Outside Inhouse Lawyer Blog : New York & Seattle Corporate Dispute Lawyer & Attorney : Grace M. Healy : Outside counsel : King County, Tacoma, Bellevue

Yesterday, the First Department issued a decision in VOOM HD Holdings v. EchoStar Satellite that is must reading for any potential litigant. The court adopted the federal “Zubulake” standard that “once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure preservation of relevant documents.” Litigation is reasonably anticipated when an organization is "on notice of a credible probability that will become involved in litigation, seriously contemplates initiating litigation, or when it takes specific actions to commence litigation."

Because of defendant’s purported failure to preserve electronic data when litigation was anticipated, and its failure to halt email purges after litigation was started, and its prior issues with destruction of electronic evidence, the decision also discusses the standards for spoliation of evidence and sanctions.  The court was not impressed with defendant's argument that it was seeking an amicable business solution so there was no reasonable anticipation of litigation.

The bottom line is that defendant will be subject to an adverse inference -- the a jury will be charged to presume the relevance of the evidence that is not available.   In addition, the defendant will return to a judge who has already determined that it is grossly negligent in its management of litigation.
 

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A recent opinion of Judge Pechman of the Western District of Washington in Aecon Buildings, Inc. v. Zurich North America, illustrates the importance of good in-house litigation management, complying with discovery, and supplying a detailed privilege log on time.  Defendant appears to have failed on all counts and the result is that defendant must pay into the court the amount that it was billed by its attorneys from the time its initial disclosures were filed through the date that defendant produced a relevant file – a period of more than eight months – as a discovery sanction.

The underlying case set forth a claim of bad faith refusal to defend and indemnify by a plaintiff who had been named as an additional insured on a policy.  At the time the insurance claim initially was tendered, it was rejected by an adjuster and the file was closed.  About one year later, and one month after the suit was started, a second adjuster reviewed the claim and noted that coverage had been triggered.  That adjuster was instructed not to continue work on the claim, and was not named in defendant’s initial disclosures as an individual who might have discoverable information. The second adjuster’s work came to light when her deposition was noted – she had signed declarations authenticating documents.  It seems that no one could state with certainty who ordered the second review, or why it was performed.

The court stated that defendant’s “failure to include in its responses to requests for production any documentation of [the second adjuster’s] work on the claim file, and its failure to produce, until the eleventh hour, a privilege log documenting those portions of the claim file attributable to her that it withheld on the basis of privilege, are clear violations of the discovery rules.”  That is a summary – the details run to almost eight pages.

This decision is must reading for anyone who believes that work done on a matter after a lawsuit has been started is privileged. 

 

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