Out of concern that a court may have set an “impossible” discovery standard that most in-house counsel cannot meet, the Association of Corporate Counsel (ACC) filed an amicus brief urging the 11th Circuit to reverse sanctions imposed on TD Bank for alleged discovery failures by in-house counsel because the opinion “profound[ly] misunderstands how in-house legal departments operate.” Should these sanctions stand, the ACC fears that it will “leave all in-house lawyers involved in litigation – along with their employers – vulnerable…”
The ACC filed its amicus brief in response to the sanctions imposed on TD Bank in Coquina Investments v. Rothstein, No. 10-60786 (S.D. Fla. Aug. 3, 2012), which alleged that TD Bank aided and abetted Rothstein’s fraudulent ponzi scheme. In Coquina, the trial judge sanctioned both TD Bank and outside counsel (Greenberg Traurig) for a pattern of discovery mistakes and misrepresentations to the court, which included producing a black and white photocopy of a document that made the document’s red banner with the words “high risk” illegible, and failing to produce a key “investigation protocol” document and repeatedly representing that the document did not exist. The court found that TD Bank’s conduct was “willful” and that outside counsel’s conduct was “negligent,” and that plaintiffs were prejudiced by the misconduct. Because the discovery abuses came to light after a two month jury trial and verdict in favor of the plaintiffs, the court ordered sanctions in the form of a direction that certain facts, including that TD Bank had knowledge of the alleged fraud, would be considered established for the purposes of post-trial motions and appeal. The court also ordered Greenberg Traurig and TD Bank to pay Coquina’s attorneys fees for the motions for sanctions.
On the issue of in-house counsel’s involvement, the court accused TD Bank’s in-house lawyers involved in the matter of being “conspicuously absent” from supervising or assisting in the litigation because they were not actively involved in discovery, including reviewing documents prior to production and actively preparing witnesses for deposition or trial. However, as the ACC’s amicus brief notes, expecting in-house counsel to perform these types of tasks defeats the purpose of why many corporate legal departments choose to use outside counsel for large litigations. The ACC also argues that because corporate legal departments vary greatly in size and many in-house counsel lack litigation experience, it is not routine for in-house counsel to review documents.
Imposing sanctions on in-house counsel for not being intimately involved in the discovery process could force in-house counsel to assume a more active role in the discovery process out of fear of being sanctioned. Yet this result could put a strain on many in-house legal departments. Given the massive volume of documents and data a company may need to produce in litigation and the potential inexperience that many in-house counsel have with large-scale discovery responsibilities, the ACC’s fears that the court’s decision sets an unrealistic standard may be justified.