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The Banks Know ESI Is At The Heart Of Their Destruction

February 17, 2010

This is a great case where two lenders are fighting with each other and of course go right after Electronically Stored Information (ESI).  There is a saying about ESI Discovery Requests… …beware what you ask for, opposing counsel my ask you to produce the same things in return! In the case of foreclosure offense I will say to the lenders… …beware the cases that you prosecute against each other, w may read them an learn from your own tactics!  Take a look at this case quote:

“Essentially Wells Fargo contends that LaSalle did not search a number of backup tapes for relevant documents and should be subject to spoliation sanctions for not maintaining all of the backup tapes which might have contained responsive ESI.”

What this means is that Wells Fargo is telling us what we should be looking for, where it is located and if the lender does not produce it we should move for sanctions. The opposing lender LaSalle returns fire by stating to the Court:

“LaSalle responds that ESI on backup tapes is not readily accessible in that it would take six months and almost half a million dollars to restore the backup tapes. LaSalle counterpunchs by accusing Wells Fargo of the same sins — not producing documents from backup tapes, not placing a litigation hold on backups, etc. Wells Fargo Bank, N.A., 5.”

Editors Notes:  What is important about this case is not th outcome or the courts rulings.  What is important is that the lenders know where the important ESI is located, how to access it and that it is discoverable.  The problem in this case is that the requests were not made timely!  Also take a look at the Defendant’s way of trying to get around having to produce “original” electronically stored information (ESI) by claiming its regular practice is printing hard copies of “important” loan documents… 

“Additionally, the Defendant’s practice of printing hard copies of “important” loan documents that had been produced in discovery made the chances of finding anything new remote.  Wells Fargo Bank, N.A., 8.”

DON’T BE FOOLED!  Banks maintain electronic versions of their information as part of their regular daily routine so it is very much discoverable.  The proper steps to making sure your request is granted is:

  1. Establish (through request) a copy of their data retention policy.
  2. Establish (through request) if they were engaged in any lawsuits during the time your loan was signed and in effect through the current date of your lawsuit and request the names of the cases and index numbers.
  3. Identify (through request) if any litigation holds were ever requested against the bank and if so produce copies.
  4. Send your own Litigation Hold Letter.

Many believe that the key is sending a Litigation Hold Letter at the outset of the case.  The upside is you put them on notice quickly the downside is you’re telling them what you’re looking for.  It is already established through the courts however that once a party even suspects that it is going to engage in litigation it MUST suspend its destruction, overwriting or other means of removing electronically stored information (ESI) from being readily accessible.  So ask yourself this… …How often do you think the banks are in litigation? 

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Don’t Bank on this Strategy to Compel Electronically Stored Information

Taken From: Bow Ties Law Blog

The Court finds the parties could have avoided the expenses of this Motion by conferring appropriately early in the case about ESI.

United States Magistrate Judge Michael R. Merz, Wells Fargo Bank, N.A. v. LaSalle Bank Nat’l Ass’n, 2009 U.S. Dist. LEXIS 70514 (S.D. Ohio July 24, 2009).

Banks really should cooperate on electronic discovery issues when they sue each other.

Instead, Wells Fargo and LaSalle exchanged broadsides over searching back-up tapes and spoliation claims very late in the litigation.  The Court denied the dueling motions and dressed down the parties for not conferring about ESI earlier in the case.

The Parties were bound by several scheduling orders, which included them conferring on the production of electronically stored information and a discovery cut-off date that was extended several times.  Wells Fargo Bank, N.A., 3-4.   

Plaintiff Wells Fargo Bank brought a motion to compel and sanctions motion against Defendant LaSalle Bank National.  The Court summarized the parties’ dispute as follows:

Essentially Wells Fargo contends that LaSalle did not search a number of backup tapes for relevant documents and should be subject to spoliation sanctions for not maintaining all of the backup tapes which might have contained responsive ESI. LaSalle responds that ESI on backup tapes is not readily accessible in that it would take six months and almost half a million dollars to restore the backup tapes. LaSalle counterpunchs by accusing Wells Fargo of the same sins — not producing documents from backup tapes, not placing a litigation hold on backups, etc. Wells Fargo Bank, N.A., 5.

The Court was less than thrilled with the Parties in this case not conferring on electronically stored information and starting an ESI grudge match four months after the close of discovery and two months before trial.  Wells Fargo Bank, N.A., 7. As the Court bluntly stated:

The current dispute is a mild example of the sorts of problems which result when counsel do not deal systematically with ESI problems and possibilities at the outset of litigation, instead of filing one-paragraph boilerplate statements about ESI and waiting for the explosion later. Wells Fargo Bank, N.A., 6-7.

The Court found that restoring the back-up takes was “disproportionate to the likely utility of doing so.”  Wells Fargo Bank, N.A., 7.  Moreover, the cost of the restoration was out of proportion to the amount in controversy.  Wells Fargo Bank, N.A., 8.  Additionally, the Defendant’s practice of printing hard copies of “important” loan documents that had been produced in discovery made the chances of finding anything new remote.  Wells Fargo Bank, N.A., 8. 

The Court very curtly denied the Motion to Compel and Sanctions Motion.  Wells Fargo Bank, N.A., 8. 

Bow Tie Lessons

Electronically stored information must be addressed early in the lawsuit in the Rule 26(f) Conference, not on the eve of trial. 

The Court gave some practice pointers for having an effective meet and confer process by citing to the Sedona Conference Cooperation Proclamation.  The Court included the following six points to aid counsel on ESI matters:

1. Utilizing internal ESI discovery “point persons” to assist counsel in preparing requests and responses;

2. Exchanging information of relevant data sources, including those not being searched, or scheduling early disclosures on the topic of Electronically Stored Information;

3. Jointly developing automated search and retrieval methodologies to cull relevant information;

4. Promoting early identification of form or forms of production;

5. Developing case-long discovery budgets on proportionality principles; and

6. Considering court-appointed experts, volunteer mediators, or formal ADR programs to resolve discovery disputes.

Wells Fargo Bank, N.A., 6, citing The Sedona Conference Cooperation Proclamation, July, 2008, available at thesedonaconference.org. 

As an old friend once said, “Bad news does not get better with age.”  Neither does ignoring electronically stored information until after the close of discovery.

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