Legal malpractice claims may surface in any transaction handled by an attorney. Generally speaking, the more complex the transaction, the more likely that a claim will arise from some problematical aspect of the proceedings. Complex novel transactions set the stage for new problems, mistakes and miscalculations by the participants. Legal malpractice then follows.

In the last several years, discovery of electronically stored information has taken center stage in litigation. Not only has the case law prompted these changes, but courts themselves are both reacting to and prompting change. What is electronically stored information and how might it and its discovery lead to claims of legal malpractice?

Electronically stored information [ESI] is almost anything digital. It may include e-mails, word processing files, stored files, letters, documents, briefs, tables, charts, graphics, electronic ledgers or databases. It may include electronic calendars, proprietary software files, Internet browsing applications, Internet communications, Internet orders, customer communications, operating systems, application software or downloaded research results.

In today’s digital world, there is no end of stored electronic data. The data may be found on individual desktops, laptops, network hard drives, media such as floppy discs, CDs, DVDs, removable hard drives, archived data on remote hard drives, back up tapes, cloud storage on remote vendor’s hard drives, data stored with Internet service providers and personal digital assistants, such as Palm Pilots, BlackBerrys and cells.

Both federal and state courts have become enmeshed in ESI discovery disputes, and have issued decisions and rules in response. The novelty and complexity of ESI discovery is certain to lead to substantial legal malpractice claims.

New York has just amended §202.12(b) Uniform Rules for the New York State Trial Courts addressing Preliminary Conferences. Rule 202.70(g) was amended as well, requiring counsel to be knowledgeable about ESI and be “sufficiently versed” in technological matters.

It is beyond cavil that ESI discovery will be handled predominantly by attorneys. Outside vendors may be selected and will do the actual harvesting, culling, selecting and production, but attorneys will almost always be responsible, and will be held accountable for the success of the mechanism. Accountability will be determined by the court [sanctions] and in later malpractice litigation. ESI disclosure will exponentially increase in volume mirroring the generalized digitalization of the commerce and legal worlds, likely following a variant of Moore’s law concerning increase in chip capacity.

Beginning With ‘Zubulake’

The modern world of ESI discovery is said to have started in 2003 with a series of decisions by Judge Shira Scheindlin in Zubulake v. UBS Warburg. There are actually five Zubulake cases.1 For legal malpractice purposes, a series of rules were fashioned. Parties have a duty to preserve electronically stored information, and must make specific efforts to preserve the materials very early on. Failure will lead to discovery sanctions. Following Zubulake I-V, Judge Scheindlin decided the case of Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities LLC, No. 05 Civ 9016 (SAS), 2010 U.S. Dist LEXIS 4546 (S.D.N.Y. Jan. 15, 2010). This decision appears to chisel certain rules in stone.

As soon as litigation is contemplated or reasonably expected, the parties must put in place a litigation hold on electronically stored information to preserve the records. This litigation hold must be in writing, and must cover, at a minimum, all key persons, locations, and materials. Failure to issue a written litigation hold is “surely negligent.” It may be “grossly negligent” or even “willful.” The litigation hold must halt all recycling of backup tapes and discarding of electronic or paper documents.

A litigation hold should direct employees to preserve all relevant records, both paper and electronic, create a mechanism for collection of records by someone other than the employees, often by the attorneys. The litigation hold should instruct the parties to hold records so that the attorneys can monitor them for privilege and relevance. Searches should be supervised, and the process documented and recorded in some fashion. The searches must collect all documents from all players, must take all appropriate measures, must end routine document retention policies and must preserve backups.

During the litigation hold, and well before the oncoming “meet and confer” conference, the search should uncover the number, types and locations of computers, operating systems, application hardware, file naming and location saving conventions, disc or tape labeling conventions, backup and archival discs or tapes, inventories or schedules of backups, the most likely location of electronic records, backup rotation schedules and archiving procedures, corporate policies regarding employee use of computers, and the identity of all employees who used the computers.

Step two in the scenario is the collection and review of ESI. Loss of documents because of a failure to put a written policy in place is “surely negligent.” The failure to collect records from “key players” in the litigation may be “grossly negligent” as is destruction of e-mails or backups. A “meet and confer” conference is required both by Federal rule and by New York State. At the conference, identification of relevant ESI, the scope of discoverable ESI, formats for preservation, potential for conducting discovery in phases or steps, procedures for inadvertent production and requests for preservation orders should be considered.

This slim and generalized background to the ESI world does not examine the methods of search, how an attorney should suggest search protocols, determining whether to produce materials in native, mirror image or metadata formats, and how to formulate and select the key words to be used.

In federal practice, Fed. R Civ Pro. Rules 26, 33, 34, 37 and 45 are all implicated. The Advisory Committee Report to the 2006 Amendments of the FRCP sets forth standards and procedures which are worthy reading. The U.S. Court of Appeals for the Seventh Circuit has issued standing orders on ESI. New York has recently issued Electronic Discovery in the New York State courts, by Justices Jonathan Lippman and Ann Pfau and has amended Part 202. The vastly unknown Uniform Trial Court Rule 202.12 (c)(3) as well as Commercial Division Rule 8(b) each apply.

In New York, Lipco Elec. Corp. v. ASG Consulting Corporation, 4 Misc.3d 1019(A) (Sup.Ct. Nassau Co., 2004), discusses the foundations of ESI discovery. When a party has notice of pending litigation, it has a duty to preserve ESI. Penofsky v. Alexander’s Dept. Stores of Brooklyn Inc., 11 Misc 3d 1052(A) (Sup.Ct., Kings Co., 2006); 2006 NY Slip Op 50186(U).

Litigation over sanctions and costs has already become commonplace. Brown v. Parfums Jacques Bogart S.A., 12 Misc.3d 1187(A) (Sup.Ct. NY Co, 2007) 2007 NY Slip Op 33900(U). Hearings on ESI and litigation holds have ended in findings of material falsehood by attorneys. Einstein v. 357 LLC, NY Slip Op 32784 (Sup.Ct. NY Co., 2009); Fitzpatrick v. Toy Industry Association Inc., 2009 NY Slip Op 30083(U), (Sup.Ct., NY Co., 2009). In Federal practice Swofford v. Estinger, 671 F.Supp.2d 1275; 2009 U.S.Dist. LEXIS, 111064 (M.D.Fla), upheld sanctions against a general counsel in an ESI setting.

ESI Discovery

It is impossible to conceive of an entity (even a one-person company) that does not today exist almost entirely through ESI. Even someone who does not “regularly” use e-mail but has scanned documents or uses Web applications will trigger ESI considerations. Today, e-mails, not to mention voicemails, must be considered ubiquitous. If they are, then every case will have an ESI component. Even old fashioned faxes are now transmitted electronically.

Plaintiff’s attorney must very early tell the client to preserve e-mails about the case, or the underlying incident, or the damages, according to Pension Committee. This direction has to be made at the onset of representation, because plaintiff’s attorney knows then that there is to be litigation. The same obligation comes a little later to defense counsel.

Sometimes it will come before a summons and complaint, just as an obligation to notify the malpractice carrier may arise before service of a summons and complaint. Sometimes it comes with retention. Nevertheless, the time comes when the attorney is required to start the ESI preservation cycle. That cycle is well and fully described in Pension Committee. The attorney will have to issue a written litigation hold, and must describe exactly how to preserve the ESI to the client. Key players must be identified, and the universe of computers, PDAs, backups, off-site storage and the like catalogued. But, the attorney’s obligations, and sources of potential legal malpractice actions do not end here.

Next, the process must be started. Here a decision has to be made. Will the attorneys directly supervise, or will vendors supervise? On the one hand, attorneys can watch over the process. However, this might later lead to a conflict between the attorneys and the clients if problems arise. In the later situation, the vendor may insulate the attorneys, but will the vendor do a good enough job?

Shortly thereafter, at the meet and confer, the attorneys will have to have accurate information, fully investigated, and complete. It will be deadly to mislead opponents on backups, how many computers exist, or whether provision of the ESI can be made in native format. Beyond these considerations, the attorneys have to be briefed in what to demand, and what to ask at the conference.

Shortly thereafter comes the provision of the documents, and eventually, hosting the opposing vendors who are there to investigate the client’s computers. How will the attorneys react, and to what extent will they intervene?

Avoiding Malpractice

Blind obedience to a procedure has never been an overwhelmingly successful strategy. There are too many permutations in real life to allow an earlier script to answer all future questions. Nevertheless, in a world of chaos, with fast moving events slipping along, having a “how to” manual is comforting. In this case, we believe that reliance on the teachings of Pension Committee will serve as a very good start. Here is what should be remembered:

• Perfection is not expected by courts.

• Necessary steps must be taken. Failure to take these steps will be deemed negligence, gross negligence or willfulness.

• The first step is preservation of relevant information. Failure to preserve evidence resulting in loss or destruction is surely negligent. A written litigation hold must be issued.

• Records must be collected from key players who have to be identified. All deletion of records must stop. Records should be collected from all employees. Backup tapes must be preserved.

• All this starts as early as a party reasonably anticipates litigation.

Pension Committee should be read and re-read.

Attorneys are today faced with a multiplicity of records which are widely arrayed, and come in many different formats. These records are in jeopardy of loss on a daily basis, and most clients will have a destruction policy in effect. E-mails will be deleted and will be deleted from backups as well. As soon as litigation is reasonably anticipated, a duty arises to preserve these electronic records.

In most instances, the litigation hold will be the job of the attorneys, and they will be held accountable for its success or failure. Success will save client funds, speed up the litigation, and generally make the attorneys’ lives easier. Initial failure to enact a litigation hold may well doom the case, and could reasonably lead to sanctions or legal malpractice litigation. Following the guide of recently decided cases may well make the difference between success and failure.

Andrew Lavoott Bluestone is a sole practitioner, specializing in legal malpractice litigation in Manhattan.

Endnote:

1. Zubulake v. UBS Warburg, 216 F.R.D. 280 (S.D.N.Y., 2003); Zubulake v. UBS Warburg, 217 F.R.D. 309 (2d Cir. 2003); Zubulake v. UBS Warburg, 220 F.R.D. 212 (S.D.N.Y., 2003) (IV); Zubulake v. UBS Warburg, 229 F.R.D. 422 (S.D.N.Y., 2004) (V); Zubulake v. UBS Warburg, 231 F.R.D. 159 (S.D.N.Y., 2004).