An insurer does not have to provide coverage when the insured’s business operation and use of the premises was not in accordance with that listed on the insurance application. In Nationwide Mutual Fire Insurance Co. v. Almco Ltd., a federal judge for the District of Columbia ruled that where an insured’s application requested insurance for a “deli,” the insurer did not have to provide coverage under the policy when a shooting occurred at the insured’s entertainment venue resulting in personal injury claims.

Defendant Almco Ltd. had plans to open a delicatessen. It obtained insurance from Travelers Casualty Insurance Co. of America from 2011 to 2012. That policy stated Almco operated a fast-food restaurant. However, during that time period Almco not only provided food, but offered billiards, entertainment, and alcohol upon the premises. In 2012, Almco obtained a new policy from Nationwide. That application provided that Alcmo operated a deli, and did not serve alcohol, have entertainment, nor billiards.

Approximately six months after Almco obtained the new insurance, a shooting occurred upon the premises during a private event at which alcohol was being served to guests. Several guests suffered injuries and Almco tendered the claims to Nationwide. In 2013, Nationwide sued Almco, seeking declaratory judgment that it owed no duty to provide coverage under the policy due to false statements.

Under District of Columbia statute, an insured may be barred from coverage where a false statement is made with the intent to deceive, or a false statement materially affects the acceptance of risk or hazard assumed by an insurer. Almco moved for Summary Judgment arguing it did not intend to deceive Nationwide. However, neither party disputed that false representations were made at the time the application was submitted.

On Nationwide’s Motion for Summary Judgment, the District Judge found material representations existed in the application, stating, “[a] disco is not a deli and the risks posed by the combination of billiards, booze and entertainment are materially different from the hazards that could arise out of a corned beef on rye.” Because there was no genuine dispute as to whether the false statement affected Nationwide’s acceptance of risk or hazards assumed, the Judge entered judgment for Nationwide. “The test of materiality is whether the representation would reasonably influence the insurer’s decision as to whether it should insure the applicant.” (Westhoven v. New England Mut. Life. Ins. Co. (1978) 384 A.2d 36, 38.) “[W]here evidence warrants, materiality may be found as a matter of law.” (Jannenga v. Nationwide Life Ins. Co. (1961) 288 F.2d 169, 172.) The court found that Nationwide set forth sufficient evidence to demonstrate it would not have provided the policy to Almco had it been aware of the true nature of the business operations.

Under California law, generally speaking, misstatements or concealment of any material facts in an application for insurance, even if unintentional, entitle the insurer to rescind the insurance policy. (LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 156 Cal.App.4th 1259, 1267.) Pursuant to Insurance Code § 332, “each party to a contract of insurance shall communicate to the other, in good faith, all facts within his knowledge which are or which he believes to be material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining.” Misstatement or concealment of “material” facts is ground for rescission even if unintentional. The insurer need not prove that the applicant-insured actually intended to deceive the insurer. However, under California law there are also exceptions to this general rule, including that an insurer cannot rescind a policy based upon facts that it knew, which it would have known through the exercise of ordinary care, or those of which the other waives communication.

Insurers should take care in issuing policies to ensure applications are fact checked and cross referenced with any other facts known to the insurer that may demonstrate the application is incomplete or fails to disclose material facts. While an insurer may have the right to rescind a policy where an insured fails to disclose material facts, in the event the insurer knew or should have known of the facts, it may not be capable of rescinding and may be liable under the terms of the policy.

This blog was originally posted to Jampol Zimet LLP on June 14. Click here to read the original entry. 

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Selecting Clients

Posted on June 6, 2016 05:22 by Steve Crislip

I am not above revisiting a topic.  It can be like jury work where you need to tell them three times and then show them the visual of the same.  So, I say again you should be selecting which clients you will represent with conscious aforethought.  See, April 2016 

When you started to elementary school, you needed basic instruction which always included:  “Stop – Look – Listen” before you crossed the street.  That single admonition will serve you well as a lawyer taking on new business.  Even lawyers fell for some version of the early Nigerian email scams.  Any such scheme preys on the human frailties and the failure to use conscious aforethought.

A new and previously unknown client presents what appears to be a nice piece of business.  You properly limit the factual information so you can first do a conflicts check and then advise the new client if you can proceed.  How about some old-fashioned checking of this prospective client to see if you deserve to be their lawyer?  Public information is readily available using the internet.  The reasonable attorney standard should now include vetting of the prospective company and its individuals.  Thereafter, more in-depth questioning of the new client should also allow you to use the old-fashioned smell tests with regard to any shell entities or money-raising schemes they may be proposing.

Lawyers, in their zeal for new work, can easily get pulled into financial schemes which leave them as the only solvent payor where the enterprise goes bust.  Before lending your name and reputation to an unknown client, shouldn’t you know why they want you to do work for some other geographical area, or if the structure they seek to use is overly complex?  See, Law360, April 8, 2016.

Further, in the modern practice there are many areas where you will just lack the required technical experience.  I often advise lawyers not to “dabble” or engage in areas beyond their experience.  There is nothing wrong with learning new areas, but it is easy to misstep without training and guidance.  Like going through a buffet line, do not take on a new case beyond your current capacity and be very wary of the last-minute new client who needs you tomorrow.

Truth to tell, no startling or novel advice is offered here.  However, there is a reason that we often tell jurors something three times and then show them a visual to make the point.  Don’t be a defendant because you failed to do what the modern “reasonable attorney” would have done.

This blog was originally posted to Lawyering for Lawyers on June 3. Click here to read the original entry. 


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The California Court of Appeal for the Fourth District recently held in Underwriters of Interest Subscribing Policy Number A15274001 v. ProBuilders Specialty Insurance Company that the statute of limitation on the insurer’s equitable subrogation claim was tolled until final payment by the insurer seeking contribution was paid.

The case involved a construction defect case against a construction company, Pacific Trades. Appellant Underwriters undertook Pacific Trades’ defense in the action under the terms of its general liability insurance policy. Appellee ProBuilders, also an insurer of Pacific Trades, denied defense on the basis that under the terms of its policy, it had no duty to defend when another insurer provided defense.

The underlying case was concluded when the parties reached a settlement, in which ProBuilders agreed to pay $270,000 of $1 million. Following the conclusion of the case, Underwriters sought equitable contribution from ProBuilders for defense costs, which was denied. ProBuilders argued in its motion for summary judgment that it was excused from contributing to defense costs on the basis that the action was time-barred by the statute of limitations. Underwriters argued its action was timely because it was filed less than two years after it made its final payment towards attorney fees. The trial court agreed with ProBuilders that the clause in its policy relieving it of defense duty when another insurer was providing defense applied and entered summary judgment in favor of ProBuilders. Underwriters thereafter appealed.

Insurers are entitled to equitable contribution from a co-insurer where they share liability with a co-obligor and have paid more than their share of losses or defended the action. The Court of Appeal held that the trial court erred in enforcing ProBuilder’s escape clause. Ordinarily, an insurer is free to limit the risks assumed within the terms of its policies, and the court will not rewrite the policy terms. On this premise, ProBuilders claimed the escape clause conditioned its duty to defend on it being the only insurer available. However, such escape clauses are strongly disfavored by the court. “Other insurance clauses that attempt to shift the burden away from one primary insurer wholly or largely to other insurers have been the objects of judicial distrust. ‘[P]ublic policy disfavors “escape” clauses, whereby coverage purports to evaporate in the presence of other insurance.’ (CSE Ins. Group v. Northbrook Property & Casualty Co. (1994) 23 Cal.App.4th 1839, 1845, 29 Cal.Rptr.2d 120….; [citation].) Partly for this reason, the modern trend is to require equitable contributions on a pro rata basis from all primary insurers regardless of the type of ‘other insurance’ clause in their policies.”

Courts have repeatedly visited arguments by insurers that “other insurance” clauses relieve them of liability in defending and indemnifying the insured and other insurers. The court in Edmondson Property Management v. Kwock (2007) 156 Cal.App.4th 197, 203–204, stated that when “the ‘other insurance’ clause in [the] policy is written into an otherwise primary policy, the courts have considered this type of ‘other insurance’ clause as an ‘escape’ clause, a clause which attempts to have coverage, paid for with the insured’s premiums, evaporate in the presence of other insurance. [Citations.] Escape clauses are discouraged and generally not given effect in actions where the insurance company who paid the liability is seeking equitable contribution from the carrier who is seeking to avoid the risk it was paid to cover.”

The Court of Appeal adhered to this trend of requiring equitable contributions on a pro rata basis. It determined the trial court erred in concluding ProBuilders’ escape clause should be enforced and that it should not be liable for its share of costs.

Considering the statute of limitations argument, the Court noted that a two-year statute of limitations period applied. Underwriters’ action was filed more than two years after ProBuilders’ initial refusal to contribute defense costs, and more than two years after the court in the underlying lawsuit confirmed the settlement. However, Underwriters’ action was filed less than two years after the insurers contributed their payments to fund that settlement, and less than two years after the settlement agreements were signed in the underlying suit, and less than two years after Underwriters’ final payment to the defense counsel hired to represent Pacific Trades.

No California case authority was directly on point on this issue. The Court, following analogous rulings, held that, although an action for equitable contribution can accrue when the noncontributing insurer first refuses to participate in the defense of a common insured, the statute of limitations should be equitably tolled until the plaintiff insurer makes the last payment in the underlying suit for which the plaintiff insurer is seeking contribution. The trial court’s decision was therefore reversed.

Insurers should take several things away from this case. It serves as a reminder to insurers to review their policies to ensure that any escape clause does not exist. Not only are such clauses unenforceable, but they are the frequent subject of litigation. Furthermore, insurers should be aware that the two-year statute of limitations will be tolled in cases of equitable contribution until the last payment is made by the insurer seeking contribution.

This entry was posted to the Jampol Zimet blog on March 22. Click here to view the original post. 


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Do Not Take Some Clients

Posted on April 7, 2016 04:10 by Steve Crislip

There are many lawyers.  The legal market is constricting. So, lawyers are out aggressively seeking new clients and new areas of law to represent.  Yet here I stand telling you not so fast – some clients just do not deserve you.  In February 2016, I advocated firing some of your problem clients ( in order to do a better job for your good clients.  Yes, I advocate pruning your client base.

Perhaps you think me daft, but there is a solid business plan here. This pruning of vexatious problem clients was to allow you to better serve your good clients, and to better develop new business from them. My new sermon today is to prevent you from taking these problem clients in the first place.  A little front-end time and the old-fashioned “sniff test” can save you lost time, anxiety, and lost deductibles later.

A few minutes, just as a matter of routine file opening procedure, checking the individual or company in various databases might just keep your name from being associated with an undesirable person or entity.  It also might reveal how often the prospective client has been in litigation, as in repeated vexatious rather than legitimate business or personal litigation.

I do not believe it is unreasonable to ask and know who has represented the proposed client before. If they have used many different lawyers before, a reasonable person might want to know why.  Certainly if they are substituting counsel in the course of a representation, I would want leave to inquire of former counsel to learn of issues or impending deadlines.  A just before a statute of limitations deadline, or the like, should justify further inquiry by you.  Why are they requesting your counsel at the last minute, and do you have adequate time to assess the proposed case and client?

What does the representation require and do you have the skill set or resources to handle it?  Regardless of the timeliness of hiring, can the proposed client pay for the services they request and do they know the extent of legal work required.  Reasonable questions and required due diligence I suggest are in order.  We routinely advise our clients to conduct due diligence before proceeding, yet do you as an attorney do the same common sense due diligence before taking in a new client? A common theme I encounter in defending legal malpractice cases is a statement by the lawyer client along the lines of:  “I never should have taken this client.” 

So unlike the previous withdrawals from problem clients, I am actively trying to get you to do preventative loss prevention by not taking stinky unworthy clients.  You will eliminate some work for me and other defense counsel, but you will be a happier and more solvent lawyer for using your good judgment on the front end of a non-representation. Protect yourself further by turning them away in writing and reminding them of all impending deadlines.

Trust me when I say the problem, stinky, non-paying, or unworthy clients are likely to file a legal malpractice action against you.  Document well and even send “I am not your lawyer” letters.  You need to do these things even in the face of declining business opportunities so you are working smarter, not just harder. 


This blog was originally posted on Lawyering for Lawyers blog. Click here to read the original entry. 

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On March 11, 2016 the Vermont Supreme Court issued a unanimous decision absolving the City of Burlington’s former Chief Administrative Officer, Jonathan Leopold, of personal liability for authorizing the expenditure of City funds to build Burlington Telecom (BT), in violation of the City’s Charter, and its Certificate of Public Good.  Osier, et al. v. Burlington Telecom, et al., 2016 VT 34 (March 11, 2016).  The taxpayer lawsuit was brought against the City and Mr. Leopold, alleging that both the City and Mr. Leopold had wrongfully used taxpayer funds to build BT.  The plaintiff-taxpayers sought (amongst other things) an accounting of all BT expenditures, and a judgment against Mr. Leopold in the amount of $17 million. The trial court dismissed the claims against the City.  Following a four day bench trial, the trial court entered judgment in favor of Mr. Leopold.  Affirming, the Supreme Court held that evidence of bad faith must be shown before an official can be held personally liable for misuse of public funds.  

There were two issues on appeal:  (1) whether the trial court abused its discretion in denying the taxpayers’ request for an “accounting” from the City of all funds disbursed on behalf of Burlington Telecom, and (2) whether a public official can be held personally liable for improper disbursements of funds from a public account, and, if so, under what circumstances.

This case stems from the creation of Burlington Telecom, a City-owned and operated television, telephone, and Internet service provider.  In order to build and operate BT, The City had to obtain a Certificate of Public Good (CPG) from the state Public Service Board.  The City obtained the necessary CPG, but it was prohibited from using taxpayer funds to pay for BT’s construction and development costs.  These costs were to be paid with outside financing and operating revenues.  In 2007, while construction was underway, BT ran out of funds.  Mr. Leopold, who was also the City’s Treasurer, authorized the expenditure of funds totalling $17 million from the City’s “pooled cash account” to pay for the ongoing construction of BT, while he sought additional financing.  The pooled cash account is a common account holding funds for many of the City’s departments, and is therefore taxpayer monies.  The economic crash of 2008, however, prevented Mr. Leopold from securing the additional financing he had counted on to pay back the pooled cash account.    

The trial court found that Mr. Leopold was not authorized to withdraw funds from the pooled cash account to pay BT’s bills, but that in doing so he did not engage in bad faith, corruption, or personal benefit.  The funds that were improperly withdrawn from the pooled cash account were used only to pay for BT expenses.  They were not used for any other purpose, and were not used for the personal benefit of Mr. Leopold.  The taxpayers appealed.

On appeal, the Vermont Supreme Court affirmed the trial court’s denial of the taxpayers’ request for an accounting, finding no error in the court’s decision.  The taxpayers had requested a full accounting of all money spent by the City on BT’s development over a four-year period.  The taxpayers sought to determine whether money had been misappropriated or diverted in some way.  They further sought to have the City pay for the accounting.  Noting that the City had already produced all of its financial records to the taxpayers in the extensive discovery process, the trial court concluded that the taxpayers had not articulated a valid reason to force the City to incur the expense and inconvenience of an accounting.  The Vermont Supreme Court agreed.  It held that the trial court did not abuse its discretion in refusing to force the City to fund a “fishing expedition” for the benefit of the taxpayers, given the extensive discovery that they had engaged in and the lack of any credible evidence that the City’s funds were spent, albeit wrongfully, on anything other than BT-related expenses.  

The Court next addressed the issue of Mr. Leopold’s personal liability.  In reaching its holding the Court relied upon McQuillan’s “The Law of Municipal Corporations,” a prominent authority on the subject of municipal liability.  McQuillan’s provides that a taxpayer action against a municipal official seeking recovery of public funds spent without authorization is only justified if some improper motive, or bad faith, is present; mere bad judgment, or even gross incompetence, does not satisfy the standard.  The Court agreed, and went on to clarify that bad faith is “evidence of spending or misappropriation of funds for the personal benefit of the official or for the purpose of causing harm to the municipality.”  Although Mr. Leopold had directed City funds from the pooled cash account to be used to pay BT-related expenses, in violation of the CPG, there was no evidence that those funds were used for any other purpose.  Further, Mr. Leopold thought that by authorizing the use of the funds he was acting in the best interest of the City – to allow BT to survive while he sought outside financing.  

The Court went on to address the public policy concerns raised by this case.  It stated that if it were to rule otherwise then few responsible persons would be willing to serve as public officers.  The Court therefore affirmed the judgment of the trial court denying recovery to the taxpayers, adopting and applying this new standard for municipal officer liability that includes an element of bad faith. 

In sum, the Vermont Supreme Court held that for a taxpayer to succeed in such a case (i.e., obtain an order requiring the municipal official to personally repay the improperly used public funds), he/she must show that:  (1) the official authorized the expenditure of public funds in violation of statutory or regulatory law; (2) acted in bad faith, defined as intending to benefit himself or others financially, or to cause harm to the municipality; and (3) the funds or property of the municipality were paid to the official or other person and not repaid to the municipality.  Since there was no evidence of bad faith or self-dealing, the taxpayers in this case failed to prove the second element of their claim.  Accordingly, the dismissal judgment of the trial court was affirmed.

Samantha Lednicky is an associate in the Litigation Group at Downs Rachlin Martin, Vermont’s largest law firm. DRM represented the City of Burlington in this case. For further information contact,, or

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Rescission in the Modern Age

Posted on March 16, 2016 08:15 by Gary L. Howard

Although the equitable remedy of rescission dates back to the common law of Great Britain, it remains an effective tool for insurers.  I look forward to presenting the topic of Rescission in the Modern Age: Overlooked Tool or Obsolete Relic? at the upcoming annual DRI Life, Health, Disability and ERISA Seminar.  

The notion that both parties to an agreement must operate in good faith is a historical tenet of contract law.  Further, insurance policies are considered to be contracts of utmost good faith.  For this reason, and because parties to insurance contracts could be more vulnerable to misrepresentation or concealment of material fact than other contracting parties, rescission has been applied to insurance policies to allow an insurer to void a contract. 

Today, state laws vary as to the requirements an insurance company must meet to employ the remedy of rescission to void an insurance contract.  Some states merely require a material misrepresentation in the policy application to rescind the contract.  In this context, a material misrepresentation generally occurs when the insured makes an untrue statement that would have changed the rate at which insurance would have been provided or which would have changed the insurer’s decision to issue the contract.  Typically, the burden is on the insurer to show that there is a material misrepresentation.  In these states, the insurer must simply show that it would not have issued the policy had it known the true facts that were misrepresented.  At the other end of the spectrum, some states may require that intent to deceive be proven in order to rescind the contract.  Additionally, some states have specific standards for rescission of life, health, and disability insurance policies that differ from other types of insurance.  Finally, another wrinkle in the availability of rescission has been the Affordable Care Act.  Under the ACA, rescission is illegal except in cases of fraud or intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage.  If a plan or health insurance issuer wants to rescind coverage, the ACA requires thirty days’ written notice and proof that an insured intentionally put false or incomplete information in his or her application.

In addition to the varying laws affecting an insurer’s access to rescission, we will cover incontestability clauses, arguments against rescission that an insurer is likely to encounter and relay some practical pointers on rescission.

As always, I look forward seeing you all in Chicago!


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Letting Some Clients Go

Posted on March 7, 2016 03:32 by Steve Crislip

 “I do not deserve to be your lawyer” is one of my favorite double entendres.  It says a lot.  Relationships of any type are rarely perfect and in some occasions it just would be better if you and a legal client parted ways.  Perhaps it is a client who refuses to listen to your advice, one who turns out to be less than truthful, and even one who refuses to timely pay you.  Often these same characteristics appear in that group known as Plaintiffs in legal malpractice cases. 

In an October 2013 post I wrote about The Pareto Principle, commonly used to refer to the 80/20 Rule now, but often used in math and business situations.  For example, it could be used to say that 80 percent of your problems come from just 20 percent of your clients, or 80 percent of your profits came from just 20 percent of your clients.  So, I advocated there that you should spend your time doing quality service for your good clients and just fire the bad ones.  Instead of always chasing the future “Apple” type client, spend your time giving very good service to your good clients.  In other words, go fire some clients you do not deserve to represent.

If you are going to do that, you need to do it right.  Never let it happen right up against deadlines.  Look at your professional rules and follow them closely.  You likely need court approval for withdrawal in matters in litigation and need to follow any trial court rules.  Likewise, you need to do a good end-of-representation closing letter that spells out client duties and all deadlines so the client is fully advised and protected.     

We all know that sometimes you discharge the client and sometimes the client fires you.  As I say, relationships do not always work.  The closing letter should address the same issues in both cases.  Here however is a most surprising fact.  At this stage, when the relationship has really soured, many lawyers just tell the client to stop at their office and get their file. They want to be done with them.  Later when a claim is made against them, that lawyer has little in the way of a file.  What were they thinking? 

Most states hold that the file, excluding work product for unpaid work in some states, belongs to the client and cannot be withheld, even when not paid.  Just like any record in any type of proceeding, you better take the time to make a copy of the file before it leaves your possession.  For an ethics claim, or a legal malpractice claim, you better have proof of what you did or did not do.  The subject of the file could be addressed in the engagement letter stating your policy to copy all, and at whose expense.  Regardless of the cost factor, you better make a copy of the file, or devise some way to have complete access to any file of a client leaving your representation.  It makes the later claim just a little hard to defend without it.

This blog was originally posted on Lawyering for Lawyers on February 2. Click here to read the original entry. 

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The Client Wants Their File

Posted on March 2, 2016 10:05 by Steve Crislip

There are many issues in loss prevention in law firms and in law practice management.  Those of us who write or consult in the area often find ourselves writing again on the same issue.  Or, we’ll see a post by another in the field and it will generate an idea or a desire to add to that subject.

A January 2016 post by Megan Zavieh (Daily Dispatch) appearing in AttorneyatWork reminded me to address this very practical issue of what is “the file.” It is a common problem that is not always clear to lawyers.  Perhaps it was easier when everything related to a client’s work was actually in a paper file folder.  You picked it up and went through it.

The general rule remains that the file belongs to the client, but it was not always clear what that was.  The American Bar Association (ABA) stepped over the issue in its opinions from 1977 (Informal Opinion 1376) until it issued ABA Formal Opinion 471 (7/1/2015); see at

So, the ABA considers these items to belong to the client:

• all property of the client supplied by the client to the lawyer, including original documents supplied by the client;

• end product items (like – reports or discovery for which the client paid; pleadings and papers filed with tribunal);

• copies of contracts, wills, corporate documents, etc., prepared by the lawyer for the clients (and considered end product);

• orders or other records of a tribunal;

• correspondence received or issued on relevant issues, including e-mail and other electronic correspondence that has been retained under the firm’s document retention policy;

• discovery or evidentiary exhibits (like transcripts, statements, reports, etc.);

• legal opinions issued;

• third-party assessments, evaluations or records paid for by the client.


The ABA opinion considered these items not to belong to the client file:

• papers and property that the lawyer generated for the lawyer’s own purpose in working on the client’s matter (unless certain of those needed to protect the former client’s interests);

• administrative materials related to the representation (e.g., conflicts checks, client worthiness, time and expense records, personal notes, drafts, research, and internal memorandums);

• drafts or mark-ups (except as above);

• notes regarding an ethics consultation;

• documents that might reveal the confidences of another.

Other common exceptions in various jurisdictions from the client file that are to be returned seem to be:

• materials that would violate a duty of non-disclosure to another person;

• materials concerning the lawyer’s assessment of the client;

• materials of only internal firm communications or welfare of client or of others;

• materials to which an attorney’s lien may apply when not paid.

Of course, each jurisdiction will have unique interpretations and those rules that need to be consulted first, e.g., file may not be withheld until paid (W. Va. L.E.I. 89-02) and Attorney Retaining Liens for unpaid attorney fees and expenses extends the right to withhold work product prepared for litigation by or for the attorney (i.e., WV L.E.I. 92-02 noting that some jurisdictions allow only the withholding of opinion work product).  Also, lawyers need to think about what is electronic and is required as a part of the modern “file” whether on the firm servers and hard drives or even on your personal device that you no doubt used while working on the file.  See ABA Model Rule 1.0(n).

While we have more guidance, you must always look to the state at issue and actively research the opinions.  You must act reasonably and under the basic guidance that you are to protect the client’s interests.  A failure to do so could result in more than just a dispute with an ex-client. 

This blog was originally posted on March 2, 2016, on the Lawyering for Lawyers blog. Click here to read the original entry. 

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By now everyone is probably acquainted with the amendments to the Federal Rules of Civil Procedure that took effect on December 1, 2015.  The amendments made a number of important changes to the rules governing discovery designed to reduce discovery costs, expedite the resolution of discovery issues, and focus courts and parties on the claims and defenses in a case. The amendments also stressed, and some might argue reintroduced, the concept of proportionality into federal discovery practice. 

One of the significant changes was the introduction of new language in Federal Rule of Civil Procedure 37(e) regarding spoliation of electronically stored information (“ESI”). The amended language was intended to reconcile conflicting authority on the degree of wrongful conduct (negligence, gross negligence, bad faith or willful intent) that must be proven before imposing sanctions for spoliation. The amended rule states that:
(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

  (1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or
    (2) only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation may:
      (A) presume that the lost information was unfavorable to the party;
      (B) instruct the jury that it may or must presume the information was  unfavorable to the party; or
      (C) dismiss the action or enter a default judgment.
Fed. R. Civ. P. 37(e)(1).

The amended rules “govern in all proceedings in civil cases [commenced after December 1, 2015] and, insofar as just and practicable, all proceedings then pending.”  2015 U.S. Supreme Court Order 00017.  Two recent decisions have reached different results on the application of Fed. R. Civ. P. 37(e)(1) to pending cases.

The first case, Stinson v. City of New York, 10 Civ, 4228, 2016 U.S. Dist. LEXIS 868 (S.D.N.Y. Jan. 5, 2016), arose out of the heavily contested class action litigation over the New York City Police Department’s policies for allegedly stopping individuals without probable cause.  The factual findings are a defendant’s nightmare of potential discovery failings.  The horror story includes failing to recognize that earlier litigation triggered a duty to preserve evidence, failing to issue a timely litigation hold, failing to insure that key custodians implemented the hold, and  failing to preserve text messages and other electronic evidence, all leading to the conclusion that relevant information had been lost.  The court concluded that the city’s conduct was grossly negligent.  However, it also found that the city had not acted in bad faith.  

Based on these findings, the court held that a permissive adverse inference instruction, allowing, but not requiring, the jury to find that evidence helpful to the plaintiffs’ case had been destroyed, was appropriate.  The court recognized its decision was inconsistent with Fed. R. Civ. P. 37(e)(1), which had gone into effect after the sanctions motion had been briefed but before it had been decided.  The court concluded that because the spoliation allegations involved both paper evidence and ESI, and because the parties had argued the issue prior to the effective date of the amended rule, it would not be “just and practicable” to enforce the amended rule in the court’s decision.

A different result was reached in Nuvasive v. Madsen Med. Inc., No. 13-cv-2077, 2016 LEXIS 8977 (S.D. Cal. Jan. 26, 2016).   In April, 20145 the court had issued a spoliation order granting a permissive adverse inference instruction based on a failure to preserve text message. The court did not make any finding that the failure to preserve the text messages was intentional, and the defendant later moved to vacate the spoliation order based on the amended language of Fed. R. Civ. P. 37(e)(1).   

Despite the plaintiff’s argument it would be prejudiced because it was not required to prove intent at the time of the spoliation order, the court granted the motion to vacate order based upon the amended rule.  Citing the Supreme Court’s language on the effective date of the amendments, as well as the general proposition that “a new procedural rule applies to the uncompleted portions of suits pending when the rule became effective . . .” the court concluded it should apply the amended rule.   The court also noted the plaintiff had an incentive to try and prove intentional conduct even prior to the amendments, and therefore was not prejudiced by the application of the new legal standard. The court then found that there was not sufficient evidence in the record to prove the failure to preserve the text messages was intentional and therefore vacated the adverse inference instruction.

These decisions demonstrate there is room for advocacy concerning the application of the amended spoliation standard to cases commenced prior to December 1, 2015. Counsel should carefully consider the impact of the amendments on spoliation issues, and prior spoliation rulings, in such cases.  In addition, while it may or may not make sense to have different rules for spoliation of paper evidence and ESI, Stinson suggests that there may be continuing vitality to the lines of authority allowing adverse inference instructions for negligent failure to preserve paper evidence, or “mixed” paper and ESI evidence.  These issues are likely to be further explored in future decisions. 


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In the age of Facebook, more and more litigants will document their life online and through social media. This opens up a plaintiff’s social media accounts, like Facebook, for discovery, especially if he or she makes an emotional distress claim. A recent decision by the United States District Court for the District of Vermont reinforces this principle by applying the liberal discovery rules to the changes and advances of social networking and online interactions.  

In Lewis v. Bellows Falls Congregation of Jehovah’s Witnesses, Bellows Falls, Vermont, Inc. et al., 2016 WL 589867 (D. Vt. Feb. 11, 2016), the Vermont federal district court granted broad discovery access to a plaintiff’s private Facebook account in a case involving claims of emotional distress and loss of enjoyment of life.  The district court’s decision in Lewis appears to be one of the first decisions in the state or federal courts of Vermont, if not the first, addressing this issue, but is consistent with the conclusion of numerous courts throughout the country that non-public content on a social networking site can be highly probative evidence of a plaintiff’s mental, emotional, and physical state.  

The issue in Lewis was whether a plaintiff could shield the non-public contents of her Facebook account from discovery in a case where she claimed to suffer emotional distress, embarrassment, loss of self-esteem, disgrace, humiliation, and loss of enjoyment of life arising out of allegations of sexual abuse.  The plaintiff claimed that by availing herself of Facebook’s privacy settings, she had an expectation of privacy that precluded discovery in civil litigation irrespective of her damages claims.  Defendant argued that by filing suit and claiming emotional distress and loss of enjoyment of life, the plaintiff had placed her mental and emotional state directly at issue and any information posted by plaintiff or a third-person to plaintiff’s online account concerning any emotion or feeling was material and relevant to the defense.  Defendant also argued that disclosure of the non-public contents of plaintiff’s Facebook account was not a violation of her right to privacy. Facebook, argued defendant, is like a diary of one’s life – but with a very important distinction:  unlike a diary, a Facebook user intends for other people to see their writings and postings.

Agreeing with defendant, the court concluded that there is no legitimate expectation of privacy with email and other internet transmissions including social networking.  Although the plaintiff had used privacy settings to limit viewings of her Facebook postings to certain “friends,” plaintiff had over 200 such “friends” and “had no justifiable expectation that [her “friends”] would keep her [Facebook posts] private.”  Lewis, 2016 WL 589867 at *2.  The court further recognized that the defendant’s need for access to the private Facebook information outweighed any privacy concerns, because Facebook information is “circumstantial evidence that offers a reasonable prospect of corroborating or undermining [plaintiff’s] claims.”  Id. (quoting Zakrzewska v. New School, 2008 WL 126594, *2-3 (S.D.N.Y. Jan. 7, 2008).  

Although the court stopped short of granting “unfettered access” to defendant, it nonetheless issued an order that plaintiff produce seven broad categories of non-public Facebook information.  Among the discoverable information is any post that “reveal[s], refer[s] or relate[s] to any emotion, feeling, or mental state” of plaintiff and all photographs and videos depicting the plaintiff or her activities.  Lewis, 2016 WL 589867 at *3.

In many lawsuits, what a plaintiff is doing on a day-to-day basis; what activities a plaintiff is engaging in; how a plaintiff is behaving; and a plaintiff’s emotional state, are all relevant to the claims they are making.  Facebook can reveal all of these things, and will do so with increasing frequency in litigation as the numbers of users continues to grow.  For example, a plaintiff might be asserting in the lawsuit that they are no longer capable of feeling joy, no longer enjoy the company of other people, and prefer to stay home.  Yet their Facebook postings, or their friends’ postings, show plaintiff socializing or even at a club, dancing.  Under the circumstances, it is entirely reasonable for defendant to assume that the “private” section of a plaintiff’s Facebook page will reveal even more information that contradicts the claims in the lawsuit.  The cases, like Lewis, show that the courts will order discovery of these “private” sections.      

Attorneys have been using social media and Facebook for years to obtain information.  Lewis and other recent cases highlight the ongoing significance of social networking discovery as a powerful tool to obtain an unmatched portrayal of a plaintiff’s everyday life.  

Jennifer McDonald is an associate in the Litigation Group at DRM, Vermont’s largest law firm, and represents the Defendant in the Lewis case cited above.

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