Closing The Loop

It’s bad enough when a client destroys evidence. Spoliation, after all, can result in significant monetary sanctions. It can bring case-dispositive adverse inferences and even default judgments.

But it’s worse when the spoliator then points his finger at you, his counsel, saying you were responsible for not deterring his spoliation. Yet in one case out of the Southern District of New York, that is just what happened. In Industrial Quick Search, Inc. v. Miller, Rosado, & Algios, LLP, U.S. District Judge Edgardo Ramos allowed breach of contract and malpractice claims to go forward against a law firm accused by their former client of failing to adequately advise them against destroying evidence. Under Judge Ramos’s ruling, failure to properly advise a client on legal holds and preservation could constitute malpractice.

When Spoliation Costs You the Case: Are the Lawyers to Blame?

First, some background. In the underlying dispute, Industrial Quick Search was accused of copyright infringement by Thomas Publishing. Both Thomas Publishing and Industrial Quick Search produce directories of manufacturing products and services, essential resources for those looking for the best deburring machinery or lubricating systems. For six years, Michael Meiresonne, a principal and investor at IQS, worked marketing and selling advertising for the Thomas Register, including while he conceived of IQS, where he was a principal and investor.

When rolling out IQS’s website, the company allegedly instructed its intern to copy material from Thomas Publishing for its own website. Several months later, the intern contacted Thomas Publishing to let them know of the copying. Subsequent investigations seemed to show that a significant amount of IQS’s content was taken from Thomas Publishing. Legal back-and-forth ensued and IQS eventually retained the firm of Miller, Rosado & Algios to represent them in the matter.

Then the spoliation began.

As the court notes, the exact details are “hotly disputed”.

According to Meiresonne, he “repeatedly asked Defendant attorneys for legal advice as to how to prepare and respond to the Thomas [P]laintiffs’ broad discovery request[s],” including “advice on the retention, storage, production of, or permissible discarding of non-responsive information,” among other things. But, Meiresonne asserts, “no advice was ever given…”

With no system for preservation in place, relevant documents were discarded and relevant files were reused as scrap paper, in an apparent attempt at environmentalism. With no system to track documents, Thomas Publishing was permitted to take 30,000 uninventoried documents from IQS, allegedly without the supervision of IQS’s counsel.

According to Meiresonne, it was not until three years after the Thomas Publishing document production that his lawyers suggested he should have a formal document retention policy in place.

IQS’s attorneys, however, claim they were never informed that IQS had discarded files prior to document production. One attorney asserted that he had issued “an oral litigation hold” during his first meeting with IQS and had discussed responsiveness with the company, though he admittedly did not conduct a “page by page review” of the documents.

Based on the strength of the evidence against IQS and concluding that the company “intentionally destroyed the documents at issue” that were “likely critical to determining the scope infringement and misappropriation,” the court entered a default judgment against IQS. Before a hearing on damages, IQS settled with Thomas Publishing for $2.5 million.

Then IQS sued its lawyers.

Is Failure to Properly Advise Clients on Discovery Negligence? Yep.

IQS claims that its law firm acted negligently and breached its contractual obligation to “render competent and professional legal services” during the litigation, directly resulting in the default judgment against them and the $2.5 million settlement.

Under New York law, a claim of malpractice requires a plaintiff to demonstrate that the attorney was negligent, that the negligence was the proximate cause of the injury, and that the plaintiff suffered damage as a result. Negligence is defined as conduct which “fell below the ordinary and reasonable skill and knowledge commonly possessed by a member of his profession.”

According to IQS, its attorneys’ alleged failure to issue a litigation hold and properly oversee their compliance with their discovery obligations amounted to negligence. In response, the firm argued that “attorneys do not owe their clients a duty to institute a litigation hold or oversee compliance with preservation obligations.”

“This premise,” the court wrote, “is mistaken.” The responsibility to preserve evidence “runs first to counsel.” Attorneys in the Second Circuit are obligated to implement both a litigation hold and oversee and monitor compliance with that hold, Judge Ramos explained, citing Zubulake. Failure to do so, the court concluded, “falls below the ordinary and reasonable skill possessed by members of the legal bar.”

Let's repeat that:

Failure to implement and monitor a legal hold “falls below the ordinary and reasonable skill possessed by members of the legal bar.”

That wasn’t the end of the discussion, however. Though denying that the attorneys had any obligation to prevent their client’s spoliation, the firm nonetheless argued that they had indeed advised IQS to preserve evidence. Here, Judge Ramos found, there were sufficient issues of fact to allow the suit to proceed, denying the firm’s motion for summary judgment.

There’s No Excuse for Discovery Incompetence

Judge Ramos’s Industrial Quick Search opinion is a significant reminder of attorneys’ duties during the discovery process. As Tushar P. Vaidya, an associate at Seyfarth Shaw, writes for the Carpe Datum Law blog, the case reminds us that:

In order to avoid a malpractice claim, litigators should “lead the charge” with respect to preservation. They should draft a detailed litigation hold notice, work with their clients to identify recipients of the hold, specify the types of documents to be preserved, and answer any [questions] clients have regarding preservation throughout the pendency of the litigation.

Indeed, today there is almost no excuse for failing to take these basic steps.

Today, fewer than two percent of cases make it to trial. In many lawsuits, discovery has become the de facto form of dispute resolution. Yet, despite discovery’s increasingly prominent role in the legal system, far too many attorneys still view discovery as “someone else’s problem.” But as recently retired Judge James C. Francis IV once told Logikcull, no competent attorney would view civil procedure as “someone else’s problem.”

“Yet, they are very much parallel. You need eDiscovery knowledge almost to the same extent now that you need civil procedure knowledge,” Judge Francis explained.

Today, you cannot overlook, brush aside, or minimize discovery obligations. As more and more evidence is digitized, and as the amount of digital data explodes, voluminous eDiscovery has become common in an ever-growing range of cases. And because so much evidence is electronic, the risk of spoliation is constant. It is, after all, much easier to delete a file than to dispose of it as “scrap paper.” And, to many parties’ chagrin, it’s easier to discover electronic spoliation than the old-fashioned, “put it through the shredder” approach.

Attorneys are, first and foremost, required to provide competent representation. It's rule 1.1 of the Model Rules. Today, competency requires familiarity with discovery in any case that might involve it. As the California State Bar has succinctly put it, the ethical duty of competence mandates that lawyers, at a minimum, possess “a basic understanding of, and facility with, issues relating to e-discovery.” Cases like Industrial Quick Search, too, show that courts will no longer brush aside attorneys’ failure to control the discovery process.

Thankfully, eDiscovery is not the expensive, risky, untested beast it was ten or fifteen years ago. Modern eDiscovery software, utilizing the efficiencies of the cloud, has made it easy to institute legal holds, preserve and upload data, review documents for relevance and privilege, and produce them, intact, to the requesting party. Today, developing competence in eDiscovery isn’t hard—and it isn’t something any attorney can afford to skip.

 

This post was authored by Casey C. Sullivan, who leads education and awareness efforts at Logikcull. You can reach him at casey.sullivan@logikcull.com or on Twitter at @caseycsull. 

2018 mid-year case law review

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