Class Action Defense

Whether involved in class action defense, truck accident litigation, or cargo loss and damage claims, a recent order from a New York federal court will likely impact transportation litigation going forward.     

Six years ago, Judge Shira A. Scheindlin, of the Southern District of New York authored the Zubulake decision.  The Zubulake decision provided the basis for current law and rules regarding the discovery of electronically stored information (“ESI”).  Recently, Judge Scheindlin has issued another decision involving ESI that will likely be looked to by other courts when addressing similar issues: The Pension Committee of the University of Montreal Pension Plan, et al., v. Banc of America Securities, et al., 05-civ-9016, (S.D. N.Y. January 10, 2010)(as corrected on January 15, 2010)(collectively, the “Order”).

In her order entitled “Zubulake Revisited: Six Years Later,” Judge Scheindlin found that – although the case did not present any egregious examples of purposeful destruction of documents – the plaintiffs failed to timely institute written litigation holds and were careless and indifferent in their preservation and collection of documents after the duty of preservation arose.  Judge Scheindlin sanctioned the Plaintiffs, with an instruction to the jury allowing the jury to assume missing documents were bad for Plaintiffs, requiring Plaintiffs to pay certain attorney’s fees and costs to Defendant, and ordering Defendant to search backup tapes for additional information.

This case is interesting because most cases addressing discovery of ESI, particularly those awarding sanctions, involve egregious behavior.  The facts of this case, however, are much more pedestrian – a party that didn’t instruct all persons with electronic documents relating to a matter in litigation to preserve all those documents with a formal litigation hold letter; gathering relevant documents was largely left to operational employees without supervision; together with other factors that led the court to describe the party’s ignorance and indifference towards discovery (including the search for and preservation of electronic documents).

Courts have previously held that failure to instruct relevant employees to preserve documents constituted gross negligence.  Likewise, courts have previously held issuing a litigation hold memorandum and delegating the task of identifying relevant documents to operational level employees is not enough. 

However, this court clarifies that instructions to employees to provide the company’s counsel with relevant documents via phone, e-mail, a memorandum, and in a monthly litigation update are not sufficient to satisfy the duties of preservation and production – since the employees were not instructed to preserve all relevant documents and there was little supervision over the preservation and collection. 

The concepts forming the basis for the Order are not novel or new.  But because these concepts were used to justify an award of sanctions where there was no intent to destroy documents or other shocking behavior, and because the author of modern law on this subject spends 87 pages laying out the rules that justify these sanctions, it is increasingly likely other courts will follow suit.
 

The 7^th Circuit has implemented a pilot program (the “7^th Circuit Pilot Program”) designed to address the rising cost associated with the discovery of electronically stored information (“ESI”). In the initial stage of this pilot program a proposed Standing Order Relating to the Discovery of Electronically Stored Information has been created and will be used in select cases by certain judges within the district. 

The 7^th Circuit Pilot Program, like the recently amended Federal Rules of Civil Procedure, requires the parties to understand and discuss likely sources of discoverable ESI at the beginning of a case. At this time the parties are also required to discuss what ESI is to be preserved and anticipated issues relating to production of that information including the format of production and privilege issues. Unlike the Federal Rules, the pilot program requires litigants to consider and discuss whether discovery can be conducted in stages to minimize cost to the parties.

The pilot program’s initial report and proposed Standing Order Relating to the Discovery of Electronically Stored Information can be viewed at:

http://www.ilcd.uscourts.gov/Statement%20-%20Phase%20One.pdf

If your company is involved in trucking class action cases, truck accident litigation, cargo claims, or simply trying to collect your freight charges, it is important to understand the role of ESI, along with traditional paper documents, in litigation. The 7^th Circuit Pilot Program illustrates that courts, like litigants, are becoming more familiar with ESI and are addressing ESI issues both under the recently amended Federal Rules and via unique approaches like the 7^th Circuit Pilot Program. As businesses store more and more information electronically it is important to recognize that this information may be discoverable in litigation and have an organizational plan regarding storage of this information (who, where, when, how long), a procedure for disposing of outdated electronic information, and the ability to suspend disposal once litigation is reasonably anticipated. Although programs like the 7^th Circuit Pilot Program may ultimately help contain the rising costs associated with discovery of ESI, a company can reduce its litigation cost related to ESI significantly by taking steps in advance of litigation to understand and manage its stored data.