Forensic Update

Reflections on information management within the legal and regulatory arena

More Sanctions for Counsel’s Failure to Understand Client’s Retention Practices

Posted by Johnny Lee on June 1, 2010

In yet another example of a growing body of case law related to forensics and sanctions, a federal Court has ordered sanctions in the form of cost sharing (specifically, half the costs related to forensic searches).  The court held that sanctions were appropriate because counsel failed to “fulfill its obligation to find all sources of relevant documents in a timely manner.”

This decision, GFI Acquisition, LLC v. Am. Federated Title Corp.(SDNY Apr. 7, 2010),  demonstrates the ongoing trend (at least in the Second Circuit) that counsel must take steps to both request potentially responsive information and to be prepared to open those steps to inquiry.  This guidance unfolds logically from the lineage of the recent Pension Committee decision, but it also seems to lower the bar that the Rimkus decision sought to raise (relative to what steps counsel must take to stay “in bounds” and avoid spoliation claims).

What is instructive about the GFI Acquisition decision is that the Second Circuit considers it necessary for counsel to follow due diligence steps relative to the method and manner of client communications.  Additionally, this court seems to be emphasizing that the parties’ good faith duties to extend to the lengths to which counsel goes to identify all potentially responsive information sources and to which counsel familiarizes herself on the “client’s document retention policies, as well as client’s data retention architecture.”

Click here for the full decision.

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