On August 3, 2012, a U.S. District judge in the Southern District of Florida levied sanctions against TD Bank and its outside counsel in Coquina Investments v. Rothstein, 2012 WL 3202273 (S.D. Fla. Aug. 3, 2012, Case No. 10-60786). Coquina was a high profile case regarding TD Bank’s alleged assistance with a Ponzi scheme that resulted in a $67 million verdict against the bank.  Judge Marcia Cooke issued a post-trial order against the bank for concealing evidence that would have been relevant at trial and against its counsel for negligently failing to turn over documents.

Judge Cooke cited numerous discovery violations in the order, including the failure to conduct an adequate search for documents.  Perhaps most importantly, however, was the finding regarding the failure to produce a document in a manner that preserved the document’s qualities.  The order stated the document “should have been produced in either a native format or in color tiff.”  The order also criticized counsel for failing to realize that some information was lost due to formatting and for failing to realize “that further printing or copying of the document would result in degradation of the document’s clarity or quality.”  Additionally, the order criticized outside counsel’s reliance on the bank’s corporate in-house counsel to locate relevant documents.  Using particularly strong language throughout the order, the judge referenced the bank’s outside counsel’s use of more than 200 attorneys on the case as “too many cooks spoiling the broth” and went on to describe the litigation as being “conducted in an Inspector Clouseau-like fashion.”

As part of the sanctions against the bank, the judge made the following finding of fact: “I will therefore direct that the facts that TD Bank’s monitoring and alert systems were unreasonable and that TD Bank had actual knowledge of Rothstein’s fraud be taken as established for purposes of this action.”  As a result of these findings of fact, it may be impossible for the bank to successfully appeal the $67 million verdict against it.  The judge also ordered that the bank and its counsel must pay attorney’s fees and costs for Coquina Investments’ added expenses resulting from the violations.

This ruling is one of many recent discovery opinions throughout the country that emphasize the significant need for attorneys to closely advise and work with their clients on discovery issues.  Further, in regard to electronic discovery, counsel and clients should take steps to preserve documents in their native forms.  Producing hard copies of documents, or even electronic copies in an altered format may no longer be enough to satisfy a discovery request. Attorneys should also diligently endeavor to recognize deficiencies in the documents produced by their clients and use due diligence in ensuring that discovery requests are properly fulfilled.