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Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC

United States District Court for the Southern District of New York

January 15, 2010, Decided; January 15, 2010, Filed

05 Civ. 9016 (SAS)

Opinion

 [*461]  AMENDED OPINION AND ORDER

SHIRA A. SCHEINDLIN, U.S.D.J.:

I. INTRODUCTION

In an era where vast amounts of electronic information is available for review, discovery in certain cases has become increasingly complex and expensive. Courts cannot and do not expect that any party can meet a standard of perfection. Nonetheless, the courts have a right to expect that litigants and counsel will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably  [**2] anticipated, and that such records are collected, reviewed, and produced to the opposing party. As discussed six years ago in the Zubulake opinions, when  [*462]  this does not happen, the integrity of the judicial process is harmed and the courts are required to fashion a remedy. Once again, I have been compelled to closely review the discovery efforts of parties in a litigation, and once again have found that those efforts were flawed. As famously noted, "[t]hose who cannot remember the past are condemned to repeat it." 1 By now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records -- paper or electronic - and to search in the right places for those records, will inevitably result in the spoliation of evidence.

In February, 2004, a group of investors brought this action to recover losses of 550 million dollars stemming from the liquidation of two British Virgin Islands based hedge funds in which they held shares: Lancer Offshore, Inc. and OmniFund Ltd. (the "Funds"). 2 Plaintiffs 3 have asserted claims under the federal securities  [**3] laws and under New York law against former directors, administrators, the auditor, and the prime broker and custodian of the Funds. 4 The Funds were managed by Lancer Management Group LLC ("Lancer") and its principal, Michael Lauer. 5 The Funds retained Citco Fund Services (Curacao) N.V. ("Citco NV") to perform certain administrative duties, but it eventually resigned as administrator of the Funds. 6 On April 16, 2003, Lancer filed for bankruptcy. 7 On July 8, 2003, the Funds were placed into receivership in the Southern District of Florida. 8 

In October, 2007, during the discovery process, Citco NV, its parent company, the Citco Group  [**5] Limited, and former Lancer Offshore directors who were Citco officers (collectively with Citco NV, the "Citco Defendants") claimed that substantial gaps were found in plaintiffs' document productions. As a result, depositions were held and declarations were submitted. This occurred from October, 2007 through June,  [*463]  2008. Following the close of this discovery, the Citco Defendants moved for sanctions, alleging that each plaintiff failed to preserve and produce documents -- including those stored electronically -- and submitted false and misleading declarations regarding their document collection and preservation efforts. The Citco Defendants seek dismissal of the Complaint -- or any lesser sanction the Court deems appropriate -- based on plaintiffs' alleged misconduct.

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685 F. Supp. 2d 456 *; 2010 U.S. Dist. LEXIS 1839 **

THE PENSION COMMITTEE OF THE UNIVERSITY OF MONTREAL PENSION PLAN, et al., Plaintiffs, - against - BANC OF AMERICA SECURITIES, LLC, CITCO FUND SERVICES (CURACAO) N.V., THE CITCO GROUP LIMITED, INTERNATIONAL FUND SERVICES (IRELAND) LIMITED, PRICEWATERHOUSECOOPERS (NETHERLAND ANTILLES), JOHN W. BENDALL, JR., RICHARD GEIST, ANTHONY STOCKS, KIERAN CONROY, and DECLAN QUILLIGAN, Defendants.

Subsequent History: As Amended January 15, 2010

Amended by, Sanctions allowed by, in part Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Secs, LLC, 2010 U.S. Dist. LEXIS 4546 (S.D.N.Y., Jan. 15, 2010)

Prior History: Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 2009 U.S. Dist. LEXIS 82301 (S.D.N.Y., Sept. 8, 2009)

Disposition:  The court granted the administrator's motion for sanctions in part and allowed a limiting instruction against plaintiffs that had acted in a grossly negligent manner in fulfilling their discovery obligations. The court awarded the administrator attorney's fees and costs against all plaintiffs. The court allowed additional discovery against two plaintiffs that had not searched back up data tapes.

CORE TERMS

documents, emails, declaration, electronic, discovery, searched, gross negligence, spoliating, destroyed, employees, records, sanctions, plaintiffs', preserved, innocent party, duty to preserve, deposition, backup, files, tapes, deleted, destruction, collection, copied, players, supervision, presume, Funds, discovery obligations, misconduct

Torts, Negligence, General Overview, Defenses, Comparative Fault, Intentional & Reckless Conduct, Civil Procedure, Discovery & Disclosure, Discovery, Misconduct During Discovery, Electronic Discovery, Electronic Information Preservation, Evidence, Relevance, Preservation of Relevant Evidence, Spoliation, Disclosure, Sanctions, Sanctions, Misconduct & Unethical Behavior, Inferences & Presumptions, Presumptions, Rebuttal of Presumptions, Burdens of Proof, Presumptions, Burden Shifting, Dismissal, Involuntary Dismissals, Jury Trials, Jury Instructions, Inferences, Securities Law, Civil Liability Considerations, Securities Litigation Reform & Standards, Stays of Discovery