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Electronic Discovery –Failing to Circulate A Litigation Hold Does Not Warrant a Presumption of Gross Negligence or Automatically Justify Non-Monetary Sanctions
Beginning in 2004, U.S. District Judge Shira Scheindlin issued several key decisions, collectively known as the Zubulake opinions. The series of Zubulake opinions set the ultimate framework for today’s jurisprudence on electronic discovery. Ever since, whenever Judge Scheindlin pens an additional decision on this subject, most lawyers sit up and take notice. That was the case in 2010 when Judge Scheindlin issued her opinion in Pension Committee of the Univ. Of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F. Supp. 2d 456 (S.D.N.Y. 2010). In that case, the judge concluded that, in light of the well known Zubulake opinions, a party’s failure to issue a written litigation hold was, by itself, gross negligence. 685 F.Supp.2d at 471. Since a finding of gross negligence permitted (but did not require) a district court to impose non-monetary sanctions, the absence of a litigation hold could easily result in an adverse inference instruction being read to the jury. When a district court judge looks down from the bench and solemnly informs the jury that a party failed to do what it was required to do, that is a serious blow for any litigant.
The Pension Committee decision transformed any failure to institute a litigation hold – including inadvertent failures – into gross negligence per se. The vagaries of electronic discovery became an even wider trap for the unwary or the unprepared. Though that remains true today, the Second Circuit recently rejected the presumption of gross negligence called for by the Pension Committee decision. In Chin v. Port Auth. of NY, 685 F.3d 135, 162 (2nd Cir. 2012), the Second Circuit said the failure to institution a litigation hold was not, by itself, gross negligence per se. Instead, the failure to adopt good preservation practices was merely one factor for the court to consider. It was not a determinative factor. Id.
While Chin is a welcome respite from the technical traps often associated with electronic discovery, it does not encourage or even permit litigation hold failures. Indeed, even though Chin rejected the presumption of gross negligence based on the failure to institute a litigation hold, it nevertheless upheld the lower court’s decision to give an adverse inference instruction. The defendant in Chin won the battle over the litigation hold, but lost the war.
The lack of a litigation hold may not result in an automatic death penalty, but the failure to preserve evidence can still derail your litigation and result in an adverse instruction being read to the jury.