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The Pension Committee Opinion

Judge Scheindlin’s Call to Action is Zubulake Déjà vu All Over Again “By now it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records – paper or electronic – and to search in the right places for those records, will inevitably result in the spoliation of evidence.”

Judge Shira Scheindlin
The Pension Committee v. Banc of America Securities (SDNY, Jan 11, 2010)

The Background
This case involves complex securities litigation in which 96 investors attempted to recover $550 million in losses due to the collapse of two British Virgin Islandbased hedge funds. Almost from the onset, the defendants began to assert discovery violations including allegations that plaintiffs failed to preserve Electronically Stored Information (ESI) and made false statements about their efforts to preserve electronic records.

In anticipation of litigation, plaintiffs engaged outside counsel and those attorneys telephoned and emailed plaintiffs requesting copies of relevant electronic records. The court, however, noted that these emails and memos did not meet the standard of a litigation hold because plaintiff’s counsel did not direct employees to preserve all relevant records and failed to create a mechanism for collecting records. Essentially, employees were allowed to determine what was relevant and to respond without supervision by counsel. (Sort of like asking Tiger Woods to collect and preserve his own text messagesin anticipation of divorce litigation!) Beyond that, a written litigation hold was not issued until four years after the failure of the hedge funds. ESI was deleted by plaintiffs well after litigation had commenced. And finally, attorneys did not instruct plaintiffs to suspend the destruction of potentially responsive ESI.

The Response
Well, the Honorable Shira Scheindlin was not happy….

“The following failures support a finding of gross negligence….[failure to] identify all of the key players and to ensure that their electronic and paper records are preserved…..”

The Result
Several plaintiffs were deemed to be grossly negligent. Scheindlin noted the plaintiffs conducted discovery in “an ignorant and indifferent fashion.” Theopinion also included monetary sanctions and a detailed “spoliation” jury instruction.

The Take-Aways

  1. Read Judge Scheindlin’s opinion and create an electronic discoverychecklist.
  2. Always issue a written litigation hold whenever litigation can bereasonably anticipated. Your hold should have an affirmative custodial response.
  3. Counsel should communicate clearly and directly with key players with respect to the identification, preservation, and collection of critical ESI.
  4. Suspend routine destruction of ESI, including back-up-tape auto deletion features
  5. Review your holds on an ongoing basis. Issue reminders and counsel custodians on their continued obligations to preserve information
  6. Institute an ESI collection process. Have a well-documented strategy. Focus on key players as a priority.
  7. Counsel has a duty to actively supervise this process.


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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.