In Sekisui American Corp. v. Hart, 2013 WL 4116322 (Aug. 15, 2013), Judge Scheindlin has added another important opinion to the law of electronic discovery. In 2003-2005 Judge Shira Scheindlin of the Southern District of New York issued five rulings in the Zubulake case that have become the basis of much of the law with regard to the obligations of lawyers and clients in dealing with discovery of electronically stored information (ESI). Id. at no. 1. The case deals with the standard for determining when a party is subject to sanctions for failing to preserve ESI.
In 2009 Sekisui purchased a medical diagnostic manufacturing company owned by the Harts. Sekisui soon became convinced that the Harts had not honored their warranty obligations under the contract of sale, and it sent the Harts a notice of claim on October 14, 2010; Sekisui subsequently filed suit on May 2, 2012. However, Sekisui failed to place a litigation hold on destruction of ESI until January 2012, fifteen months after it had sent its notice of claim. In addition, the Sekisui did not notify the vendor in charge of managing its ESI to preserve such material until July 2012, six months after it instituted the litigation hold and two months after filing suit. During this period the email files belonging to Mr. Hart and another employee who was responsible for FDA compliance were permanently deleted by the vendor at the direction of Sekisui’s Head of Human Resources.
The Harts moved for sanctions against Sekisui, in particular the imposition of an adverse inference instruction to the jury. The magistrate judge who was assigned the case ruled against the Harts because they had failed to establish that the destruction of the ESI prejudiced the Harts. Judge Scheindlin reversed. She found that the evidence established the Sekisui was grossly negligent in failing to institute a litigation hold in a timely fashion and that prejudice could be presumed because of their culpability. She reasoned that the innocent party should not bear the burden of showing prejudice, which would often be difficult if not impossible to do when the evidence no longer exists.
In addition to establishing standards for determining when a party’s negligence with regard to implementation of litigation holds warrants sanctions, the decision is significant in several other respects. First, while motions for sanctions for failure to preserve ESI are usually directed against defendants, it is clear that the obligation also applies to plaintiffs, as in Sekisui. Second, the case also illustrates the principle that the trigger for a litigation hold can often precede the filing of a lawsuit. Ironically, in Sekisui the plaintiff pulled the trigger that shot its own case. Third, for lawyers and judges looking for model language of an adverse inference instruction, Judge Scheindlin’s opinion, which contains the instruction she plans to give at trial, is an excellent source. Finally, in the opinion Judge Scheindlin criticizes and rejects the proposed amendment to Federal Rule of Civil Procedure 37(e), which would prohibit sanctions for negligent failure to preserve ESI. For the text and report of this and other proposed amendments to the federal rules, see http://www.uscourts.gov/uscourts/rules/preliminary-draft-proposed-amendments.pdf (last visited October 23, 2013).
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