.jpg "Andrew Martin") Although the proposed e-discovery legislation in New York State has yet to be implemented, a decision of the New York Supreme Court, New York County Commercial Division should cause all New York State Court practitioners to take note that e-discovery practice is already upon them. Justice Charles E. Ramos, in Einstein v. 357 LLC, 2009 N.Y. Slip Op. 3261 (N.Y. Cty. 2009), dispensed with the “we have produced what we could find” electronically stored information (ESI) defense by slapping the offending party with an adverse inference sanction. An adverse inference sanction allows the jury to presume that the lost evidence would have contradicted that party’s position at trial. The effect of such an instruction is devastating.
What happened:
Defendants were sued for deceptive practices in the marketing of New York City real estate. Soon after the litigation started defense counsel instructed the company’s IT director to put a litigation hold on relevant information. Faced with allegations of incomplete production of ESI, defense counsel filed an affidavit and represented to the Court that the electronic information was centrally stored and all relevant documents had been produced. At a subsequent hearing, it was discovered that the litigation hold was inadequate in that employees of the company could delete electronic documents in between the time that the company backed-up copies of its network. Furthermore, it was not until the fourth day of hearings that it became known that there were backup tapes available from which to cull data—a fact that had heretofore been affirmatively disclaimed.
According to the IT Director’s testimony, he never told counsel that there was a possibility, notwithstanding the litigation hold, that the Defendants could permanently delete documents without any means of recovery. He continued by testifying that no one asked him to ensure nothing could be deleted. Further testimony confirmed that the specific rules contained in the retention order were not even discussed with the IT Director, nor were examinations of the Defendants’ hard drives performed as ordered.
Lessons to be learned:
Communication between legal counsel and information technology managers is now more important than ever. Ensuring that litigants understand what is and is not possible with respect to information technology is of the utmost importance. Insufficient understanding of the technologies used to store ESI coupled with a lack of communication with the IT departments that are called on to execute e-discovery orders can turn a case in which you should win on the merits into one in which you lose due to discovery sanctions. |