper and electronic -- nor does it create a mechanism for collecting the preserved records so that they can be searched by someone other than the employee. Rather, the directive places total reliance on the employee to search and select what that employee believed to be responsive records without any supervision from Counsel. Throughout the litigation, Counsel sent plaintiffs monthly case status memoranda, which included additional requests for Lancer-related documents, including electronic documents. But these memoranda never specifically instructed plaintiffs not to destroy records so that Counsel could monitor the collection and production of documents.”

On Back-up Tapes

  • “A cautionary note with respect to backup tapes is warranted. I am not requiring that all backup tapes must be preserved. Rather, if such tapes are the sole source of relevant information (e.g., the active files of key players are no longer available), then such backup tapes should be segregated and preserved. When accessible data satisfies the requirement to search for and produce relevant information, there is no need to save or search backup tapes.”
  • “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.”

On Collection

  • During the collection phase, “the failure to collect records - either paper or electronic - from key players constitutes gross negligence or willfulness… as does the destruction of email or backup tapes after the duty to preserve has attached.”
  • “By contrast, the failure to obtain records from all employees (some of whom may have had only a passing encounter with the issues in the litigation), as opposed to key players, likely constitutes negligence as opposed to a higher degree of culpability.”
  • “[T]he failure to collect information from the files of former employees that remain in a party’s possession, custody, or control after the duty to preserve has attached [can constitute] gross negligence.”
  • “[T]he failure to assess the accuracy and validity of selected search terms [can constitute] negligence.” (citing Victor Stanley (blogged here).
  • “I note that not 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 elevated on a case by case basis.”

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