The Honorable Shira Scheindlin of the Southern District of New York -- author of the seminal Zubulake opinions -- recently issued another landmark e-discovery decision that practitioners will be analyzing for years to come. In The Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities LLC, et al., No. 05 Civ. 9016 (SAS), 2010 WL 184312, S.D.N.Y. (Jan. 15, 2010), Judge Scheindlin revisits the issue of spoliation of evidence and the duty to preserve documents. As most practitioners now know, the duty to preserve documents may arise well before the filing of the complaint or even the retention of counsel. The test is whether the party reasonably anticipates litigation. The duty to preserve documents, however, is intertwined with the duty to collect them. Not only must a party institute a written litigation hold in a timely way., it also must collect documents from key players, and depending on the facts and circumstances of the case, collect documents from peripheral and former employees and preserve backup tapes.
The Pension Committee decision involved spoliation sanctions against 13 plaintiffs based on their alleged failure to timely issue written litigation holds and to preserve certain evidence before the filing of the complaint. While acknowledging that litigants were not required to produce documents with "absolute perfection," the court cautioned that "at a minimum they must act diligently and search thoroughly at the time they reasonably anticipate litigation" or face potential spoliation of evidence consequences and sanctions, including but not limited to dismissal of their pleading, an adverse inference and monetary sanctions as may be appropriate. Certain plaintiffs found to have been "grossly negligent" were ultimately subject to an adverse inference instruction and monetary sanctions even though the court found no "egregious examples of litigants purposefully destroying evidence."
In February 2004, plaintiffs, a group of investors holding shares in two British Virgin Island-based hedge funds seeking to recover alleged losses of $550 million arising from the liquidation of the funds, commenced an action in the United States District Court for the Southern District of Florida. In October 2005, the matter was transferred to the Southern District of New York. Between 2004 and February 2007, all discovery was stayed as was required by the Private Securities Litigation Reform Act.
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By: Beth S. Rose and Charles J. Falletta