2014: Winter Issue

Home – Corporate Counsel Group Offers Courts a Lesson in How Legal Departments Operate

Corporate Counsel Group Offers Courts a Lesson in How Legal Departments Operate

At least when you cannot find a needle in a haystack, all you end up with is a lot of hay. Hay fever aside, you’ll live. Some would say that a single document among thousands is something like the needle, while others would say no, there are sophisticated techniques and systems to find that pointy bad boy in a heap of dead grass.


But when it comes to a half a million bucks for not finding the needle or just not sharing it, well, a hackneyed metaphor turns into a cause. In this case the cause was taken up by the 30,000-member Association of Corporate Counsel (ACC), which boasts members in 75 countries.


The story begins when, in the case of Coquina Investments v. TD Bank, N.A., the bank was found liable for $67 million because of its alleged connection with convicted ex-lawyer and Ponzi schemer Scott Rothstein. Attorneys with TD’s law firm, Greenberg Traurig LLP, said they found a key document that their client claimed did not exist, giving that as the reason for failing to produce the document during discovery.


In sanctioning the bank, U.S. District Court Judge Marcia G. Cooke commented that it was “hard for me to describe in words the difficulty throughout this trial related to documents and discovery.” She quipped that this was not Greenberg Traurig’s “first day at the litigation rodeo,” adding, “It’s a little surprising that nobody picked up on this."


In-House Counsel Are Not Uniform and All-Knowing


The Coquina investors fell victim to Rothstein’s $1.4 billion scheme, which, as they would say in an episode of AMC’s Breaking Bad, is “a lot of cheddar.” Based on the judge’s findings, the investors have asked for nearly half a million dollars in legal fees as a result of the alleged discovery violations by TD Bank and its counsel. 


But the ACC says Judge Cooke was wrong and she, like other courts, apparently need a lesson in how legal departments operate. The organization said in an amicus curiae brief filed with the Eleventh Circuit U.S. Court of Appeals that legal departments “come in all shapes and sizes,” and their roles vary from company to company. Those roles then change when the company has been sued, the association says—sometimes it’s the in-house counsel who gather information for discovery; other times they may oversee work conducted by staff members or third-party vendors. “There’s no one-size-fits-all rule,” the ACC says. The court “fail[ed] to appreciate this truth about the in-house world.”


Reasonable, Not Perfect


In its website announcement, the ACC “reminds the court of appeals that the Federal Rule of Civil Procedure 37—which served as the basis for the sanction—is not meant to force legal departments to restructure themselves to meet such a standard. To the contrary, the Federal Rules call for discovery to be cost effective, and for lawyers to do a reasonable job rather than a perfect one.”


“The wholly inappropriate one-size-fits-all conception of in-house practice imposed by the district court will not only fail to lead to better discovery practice, but it will also run roughshod over the efforts of in-house lawyers to better represent their clients across the wide spectrum of corporate activities,” said Amar Sarwal, ACC’s vice president and chief legal strategist. “The Eleventh Circuit should therefore make clear that discovery mistakes will not be presumed to be willful misconduct without extensive examination of the underlying facts and the context in which those alleged mistakes were made.”


In-house counsel are not “all-knowing or all-powerful,” the ACC says, adding that if allowed to stand, the ruling “will leave all in-house lawyers involved in litigation—along with their employers—vulnerable to the fantastic views that the district court in this case held about their jobs.”


Needless to say, the ACC says the District Court’s sanctions order should be overturned.


Key Takeaways


Set expectations. If you represent companies, note the importance of clearly defining what role the in-house counsel for your specific client plays.


Regardless of the type of client you represent, this case serves as a reminder of how serious courts take even the appearance that evidence has been withheld, even if due to error, and certainly if done intentionally.