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Court Sanctions Client and Counsel for Unfamiliarity with Data Systems
In an by Article by Denise E. Backhouse, et al, of Morgan Lewis (10 May 2010), the authors note that "According to the U.S. Bankruptcy Court for the Southern District of New York [In re A&M Florida Properties II, LLC, Bkrtcy. No. 09-15173, 2010 WL 1418861 (Bankr. S.D.N.Y. Apr. 7, 2010) (A&M Florida)], a lack of bad faith is no longer a defense to court sanctions for failure to produce documents in a timely manner. That court, in In re A&M Florida Properties II, recently awarded sanctions against both a party and its counsel for the counsel's failure to become familiar with the client's email and data-retention policies and systems- despite the absence of any bad faith or willful delay.
"GFI was advised by its counsel to conduct a companywide email search. GFI's Chief Technology Officer conducted a search of active email folders, but did not search deleted files or archived emails. She did not inform GFI's outside counsel that GFI employees routinely archived emails and that the company maintained deleted folders and archived emails. This search resulted in the production of a few emails. The two parties subsequently agreed to jointly retain a computer forensics expert to conduct a search of GFI's email system. This search was conducted, but again did not include a search of deleted files or archived folders. A small number of additional documents were produced, but American Federated remained unsatisfied, as a March 22, 2007 email that should have turned up in the search was not produced.
"In this case, the court found that even though all of the elements for an adverse inference instruction were present, the penalty would be too harsh for the situation. After all was said and done, American Federated received the emails in question and there was no evidence of bad faith on the part of GFI or its counsel. The bad behavior was simply a result of counsel's lack of knowledge about electronic discovery.
"The court did, however, impose monetary sanctions. Although it found that the delays in production were not intentional or in bad faith, it determined that it was the responsibility of GFI's counsel to find all sources of relevant information in a timely manner. According to the court, it was not enough for counsel to request documents from a client; counsel must affirmatively act to communicate with the client to identify all sources of information and to ‘become fully familiar with [the] client's document retention policies . . . and data retention architecture.' If GFI and its outside counsel had lived up to their obligations, the archived emails and deleted folders would have been discovered, and the emails in question would have been produced much earlier in the process. There would have been no need to call in a computer forensics expert, or for motions to compel and for sanctions. Because of this fact, the court determined that the costs of the motions and the retention of the computer forensics expert should be borne entirely by GFI and its outside counsel."
The authors conclude that: "Many electronic discovery headaches can be avoided entirely by good discovery planning and careful execution the first time around. Defensible and efficient discovery-which includes the avoidance of possible sanctions-requires effective planning, knowledge, and communication between counsel and client about record retention, IT infrastructure, and data-management practices. Electronic discovery has become a highly specialized practice and requires both advanced technical knowledge and current and informed legal advice to avoid an outcome such as occurred in A&M Florida."