New York State Supreme Court Dismisses Case Due to Spoliation from Ineffective Litigation Hold Process
In a legal malpractice case dating back to 2008, a plaintiff had a $20 million claim dismissed outright due to ESI lost because of a legal hold that was completely ineffective. In 915 Broadway Associates, LLC, v. Paul, Hastings, Janofsky & Walker, LLP, 2012 NY Slip. Op. 50285U (N.Y. Sup. February 16, 2012), the Court determined that even though a legal hold was implemented the party took no affirmative steps by overseeing compliance. We learned about this case from Gibbons’ E-Discovery Director Paul Asfendis in the firm’s May 18 E-Discovery Law Alert.
The complaint stemmed from a real estate transaction gone bad. Due to a lack of oversight, the plaintiff failed to act on a $20-million Letter of Credit before it expired thus forfeiting the opportunity to draw upon it. Nine Fifteen Broadway Associates felt it was their attorney’s responsibility to monitor the deadline so they took him to court for malpractice to recover the full value of the line of credit.
In a promising start, the plaintiff issued a legal hold to its employees on April 1, 2008, instructing them to save files pertaining to the matter and, importantly, to suspend automatic deletion of emails. Clearly, the counsel at 915 Broadway demonstrated an awareness of the need to preserve ESI. Unfortunately, their employees did not share this and the legal team made no effort to monitor compliance.
During that time, emails and other documents were irretrievably lost that were necessary to try the case. The defense showed through testimony of an IT forensics expert that emails were destroyed by the failure to suspend automatic email deletion.
An all-star panel of the e-discovery world gathered at the New York City Bar Association on May 17, 2012, to discuss the challenges faced in different roles when it comes to issuing legal holds and managing preservation.
The event, Four Perspectives on Preservation and Proportionality, was organized by Legal Hold Pro and featured U.S. Magistrate Judge James Francis, Lynn Dummett, Senior VP and Sr. Counsel at Allianz Global Investors, William Butterfield of Hausfeld, Robert Owen of Sutherland Asbill & Brennan, and Ronald Hedges, a former U.S. magistrate judge who served as moderator. The program’s theme was to compare and contrast the various perspectives of key stakeholders in the preservation process.
Rather than recap the program here, check out the article by Monica Bay of Law Technology News called Coping with Preservation and Proportionality in Legal Holds to read a thorough recap of the program.
For those not able to attend, visit the Four Perspectives on Preservation and Proportionality resource page to see a complete video replay and to access the digital bibliography.
From L-R: U.S. Magistrate James C. Francis, Lynn Dummett (Allianz), Robert Owen (Sutherland), and William Butterfield (Hausfeld) speaking on May 17, 2012.
A recent opinion from the Middle District of Alabama (M.D. Ala.) demonstrates the importance of having a sound litigation hold process in place to avoid sanctions for failure to preserve electronic information. We first read about this case in A Spoliation Ace in the Hole which appears in Cozen O’Connor’s E-Discovery Law Review.
In Danny Lynn Electrical v. Veolia ES Solid Waste, No. 2:09CV 192-MHT, 2012 U.S. Dist. LEXIS 31685, (M.D. Ala. March 9, 2012), the plaintiff filed a motion for sanctions late in the case – a full seven months after entering into their agreement for the method of obtaining emails and only one week before their discovery deadline. U.S. Magistrate Judge Terry F. Moorer denied the motion for several reasons.
In his analysis, Judge Moorer considered both culpability and resulting prejudice. He questioned whether any intentional destruction or concealment of evidence had actually taken place, finding “no evidence that any of the alleged emails…were permanently deleted” and notes that the defendants had implemented a new backup and software system to archive emails. The Court also did not feel that the defendants acted in bad faith. He states, “the defendants have expended great effort to ensure that the plaintiffs receive information from both their live and archived email system…” and that the degree of prejudice was minimal. He also reviewed “all of the litigation hold letters provided by the defense” and concluded they had an effective litigation hold process in place.