Pension Committee and small firms

According to a new decision by an influential judge, the grace period for “empty head[s] and pure heart[s]” in ediscovery is over. Judge Shira Scheindlin authored the Zubulake opinions, and has coauthored a book on ediscovery. The new opinion describes a continuum of “negligent,” “grossly negligent,” and “willful or reckless” misconduct in ediscovery, and sanctions parties that were careless or indifferent in collecting and gathering electronically stored information. Pension Comm. of Univ. of Montreal Pension Plan v. Banc of America Sec., LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010).

The opinion sets a high bar; ediscovery leader George Socha says “well upwards of 90% of attorneys handling lawsuits are committing gross negligence,” if the Pension Committee standards are widely adopted.

The opinion has sparked all kinds of analysis. But I see several important implications for small and mid-sized firms handling cases involving electronic information.

1. Lawyers who understand ediscovery must be deeply involved in collection and analysis. A hold letter does not pass the torch (or the buck) to litigation support or the client. In Pension Committee, clients received perfunctory letters from counsel, but there was little attorney oversight of those efforts until the gaps were obvious. Worse, the follow-up declarations by the clients were a disaster, repeatedly averring that “all” documents had been collected, when many gaps were present. If no lawyer on the team has the experience to evaluate ediscovery efforts, it is time to bring in additional counsel.

2. Small-firm plaintiffs must plan ediscovery early in the case. Judge Scheindlin pointedly noted that plaintiffs’ counsel failed to issue an adequate litigation hold in conjunction with drafting the complaint. The need for ediscovery expertise begins sooner rather than later; perhaps even before filing.

3. A small player in a big case is in a dangerous spot. The ediscovery efforts of ancillary parties could affect the core of the case. For example, Pension Committee involved 96 plaintiffs pursuing a $500 million claim. Only 13 plaintiffs were sanctioned, many of them small businesses.

But the sanction of an adverse inference will impact all the plaintiffs. It will be extremely difficult for jurors to avoid wondering if the missing documents on one plaintiff’s computer might support defendants’ position generally, even against the other plaintiffs.

If you are counsel for a small clients in a big cases, an early discussion about sharing ediscovery costs is in order. Pension Committee should give larger parties a good reason to consider sharing those costs.