Issuing a Timely and Comprehensive Litigation Hold

Case: E.I. du Pont de Nemours v. Kolon Industries (E.D. Va. July 21, 2011)

Summary: The court issued a stiff rebuke against defendant Kolon Industries for failing to issue a timely and proper litigation hold.  That rebuke came in the form of an instruction to the jury that Kolon executives and employees destroyed key evidence after the company’s preservation duty was triggered.  The jury responded by returning a stunning $919 million verdict for DuPont.

The spoliation at issue occurred when several Kolon executives and employees deleted thousands emails and other records relevant to DuPont’s trade secret claims.  The court laid the blame for this destruction on the company’s attorneys and executives, reasoning they could have prevented the spoliation through an effective litigation hold process.  At issue were three hold notices circulated to the key players and data sources.  The notices were all deficient in some manner.  They were either too limited in their distribution, ineffective since they were prepared in English for Korean-speaking employees, or too late to prevent or otherwise ameliorate the spoliation.

The Lessons for 2012: The DuPont case underscores the importance of issuing a timely and comprehensive litigation hold notice.  As DuPont teaches, organizations should identify what key players and data sources may have relevant information.  A comprehensive notice should then be prepared to communicate the precise hold instructions in an intelligible fashion.  Finally, the hold should be circulated immediately to prevent data loss.

Organizations should also consider deploying the latest technologies to help effectuate this process.  This includes an eDiscovery platform that enables automated legal hold acknowledgements.  Such technology will allow custodians to be promptly and properly apprised of litigation and thereby retain information that might otherwise have been discarded.

Another Must-Read Case: Haraburda v. Arcelor Mittal U.S.A., Inc. (D. Ind. June 28, 2011)

Suspending Document Retention Policies

Case: Viramontes v. U.S. Bancorp (N.D. Ill. Jan. 27, 2011)

Summary: The defendant bank defeated a sanctions motion because it modified aspects of its email retention policy once it was aware litigation was reasonably foreseeable.  The bank implemented a retention policy that kept emails for 90 days, after which the emails were overwritten and destroyed.  The bank also promulgated a course of action whereby the retention policy would be promptly suspended on the occurrence of litigation or other triggering event.  This way, the bank could establish the reasonableness of its policy in litigation.  Because the bank followed that procedure in good faith, it was protected from court sanctions under the Federal Rules of Civil Procedure 37(e) “safe harbor.”

The Lesson for 2012: As Viramontes shows, an organization can be prepared for eDiscovery disputes by timely suspending aspects of its document retention policies.  By modifying retention policies when so required, an organization can develop a defensible retention procedure and be protected from court sanctions under Rule 37(e).

Coupling those procedures with archiving software will only enhance an organization’s eDiscovery preparations.  Effective archiving software will have a litigation hold mechanism, which enables an organization to suspend automated retention rules.  This will better ensure that data subject to a preservation duty is actually retained.

Another Must-Read Case: Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011)

Managing the Document Collection Process

Case: Northington v. H & M International (N.D.Ill. Jan. 12, 2011)

Summary: The court issued an adverse inference jury instruction against a company that destroyed relevant emails and other data.  The spoliation occurred in large part because legal and IT were not involved in the collection process.  For example, counsel was not actively engaged in the critical steps of preservation, identification or collection of electronically stored information (ESI).  Nor was IT brought into the picture until 15 months after the preservation duty was triggered. By that time, rank and file employees – some of whom were accused by the plaintiff of harassment – stepped into this vacuum and conducted the collection process without meaningful oversight.  Predictably, key documents were never found and the court had little choice but to promise to inform the jury that the company destroyed evidence.

The Lesson for 2012: An organization does not have to suffer the same fate as the company in the Northington case.  It can take charge of its data during litigation through cooperative governance between legal and IT.  After issuing a timely and effective litigation hold, legal should typically involve IT in the collection process.  Legal should rely on IT to help identify all data sources – servers, systems and custodians – that likely contain relevant information.  IT will also be instrumental in preserving and collecting that data for subsequent review and analysis by legal.  By working together in a top-down fashion, organizations can better ensure that their eDiscovery process is defensible and not fatally flawed.

Another Must-Read Case: Green v. Blitz U.S.A., Inc. (E.D. Tex. Mar. 1, 2011)

Using Proportionality to Dictate the Scope of Permissible Discovery

Case: DCG Systems v. Checkpoint Technologies (N.D. Ca. Nov. 2, 2011)

The court adopted the new Model Order on E-Discovery in Patent Cases recently promulgated by the U.S. Court of Appeals for the Federal Circuit.  The model order incorporates principles of proportionality to reduce the production of email in patent litigation.  In adopting the order, the court explained that email productions should be scaled back since email is infrequently introduced as evidence at trial.  As a result, email production requests will be restricted to five search terms and may only span a defined set of five custodians.  Furthermore, email discovery in DCG Systems will wait until after the parties complete discovery on the “core documentation” concerning the patent, the accused product and prior art.

The Lesson for 2012: Courts seem to be slowly moving toward a system that incorporates proportionality as the touchstone for eDiscovery.  This is occurring beyond the field of patent litigation, as evidenced by other recent cases.  Even the State of Utah has gotten in on the act, revising its version of Rule 26 to require that all discovery meet the standards of proportionality.  While there are undoubtedly deviations from this trend (e.g., Pippins v. KPMG (S.D.N.Y. Oct. 7, 2011)), the clear lesson is that discovery should comply with the cost cutting mandate of Federal Rule 1.

Another Must-Read Case: Omni Laboratories Inc. v. Eden Energy Ltd [2011] EWHC 2169 (TCC) (29 July 2011)

Leveraging eDiscovery Technologies for Search and Review

Case: Oracle America v. Google (N.D. Ca. Oct. 20, 2011)

The court ordered Google to produce an email that it previously withheld on attorney client privilege grounds.  While the email’s focus on business negotiations vitiated Google’s claim of privilege, that claim was also undermined by Google’s production of eight earlier drafts of the email.  The drafts were produced because they did not contain addressees or the heading “attorney client privilege,” which the sender later inserted into the final email draft.  Because those details were absent from the earlier drafts, Google’s “electronic scanning mechanisms did not catch those drafts before production.”

The Lesson for 2012: Organizations need to leverage next generation, robust technology to support the document production process in discovery.  Tools such as email analytical software, which can isolate drafts and offer to remove them from production, are needed to address complex production issues.  Other technological capabilities, such as Near Duplicate Identification, can also help identify draft materials and marry them up with finals that have been marked as privileged.  Last but not least, technology assisted review has the potential of enabling one lawyer to efficiently complete the work that previously took thousands of hours.  Finding the budget and doing the research to obtain the right tools for the enterprise should be a priority for organizations in 2012.

Another Must-Read Case: J-M Manufacturing v. McDermott, Will & Emery (CA Super. Jun. 2, 2011)

Conclusion

There were any number of other significant cases from 2011 that could have made this list.  We invite you to share your favorites in the comments section or contact us directly with your feedback.

For more on the cases discussed above, watch this video:

The eDiscovery battle over admissibility of this email, as well as whether it can be a public record, is natural and to be expected, especially in such a high profile dispute. Google has already made five attempts to either claw back these documents or protect them under seal. Besides the question of whether privilege waiver is in fact granted simply by adding an “Attorney Work Product” annotation to email, which Judge Alsup has eloquently addressed in the filing here, there is another interesting question to be considered. In addition to the two email copies that had the above designation, there were nine other sequential drafts, created within a five minute period. These drafts were generated by the “auto save” capability of the email software, possibly as a way to prevent the author of the email from losing partial work. Don’t we all love that feature, since despite all the technological advances computers crash, networks fail, and software freezes, and in those times we’re thankful that our work was indeed automatically saved? However, if these are indeed present, are these drafts discoverable, especially if they have not been shared with anyone?

Although in this instance the intent of these drafts is made evident by the final email, which included the recipients, none of the nine drafts of the email have a TO:, CC: or BCC: address field filled in. So technically, the drafts in their “pre-final” form were never communicated to anyone else. If so, should they even be considered electronically stored information (ESI) that needs to be produced? Let’s say that these emails were never sent and merely existed as drafts, perhaps capturing a person’s train of thought. Are they discoverable?

Of course, determining whether such partial and non-evidentiary ESI exists among your millions and millions of documents to be examined for production becomes increasingly the purview of powerful search and analysis software. In this instance, Google and their legal team would have been well-served by email analytical software that can isolate drafts and offer them for removal from production. Also, using a capability such as Near Duplicate Identification would have identified these drafts as similar to the final ones that were marked as privileged. After all, if the legal team had known of their existence prior to production, they would not have been surprised by the opposing team producing them as key documents.

I invite your comments, especially on the notion that partially completed drafts are admissible as evidence.

The “past” can be a powerful playbook in the game of eDiscovery.  Fortunately for organizations, the lessons of eDiscovery history abound.  Indeed, the decisions that courts issue every day across the United States and in other countries provide substantial guidance on what organizations should and should not do to properly prepare for the discovery phase of litigation.

One of the principal lessons that can be gleaned from American court cases in 2011 is that technology can help organizations address the demands of eDiscovery in litigation.  Technology has assumed such a significant role because it facilitates the oversight process that lawyers must engage in to ensure that pertinent documents are preserved for discovery.  This year alone, the failure to exercise that oversight has in many instances culminated in evidence destruction and sanctions.

That message was emphasized this summer by a Virginia based federal court in a hotly contested trade secret dispute.  In E.I. du Pont de Nemours v. Kolon Industries (E.D. Va. July 21, 2011), the court determined that it would issue an adverse inference jury instruction against defendant Kolon Industries as a sanction for its evidence spoliation.  The spoliation at issue occurred when Kolon deleted emails and other records relevant to DuPont’s trade secret claims.  After being apprised of the lawsuit and then receiving multiple litigation hold notices, several Kolon executives and employees met together and identified emails and other documents that should be deleted.  The ensuing destruction was staggering.  Nearly 18,000 files and emails were deleted.  Furthermore, many of these materials went right to the heart of DuPont’s claim that key aspects of its Kevlar© formula were allegedly misappropriated to improve Kolon’s competing product line.

Surprisingly, however, the court did not finger the Kolon employees as the principal culprits for spoliation.  Instead, the court laid the blame on Kolon’s attorneys and executives, reasoning they could have prevented the destruction of information through better oversight.  The hold process was particularly flawed.  The notices were either too limited in their distribution, ineffective since they were prepared in English for Korean-speaking employees, or too late to prevent or otherwise alleviate the spoliation.  Given the logistical challenges of implementing a hold in this instance, perhaps only the automated functions of technology such as archiving software might have strengthened the oversight process and obviated the spoliation that took place.

The lack of attorney oversight also factored into another pertinent sanctions order this year, this time from a federal court in Chicago.  In Northington v. H & M International (N.D.Ill. Jan. 12, 2011), the court issued an adverse inference jury instruction against a company that destroyed relevant emails and other data.  The spoliation occurred in large part because the company neglected to establish a global litigation response effort.  For example, there was no process for issuing or ensuring compliance with a litigation hold.  Nor was counsel engaged in the critical steps of preservation, identification or collection of electronically stored information (ESI).  Into this vacuum stepped rank and file employees – some of whom were accused by the plaintiff of harassment – who were tasked with identifying and collecting discoverable emails from their workstations.  Predictably, key documents were never found and the court had little choice but to promise to inform the jury that the company destroyed evidence.

The problems associated with the lack of oversight in DuPont and Northington are compelling reasons why organizations should consider using technology tools as part of their overall litigation response strategy.  One of the most helpful tools in this regard is archiving software.  Indeed, having the right archiving solution in place might have preserved the spoliated records in these actions.

For example, archiving software can be programmed to prevent employees from deleting emails and other electronically stored information.  By ingesting data into a central repository and leaving copies of the materials on local computers, employees could have access to their archived records.  They would not, however, be able to delete those documents from the software archive.  In addition, a litigation hold could have been placed on archived data to prevent automated retention rules from overwriting information.  Either of these features might have prevented much of the spoliation – and the resulting sanctions – that occurred in both the DuPont and Northington cases.

The automated functions of archiving technology can benefit a company’s litigation response in other ways.  For example, such a tool may limit the amount of potentially relevant information available for follow-on litigation.  Absent a legal hold, retention rules that are programmed into the software will ensure that ESI is expired once it reaches the end of a designated period.  In DuPont, such a feature could arguably have eliminated entire categories of older documents before a duty to preserve those materials ever ripened.  This facet not only has the potential to reduce legal exposure, but also the attendant costs associated with reviewing those documents in litigation.

DuPont, Northington and other cases from the recent past delineate the steps companies can take to address the challenges of eDiscovery.  Organizations do not have to “repeat” past mistakes that victimized clients and counsel alike.  Instead, they can implement the right technology tools as part of a thoughtful, proactive approach to litigation.  By so doing, organizations will avoid Santayana’s judgment by “remembering” the lessons of eDiscovery history.

• “All in one” e-discovery will be the vendor message de jure, even if the beginning phase is first pass review and the last phase is granular review.  The mantra “don’t let the truth get in the way of a good story” (not surprisingly) holds more water at LTNY than in most places.
• For the first time, it will actually take longer to get to your room in the Hilton (never mind the annoying ads) than it would at another hotel across the street.
• At least one person will have an Inception moment and think that they’re having a dream (or perhaps a dream within a dream – if they’re really sedated) about being on the Legaltech show floor, while they’re really still in their hotel room, waiting for their Starbucks Trenta (a whopping 30 ounces) to kick in.
• The b-discovery group will hold a massive all chapter party without any official affiliation with the LTNY conference, showing again that the off-the-floor meetings, parties, sessions, interviews and the like are continuing to eclipse the officially sanctioned events.  As another prime example, check out these stellar Supersessions.
• Members of the European Cockpit Association (yes there really is one) will accidentally show up for day one of the conference, after getting a pamphlet at LaGuardia airport advertising free wine and cheese with a discussion of ECA.
• DTI will announce that it’s stepping up and acquiring FTI (since the acronyms are pretty similar) after a torrent of other purchases in the space, including Unlimited Discovery and Daticon/EED.
• Given his prominence in NYC, I think it’s likely that Donald Trump makes an appearance (probably to look for a lit support professional as an all new Apprentice: the e-discovery edition).

In some cases, these dual interests are aligned. However, in e-discovery, it’s not so clear. Over the last couple of years, many vendors have pushed a notion of “index everything” or so-called “proactive” e-discovery, in which you have instant access to all the information in your enterprise, in real-time, from which to drive your e-discovery process. But is this feasible? Or even desirable?

The Myth of the Silver Bullet

It can be tempting for IT to turn to an enterprise search solution that can index all data sources – laptops, desktops, file servers, SharePoint servers, databases, email archives, content management systems – and enable e-discovery across the entire enterprise in an instant. The reality is that while such a solution may work for enterprise search in small and medium-sized companies with a finite scope of data, the level of complexity in scale and defensibility of operations makes this simply not an achievable approach for e-discovery at most large enterprises. As Anne Kershaw and Joe Howie of the Electronic Discovery Institute noted in their just-published Judges’ Guide to Cost-Effective E-Discovery:

“There is no single silver bullet that solves all problems associated with escalating discovery costs and delays. As noted above, the single most effective cost reduction method is the focused collection of records most likely to contain relevant information. Some argue that e‐discovery is best accomplished by taking large amounts of data from clients and then applying keyword or other searches or filters. While, in some rare cases, this method might be the only option, it is also apt to be the most expensive. In fact, keyword searching against large volumes of data to find relevant information is a challenging, costly, and imperfect process. A much better approach is to ask key client contacts to help you locate core relevant information and then, by reading that information, determine other sources of relevant information.”

What are the specific reasons why a targeted collection approach is superior? From our conversations with clients as we have been developing our solution to this problem over the last couple of years, three major drawbacks to the index-everything approach stand out.

1. Impact to Existing IT Environment

While the collect-and-preserve approach employed by Clearwell is widely accepted for e-discovery, index-everything and preserve-in-place solutions have recently emerged, originating from other enterprise applications such as knowledge management and enterprise search. These approaches from other domains have significant disadvantages when applied to e-discovery, including impact to existing IT infrastructure and processes that result in increased cost and complexity. For instance, the scope of e-discovery can exceed the amount of information being indexed by knowledge management or enterprise search applications. According to Forrester, the majority of enterprise search implementations range in size from the hundreds of thousands to tens of millions of records, not billions of documents that are potentially discoverable during litigation. Consequently, index-everything solutions must index a much larger volume of data across a broader range of applications and data stores than would typically be necessarily for enterprise search.

Indexing such a large amount of data has implications for the entire IT environment. These solutions either crawl data repositories over the network or employ agents on local desktops and laptops to find new and modified files. IT organizations using these solutions report experiencing disruptions including:

• Requiring read access and permissions to numerous line-of-business applications and storage systems where data resides

• Significant increases to disk I/O for enterprise applications, network file shares, and client machines

• Increased network consumption as large amounts of data are read over the network

• Increased consumption of local hard drive space on employee desktops and laptops for search indexes and redundant copies of preserved files

• Scheduling resource-intensive indexing tasks during off-peak hours, impacting the ability of IT departments to complete backups during shrinking backup windows

Taken together, these issues add cost and complexity to the deployment of index-everything and preserve-in-place solutions. This often results in organizations not fully deploying the solution after purchasing licenses and spending months or years trying to integrate with their existing systems.

2. Risk of Missing Critical Data

Another key concern of organizations seeking to meet e-discovery requests is the ability to find all relevant files and documents for a case. Missing even a few important documents may result in multimillion dollar fines and sanctions. UBS and Morgan Stanley each paid $29.2 million and $12.5 million, respectively, for losing key files during litigation. It is therefore critically important that e-discovery solutions have the ability to not only index and search common file types, but also a range of less common but equally important files such as those within nested container files, encrypted files, and TIFF images containing text. Solutions that originate from applications outside the e-discovery domain often skip these files because 100% accuracy is not required for other applications such as enterprise search. Across organizations with billions of documents, there may be hundreds of thousands of potentially relevant files which are in the dark and unknown to legal teams because they are not indexed.

Index corruption is another commonly reported issue with index-everything solutions that results in incomplete search results. Search indexes are susceptible to data corruption just like any other computer file, but the large size of indexes containing billions of records increases the probability of errors. In fact, this is a common problem of most archive solutions and other solutions that manage billions of records. A corrupt search index will result in incomplete results or in the worst case scenario, the inability to conduct searches until the index is repaired. In some situations, data must be re-indexed to rebuild a corrupt search index which is time consuming due to the slow speed of some solutions.

The net result isthat in-place solutions increase the likelihood of missing critical data, exposing the organization to considerable legal and financial risk.

3. Time Delays and Uncertainty in Searches

When embarking on a project to make all enterprise data searchable for e-discovery, an important consideration is indexing speed in relation to total outstanding data and projected data growth. Organizations deploying such a solution typically have a large amount of existing data that needs to be indexed, and this index must be continually updated as data is modified and new data is created. Many companies report that although vendors claim high processing rates, these high rates erode over time as companies index greater amounts of their existing data, increasing the size of search indexes. Beyond an application’s ability to index data, there are exogenous factors affecting indexing performance including network speed, disk I/O, and latency. Along with index size and the number of search indexes, these factors can also affect search query performance, resulting in searches that take hours or days to return results.

Another issue facing organizations deploying index-everything solutions is that end users may be creating and modifying documents faster than the solution can index them. As a result, there is a widening gap between the state of data in the wild and the solution’s picture of that data, leading to incomplete search results. Equally troubling, search results may include files that were moved after the search engine indexed them, and so they appear in the results but cannot be viewed, retrieved, or preserved. End users clicking on the link to an item may receive an error similar to the “404 Error: File Not Found” that everyone has experienced when browsing the web. This presents a significant defensibility problem in e-discovery, and IT teams often end up tracking down these missing files one-by-one to ensure they are preserved. The result is that organizations may be exposed to unnecessary legal risk while IT teams have the additional burden of manually tracking down hundreds of files for each legal matter.

A Better Approach to Collection and Preservation

Recognizing the challenges of collection and preservation, Clearwell has developed a targeted approach that enables organizations to defensibly collect and preserve data without increasing the work of IT or exposing the organization to risk. Targeted collection provides an easy way for IT or Legal teams to collect from all critical data sources and securely manage collected data in a preservation store for the duration of a case. Unlike index-everything and preserve-in-place approaches, Clearwell is up and running quickly, delivering value in hours or days without the cost and complexity of lengthy multi-month deployment timelines. In addition, Clearwell’s targeted collect-and-preserve approach has a number of benefits over in-place approaches:

Minimal impact to IT infrastructure: Clearwell only collects potentially relevant data from custodians involved in a case or investigation, targeting resources at the most important data instead of wasting resources on indexing all data across the entire organization. As a result, targeted collection requires less impact to existing applications and storage systems, does not cause significant increases to disk I/O or network consumption, and does not require agents to be installed on client machines or servers.

Finds all critical data: Purpose-built to support the complex and difficult to read file types required by e-discovery, Clearwell can index and search all critical content such as nested container files, encrypted files, images containing text, and hidden content.

Up-to-date collection: Clearwell collects all relevant data for e-discovery by targeting information that is related to custodians in the case. Because this approach is not limited by legacy indexing approaches, Clearwell is able to collect data that has been recently modified or moved.

Maintains existing workflow: With Clearwell, end users are able to continue using their existing workflows and business processes without interruption. Using targeted collection, Clearwell can collect data in the background without altering data where it resides. When users create or modify files in the normal course of business, Clearwell incrementally collects new data automatically.

Reduces risk: Targeted collection significantly reduces the risk of spoliation by retaining data in a secure preservation store, providing a defensible process that maintains chain of custody. As a result, data cannot be tampered with by end users or accidently lost on laptops, desktops, or other data repositories not under the control of IT.

Collecting and preserving evidence are critical steps in the e-discovery process. Solutions that promote indexing everything as the optimal solution for your e-discovery problems might be conceptually promising, but create new challenges for IT and increase risk in practice. As a result, organizations are seeking a solution that enables them to respond effectively to e-discovery without causing major disruptions or exposing the organization to additional risk. Clearwell’s targeted approach solves the challenges of collection and preservation by making it easy to collect data from all critical data sources and preserve data defensibly, without incurring greater risk or disrupting the organization’s business processes.