Compare and Contrast: US and UK attitudes to Preservation Sanctions

“My five year old can tell by page three of an Opinion that it is going to end in sanctions”.

The best panel sessions leave you with a one-liner which summarises at least one of the viewpoints. The DoJ’s Allison Stanton gave us this one at the Masters Conference preservation panel as a memorable shorthand for the idea that parties who are punished by the court for discovery defaults generally deserve what they get. Some combination of unconscionable conduct and a more-than-technical breach of the rules makes it obvious what is coming as you start to read the court’s decision.

Apparently different views do not necessarily contradict this idea. To say, as many do, that the fear of being sanctioned is driving ever-bigger discovery exercises is not answered by the assertion that you can always identify a bad case from the judge’s tone on page three. You can tell that it rained by the fact that your visitors are soaking wet, but that does not necessarily help them decide what to wear tomorrow.

The formal title of the panel at the Masters conference was Preservation: Will this be the next change to the Federal Rules? It was moderated by William Butterfield of Hausfeld and comprised, as well as Allison Stanton, Martin Audet of Nuix, Courtney Barton of AOL, John Rosenthal of Winston and Strawn and Paul Weiner of Littler Mendelson.

Preservation Panel at the Masters Conference

Bill Butterfield drew attention to the recent discussions about a possible new preservation rule – see these articles by Dean Gonsowski and by Matthew Nelson of Clearwell for a summary of the options. There is no unanimity as to the need for a rule change at all, still less as between the options.

It is not clear why preservation issues are so serious in the US but are barely heard of in the UK or elsewhere. However patriotic I am, I do not suggest that UK litigants and their lawyers are any more honest, competent or conscientious than their US equivalents; pro rata to the quantity of litigation, there must be as many preservation failures in the UK through dishonesty, through some level of neglect or negligence, or through breach of duty to the court as in the US. The same must be true of other common law jurisdictions. Only the US, however, seems to have made a kind of religion out of it.

It could be that many UK courts and opponents would not know a preservation failure if they saw one except in the most glaringly obvious cases.  It seems more likely (to an outsider at least) that the bar is set so high in the US that more failures occur, come to light and are punished. The last possibility is that we are chasing shadows and that the perception of sanctions risk is actually very much higher than the reality.

A recent report by Gibson Dunn & Crutcher suggested that there were many fewer sanctions decisions than popular legend had it, with the implication that over-reaction is endemic.

John Rosenthal challenged the figures underlying the report, saying that his own cases exceeded the numbers referred to by Gibson Dunn – the statistics do not reflect the problem, he said. The number of sanctions decisions had “gone off the charts” including terminating sanctions, and the threat of sanctions was as bad: “We have put aside the trial of cases, and focus on searching for needles with over-broad discovery, pricing litigants out of the courts by over-preserving of documents which will never be discovered and will never be dispositive”.

It is very easy, he said, for a plaintiff to give notice requiring a hold. Plaintiffs have no ethical and legal restraint and letters were sent out as a precursor to possible sanctions motions in due course before there was necessarily any intent to start proceedings. However hard he tried, as a defendants’ lawyer, to initiate a dialogue, this rarely proved possible. A further problem, he said, was that different courts apply different principles so that there is no consistent case law. This makes it very difficult to devise a definition of reasonable anticipation.

Paul Wiener said that clients were scared of publicity as a result of the SanDisk case and were willing to avoid the risk of damage to reputation and of over-preservation at what was, in reality, a very high cost for the level of culpability involved.

Courtney Barton said that there was fear about the whole process, not just defining the trigger, deciding on the scope or deciding when to lift a hold. Parties did not want to miss that one person who may prove to be important and were retaining documents of people who have nothing to do with the case. Fear of sanctions has created a new and suspicious relationship between lawyers and custodians. In paper days you took in the files from a custodian and did not “creep around with a flashlight” looking for further documents. Courtney questioned whether any rule could be clear enough, and took the view that none of the existing proposals were likely to get us to a reasonable place.

Allison Stanton said that we need far more study and more evidence before seeking to change the rules. Whatever the actual numbers, the percentage of cases involving sanctions was small relative to the amount of fear being generated. We need, she said, to be “good corporate data citizens” and “better custodians of our data”. Much of the data which was the subject of a legal hold would be preserved anyway but, equally, much could have been properly disposed of. She suggested that litigation hold is being used as a scapegoat for poor information management. Most, if not all serious sanctions cases had an element which went beyond mere oversight or neglect.

The panel made other points between them, including these:

Individual attorneys are scared to be the one who says “don’t bother with that”. The more they know, the more nervous they become, and do not want to be named as having failed to reach the appropriate standard – whatever that standard may be in their jurisdiction.

The sort of people who take part in these panels think that e-discovery is the most important thing, but most businesses don’t make better business decisions based on e-discovery implications.

The search for absolutes was often futile – we make apparently arbitrary decisions all the time, using our discretion, for example, to decide on date ranges or the identities of custodians.

There is an unacceptable arbitrariness in presumptive limitations such as the number of search terms or custodians as in the recent model order for patent cases.

Cooperative litigation would not work while there were no real consequences for failure to agree. In the absence of uniformity, lawyers feel they must take the most conservative approach, especially if they are in a “bad faith” jurisdiction.

There should be no sanctions if there was no bad intent

One of the panellists has recently seen a panel of judges who simply did not get this subject.

The technology is getting better and cheaper. It does not replace people but empowers the lawyers and we would still need people to make decisions.

However good the technology became, new problems – tablets, instant messaging and other new things always kept appearing.

I was asked at a subsequent panel for an outsider’s view of the US preservation and legal hold position and I said, as I usually do, that anyone wishing to create a system which maximised cost and effort for minimal practical purpose would copy the US system as it had grown up since Zubulake. That implies no blindness to the undoubted cases which justify the need for the “policeman on the block” (as US Magistrate Judge Elizabeth Laporte puts it). No-one will argue that the defendants in United Cent. Bank v. Kanan Fashions, Inc. (to take a recent example) should get away with conduct clearly designed to conceal evidence. Equally, no-one would use this example as a reason for over-zealous collection next time. Or would they? Sometimes I wonder.

It might equally follow from my outsider’s criticism that I think that we do things better in the UK. We certainly do it differently. I touched on this above, but considered the point more fully in my article Rybak v Langbar sends warning to those who would destroy evidence which shows that the UK does in fact take document preservation seriously. It might be more accurate to say that we take document destruction seriously, a distinction which lets us off the assumption that every custodian is hiding something (Courtney Barton’s ‘flashlight’ point above), that every litigant is duplicitous and that every lawyer is ignorant – any or all of these things may be true in many cases, but a system which is premised on that probability is necessarily going to “focus on searching for needles with over-broad discovery”, as John Rosenthal put it.

This difference in approach came up in another of my articles which gives an example of a judge stating what is the norm in UK proceedings – that arguments about disclosure deficiencies are generally left to the judge at trial. The UK case Earles v Barclays Bank shows that while the UK does not have a formal concept of legal hold prior to the issue of proceedings, that does not entitle a party to destroy documents in advance of proceedings which ought to be available to the court.

If that all seems a bit vague to a jurisdiction whose lawyers forever seek bright-line distinctions, it does seem to work in its rough and ready way.

Given that there is as yet no agreement about the need for a new US preservation rule let alone the potential scope of such a thing, it will be at least two years before we will see a rule change. It is equally true that no quantity of judicial views, expressed on or off the bench, will encourage lawyers or their clients to take a more courageous view of their preservation obligations. There are parallels here with the take-up of new technologies generally known as “predictive coding”; in both cases, cost mitigation vies with risk-averseness, co-operation conflicts with aggression and tactical play, no one is prepared to take a lead and, put bluntly, clients’ money goes down the drain whilst lawyers pursue a course which, by happy chance, makes the most prudent course the one which is most lucrative for them.

The panel did not reach an answer to their question whether a new preservation rule would be the next FRCP change. That is unsurprising given that, as Bill Butterfield put it in opening the session, debate about preservation began before the ink was dry on the 2006 FRCP amendments, and given that the very elevated level of debate in the last two years has failed to reach a conclusion. What we did get was a good summary of the arguments and, perhaps, encouragement to read to at least page 3 of one or two sanctions opinions before deciding that your present case requires an enormous preservation exercise to head off the risk of sanctions.

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