Securities Plaintiffs Sanctioned For Not Producing Electronic Files

On January 11, 2010, Judge Shira Scheindlin of the U.S. District Court for the Southern District of Manhattan sanctioned 13 plaintiffs for failing to preserve electronic files in discovery. Pension Comm. of Univ. of Montreal Pension Plan v. Banc of America Secs. LLC, No. 05 Civ. 9016 (S.D.N.Y. Jan. 11, 2010).

These plaintiffs are suing two failed hedge funds for negligence and gross negligence. The District Court will assess monetary fines against these 13 plaintiffs, and will give the jury an adverse instruction as to six of them.

The Court lambasted these plaintiffs for, among other wrongs, failing “to institute a timely written litigation hold.” A litigation hold is a communication which, in anticipation of a civil enforcement proceeding or commercial litigation, directs employees to cease the legitimate and routine destruction of information.

The District Court’s decision may dissuade litigants, charged with destroying documents after litigation began or became reasonably foreseeable, from arguing that such destruction was unintentional. The Court’s decision is currently available online only to those with a PACER account; however, below is a link to an article concerning the Court’s decision.

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