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Federal and State Guidelines Align on E-Discovery

Federal and State Guidelines Align on E-Discovery

By Robert M. Redis – February 12, 2013

 

For many years, state requirements for e-discovery varied from one another and from the requirements of the federal courts. With the recent release of two new opinions in New York state court, federal and state requirements regarding preservation, production, and preclusion of e-discovery have aligned.

 

In a series of opinions issued over a relatively short time, the federal and state requirements regarding preservation, production, and preclusion of e-discovery have aligned. The new opinions, Voom H.D. Holdings LLC v. EchoStar Satellite L.L.C., 2012 NY Slip Op. 00658 (N.Y. App. Div. Jan. 31, 2012), and U.S. Bank N.A. v. GreenPoint Mortgage Funding, Inc., 2012 NY Slip Op. 01515 (N.Y. App. Div. Feb. 28, 2012),  give litigators a clear guide as to what is expected of them when involved in e-discovery.

 

The Appellate Division of the Supreme Court First Department in New York hears appeals from the New York County Commercial Division. The Commercial Division is the court of first instance for arguably the most complex and far-reaching commercial litigation at the state level.

 

Prior to the 2012 opinions in Voom and GreenPoint , there had not been a consistent appellate opinion dealing with the various issues of e-discovery in New York state court.

 

Voom changed that.Voom brought New York, and arguably most other state courts, into alignment with the developing federal common law on e-discovery, which began with Judge Scheindlin’s seminal opinion in Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003).

 

The Duty of Preservation
Litigators now know that the duty to preserve electronically stored information (ESI) begins when “litigation is reasonably anticipated.” That is before actual litigation has commenced. And litigation is “reasonably anticipated” by future parties when they are on notice of a “credible probability” that they will become involved in litigation and that ESI could be “material and necessary” for that litigation.

 

Once the duty to preserve is triggered under both Voom and Zubulake, it becomes necessary to place a written “hold” on ESI to stop the automatic, routine deletion and overwriting of that potentially relevant evidence. That preservation hold document must direct appropriate employees to preserve all relevant records, electronic or otherwise, and create a mechanism for collecting the preserved records so that they are searchable by someone other than the employee. The litigation hold should be as specific as possible, describe the ESI at issue, and stop the automatic deletion and overwriting of it. The litigation hold should spell out the consequences of failing to comply with the hold.

 

In language reminiscent of Judge Scheindlin’s Zubulake direction to counsel, the Appellate Division wrote that in large companies, counsel has an obligation to supervise the hold.

 

Spoliation
Voom also provided guidance with respect to the potential consequences of failing in the duty to preserve. To warrant sanctions based on spoliation (the intentional or negligent destruction of potentially relevant evidence), a party seeking sanctions must demonstrate (1) that the party with control over the ESI had an obligation to preserve the ESI when it was destroyed, (2) that the ESI was destroyed with a “culpable state of mind” (which mental state includes ordinary negligence), and (3) that the evidence was relevant (i.e., that it would likely support a claim or a defense).

 

Like ZubulakeVoom held that it was “gross negligence” (1) if a party fails to issue awritten hold when appropriate, (2) when there is a failure to identify all key employees having access to the ESI and to ensure preservation of their electronic records, or (3) when there is a failure to stop the routine, automatic deletion of email.

 

Where the destruction of ESI is intentional, willful, or grossly negligent, a rebuttable presumption of relevance attaches to the destroyed evidence. Where the destruction is simple negligence, relevance is not presumed but must be established by the party seeking sanctions.

 

Bearing the Cost of Production 
In GreenPoint, the appellate decision clarified a split of authority with respect to which party bears the cost of producing ESI in discovery. After analyzing the various rulings, the appellate court wrote, “We are persuaded that the courts adopting the Zubulake standard are moving discovery, in all contexts, in the proper direction.” Consequently, the court held that the expense of producing ESI pursuant to a request should be paid by the producing party in the first instance.

 

The court wrote that the seven factors set forth in Zubulake may be considered in exercising its discretion to shift the cost of production to the requesting party:

 

  1. extent to which the request is specifically tailored to discover relevant information
  2. availability of such information from other sources
  3. total cost of production, compared with the amount in controversy
  4. total cost of production, compared with the resources available to each party
  5. relative ability of each party to control costs and its incentive to do so
  6. importance of the issues at stake in the litigation
  7. relative benefits to the parties of obtaining the information

 

Keywords: litigation, technology, e-discovery, ESI, duty to preserve, spoliation, litigation hold

 

Robert M. Redis is of counsel at McCarthy Fingar, LLP, in White Plains, New York.