e-discovery 2.0

Almost two years ago I wrote one of my first blog posts entitled “Review-less E-Discovery Review.”  Despite the tongue twister of a title, the post posited that “there is a very real possibility that we’re on the cusp of computers taking over a significant e-discovery task for attorneys.” I’d like to take a look and see how much (if at all) my prognostications have materialized.

A cynic might think that this is the moment where E-Discovery 2.0 jumps the shark.  But no, this isn’t one of those sitcom episodes where they flashback to previous shows as an easy way to recycle content.  Instead, it seems useful to see how the legal market has evolved from a litigation workflow perspective, particularly with some vendors touting the benefits of review-less technologies like predictive coding.

In the original blog, I noted that there was a “scenario where a non-manual review methodology may make sense” (while importantly noting that “this approach is not without risk”).  Since my last post there has been the successful adoption of Evidence Rule 502,which makes this methodology (at least conceptually) safer.

But again (imagine dreamy flashback mode), here were the guidelines I previously proffered:

1. Large data set.  This may sound a bit obvious, but a non-manual approach is best suited for large, unwieldy data sets.  The corpus doesn’t need to be in the terabytes, but the data set should be evaluated in term of discovery processing costs and attorney review estimates.
2. Short Production Timelines.  Once the above calculations are conducted, the next step is to determine if a human based review could even conceivably be conducted in the given time frame.  In many instances, an eyes-on review process just won’t be feasible since there won’t be enough bodies to throw at the problem.
3. Next Gen “PAR” Tools.  In order to pull this “review-less” review process off, both safely and quickly, the responding party needs to have access to fast, robust processing, analysis and review (“PAR”) tools.  Certainly, it’s possible to have this scenario work with an e-discovery service provider, if they have the capability.
4. Relatively Small Amount in Controversy.  For the time being, this approach should not be considered for any “bet the company” litigation, nor anything with significant downside risk (governmental inquiries, punitive damages, class actions, 2nd requests, etc.).  Yet, for many standard commercial lawsuits, corporate investigations, HR claims, etc. this review-less approach may be worth considering.
5. Ability to Use a Clawback Provision.  Entering into a clawback provision with the opposition is mandatory in this methodology since the chances of an inadvertent production are statistically ever-present.  Yet, until Evidence Rule 502 is resolved, there will always be a risk that the clawback won’t be enforceable against 3rd parties.
6. Non-governmental Production.  Most information in governmental productions becomes part of the public record, meaning that a clawback isn’t going to be feasible.  Here, trade secret information, personally identifiably data and the like would be disastrous if pushed out into the public domain.

The goal of this post is to see if this dog is any more ready to hunt than it was two years ago.  The short answer (right now) appears to be: No.

We all know that litigators are both risk adverse and generally slow to adopt new technology approaches.  This is particularly true when there’s a perception that they won’t have insight into the technological black box behind automated coding/tagging decisions.  Litigators are understandably sensitive about the ability to prove up the reasonability of their search and review processes.  This “reasonableness” requirement lines up both with the Victor Stanley requirements and FRE 50(b), which eliminates the chance of a waiver only “if the holder of the privilege or work product protection took reasonable precautions to prevent disclosure.”

Given this ongoing hesitancy, the question remains shouldn’t we be seeing more movement in automated review than the glacial progress that’s been achieved to date, particularly with the known shortcomings of the eyes-on review process?  Most are familiar with the 1985 STAIRS study by Blair and Marion where the percentage of relevant documents lawyers thought they had found using Boolean Keyword searches was 75% – when the percentage they actually found was 20%.

But, despite the known deficiencies of eyes-on review it follows into the “go with the devil you know” mindset that often makes sense when dealing with judges and juries who aren’t likely to grok newer-fangled approaches.

In addition to these high-level, almost dogmatic challenges, there is one other tactical element I’d add to my previous list (of 6 factors).

7. All documents processed up-front (no rolling collection). I’ve heard some in the trenches e-discovery experts claim that they’ve never had a case that didn’t involve at least some level of incremental data collections.  Whether this is an overstatement is immaterial.  The fact is that a large number of e-discovery projects involve ESI that is collected (and then processed) in dribs and drabs.  This if often a good thing, largely attributable to the incremental (start slowly) nature of a well thought out e-discovery project where a smaller number of initial custodians are processed, then ECA is conducted and only then is the additional ESI added to the corpus.  This common methodology causes some significant heartburn for a review-less methodology since the ever changing nature of the corpus makes it difficult/impossible for a sample to be truly extensible to what will eventually be the entire data set.  For this reason, the review-less approach should be limited to where the entire corpus is collected and processed at once.

In sum, the seven foregoing factors appear to still be largely valid and create an environment where an automated, review-less methodology will only make sense in a relatively rare set of circumstances.  This may change in the future, but given the risk adverse DNA of most litigators I can’t imagine this tipping point happening any time soon.

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Much of the business and personal productivity that comes in the digital world  is from email and its unique abilities. Email allows us to communicate in a way that helps us associate context to our discussions, namely in its ability to be chained into a sequential thread when email users reply to or forward emails they previously received. This accomplishes two important tasks: 1) it allows the person sending the reply or forward to get an understanding of the issues so he/she can craft a meaningful response, and 2) it allows the person receiving the response to understand that response in the context of other on-going discussions. Email programs such as Microsoft Outlook, Eudora, and Gmail help by automatically including content from prior emails, thus producing a long chain of reference.

It is no coincidence that emails thus constitute key evidentiary value in the context of litigation. The inherent value captured in emails is what makes email productions central to pre-trial disclosures and the electronic discovery that precedes it. Courts have long recognized that emails are a business record and subject to discovery. Establishing who said what in the context of a matter in dispute is greatly facilitated by examining the thread of emails recorded in email repositories. With respect to electronic discovery, however, email threading presents several unique challenges. The area of greatest confusion and uncertainty has been the determination of privilege when emails are exchanged with in-house counsel and attorneys and whether such emails are protected by attorney-client privilege or not. A central issue is the composition of privilege logs under these circumstances.

There are several legal opinions on the matter of intermingling privileged and non-privileged communications in an email chain. These opinions have left the matter with little clarity, especially regarding whether the entire email thread is privileged or whether individual emails must be separated out and classified as privileged, with a privilege log listing them. Typically, the most recent email in a thread contains all other emails in that thread. Separating out individual emails (i.e., the contained emails) from the containing email would allow for treatment of just the portions of the email thread that may have privilege. When such separation is permitted, some contained emails may be assessed as privileged while others may not. However, it is entirely possible that the contained email is also present as an independent email under possession of the same custodian or another custodian. When it is present, one could argue that the contained email can just be ignored, and if the corresponding email is responsive, one can ignore the contained email. But rarely does a collection include a complete set of custodians, so the question of whether the privilege log should include the contained item in question still remains. In terms of management of review, and for constructing a privilege log, treating the most recent email and all its contained emails as a single entity is less expensive and cleaner than separating and determining privilege status of each contained email.

Another complicating factor is simply a determination of privilege. Does the mere fact that an attorney was listed as a courtesy CC recipient make the entire email privileged? And, when such emails are then forwarded only to an attorney involved in the case, with a legal strategy discussed in the containing email, is only the new content added to the containing email privileged, or does the privilege determination extend to the other contained emails?  Let’s examine a few opinions for guidance.

With respect to privilege there is a significant body of opinions that would suggest that only communications that explicitly seek legal advice are privileged.

“With respect to internal communications involving in-house counsel, a party “must make a ‘clear showing’ that the ‘speaker’ made the communications for the express purpose of obtaining or providing legal advice”, Chevron Texaco Corp., 241 F. supp 2d) at 1076 (quoting In Re Sealed Case, 737 F.2d 94 (D.C. Cir. 1984)). If the legal and business advice are inextricably intertwined, “the legal advice must predominate over the business advice, and not be merely incidental, for the communications to be protected under attorney client privilege.” Evidently, attempts to include an incidental attorney in a thread would not offer privilege protections. However, the issue is complicated if the most recent containing email is indeed a genuine attempt to seek such guidance. Here again, there are two opinions. In United States v. Chevron Texaco Corp., 241 F. supp. 2d 1065, 1074 n.6 (N.D. Cal. 2002), we note that:

“With respect to each series of emails for which Chevron asserts protection under privilege, Chevron breaks the series into each discrete message. In our view, such a representation of the document is misleading. Each email/communication consists of the text of the sender’s message as well as all of the prior emails attached to it. Therefore, Chevron’s assertion that each separate email stands as an independent communication is inaccurate.”The above would have you prepare a single entity with the most recent containing email and all other quoted emails treated as a single unit. On the other hand, we see the opposite opinion in Universal Service Fund Telephone Billing Practices Litigation, 232 F.R.D. 669, 674 (D. Kan. 2005) where “the court strongly encourages counsel, in the preparation of future privilege logs, to list each email within a strand as a separate entry”. In a related ruling, the court notes: “Obviously, a sufficient (i.e., reasonably detailed) privilege log is vital if litigants and judges are to determine whether documents have been properly withheld from discovery.” As mentioned earlier, this can be much more expensive from a review and production standpoint.

In Chemtech Royalty Assoc., L.P. v. United States, Nos. 05-cv-00944, 06-cv-00258, 07-cv-00405, at (M.D. La. Mar. 30, 2009), we get another perspective: “Asserting privilege for an entire email thread in the privilege log, but only describing the last message in the thread is deficient.”

In Baxter Healthcare Corp. v. Fresenius Med. Care Holding, Inc., No. 07-cv-01359, 2008 BL 229777 at (N.D. Cal. Oct 10, 2008), the defendants are ordered to produce a privilege log that “separately identifies the author, recipient(s), copyee(s), and blind carbon copyee(s) for each logged email communication regardless of whether the communication is part of an email string”. The court directive is: “Each email is a separate communication, for which a privilege may or may not be applicable. Defendants cannot justify aggregating authors and recipients for all emails in a string and then claiming privilege for the aggregated emails.”

Thus, the contained emails must be treated as separate privilege log entries.

In Vioxx Products Liability Litigation, 501 F. Supp. 2d 789, 812 (E.D. La 2007) the court notes:

“Email threads in which attorneys are ultimately involved were usually listed on the privilege log as one message.”  Further, “Simply because technology has made it possible to physically link these separate communications (which in the past would have been separate memoranda) does not justify treating them as one communication and denying party a fair opportunity to evaluate privilege claims raised by the producing party.”

Again, the preference has been to separate out individual contained emails as independent emails with corresponding privilege log.

In C.T.  v.  Liberal School District, Nos. 06-cv-02093, 06-cv-02360, 06-cv-02359, 2007 BL 21826 at (D. Kan. May 24, 2007), the court orders the plaintiff to submit an amended privilege log that listed email in a string as a separate entry.

In Se. Pa. Transport Authority v. Caremark PCS Health, L.P., 254 F.R.D., 253, 264-65 (E.D., Pa 2008) court recommends “analyzing emails in chain separately to rule on defendant’s privilege claims”.

Another significant opinion is found in Muro v. Target Corp., 250 F.R.D. 350 (N.D. Ill. 2007). In addition to at least four motions, an in camera review  was requested for identifying the privilege status of eighty nine documents. Here, the court ruled that FRCP Rule 26(b)(5)(A)  does not require that all contained emails be separated out. However, the court sustains Target’s objection to the Magistrate Judge’s ruling that its privilege log was inadequate for failure to separately itemize each individual email quoted in an email string. In Muro, though, you are allowed to treat an entire email as a single entity only if the non-privileged communications in that chain are otherwise disclosed. Hence, if you wish to treat an email as a single unit, you are required to either disclose the individual contained emails from other custodians, or to list them as Derived Emails (see below).

Another important case is the Rhoads Industries Inc. v. Building Materials Corp. of America et al 2008, WL 5082993 (E.D. Pa Nov. 26, 2008), where the court rendered the opposite opinion:

“Each version of an email string (i.e., a forward or reply of a previous email message) must be considered a separate, unique document, and therefore each message of the string which is privileged must be separately logged in order to claim privilege in that particular document.”

Of course, the context of the Rhoades opinion is the statement: “In the world of electronic communications, a series of email messages, among people employed by the client, but working in different locations, can replace the meeting with an attorney and subsequent letter.” However, this opinion is very debatable.

An entirely different approach is suggested in Apsley v. Boeing Co., No. 05-cv-01368, 2008 BL 12035 at (D. Kan. Jan 22, 2008), with the opinion “Although Boeing listed on its privilege log entire email strings, it redacted only the portion of the string that contained legal communications.” While this seems to be a perfectly reasonable approach, wouldn’t this compromise case strategy since the very fact that certain portions of the non-privileged, unredacted emails were being exchanged with in-house counsel and is therefore part of an attorney communication can be damaging?

Suffice it to say, the courts differ in their opinions on how to handle email threads and their privileged logs. It is in this context that the Clearwell E-Discovery Platform’s treatment of email threads is extremely helpful for preparing your litigation response. In fact, Clearwell has received two patents related to email threading, one for constructing email threads and its ranking and another for determining derived emails from other containing emails and de-duplication in the context of original emails. Clearwell has advanced email meta-data and content analytics to piece together all emails of a thread. Furthermore, its Derived Email feature separates out contained emails as complete emails, which are then de-duplicated against other emails that are not derived from a contained email. In situations where such a duplicate is not identified, the derived email is maintained in a special state. Also, the containing email’s thread is separated out in such a way that each individual email’s privilege status can be determined. One can apply either a single- or multiple-record policy satisfying whatever the prevailing opinion is from the bench. Also, Clearwell’s redaction capabilities and its ability to produce the same set of documents for multiple parties allow the case team to provide a quick turnaround if there is a motion to produce either a privilege log or the non-privileged snippets of emails. Such technology can be a lifesaver when it comes to meeting electronic discovery obligations.

Recently, I attended a conference in Washington DC with a large number of government agencies, including (I must confess) many Clearwell customers like the Department of Health and Human Services, the Department of Homeland Security, and the Veterans Administration. It will probably come as no surprise that, during our conversations, it became abundantly clear that they had substantial electronic discovery technology needs. Many were still reviewing PST files manually in Outlook; others were TIFFing millions of pages of documents prior to directly loading into a traditional review application for eyes-on review. That’s right, nary a trace of early case assessment, transparent search, or culling to be found.

Sadly, no news there. What was fascinating for us was the reaction to the latest release of the Clearwell E-Discovery Platform, Version 5.5. Version 5.5 contains significant new functionality, including dramatically increased performance and scalability along with a number of substantial processing, analysis, review, and production enhancements. But, in addition to these features, we have rolled out a set of e-discovery best practices templates designed to make it vastly easier for organizations to implement a formal e-discovery methodology that builds on the integrated nature of our platform. And it was the prospect of such a methodology, even more than the technology, that people were buzzing about at the summit.

Why? With all of the activity going on in the e-discovery space around product and technology innovation, there was some strong feedback that process and methodology may have gotten lost in the shuffle. And, if you think about it, it’s process and methodology that are likely to be most carefully assessed when the courts are considering the reasonableness (or lack thereof) of e-discovery for a case.

The importance of putting process and methodology front and center (along with a commitment to making the necessary organizational changes to make it happen) is not exactly a new concept. Ralph Losey has been talking about it for years over on his groundbreaking and irreverent e-discovery team blog, and it’s a frequent topic of keynote speakers on the e-discovery lecture circuit. However, like eating your vegetables or exercising, putting in place the right e-discovery process in an organization is something that people realize the benefit of, but still ignore.

This cannot continue, as the stakes are escalating. Take the recent case of Mt. Hawley Ins. Co. v. Felman Prod., Inc. Dean will dive into this case in much greater detail in an upcoming post, but it is very relevant to the methodology versus technology discussion in that it highlights how a methodology problem can cause a fateful technology problem to be overlooked. In this case, a lack of sufficient quality control processes caused the plaintiff to inadvertently produce a number of privileged emails. The court found the inadvertent production was not “solely attributable” to a problem with a Concordance index, and that the plaintiff “failed to perform critical quality control sampling” to determine whether the production was appropriate. Privilege was waived.

What’s the solution? We believe that we’re on to something with Clearwell 5.5, in that we can, uniquely among e-discovery products, marry together methodology and technology in a single platform that allows for the entire e-discovery process to be documented and defended, end-to-end. We have particularly focused on the most critical part of the process which seems to come up over and over again in sanction and privilege waiver decisions, which is the way that an organization moves from an initial pool of documents to a set of defensibly-culled, potentially responsive documents, on through to tagging and production. Our unique workflow capabilities allow the entire process to be documented and instantly recalled with the click of a mouse, letting you see each decision that was made during the course of the case in a step-by-step fashion, and then to structure additional quality control audits on top of those decisions to ensure that every “i” is dotted and every “t” crossed.

It’s a good thing for everyone involved in litigation that e-discovery technology is maturing rapidly to the point where it can start to help solve these sorts of process problems rather than being the cause of them (as was the unfortunately case in Mt. Hawley). This is a major focus for us at Clearwell and you’ll see a lot more exciting news from us on this front over the next few months, so stay tuned!

Yesterday, Marsh & McLennan (M&M) announced the sale of Kroll, its investigative services division which last year generated $678 million in revenue. Kroll is being acquired by Altegrity, another investigative services company which is owned by Providence Equity. The acquisition price is $1.13 billion, below the $1.3 billion M&M was rumored to be asking, and the deal is financed by Apollo Investment Services and Goldman Sachs.

There are many aspects to this transaction, but I want to focus on just one: what does this mean for Kroll Ontrack, Kroll’s largest division with $250 million in revenue and a staggering 1,500 employees, making it by far the world’s largest e-discovery service provider?

To answer this question, I will first outline the strategic challenge facing Kroll Ontrack, before outlining two alternative strategies its new owners may adopt for addressing it.

Strategic Challenge: Kroll Ontrack Is The “Yahoo! Of E-Discovery”

Just as Yahoo was an internet pioneer in the 1990s, Kroll Ontrack was the pioneer of electronic discovery services. Like all pioneers, as the first to market, Kroll had to build everything itself. So Kroll Ontrack invested not only in recruiting and training its staff of skilled consultants, the company also developed its own suite of e-discovery tools and software. It offered this integrated package of services and software to the market and, justifiably, charged a price premium.

But as the industry matured, it disaggregated with more savvy customers and new companies focused on specific parts of the value chain. Customers became better educated and more confident making decisions, diminishing the value of Kroll’s “we-are-the-safe-choice” value proposition. These customers today have many more options for e-discovery than was the case in years gone by, primarily because of a generation of e-discovery software companies, such as Clearwell, Guidance, Exterro, and kCura/Relativity, which offer capabilities like collection, ECA (Early Case Assessment), litigation hold management, and linear review. These have been widely adopted by Kroll Ontrack’s competitors, negating Kroll’s technological advantage. Even worse, because Kroll Ontrack’s competitors do not need to invest in R&D, they have a substantially lower cost structure. As a result, they have undercut Kroll Ontrack on price, which has halted its growth and squeezed its margins.

In a directly analogous way, Yahoo! has seen its broad internet service to consumers eroded by a host of more focused competitors such as Google, Facebook, and Skype. Consumers today are much more familiar with the internet, and feel comfortable making separate choices for search, social networking, and messaging, without the need for an umbrella brand. That has left Yahoo! without a reason for being: even today, its CEO struggles to answer the fundamental question “what is Yahoo!?”

Solution: Sell It Or Fix It

As Kroll Ontrack’s new owner, Altegrity has a simple choice. It could sell Kroll Ontrack, making the strategic challenge someone else’s problem; or Altegrity could fix it, by adopting a fundamentally different strategy.

Let’s consider each in turn:

Sell It: Most sensible people would find it funny to think about selling something right after you bought it. But in this case, it could make a lot of sense. Altegrity is a leading provider of investigative services, not e-discovery, making the “non-Ontrack” part of Kroll’s business a much better fit. So why not sell Kroll Ontrack, pay down debt, and focus on the services business which it understands? This would be especially attractive if, as Vivian Tero at IDC suggests, there are willing buyers such as ECM or storage software companies which like Kroll Ontrack but do not want the services business.

Fix It: Mike Cherkasky, Altegrity’s CEO, is a former head of Kroll, and so is perhaps uniquely well placed to bring about a change in direction. To do so, he must decide what Kroll Ontrack wants to be. If its goal is to be the leading e-discovery service provider, then it should kill its internal software development efforts and focus on providing customers the absolute best service using industry leading tools. If it wants to be an e-discovery software company, which would be a much harder transition, then it needs to exit the services business and make its technology available every litigation support company.

Either way, it will take time and a lot of painful decisions for Kroll Ontrack to recover its momentum. But if any encouragement is needed, the Altegrity and the Kroll Ontrack teams need only look at what’s happening to Fios, another of the industry’s early pioneers. So far, Fios has refused to decide what it wants to be, abandoning its internal review platform for Relativity but keeping its proprietary processing software. The result? It’s had three different CEOs in the past 12 months, and competitors continue to steal market share.

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Every car dealer knows he should focus customers on the monthly payment, not the total cost of the car. Every credit card solicitation (or sub-prime mortgage, for that matter) starts with the offer of 0% interest, not the actual interest rate or fees the customer will pay after the first 6 months. The reason is simple: once you lease the car or put a balance on the credit card, it’s very hard to switch away when – as often happens – you find yourself paying much more than you should later on.

I was reminded of these examples when reading about Kroll Ontrack’s offer of “free ECA” and Stratify’s recent press release announcing “free early stage filtering” for electronic discovery. Taking each in turn:

Kroll Ontrack Advanceview

Based on feedback from several customers in Washington DC, New York, and the Mid-West, Kroll Ontrack often provides Advanceview at no charge. That means customers can get “custodian de-duplication” and “1 keyword and date filter pass” for free, although Kroll still charges $200-250/hour for doing the work. The resulting data set is then processed and loaded into its review platform for $1,500-$1,800 per gigabyte.

Is this a good deal? For the vast majority of customers, the answer is “no” for three reasons.

First, customers typically end up paying more than they would using alternative products. For example, in the chart below, we compare the cost of using Kroll Ontrack to that of Clearwell for a 100 gigabyte project. In both cases, we assume customers are doing de-duplication, filtering, keyword searching, first pass review, and load file creation. As with any comparison of this sort, you have to make some simplifying assumptions. For example, we excluded data hosting fees and professional services fees from the analysis.

Whether customers are better off with Kroll depends entirely on how much data is culled out for free before customers incur the high, back-end charges. Given that all Kroll is doing for free is custodian de-duplication and running one set of keywords and date filters, the typical cull rate is likely be anywhere from 20% to 50% — nowhere near the 80% cull rate required for Kroll to be more cost effective than Clearwell.

The second reason why this is not a good deal is that it gives customers no certainty about costs. Culling rates from de-duplication and blind keyword searches are unpredictable and vary widely, meaning that some projects will cost more than expected while others will cost less. But every project has budget that’s determined up front and, as any litigation support manager will tell you, you get much less credit for being under budget than you get pain for going over budget. That’s why cost certainty is one of the leading requests from anyone involved in electronic discovery.

Finally, excluding data based on a single round of keyword searches and date filters is not in line with The Sedona Conference best practices. Rather, Sedona recommends that customers iterate their keywords and culling strategies to hone them appropriately.

Iron Mountain Stratify OnPoint

It is not yet possible to do the same detailed analysis on Stratify’s OnPoint which offers “free early stage filtering”, because it’s impossible to tell exactly what that means. In its artfully-worded press release and data sheet, Stratify promises to provide “free processing and loading of unlimited data for early stage filtering”. Does that include de-duplication? Does that include any keyword searching? My guess is “no”, in which case all they are really doing for free is offering to load data into their review platform so that they can then charge you – not a very compelling offer. But if anyone does know the answer to these questions, or if Stratify would like to clarify exactly what’s being offered for free, then please let me know and I’ll post an update.

Once data is in Stratify’s system, it charges a “one-time fee starting at $500 per gigabyte” for “reviewable data”. But it does not say if that’s the only fee. What about monthly hosting charges? Fees for additional reviewers? Again, it’s not yet clear what the downstream cost of review really is using Stratify, so it’s impossible to know whether this is a good deal.

If there’s one lesson from all of this, it’s “buyer beware”. Just as when you buy a car, sign up for a credit card, or click on that offer to get more corn on Farmville, you need to look beyond the “free offer” and understand what it’s really going to cost you.