© 2009 Hogan & Hartson LLP. All rights reserved. PENSION COMMITTEE v. BANC OF AMERICA SECS., LLC Diving Deeper Into the Zubulake Alvin F. Lindsay 24 February 2010

2 © 2009 Hogan & Hartson LLP. All rights reserved. Pension Committee v. Banc of America Secs., LLC, __ F.R.D. __, 2010 WL (S.D.N.Y. Jan. 15, 2010) “Zubulake Revisited: Six Years Later”

3 © 2009 Hogan & Hartson LLP. All rights reserved. Why the title? “Those who cannot remember the past are condemned to repeat it.” George Santayana, Reason in Common Sense, Vol. 1 of The Life of Reason (1905) (Prometheus Books 1998 at 82).

4 © 2009 Hogan & Hartson LLP. All rights reserved. The Zubulake Opinions Zubulake I: To what extent is inaccessible data discoverable, and who should pay? May 2003 July 2003 Oct July 2004 Zubulake III: Balances and allocates discovery costs for inaccessible data Zubulake IV: Duty to preserve when litigation reasonably anticipated. Zubulake V: Spoliation adverse inference instruction.

5 © 2009 Hogan & Hartson LLP. All rights reserved. Pension Committee Zubulake I: To what extent is inaccessible data discoverable, and who should pay? May 2003 July 2003 Oct July 2004 Zubulake III: Balances and allocates discovery costs for inaccessible data Zubulake IV: Duty to preserve when litigation reasonably anticipated. Zubulake V: Spoliation adverse inference instruction. Pension Committee Complaint filed in S.D. Fla. Feb Funds placed into receivership in S.D. Fla.

6 © 2009 Hogan & Hartson LLP. All rights reserved. Case transferred to S.D.N.Y The Pension Committee Chronology 2007 Oct June 2008 Citco Defendants identify “gaps” in Plaintiffs’ production documents not produced PSLRA STAY OF DISCOVERY DEPOSITIONS & DECLARATIONS 2004 Oct. 2005

7 © 2009 Hogan & Hartson LLP. All rights reserved. What’s So New? Discovery failures now linked to concepts of tort

8 © 2009 Hogan & Hartson LLP. All rights reserved. Tort Concepts “Negligence” is conduct that: Falls below the standard established by law for the protection of others; Caused by heedlessness or inadvertence, by which the negligent party is unaware of the results; May also arise where possible consequences carefully considered and best judgment used.

9 © 2009 Hogan & Hartson LLP. All rights reserved. Tort Concepts “Gross negligence” is conduct that: Fails to exercise even that care that a careless person would use Differs from ordinary negligence in degree only, not in kind.

10 © 2009 Hogan & Hartson LLP. All rights reserved. Tort Concepts “Willful, Wanton and Reckless” conduct: Is unreasonable and intentionally done; In disregard of a known or obvious risk; Highly probable to cause harm; Conscious indifference to consequences.

11 © 2009 Hogan & Hartson LLP. All rights reserved. The Pension Committee Holdings No willful misconduct Six plaintiffs grossly negligent – No collection until 2007 – Failure to collect from key players – Failure to preserve back-up tapes – Failure to supervise collection – False and misleading declarations Spoliation instruction, costs and fees awarded Seven plaintiffs negligent – Untimely litigation holds – Insufficient custodian searches – Failure to supervise collection – Failure to search in appropriate places Costs, fees and further discovery awarded

12 © 2009 Hogan & Hartson LLP. All rights reserved. The Pension Committee Continuum Negligence Gross Negligence Willful/Wanton Bad Faith } Failure to obtain records from all employees

13 © 2009 Hogan & Hartson LLP. All rights reserved. The Pension Committee Continuum Negligence Gross Negligence Willful/Wanton Bad Faith } Failure to take “all appropriate measures” to preserve ESI

14 © 2009 Hogan & Hartson LLP. All rights reserved. The Pension Committee Continuum Negligence Gross Negligence Willful/Wanton Bad Faith } Failure to issue written litigation hold

15 © 2009 Hogan & Hartson LLP. All rights reserved. The Pension Committee Continuum Negligence Gross Negligence Willful/Wanton Bad Faith } Failure to collect information from files of former employees

16 © 2009 Hogan & Hartson LLP. All rights reserved. The Pension Committee Continuum Negligence Gross Negligence Willful/Wanton Bad Faith Failure to preserve evidence resulting in loss or destruction of relevant information. }

17 © 2009 Hogan & Hartson LLP. All rights reserved. The Pension Committee Continuum Negligence Gross Negligence Willful/Wanton Bad Faith } Failure to collect records from key players

18 © 2009 Hogan & Hartson LLP. All rights reserved. The Pension Committee Continuum Negligence Gross Negligence Willful/Wanton Bad Faith } “burning, shredding, wiping hard drives”

19 © 2009 Hogan & Hartson LLP. All rights reserved. Possible Sanctions Terminating sanctions (default or dismissal) Preclusion of evidence (issue/claim preclusion) Adverse-inference instruction Fines Cost shifting Additional discovery

20 © 2009 Hogan & Hartson LLP. All rights reserved. Adverse Inference Instructions 1.Issue Preclusion: Directs jury to deem certain facts admitted. 2.Direction to Presume: Directs jury to presume (subject to rebuttal) that missing evidence would have been favorable to innocent party (relevance and prejudice). 3. “Spoliation Charge”: Permits (but does not require) a jury to presume the lost evidence is both relevant and favorable to the innocent party (relevance and prejudice).

21 © 2009 Hogan & Hartson LLP. All rights reserved. Adverse Inference Instructions Negligence Gross Negligence Willful/Wanton Bad Faith Relevance & Prejudice

22 © 2009 Hogan & Hartson LLP. All rights reserved. Adverse Inference Instructions Negligence Gross Negligence Willful/Wanton Bad Faith Burden on Innocent Party Relevance & Prejudice “May seem unfair” but prevents “gotcha” litigation game.

23 © 2009 Hogan & Hartson LLP. All rights reserved. Adverse Inference Instructions Negligence Gross Negligence Willful/Wanton Bad Faith Rebuttable Presumption Relevance & Prejudice Permitted-Imposed

24 © 2009 Hogan & Hartson LLP. All rights reserved. Zubulake IV, 220 F.R.D. 212, (S.D.N.Y. 2004) “In practice, an adverse inference instruction often ends litigation – it is too difficult a hurdle for the spoliator to overcome. The in terrorem effect of an adverse inference is obvious.... Accordingly, the adverse inference instruction is an extreme sanction and should not be given lightly.”

25 © 2009 Hogan & Hartson LLP. All rights reserved. A Very Adverse Instruction... “I instruct you, as a matter of law, that each of these plaintiffs failed to preserve evidence after its duty to preserve arose. This failure resulted from their gross negligence in performing their discovery obligations. As a result, you may presume, if you so choose, that such lost evidence was relevant, and that it would have been favorable to the Citco Defendants.”

26 © 2009 Hogan & Hartson LLP. All rights reserved. Key Considerations Resulting from Pension Committee:

27 © 2009 Hogan & Hartson LLP. All rights reserved. Preservation Duty Applies to plaintiffs too! Existed since 1985 (Roe and Bills) Here, duty triggered in April 2003 when, – Fund filed bankruptcy – Complaint filed with BVI Financial Services Commission – Certain plaintiffs had retained counsel – Communication initiated with other plaintiffs

28 © 2009 Hogan & Hartson LLP. All rights reserved. Litigation Hold Must be in writing Instruction to “collect” not a litigation hold: – No direction to preserve all relevant records – No mechanism for collecting records for search by someone other than employee Plaintiff’s must issue before filing

29 © 2009 Hogan & Hartson LLP. All rights reserved. Supervision of Collection Self collection insufficient (in this case) Bad when collector – “had no experience conducting searches” – “received no instruction on how to do so” – “had no supervision during collection” – “had no contact with Counsel during the search” Should have – “been taught proper search methods” – “remained in constant contact with Counsel” – “been monitored by management”

30 © 2009 Hogan & Hartson LLP. All rights reserved. Consider What Should Exist Plaintiffs had a “fiduciary duty” to conduct due diligence, thus – “ Surely records must have existed” – “The paucity of records produced... and the admitted failure to preserve... leads inexorably to the conclusion that relevant records have been lost or destroyed.”

31 © 2009 Hogan & Hartson LLP. All rights reserved. Custodians Failure to collect from key players – gross negligence Failure to collect from “all employees” – negligence Former employees? Evaluate early and often

32 © 2009 Hogan & Hartson LLP. All rights reserved. Address Other Possible Sources “[P]ersonal computers outside of... office” Palm Pilot Other offices Other servers

33 © 2009 Hogan & Hartson LLP. All rights reserved. Stay of Discovery PSLRA (or other) stay of discovery does not justify: – Failure to preserve – Failure to issue litigation hold – Failure to “focus efforts” on discovery

34 © 2009 Hogan & Hartson LLP. All rights reserved. Declarations Court emphasized importance of declarations’ accuracy, but – 4 had to be amended – 1 included information not previously revealed – “most” were “false and misleading” – and/or issued without personal knowledge Memorialize preservation and collection efforts!!

35 © 2009 Hogan & Hartson LLP. All rights reserved. Memorialize What files were searched? How search was conducted? Who was asked to search? What they were told? Extent of any supervision?

36 © 2009 Hogan & Hartson LLP. All rights reserved. Backup Tapes – Preservation No requirement “all” backup tapes preserved. Preserve “if such tapes are the sole source of relevant information” For example, “if active files of key players are no longer available”

37 © 2009 Hogan & Hartson LLP. All rights reserved. Backup Tapes – Search Routine searches not required except: – Relevant material existed but was not produced; – Or, when relevant material should have existed but was not produced.

38 © 2009 Hogan & Hartson LLP. All rights reserved. Not Addressed In Pension Committee Proportionality (Rule 26(b)(2)(C)(iii)) Early attention (Rule 26(f))

39 © 2009 Hogan & Hartson LLP. All rights reserved. Final Thoughts... Pension Committee resulted from “ignorant” or “indifferent” practices. “While litigants are not required to execute document productions with absolute precision, at a minimum they must act diligently and search thoroughly at the time they reasonably anticipate litigation.” Observe the Rule of Reason.

40 © 2009 Hogan & Hartson LLP. All rights reserved. Lagniappe

41 © 2009 Hogan & Hartson LLP. All rights reserved. Today’s Presenter: Alvin F. Lindsay Mr. Lindsay is a partner at Hogan & Hartson LLP where he specializes in complex commercial litigation and arbitration. He is the author of a book and DVD titled Technology In Litigation published by the National Institute for Trial Advocacy (NITA). The Associated Press calls Mr. Lindsay “an expert in technology and litigation,” and The Wall Street Journal quoted him extensively in explaining the December 2006 revisions to the Federal Rules of Civil Procedure to encompass electronically stored information. Mr. Lindsay hosts the website TechnologyInLitigation.com, and can be reached at

42 © 2009 Hogan & Hartson LLP. All rights reserved. Abu Dhabi Baltimore Beijing Berlin Boulder Brussels Caracas Colorado Springs Denver Geneva Hong Kong Houston London Los Angeles Miami Moscow Munich New York Northern Virginia Paris Philadelphia San Francisco Shanghai Silicon Valley Tokyo Warsaw Washington, DC For more information on Hogan & Hartson, please visit us at