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Some Say Courts Don’t Agree with Pension Committee – But Is That Really the Case?

By Brad Harris

The preservation landscape appears to be settling down considerably compared to the turbulent year that was 2010. (If you need a refresher, see Pension Committee Revisited white paper and webinar for a complete recap.) A few opinions have come up in recent months that provide additional insight into how the courts are interpreting reasonable steps that litigants need to take when responding to a duty to preserve data.

In reviewing commentaries of these cases, I frequently read how these opinions either undermine or refute Judge Scheindlin’s Pension Committee opinion (e.g., “failing to issue a written legal hold is per se gross negligence”). Yet a full reading of Judge Scheindlin’s opinion includes an understanding of the degree of analysis and nuance that the court applied when considering culpability and sanctions. Too often when boiling Pension Committee down to one or two sound bites, as so often seems the case, such commentaries miss the point. Judges are entrusted to evaluate each case within a broader framework and Pension Committee offered some new guidance to help them on their way.

In late April, U.S. Magistrate Leslie G. Foschio issued an opinion in Steuben Foods, Inc. v. Country Gourmet Foods, LLC (WL 1549450,WDNY April 21, 2011) denying a request for sanctions merely because of a failure to issue a written legal hold. The defense counsel in the breach of contract case had asserted that documents they had obtained from a third-party should have been produced by the plaintiff. However, the plaintiff in the case, Steuben Foods, had issued an oral hold to key players and produced nearly 12,000 pages during discovery (*4). The court ruled that the missing documents did not prejudice the case and there was no evidence of spoliation. In spite of a “failure to issue a written legal hold,” the court denied the sanction request.

In May, a similar case and result emerged from the Southern District of New York in Centrifugal Force, Inc. v. Softnet Communication, Inc. (S.D.N.Y. 08 Civ. 5463, May 5, 2011). The roles were reversed in that the plaintiff’s counsel was seeking the sanction for failure to issue a timely written legal hold. In this case, the defendant had issued an oral hold right away, followed by a subsequent written legal hold notification. U.S. Magistrate Gabriel W. Gorenstein ruled that in this case that the defendants’ response was adequate under the circumstances.

So where does that leave the written legal hold?

It remains what it always has been: a vital tool for demonstrating an entity’s due diligence in its preservation efforts. As Judge Scheindlin has said as far back as the Zubulake opinions, having a detailed audit trail of who did what and when is invaluable when defending one’s actions to the court. As Judge Scheindlin said in a public appearance last November:

I know that a lot of the world is unhappy with me about this litigation hold issue, but I‘ve never understood what the big problem is. Write it up, protect yourself… Spell out for your company what they have to do. It‘s wise. Instead of fighting me about it – just do it. Because if you just do it you will have a defensible process and people will have guidance as to what they have to hold on to.

Written legal holds are here to stay. Are they necessary in every circumstance? Of course not, but that was never the point. What they are is the best mechanism for notifying and recording a necessary process, the absence of which creates undue burdens on litigants and on the courts. The more frequently litigators heed Judge Scheindlin’s advice, the easier we can get beyond frivolous sanctions motions that are prolonging the very problem (e.g., wasting the courts’ time on e-discovery issues) that written legal holds are meant to remedy.