Pension Committee: Degrees of Culpability and Discovery Sanctions


In 2003 and 2004, Judge Shira Scheindlin of the Southern District of New York issued her oft-cited series of opinions in Zubulake v. UBS Warburg that influenced the landscape of e-discovery practices throughout the federal court system.1 In her latest discovery decision, Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC,2 subtitled “Zubulake Revisited: Six Years Later,” Judge Scheindlin provides a framework for when acts or omissions in preserving, collecting, and producing documents may breach current standards of care in discovery practice and when such acts or omissions may lead to the imposition of sanctions.


Pension Committee was filed in the U.S. District Court for the Southern District of Florida in 2004. It involves federal securities fraud and New York state-law claims by a large group of investors seeking to recover $550 million in losses arising out of the liquidation of two offshore hedge funds in which they held shares: Lancer Offshore, Inc. and Omnifund Ltd. The funds were managed by Lancer Management Group LLC and its principal, who for a period of time retained Citco Fund Services (Curacao) N.V. to act as the administrator. Citco N.V., its parent organization, and former Lancer directors who were Citco N.V. officers were names as defendants.

The case was transferred to the U.S. District Court for the Southern District of New York in 2005, but was then stayed for two years under the Private Securities Litigation Reform Act. After the stay was lifted and discovery commenced, it became apparent to the Citco defendants that there were gaps in the plaintiffs’ document productions. In response to a court order, the plaintiffs filed declarations regarding their efforts to locate, preserve, and produce documents.

The declarations outlined the steps plaintiffs took to preserve documents and averred that no documents were destroyed after a particular date. The Citco defendants then deposed the declarants and other individuals and discovered that numerous documents that should have been produced had not been. They also showed that “almost all of the declarations were false and misleading and/or executed by a declarant without personal knowledge of its contents.” After the close of discovery, the Citco defendants moved for sanctions against 13 of the 96 plaintiffs based on their deficient document productions and misleading declarations. The Citco defendants sought dismissal or any other sanction the court deemed appropriate.

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