E-Discovery Sanctions: Not for Defendants Only

Leonard Deutchman The Legal Intelligencer September 16, 2010

In the beginning, there was Zubulake.
OK, maybe that's an overstatement, but it is no overstatement to say that most civil litigators were introduced to the world of e-discovery through the series of opinions leading up to the final decision in Zubulake v. UBS Warburg, a 2004 case out of the U.S. District Court for the Southern District of New York. The other notorious case that woke up litigators to the issues involving e-discovery was Morgan Stanley & Co. v. Coleman (Parent) Holdings, a 2004 case that went before Florida's 4th District Court of Appeals.
In both matters, the defendants' gross deficiencies in preserving and producing e-discovery led the courts to find that spoliation, i.e. the destruction of evidence, had occurred. The courts provided remedies in the form of monetary sanctions, as well as adverse inference instructions to the jury that they must infer from defendants' failure to produce discovery that such discovery would have supported the plaintiffs' version of events. Those cases made familiar those and other terms now often used and generally associated with e-discovery matters.
Both cases also provided the parties with the roles we associate with e-discovery litigation: The plaintiff demands e-discovery while the defendant produces it.
Zubulake, in particular, provided the most familiar scenario in e-discovery litigation, in which the "David" plaintiff seeks smoking-gun e-mails from the "Goliath" defendant.
And the position taken by the civil defense bar confirms the reality that, in most cases, plaintiffs seek e-discovery while defendants produce it.
Two recent cases, however, challenge that stereotype.
In a January 2010 ruling from the U.S. District Court for the Southern District of New York, Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, Judge Shira Scheindlin, who authored the Zubulake decisions, imposed sanctions upon plaintiffs for failure to preserve and search e-discovery.
That case has been discussed by many in the e-discovery community, including me in The Legal Intelligencer in April ("Assigning Value to E-Discovery's Unknown" and "The Last Words on E-Discovery?)."
More recently, in a June U.S. District Court for the District of Colorado, Medcorp Inc. v. Pinpoint Technologies Inc., Magistrate Judge Kristen L. Mix, hearing an appeal from an order by a special discovery master, upheld sanctions against the plaintiff for what the court found to be "willful" destruction of hard drives on which relevant discovery resided. The court amended some of the relief ordered by the special master, but did not disturb the sanction of ordering that the plaintiff be subject to adverse inference instructions.
Pension Committee and Medcorp bring us to a point where plaintiffs are now facing the same sanctions with which they had threatened defendants in the wake of Zubulake and Morgan Stanley. What does this mean to the immediate future of civil litigation?
In Pension Committee, the defendants in the case sought sanctions against 13 of the 96 plaintiffs for failing to properly preserve and collect discovery in a suit stemming from the liquidation of two hedge funds in which the plaintiffs held shares.
The court imposed the sanctions in the form of adverse inference instructions and monetary sanctions of reasonable costs, including attorneys' fees, finding the plaintiffs failed to "timely institute written litigation holds," that those holds were deficient both in how they were drafted and how the plaintiffs audited their imposition and that the plaintiffs' "careless and indifferent collection efforts after the duty to preserve arose" undoubtedly resulted in "some documents" being "lost or destroyed."
The court found the plaintiffs' preservation efforts could be "best characterized as either grossly negligent or negligent because they failed to execute a comprehensive search for documents and/or failed to sufficiently supervise or monitor their employees' document collection." The court noted that "several plaintiffs failed to collect and preserve documents of key players" and "one or more of these plaintiffs failed to collect or preserve any electronic documents prior to 2007."
One plaintiff, according to the court, assigned an employee to produce e-discovery who was "ill-equipped" and "inexperience[d]."
The employee's errors included searching only one network drive, permitting employees to conduct their own searches, delegating one office's search "without follow-up" and not searching backup tapes, although the employee knew they existed, according to the court. Other plaintiffs made similar mistakes.
In Medcorp, the plaintiff willfully destroyed 43 hard drives which "contained information relevant" to the litigation. The drives were, apparently, destroyed during an ordinary recycling cycle and not with the motive to destroy discovery. The plaintiff was able, "at least in part, to produce information to replace the information that was lost," according to the court.
Because of that, the court decided that a defense request for dismissal as a sanction was too severe. Instead, it awarded an adverse inference instruction with regard to the unrecovered data and monetary sanctions of reasonable attorneys' fees and costs.
Review of the opinion in Medcorp is as instructive for what it does not say as for what it does.
Little of the opinion is devoted to establishing that the plaintiff engaged in sanctionable conduct. This is taken almost as a given; the plaintiff's state of mind when destroying the drives went to mitigation of penalties, not to excusing the conduct, and most of the opinion was devoted to how to fashion a remedy.
Taking into account that the plaintiff's actions, while willful, were not aimed at destroying evidence, but rather resulted from failing to halt the ordinary recycling of the drives and that plaintiff otherwise produced responsive discovery, the court reasoned that the adverse inference instruction and the award of reasonable costs would be proportionate to the harm caused by the plaintiff, while dismissal of the matter would be disproportionate.
THE BARRY SCHECK OF E-DISCOVERY?
Pension Committee and Medcorp are two extreme examples of a phenomenon that e-discovery observers will acknowledge if pressed to be honest and candid: the plaintiffs bar knows far, far less about e-discovery than does the defense bar.
There are many reasons for this.
The defense bar embarked upon educating itself regarding e-discovery only after judgments such as those in Zubulake ($29.5 million) and Morgan Stanley ($1.5 billion, but reversed on other grounds) were awarded in large part because of the adverse inference instructions imposed against defendants as sanctions for the spoliation of evidence.
Up until Pension Committee and Medcorp, however, plaintiffs counsel in e-discovery matters have typically been the ones asking for discovery, not producing it.
The consequences of the plaintiffs bar not knowing which e-discovery to ask for are great, but they are not concrete and are impossible to measure: how could one establish that a plaintiff would have been awarded $29.5 million or $1.5 billion but for counsel's failure to seek e-discovery properly? In the absence of such stark and concrete measurement of failure, the plaintiffs bar has not been sparked to master e-discovery practice.
Because plaintiffs rarely produce e-discovery, they fail to learn not only how to preserve and produce it, but how even to ask for it.
An attorney tasked with producing e-discovery will first learn how to gather sufficient information from his or her client to draw a "data map" of digital media -- computer workstations, servers, backup tapes, third party data hosts, external media such as USB drives -- where potential e-discovery could reside, task those in control of such media with preserving it so data on it is not overwritten, oversee the collection of data from that media by in-house personnel or outside vendors, search the data collected for responsive data, and produce it to opposing counsel.
By learning how to search for, gather, and produce e-discovery, defense counsel also learns how to seek e-discovery from opposing parties. Conversely, because plaintiffs rarely must produce e-discovery, they also never learn how to ask for it.
Of course, the question arises as to why the simple prospect of winning cases would not spark the plaintiffs bar to become e-discovery experts. And, of course, the same could be asked of the civil defense bar which, while outpacing its colleagues on the other side of the aisle, is nevertheless also far behind the learning curve regarding e-discovery.
To take a step back, it must be recognized that for anyone to understand e-discovery, they must learn: the technical basics of how computers and servers work and store information; where information is typically kept in an information system; how it is structured and how it should be collected; what a review database for lawyers is and how to compare the virtues of different ones; how searches of data work; and how data is electronically printed and produced to opposing counsel. They should also learn about differences in how Windows and Mac operating systems work, how cell phones store information, and how they differ from each other as well as from computers. There are also many other issues.
Litigators typically do not learn this for several reasons.
First, while it is information that all litigators must learn, it is not what they typically learn. Rather, it is much more like the biological science that medical malpractice or biological patent attorneys must know. While those latter practices are niche practices, populated by the self-selecting few who know both the biological sciences and the law, e-discovery practice is for all litigators, and so those lawyers who simply do not want any math on their exams cannot opt out, as they can from entering niche practices.
Second, there are few outlets for this information. Most lawyers look at CLEs as necessary evils and get little out of them; many bring newspapers to read and do so conspicuously to register their disdain for the requirement. But even e-discovery CLEs rarely present the technical aspects of e-discovery. Most of them involve discussion of recent case law and rule changes, with little attention given to the technical underpinnings of the opinions or rules. It is hard to find and attract geeks who can speak "geek" to lawyers and, generally, those who put together CLEs literally do not know what they are missing.
Third, lawyers do not want to learn this "new" stuff about computers. They didn't go to law school to learn about computers, etc. In large law firms, which typically are defense-oriented firms, e-discovery rolls downhill to the junior associates, who a) are thought to be computer whizzes because they are younger; and b) are powerless to push off the task to anyone less senior. Enlightened defense firms have senior litigators in charge of e-discovery practice, but most firms are still in the Dark Ages of e-discovery.
Plaintiffs firms, however, are usually not structured with as many junior associates to whom e-discovery can be tasked. Thus, unless the Brahmans who often dominate plaintiffs firms are already schooled in or naturally inclined to learn the information technology that underlies e-discovery practice, the art of seeking e-discovery will be lost upon them, and on those occasions where they must produce e-discovery, outcomes such as those in Pension Committee and Medcorp await.
It may be reasonably asked how lawyers can get away with not learning a skill so important to their practice.
The answer lies, most probably, in the large company of attorneys in the same position. In an area where counsel and the courts are learned and sharp, those ignorant of what they should know will be quickly exposed and humiliated. Where, however, the bench is generally as baffled as is counsel by the technology of e-discovery and so cannot make sense of the rules, counsel and the bar are less likely to point the finger at one another for making mistakes, particularly mistakes of omission, i.e., when plaintiffs counsel fails to seek e-discovery which could be important to the matter. In such a climate, it is easy for such mistakes to blend seamlessly with the other many reasons why a party may not prevail in litigation or obtain the result they had been expecting.
Those who recall the O.J. Simpson murder prosecution some 15 years back will remember how Barry Scheck, one of Simpson's defense attorneys, used his understanding of DNA evidence to cast doubt upon the prosecution's case.
I was a prosecutor then, and, following that case, prosecutors expected waves of attacks upon DNA evidence, but they never materialized. Criminal defense attorneys, it seems, particularly homicide defense attorneys, had won their victories and made their reputations using more traditional cross-examination and defense-building techniques and thought that they did not need to learn one more.
Similarly, when I began investigating and prosecuting computer crimes in the mid-1990s, I was aware of all of the potential weaknesses in computer forensics evidence and braced myself for every attack upon that evidence when I went to court, but the attacks never came. The same criminal defense bar had even less interest in learning about computer forensics than it did about DNA; they knew how to cast doubt on an eyewitness and call a testifying co-defendant a liar and, so far as they were concerned, needed no more clubs in their bag. When I left my career as a prosecutor in 2005, neither I nor any other prosecutor in my unit had any digital forensics evidence even remotely challenged in any of our cases.
Pension Committee and Medcorp should be wake-up calls for the civil plaintiffs bar.
As little as civil defendants can afford the costs of e-discovery, much less sanctions, civil plaintiffs can afford them even less. The plaintiffs bar usually works under contingent fee agreements and so is even more aware of the costs of litigation than are defense counsel. Often this awareness can result in pennywise, pound-foolish decisions such as those in Pension Committee, where plaintiffs decided not to deal with discovery issues until the motions to dismiss were defeated, or in Medcorp, where plaintiff's refusal to suspend the business practice of recycling computers prior to gathering evidence from them led to onerous sanctions.
These two cases should ripple through the plaintiffs bar as Zubulake and Morgan Stanley did through the defense bar, and spur plaintiffs counsel to become e-discovery literate, a decision that would please their clients immeasurably.
Leonard Deutchman is general counsel and administrative partner of LDiscovery, a firm based in New York City, Fort Washington, Pa., McLean, Va., and Chicago that specializes in electronic digital discovery and digital forensics. He is also an adjunct professor at Chestnut Hill College in Philadelphia.