State Court Issues Preservation Order Despite Some Overlap with Existing Federal Preservation Orders

Weiller v. New York Life Ins. Co., 2004 WL 3245345 (N.Y. Sup. Ct. Mar. 16, 2005) (Unpublished)

Plaintiff brought a putative class action in New York state court alleging that Unumprovident Corporation had engaged in an elaborate scheme to limit its liability to policyholders by denying meritorious claims based on economic factors having nothing to do with insureds’ actual qualifications under the policies. Plaintiff named Unumprovident as a defendant, as well as two other disability insurers. Eight other similar class actions are part of a Multi-District Litigation (“MDL”) pending in the United States District Court for the Eastern District of Tennessee, Unum’s home venue. In addition, six pending securities class actions accuse Unum of implementing the decade long scheme and seek damages for Unum’s alleged failure to maintain sufficient reserves to account for any resulting liabilities. Other related class actions and derivative shareholder suits are also pending against the defendant based on similar claims. Preservation orders were entered in the MDL case and in Keir v. UnumProvident Corp., which required UnumProvident to preserve 25 categories of documents dating back approximately 10 years, including substantially all computer disks and drives, and email files.

A little over a month after the commencement of the action, plaintiff’s counsel asked defendants’ counsel to stipulate to a document preservation order. Although defense counsel agreed to preserve documents, they declined to stipulate to an order. Specifically, they acknowledged defendants’ ongoing duty to preserve documents and data pursuant to the preservation orders in the Keir action and the MDL, and argued that a formal order in this case would be redundant and unnecessary. Plaintiff’s counsel insisted on a formal order, and filed the instant motion. The form of order sought was conceded to be “a word-for-word duplicate of the Order entered in the Keir class action litigation and in the ERISA Benefit Denial Actions in Tennessee,” except for what counsel referred to as “additional categories of material that must be preserved.”

The court observed that, aside from the existing federal orders which already require defendants to preserve documents, defendants were also bound by the federal statutory document preservation strictures applicable under the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). However, it noted that the federal protections were not directly binding. “It is true that the federal court could, and probably would, enforce the PSLRA and the court’s orders. But, this court could not independently enforce a breach of the obligations to preserve.”

The court rejected plaintiff’s argument that the preservation order was necessary due to alleged “destruction” of email messages by Unum in the past, finding that plaintiff’s counsel’s portrayal of the findings made by the court in Keir v. Unumprovident Corp., 2003 WL 21997747 (S.D.N.Y. Aug. 22, 2003) “may be exaggerated.” It noted that the Keir court “expressly recognized that the loss of the e-mail, caused by the overwriting of backup tapes, was not deliberate, but inadvertent.”

The court went on to grant plaintiff’s motion, however, reasoning:

The court can envision one or more scenarios in which the federal preservation orders might not be sufficient protection for plaintiff in this state action. For example, if the federal court did not require the production of certain materials or documents, and this court did require such production. A separate preservation order in this court might then be necessary as to those materials. Similarly, the allegations in this action might well diverge from those in the federal actions, causing a divergence in the scope and details of discovery, thus requiring a separate order.

The court further directed defendants “to promptly notify plaintiff’s counsel if the Federal preservation orders are amended or vacated, and if defendants or any of them are accused by the court or their adversaries, of violating either of said orders.”

The court went on to analyze defendants’ objections to a number of plaintiff’s requests for production, narrowing the scope of several. However it found plaintiff’s broad request for “[a]ll databases, electronic material, tape media, electronic media, hard drives, computer disks and documents” relating to the categories of documents sought in other requests was proper “in light of today’s technological realities.”

In response to defendant’s claim that preservation of computer hard drives under the preservation order issued in the MDL resulted in a cost to defendants of more than $1 million, the court stated:

The court is not insensitive to the cost entailed in electronic discovery, and would, at the appropriate juncture, entertain an application by defendants to obligate plaintiff, the requesting party, to absorb all or a part of the cost of the e-discovery it seeks, or will seek, herein. However, the court will not constrain the production of possibly relevant evidence on account of the later need to allocate the cost.

2005 WL 3245345, at *6 (citations omitted).