Proportionality in E-Discovery: Wishful Thinking?

While the potential for electronic discovery has been around since the invention of the computer, the bar’s consciousness of e-discovery may be dated to 2003–2004, when U.S. District Judge Shira A. Scheindlin, of the Southern District of New York, issued a series of ground-breaking opinions in Zubulake v. UBS Warburg LLC.

Judge Scheindlin addressed a cluster of e-discovery issues that many federal practitioners had not previously considered, including: (a) the scope of the duty to preserve electronic evidence during litigation; (b) the lawyer’s duty to monitor clients’ compliance with e-data preservation and production; (c) data sampling; (d) cost-shifting in the restoration of inaccessible back-up tapes sought in discovery; and (e) sanctions for “spoliation,” the negligent or intentional destruction of e-evidence in pending or reasonably foreseeable litigation, proportional to the severity of the violation.

Flash forward to 2010, and the last of those issues, spoliation, has assumed signal importance in federal courts. This is amply demonstrated by two recent decisions, Pension Committee of University of Montreal Pension Plan v. Banc of America Securities and Rimkus Consulting Group, Inc. v. Cammarata, both of which have received extensive coverage in the legal press, including Litigation News. While these opinions overlap somewhat, Pension Committee concerns the range of sanctions for negligent spoliation, while Rimkus addresses sanctions for intentional spoliation. Together, these cases have aptly been termed by one commentator as “important bookends covering the full spectrum of sanctionable conduct relating to the failure to preserve evidence in response to litigation or when litigation is reasonably anticipated.”

The prospective standards enunciated in these cases, which could well vary from circuit to circuit in their application, have created a great deal of uncertainty in the bar. What exactly is required to meet the duty to preserve? What sanctions might flow from failure to preserve? What level of culpability, and how much relevance and prejudice, must be shown to warrant serious sanctions? Who has the burden of proof, and when?

As reported by Kent Lambert in Litigation News, a proposal has been made outlining the elements of a new rule to govern preservation and spoliation of records and data and thereby provide uniformity throughout the circuits.

The notion of “proportionality” is suffused within the case law and the rule proposal, as both recognize that the duty to preserve, as well as the sanctions for failure to do so, should be in proportion to the matter at issue. This is a logical extrapolation from the “proportionality” requirement in Rule 26(b)(2)(C)(iii), which limits “the frequency or extent of discovery” where “the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.”

How should “proportionality” be applied, however, to a duty to preserve that arises before the lawsuit is filed? While the rule proposal suggests pre-litigation triggers for imposition of the duty (e.g., preparation of an incident report, hiring an expert, drafting a regulatory claim, hiring counsel), it does not address the flip-side—determination of a sanction that is “proportional” to a pre-litigation breach.

Imagine that while walking down the street you encounter another lawyer who says: “Hey, I hear your client is about to be sued for that new product it just put on the market!” You ask for details, but none are forthcoming. You write to your client, recounting the conversation and advising, as a precaution, that a “litigation hold” be put on all documents and electronic material germane to the issuance of the new product. When your client asks for clarification, you say, “All we know is that a suit may be filed that somehow relates to the new product—so for now you should save everything.” Three months later, your client is sued. You learn that one month before suit was filed, much material later determined by the court to be relevant to the claim was destroyed. The court finds that your client breached the duty of preservation.

But what sanction should be imposed? How can “proportionality” ever be measured here, where the nature and scope of the threatened lawsuit—and by implication, the breadth and duration of the concomitant duty to preserve—are speculative? Can a prospective rule provide useful guidance in this case, or might it merely open the Pandora’s Box of litigation even further? Given the variety of realistic pre-litigation scenarios that can be envisioned, concern for the latter would not appear to be unreasonable.

Editor’s Note: This column contains the views of the author and not necessarily those of the ABA or Section of Litigation. Litigation News hopes this column will spark interest and debate. We welcome your comments and viewpoints on this issue.