Shapiro, Lifschitz & Schram

“They personally do the work – you get who you hire.”

Evans Barba – President and CEO, Barba Consulting

COMPANIES NOW FACE COURT SANCTIONS FOR HAVING NOT PRESERVED ELECTRONIC DOCUMENTS MAINTAINED BY ITS THIRD-PARTY CONSULTANTS

E-Discovery savvy companies today are very keen on avoiding the myriad of pitfalls associated with the production of electronic data in litigation.  Experienced and informed in-house counsel are quick to issue litigation hold memos in order that the requisite electronic documents be preserved for potential litigation and the company avoids spoliation sanctions from the court.  Now, in the wake of a recent decision by the U.S. District Court for the Southern District of New York, inside-counsel and executive decision-makers must consider their company’s obligation to ensure the preservation of electronic documents that are not under their companies’ direct control but maintained by third parties.

In GenOn Mid-Atlantic, LLC v. Stone & Webster, Inc., the U.S. Magistrate Judge was presented with the question of whether the loss of electronic documents by the plaintiff’s third-party consultant could form the legitimate basis for sanctions.  In this case, the requested sanctions included dismissal and throwing out the plaintiff’s complaint entirely.

The court, although denying the motion for sanctions, agreed with the defendant that the plaintiff should have directed the third party to take the necessary steps to preserve the key information because it knew early on that the litigation was likely, or at least expected.  The court determined that this knowledge triggered a duty preserve documents, but despite this duty, the plaintiff failed to advise its consultant to issue a litigation hold letter to its employees. 

Ultimately, the court denied the motion after the analysis of the electronic documents produced in the case revealed that the missing documents were not relevant to the issues being litigated, and therefore the defendant could not prove that it was prejudiced by the loss of the consultant’s data.

This case and the similar cases to come, show that it is now imperative that companies consider the preservation of electronic documents not in the company’s own possession.  Companies and their ESI counsel in their early preparation efforts for potential litigation must also contemplate whether there are any third-party consultants or other outside specialists that may have potentially relevant data.  And, if such a third party and its data is recognized, companies and ESI counsel must direct the third party to carry-out a process by which that relevant data is preserved in all of its forms, such as by means of issuing a litigation hold letter.

Did You Know . . .

Members of the SLS trial group have tried in excess of 50 jury trials and 75 bench trials?

The SLS construction group has worked on sports stadiums across the country including Orioles Park in Baltimore and Paul Brown Stadium in Cincinnati?

The SLS construction group has worked on power plant projects across the country?

In 2007 SLS was selected for an Honorable Mention as one of the Best Places To Work in Washington DC?

Ron Shapiro, Steve Schram and Judd Lifschitz have all been selected as SuperLawyers by Law and Politics?

The SLS office building is an historic townhouse constructed in the late 1800s?

SLS has been selected by Martindale-Hubbell as a Preeminent Law Firm?

SLS trial lawyers have argued appeals in the U.S. Circuit Courts of Appeal for the 4th, 5th, 9th, D.C. and Federal Circuit?

SLS trial lawyers have been lead trial counsel in cases in Arizona, California, District of Columbia, Florida, Louisiana, Maryland, New Jersey, New York, North Carolina, Oregon, Texas, and Virginia, - to name just a few?

Virtually all the cases that SLS trial lawyers mediated have been favorably settled at mediation?

The transactional group at SLS was lead counsel on one of the largest, most complex mixed-use projects in downtown Washington, DC involving 4 lenders and 6 property owners?

In appreciation for the outstanding efforts of each of its employees during 2007, SLS gave everyone (attorneys, paralegals, and staff) a 4 day/3 night expense paid trip to Key West, Florida?

The transactional group at SLS has represented tenants in more than 200 retail leases in the Mid-Atlantic region?

Every attorney in the transactional group at SLS has at least 15 years experience?

The transactional group at SLS has represented developers in the purchase, construction, financing and/or sale of more than 75 multi-family apartment projects?

The transactional group at SLS has represented real estate investors and developers with respect to property in Pennsylvania, West Virginia, Delaware, Maryland, the District of Columbia, Virginia, North Carolina, South Carolina, Georgia, Florida, Texas, Tennessee, Michigan and the U.S. Virginia Islands?

Attorneys in the transactional group at SLS have represented eight national banks in commercial real estate loans?

Attorneys in the transactional group at SLS have represented the FDIC, the Resolution Trust Corporation and several banking institutions in loan workout transactions throughout the Mid-Atlantic region?

The transactional group at SLS has represented homebuilders and commercial real estate developers in work-outs of individual loans and also for work-outs of large portfolios involving dozens of properties in several states?

The trial lawyers of SLS have numerous reported decisions to their credit?