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Legal Holds – Examined Under the Standard of Gross Negligence?

At the beginning of 2010, six-years after Zubulake V (Legal Hold best practices case), Judge Scheindlin in Pension Comm. of Univer. of Montreal Pension Plan. Banc of Am. Secs., LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010), in part addresses a party’s preservation obligations, in conjunction with spoliation; including a detailed analysis of the varying levels of culpability (e.g., negligent, grossly negligent, and willful behavior) in failing to comply with a party’s discovery obligations (e.g., Legal Holds).

At the outset of the lengthy opinion, Judge Scheindlin recognized that we are living in an era where of vast amounts of electronic information that is available. However, in the very next breath, the she acknowledged that “Courts cannot and do not expect that any party can meet a standard of perfection. Nonetheless, 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 referencing her previous opinions in Zubulake, Judge Scheindlin delineated what failures constituted a finding of “gross negligence” when the duty to preserve has attached:

  • Failing to issue a written legal hold
  • Failing to identify all the key players and to ensure that their electronic and paper records are preserved
  • Failing to stop the deletion of email
  • Failing to preserve the records of former employees that are in the party’s possession, custody, or control
  • Failing to preserve backup tapes when they are the sole source of relevant information or when they relate to key players, and that information is not readily accessible from other sources

In the Pension case, Judge Scheindlin identified specific actions or inactions that constituted “gross negligence” and ordinary “negligence”. The following breakdown of the numerous Defendants’ combined failures is provided for your review.

Grossly Negligent Action/Inaction

  • Failure to issue a timely written litigation hold
  • Failure to collect or preserve any electronic documents after the duty to preserve arose
  • Loss of responsive data
  • No follow-up to initial legal hold
  • Failure to conduct its own search separate and apart of the employee search
  • Continuation to delete electronic documents after the duty to preserve arose
  • Did not request documents from key players (custodians)
  • Making a partial request (omitting 2/3 thirds of the key players from a search request)
  • Delegated search efforts without any supervision from management or legal counsel
  • Destruction of backup data potentially containing responsive documents of key players that were not otherwise available from other sources
  • Submitted misleading or inaccurate Declaration of a party’s discovery efforts (i.e., claiming all documents had been produced, when party admitted some responsive documents were not turned over in another pleading)
  • Severely deficient search efforts for responsive documents (e.g., failure to request documents from current or former employees who were considered key players; searched only 1 network drive as opposed to many)

Negligent Action/Inaction

  • Failure to instruct key players to preserve and collect responsive documents
  • Failure to provide any meaningful supervision during the search
  • Failure to conduct a thorough search of a computer system (e.g., searched subfiles only)
  • Failure to personally instruct anyone to preserve emails or paper documents
  • Failure to produce relevant documents
  • Delegated search efforts to employees of their own computers and files
  • Failure to check the electronic files of each employee to confirm that their search was complete

For those parties that were found to have been grossly negligent in their discovery efforts, the court imposed a modified adverse inference instruction and ordered monetary sanctions.
In closing, Judge Scheindlin stated that “[w]hile 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.”vii The Pension case is clearly a reminder that the Zubulake duties are not a thing of the past. The message from Pension is that careless and indifferent discovery efforts will not be tolerated and may warrant sanctions.

The Take-Aways
1. Incompetence = Sanctions
Become knowledgeable on IT and E-Discovery issues. Or team up with someone who can assist you with ESI and E-Discovery matters.

2. Zubulake Duties Are Not Dead
Just because the Zubulake opinion was issued six (6) years ago, doesn’t make it irrelevant or forgotten. Judge Schendlin dipped back into the well and revisited the holding of Zubulake V in the 2010 Pension opinion. And non-compliance cost the client and legal counsel dearly.

Top 10 Components of a Good Legal Holdviii

  1. Written form
  2. Timely Issuance
  3. Priority on key players
  4. Affirmative custodial responses
  5. Clearly articulated preservation instructions
  6. Review and issue routine hold reminders
  7. Supervision by counsel
  8. Institute a collection process
  9. Suspend automatic deletion
  10. Preserve backup media if they are sole source of information

3. Gross Negligence is not limited to Tort cases
The civil standard of gross negligence is rearing its head in E-Discovery cases regarding a client and/or legal counsel’s actions or inactions. The first step on the road to recovery is an ESI/E-Discovery GAP assessment concerning the state of affairs of a client’s ESI, Legal Hold Policy and Procedures, and EDiscovery Workflow.

i Pension Comm. of Univer. of Montreal Pension Plan v. Banc of Am. Secs., LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010), *1
ii Id. at *1
iii Id. at *7
iv Id. at *12 —*17
v Id. at *18 — *23
vi Id. at *23 — *24
vii Id. at *24
viii The Pension Committee Opinion, Judge Scheindlin’s Call to Action for Effective Legal Holds, by Brad Harris and John Jablonski of Zapproved, Feb. 2010; http://www.legalholdpro.com/Welcome/ResourceCenter?wpredir=1; Zubulake v. UBS, 229 F.R.D. 422 (S.D.N.Y. 2004) (Zubulake V)

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About Jeff Hartman

Jeff is a 30 year veteran of the corporate security, computer forensics, and eDiscovery community and a co-founder and partner at 4Discovery. 4Discovery is a leading provider of computer incident response and computer forensics services to attorneys, corporate security executives, and the information protection community.