e-discovery 2.0

I was at Sedona midyear meeting last week and during Ken Withers’ excellent discussion of recent e-discovery case law, a few thoughts occurred to me. First, there are so many cases coming out now each week it’s hard to stay above the fray and mine for useful nuggets. The task is a bit Sisyphean, so folks like Ken (who keep a rolling index of cases) are particularly helpful. Next, I was struck by how hot Pension Committee still is, even after almost a year and a half. Certainly, this ongoing spotlight wasn’t an accident, and it’s almost certain that Judge Scheindlin is pleased by the ongoing debate.

I frequently get questions from enterprise clients regarding which cases they should know about, and so I put together an EDRM oriented (left to right) list for folks who just can’t get to all the latest cases. While it’s not an annual roundup per se, I do think it’s a bit more functional for busy electronic discovery professionals who need to stay current. So, here’s the buzz index of cases arranged by topic:

Preservation: The Legal Hold Gold Standard

Case: Pension Committee of the Univ. of Montreal Pension Plan, et al., v. Banc of America Securities, LLC, et al. (S.D.N.Y. 2010).

Summary: The dispute focused on claims by a group of investors who brought an action to recover losses of $550 million dollars stemming from the liquidation of two British Virgin Islands based hedge funds. Unlike many typical e-discovery disputes, this instant action focused on the conduct of the plaintiffs as they attempted to deal with the often murky landscape of electronically stored information (ESI) preservation, collection and production. Judge Scheindlin goes out of her way to crystallize duties and identify the type of conduct that can cause an e-discovery breach. “After a discovery duty is well established, the failure to adhere to contemporary standards can be considered gross negligence. Thus, after the final relevant Zubulake opinion in July, 2004, the following failures support a finding of gross negligence, when the duty to preserve has attached:

• to issue a written litigation hold;
• to identify all of the key players and to ensure that their electronic and paper records are preserved;
• to cease the deletion of email or to preserve the records of former employees that are in a party’s possession, custody, or control;
• and to preserve backup tapes when they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those players is not obtainable from readily accessible sources.”

Why it’s (still) important: First of all, Pension Committee is written by Judge Scheindlin, who is the most famous electronic discovery jurist on the planet. Next, since she’s in the Southern District of New York, it means that folks even in other jurisdiction that aren’t bound by her opinions still must take heed given the fact that New York is home to so many multinational organizations. Finally, her opinion is the clearest (even if disputed) articulation regarding the standard of care for the issuance of legal holds and the duty to preserve ESI. She attempts to categorically define conduct that is grossly negligent and therefore susceptible to extreme sanctions, including spoliation inferences and terminating sanctions. Fortunately, she recognizes the numerous challenges associated with electronic discovery. And, so as to blend in a healthy dose of reality Judge Scheindlin also said: “In an era where vast amounts of electronic information is available for review, discovery in certain cases has become increasingly complex and expensive. Courts cannot and do not expect that any party can meet a standard of perfection.”

In the end, Pension Committee, was the case of the year in 2010 and even in 2011 it’s generating an unprecedented level of retrospectives (here and here). It may be because Judge Scheindlin’s relatively bright line standard has created so much debate, but in the end the Pension Committee discussion will likely continue for the foreseeable future (perhaps only ending when/if the culpability rules are amended to create a unified national standard).

Preservation: Why Preserve in Place is Risky?

Case: Wilson v. Thorn Energy, LLC, (S.D.N.Y. 2010).

Summary: In Wilson, the defendant corporation identified a flash drive that contained relevant ESI, but rather than copying that data safely to a centralized evidence repository, the defendant’s employee chose to hold on to the drive, putting it instead into a desk drawer. When the files were requested for review and production, the files could not be read from the drive. The defendant’s employee attempted to recover the ESI contained on it, but those efforts failed. Granting plaintiffs’ motion for sanctions, the court ordered that defendants would be precluded from offering evidence at trial concerning the data contained on the discarded drive.

Why it’s important: In today’s e-discovery world, many organizations are instituting hold processes via manual solutions and then waiting weeks or months to ultimately collect the ESI. Wilson shows the danger of simply preserving data and makes the argument that you should either “collect to preserve” or collect very shortly after the litigation hold notice goes out. While focusing on a certain media type (flash drive), this analysis can be extended to any digital system containing ESI that inherently has some set failure rates or can be imagined to fail without express, conscious action (due to loss, theft, recycling, etc.).

Identification & Collection: “Manual” Collections Come Under Fire

Case: Green v. Blitz U.S.A. (E.D. Tex. Mar. 1, 2011)

Summary: In this case, Plaintiff sought to re-open her lawsuit despite prior settlement upon learning that defendant had failed to produce relevant documents. Finding that defendant had committed discovery abuses, including failing to disclose relevant evidence and failing to issue a litigation hold, the court ordered defendant to pay plaintiff $250,000, to provide a copy of the court’s order to plaintiffs “in every lawsuit proceeding against it” for the past two years and to file the court’s order in every case that defendant is involved in for the next 5 years. It was revealed that the employee “solely responsible for searching for and collecting documents relevant to litigation” issued no litigation hold, conducted no electronic word searches for emails, and made no effort to speak with defendant’s IT department regarding how to search for electronic documents.

Why it’s important: Green is the latest in a line of cases [See also Ford Motor Co. v. Edgewood Properties Inc., 257 F.R.D. 418 (D.N.J. 2009) and Phillip M. Adams & Assoc., LLC v. Dell, Inc., 621 F. Supp. 2d 1173 (D. Utah 2009) ] that have been highly critical of manual (or self) collection efforts by the individual custodians. Historically, if the custodians were monitored/supervised enough by counsel, this manual collection process was largely deemed defensible, but it looks like this behavior is simply too risky for any conservative enterprise. The better practice is to leverage the custodians to point out where relevant ESI might exist and utilize software tools to conduct broad collections from key players. While it’s not necessary to use IT tools to collect data immediately for all custodians who have received a litigation hold notice, it’s probably unreasonable to not quickly collect ESI (via formal, IT based methods) from at least some subset of key players. The main point is that this isn’t an all or nothing calculation. Costs, risks and benefits should all be carefully evaluated and documented, in case there’s a downstream challenge.

Analysis & Review: Failure to Test Keywords and Sample

Case: Mt. Hawley Ins. Co. v. Felman Prod., Inc., (S.D. W. Va., 2010).

Summary: In this case the court examined the reasonableness of plaintiff’s precautions to prevent disclosure of email, which was inadvertently produced by the plaintiff amidst “a massive disclosure of e-discovery.” The Mt. Hawley court applied the five-factor test established in Victor Stanley, Inc. v. Creative Pipe, Inc. (D. Md. 2008) and found that the producing party had not taken reasonable steps during discovery. In particular, the court was unwilling to find that the inadvertent production of 377 privileged documents was “solely attributable” to a technological glitch and instead found that plaintiff and counsel “failed to perform critical quality control sampling to determine whether their production was appropriate and neither over inclusive nor under-inclusive.” This finding meant that their attorney client privilege was waived as to the subject documents.

Why it’s important: Mt. Hawley demonstrates why sampling and keyword search term formulation is critically important to any defensible discovery effort. In many instances where “blind” keyword strategies are used, the producing party is taking on an undue risk, in essence flirting with the “3^rd rail” of electronic discovery (inadvertent production). Blind keyword searching (followed by brute force review and production) is sadly still a very common practice today. My hope is that cases like Mt. Hawley will force the blissfully ignorant practicioners to take stock of their risky practices and get with contemporary best practices like ECA, sampling, iterative search and the like.

Conclusion

Simply by creating such a list, I’m sure to leave off cases other folks think are more buzz worthy. But, for me, having a few good legal chestnuts is better than trying to boil the ocean and synthesize all the available case law. If you have any comments I’d be eager to hear (good, bad or indifferent).

In past blogs I’ve discussed a number of cases that have expressed skepticism over the self collection of electronically stored information (ESI) in the electronic discovery process.  In many of these cases, the reviewing judge or magistrate has looked at this process with an increasingly jaundiced eye, in some cases using the self collection component as part of its rationale for sanctions.

My conclusion up until now has been that this collection methodology (where employees manually select and potentially harvest their own data) could be defensible if properly executed; meaning with the requisite level of attorney guidance and oversight.  And, while this is still technically accurate, I think the pendulum has swung far enough to proclaim that this approach is simply far too dangerous for most enterprises, except perhaps those that are extremely risk tolerant.

While there was no particular straw that broke the camel’s back, the trend in the case law now seems to be moving inextricably in one direction – i.e., that self (or manual) collection is no longer safe enough for average enterprises.  Just like tight rope walking without a safety net, self collection protocols aren’t inherently doomed to failure, but there isn’t much (probably any) margin for error.

In the recent case of Green v. Blitz U.S.A., (E.D. Tex. Mar. 1, 2011) we see yet another example of self collections gone awry.  In Green the Plaintiff sought to re-open her lawsuit despite a prior settlement, once she suspected that the defendant had failed to produce relevant ESI.  Finding that defendant had committed numerous discovery abuses, including not disclosing relevant evidence and failing to properly issue a litigation hold, the court put the hammer down, issuing a wide range of sanctions:

• Defendant had to pay plaintiff $250,000
• Defendant had to provide a copy of the court’s order to plaintiffs “in every lawsuit proceeding against it” for the past two years
• Defendant had to file the court’s order in every case that it is involved in for the next 5 years.

Self collection was again a material culprit in the culpable behavior.  It was revealed that the employee “solely responsible for searching for and collecting documents relevant to litigation” issued no litigation hold, conducted no electronic word searches for emails, and made no effort to speak with defendant’s IT department regarding how to search for electronic documents.  To exacerbate matters, the main individual in charge of collections was also closely tied to the research and development of the “flame arresters” that were at issue in this exploding gas can case.

Adding fuel to the fire (pun intended) was the fact that the responding company failed to locate or collect emails with the search term “flame arrester.”  The court went on to note that some of the smoking gun emails not only contained this “most obvious term to search for in electronic documents in this case”, but in fact “flame arrester” was used in the title of certain emails.

While folks have called this practice an example of a “fox guarding the henhouse,” in my mind it’s less that custodial bias renders self collection too risky for prime time.  While there are certainly examples like the Green case where bias likely was an issue, the bigger problem is that any significant reliance on custodians to direct a collection process (even a well supervised one) has too many failure points.  The most obvious (and innocent) scenario is where custodians simply can’t remember if they had responsive ESI or where such information might reside.  This problem can be particularly acute given the fact that litigation is almost always conducted in the rear view mirror.  Since I often can’t remember what I had for breakfast I don’t find it surprising that a custodian might not recall if they had data relating to a discrete issue 4-5 years ago.

As such, the contemporary “best practice” for the collection of ESI is quickly evolving past the old manual collection workflow.  Technology is rapidly making it quick and painless to conduct searches for blatantly relevant ESI (like emails with “flame arrester” in the title).  Not only can you conduct basic searches with existing technologies, but recent advancements around concept search and other analytical tools makes the failure to leverage these technologies seem that much more unreasonable.  For example, in the recent case of Northington v. H&M Int., (N.D. Ill. Jan. 12, 2011) the defendant was sanctioned, in part, because they didn’t search for minor misspellings of the plaintiff’s name.

When a court sees manual blunders like that in the Green case it’s not surprising to see such missteps cast as at least negligent and perhaps even more culpable.  This conclusion is made even easier when organizations like the Sedona Conference (in its Best Practices Commentary on the Use of Search and Information Retrieval Methods in E-Discovery) state:  “[i]n many settings involving electronically stored information, reliance solely on a manual search process for the purpose of finding responsive documents may be infeasible or unwarranted. In such cases, the use of automated search methods should be viewed as reasonable, valuable, and even necessary.”

Green is now the latest in a line of cases [See also, Ford Motor Co. v. Edgewood Properties Inc., (D.N.J. 2009) and Phillip M. Adams & Assoc., LLC v. Dell, Inc., (D. Utah 2009)] that have been highly critical of self collection efforts by individual custodians.  The better practice is to utilize technology to conduct collections from key players and perhaps leverage the custodians (and technology) to point out where relevant ESI might exist.  As such, a belt and suspenders approach is undoubtedly the safer way to go.  In this “dual protection” scenario “key custodians still search, identify, and self-collect what they think are relevant emails, but, as a fail safe, IT also collects all of the key custodians’ emails. Then attorneys search and identify relevant documents from this full, uncensored, unfiltered, collection. This double effort guards against the intentional and unintentional mistakes that can sometimes arise in self-collection.”

We know that electronic discovery is never going to be a perfect process, but self collections simply inject too much risk into an already complicated process.  Now is the time to change tactics and stop tight rope walking without a safety net.  After all, no enterprise wants to be the next to endure a highly publicized fall.

It’s widely known that Microsoft is a Clearwell customer, and uses our product for e-discovery across a wide range of matters. One such matter is the case of Datel Holdings v. Microsoft Corporation, which is presently in District Court for the Northern District of California. As part of those proceedings, Microsoft mentioned Clearwell in its Opposition to Datel’s Motion to Compel that was ruled upon on March 11, 2011:

Defendant explains that after potentially responsive documents were collected from custodians, they were loaded into a computerized document processing system known as “Clearwell.” Clearwell extracted metadata from each document and converted the documents into a format that allowed for text searching. Once the documents were processed through Clearwell, they were entered into an online platform, where they were reviewed by attorneys. For reasons still unknown to Defendant, Clearwell truncated some “Re-auth” documents during processing.

In itself, this sounds unremarkable. But we’ve noticed that some of our small competitors have been using this statement, and particularly the last line of it, to suggest that there are problems with the Clearwell product.

We realize that, as the market leader, there will always be small competitors seeking to leverage any opening to their advantage. Usually, we ignore this nonsense. But this time, to set the record straight, we asked our customer at Microsoft to respond on our behalf

Here’s what Joe Banks, who manages the e-discovery team at Microsoft, wrote about the issue and gave us permission to publish:

Statement from Microsoft:

In regard to the Declaration of Hojoon Hwang referenced in the 3/11/11 Order granting in part and denying in part plaintiff’s Motion to Compel in Datel Holdings LTD v. Microsoft, No.C-0905535EDL in the Northern District of California, the statement ‘For reasons still unknown to Defendant, Clearwell truncated some ‘Re-auth’ documents during processing’ should be corrected.  Microsoft subsequently learned that the cause of the truncation was the Microsoft software (AD/RMS Bulk Protection Tool) employed to decrypt previously encrypted content, and the truncation issue had nothing to do with Clearwell’s technology whatsoever.  Shortly after Mr. Hwang’s declaration was filed, he clarified – on the record in open court on February 22 – that Microsoft’s decryption process was the true cause of the data truncation:

6 A lot of Microsoft documents, including e-mails, are

7 encrypted when they are sent. And for production purposes, we

8 have to decrypt it. In that process, some of the material got

9 cut off.

Microsoft does not use Clearwell technology to decrypt its data.  In actuality, Clearwell’s Engineering and Support teams were instrumental in helping to identify the root cause of the truncation issue.  Microsoft continues to use Clearwell’s processing and analysis technology on this matter and greatly appreciates the partnership and support Clearwell provides without fail.

At Clearwell, we’re constantly ruminating on innovative ways to help make our customers’ e-discovery process more efficient. Given the astronomical growth of social gaming, we began asking ourselves, “How can we harness the power and passion of millions of social gamers for the greater good?”

Questions like this really get our engineers cooking, and what they came back with is, to steal a word from one of our most popular product launches a year ago, simply “magical”.

Starting today, Clearwell’s eDiscovery World leverages the red-hot consumer social gaming trend to provide dramatic and previously unattainable increases in e-discovery technology training and productivity. In fact, the promise of eDiscovery World is so great that we have added social gaming as a core part of our product architecture across all Clearwell modules, from legal hold through production.

And we’re not stopping there. We believe that strategic social gaming delivers such powerful benefits to a best practices e-discovery process, that we’ve proposed modifying the EDRM diagram to account for this critical new requirement for truly end-to-end discovery.

Prior to today, unstructured obsession with social gaming has actually been an obstacle keeping end-to-end e-discovery from becoming a reality in many organizations. Interviews conducted across law firms, service providers, and every major enterprise vertical indicate that the time spent protecting crops from withering and urban blight from descending upon virtual cities has left insufficient hours with which to implement next-generation electronic discovery technology. As a result, legal costs have continued to rise and the risk of sanctions has grown substantially. One Director of E-Discovery at a Fortune 100 company, when grilled about his organization’s failure to implement a robust legal hold process, pleaded, “Can you spare some Facebook credits so I can buy a chicken?”

Now, Clearwell has turned this challenge into a tremendous opportunity. In eDiscovery World, we provide an alternative to traditional social gaming that allows users to perform end-to-end e-discovery in a virtual environment – first in training mode to gain e-discovery process knowledge and experience, and then working with live documents and high-stakes cases. All stages of the e-discovery process are functional in the eDiscovery World environment, which is backed by a robust cloud computing platform able to support the largest and most complex cases. Best of all, in addition to the substantial productivity gains our beta customers have already achieved, many have even found their employees clamoring to forego significant portions of their salaries in order to earn precious Facebook credits, thus delivering dramatic cost savings for the organization.

eDiscovery World is truly a win-win, and we couldn’t be more excited about it. Enjoy!

In many ways sanctions cases are the lifeblood of the electronic discovery industry.  While the FRCP, Sedona Conference and EDRM are all out there as shining examples of what to do, it seems like more practitioners learn from the scared straight cases like Zubulake, Morgan Stanley, Pension Committee, etc.  Well, if you liked those horror stories, Philips Elecs. N. Am. Corp. v. BC Tech., may certainly keep you up at night.

In this intellectual property (IP) case with copyright infringement, misappropriation of trade secrets, and associated claims, the court entered a number of discovery orders compelling both production and preservation. The court found that, despite these orders, a proper litigation hold was not issued until 19 months after the duty to preserve arose and thousands of files were deliberately deleted from five key players’ computers. Not surprisingly, the plaintiff moved for a finding of contempt and for terminating sanctions.

In this decision, Magistrate Judge Samuel Alba goes the extra mile in his initial opinion (which was upheld on appeal) to detail the defendant’s significant errors.  While it doesn’t quite rise to the maliciousness demonstrated in Victor Stanley 2 (by the “gang that couldn’t spoliate straight”), it still provides a textbook example of “worst” practices.

To begin, Magistrate Alba cites Pension Committee for the general notion that “[c]ourts cannot and do not expect that any party can meet a standard of perfection. Nonetheless, the courts have a right to expect that litigants and counsel will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated, and that such records are collected, reviewed, and produced to the opposing party.”  Despite the early recognition that the electronic discovery process need not be perfect, he then uses most of the 48 page opinion to detail the parade of horrors committed by the defendant:

“BCT’s behavior, such as failing to timely issue a litigation hold, failing to follow up on that litigation hold, failing to request discovery documents from key employees, and so forth, reveals its intentional failure to meet discovery obligations and its flagrant disregard of the obvious great risk that it was highly probable the destruction of relevant documents would result from its behavior, and BCT’s conscious indifference to the consequences of that risk.”

Magistrate Alba honed in on the culpability analysis because terminating sanctions were being sought and the case law requires the judge to consider lesser sanctions before dismissing a case (“Because dismissal with prejudice ‘defeats altogether a litigant’s right to access to the courts,’ it should be used as ‘a weapon of last, rather than first, resort.’”).  The Defendant not surprisingly proffered a host of unpersuasive arguments about their behavior, attempting to portray many of the key player’s actions as merely inept and rogue.  Examples include:

• Employee “deleted files and folders for over 5 1/2 hours” and then started “loading five movies onto his computer” which comprised approximately twenty gigabytes of data, permanently overwriting the files recently deleted, eliminating the possibility of forensic recovery.
• Employee “deleted and intentionally wiped files from his computer” the day after Philips demanded his laptop be turned over.  He also “twice ran a Microsoft program called “’Cipher.exe’.”
• Employee deleted 97,000 files from his My Documents file, of that 41,000 were lost files covered up by AbsoluteShield (a file wiping program).

But, Magistrate Alba found the requisite scienter anyway, despite lacking express malice.  He held: “[b]ad faith, or culpability, ‘may not mean evil intent, but may simply signify responsibility and control.’” This control component was critical since the defendant attempted to convince the court that it did not have sufficient power over its employees during the legal hold and preservation process.

“BCT argues that it is not responsible for the ESI’s destruction because the executives and employees who destroyed the documents were acting individually and contrary to BCT’s express directives not to delete documents from their laptops.”

Magistrate Alba was not convinced:

“Also, other commonsense actions were not taken to preserve evidence, such as interviewing key employees, or even asking them to produce discoverable information. BCT appears to have been merely going through the motions rather than genuinely trying to preserve evidence since this method of communication was known to be unreliable and ineffective within the company; thus, BCT was not fulfilling its responsibility to diligently and thoroughly ensure that relevant documents were preserved. …  BCT’s sparse and ineffective communication with its employees does not relieve it of its responsibility of its employees’ actions in disobeying direct court orders and destroying massive numbers of electronic documents…. BCT is the party; it has the responsibility; it must follow the court’s orders. The justice system would break down if company employees could claim that they did not know about the court orders and simply disregard them.”

To further complicate the spoliation allegations, the timing of the deletions were extremely suspect (“almost all of the deletions took place a day or two before the BCT laptop computers in question were sent to be imaged”).  And, the number of the deletions were significant as well, with thousands of files that were forensically unrecoverable.

At the end of the day, the Defendants’ underlying incompetence was compounded by attempts to obscure the facts, ultimately dooming any shred of credibility.

“BCT’s dishonesty and efforts (perhaps even strategy) to hide and destroy ESI shred BCT’s credibility and reveal BCT’s overall contumacious and dishonest attitude toward this case, this court, and the system of justice. This inexcusable behavior and attitude greatly contribute to this court’s finding of bad faith. BCT must be excoriated for filing false sworn declarations, giving testimony riddled with lies and deceit, and making false representations to this court.”

These repeat offenses shut the door on any potential “do-over” with the Magistrate noting that the integrity of the judicial process cannot function when litigants so blatantly disregard their obligations.

“Civil litigation and discovery demand a level of integrity from the parties in order to properly function. When parties disregard that responsibility and/or ignore the court’s mandates, there must be strong consequences. Having examined the degree of prejudice to Philips, the interference with the judicial process, BCT’s culpability, whether BCT was warned in advance that its non-compliance may result in dismissal, and the efficacy of lesser sanctions, the court concludes that extreme sanctions are warranted in this case where discovery abuses of a serious magnitude involving bad faith and willful disregard of two direct court orders occurred.”

And, to pour further salt on the Defendant’s wound, the Magistrate recommended perjury sanctions for lying under oath:  “[I]n light of the above findings, the court recommends that this matter be referred to the United States Attorney’s Office for investigation and criminal prosecution.”

Searching for a singular takeaway amongst all the culpable behavior is a bit hard.  But certainly it is easy to point out that the Defendant’s legal hold process (and technology) was woefully behind the times.  If a litigant is going to utilize a manual, custodian based litigation hold process it needs to recognize the risks.  This isn’t to say that this type of approach won’t work, but an unsupervised process (via outside counsel) means that internal employees who may have something to hide can easily put their employer in the cross hairs, as was seen in Phillips.  Once files are destroyed, it’s not surprising to see an ensuing cover-up, and then terminating sanctions aren’t far behind.  We’ll see how many folks are scared straight by this latest horror story.

Surprisingly, a large percentage of the population has been captivated by what many characterize as a public melt down by Two and a Half Men star, Charlie Sheen. Following his well-publicized split with the show’s executive producer, Chuck Lorre, Sheen’s media interviews have been harder to avoid than cowboy hats at a Kenny Rogers concert. Regardless of whether or not you’re a pop-media junkie, fan of Two and a Half Men, or completely disinterested in the entire saga, it’s clear that many of Mr. Sheen’s ramblings have stirred controversy.

What do all Mr. Sheen’s seemingly random musings mean? Has he lost his mind? Is he pulling the wool over the eyes of the media by flawlessly executing the biggest Hollywood hoax in history? Maybe, just maybe, Mr. Sheen is a stealth e-discovery expert, secretly providing the legal community with a guide for handling litigation. Don’t agree? Well, maybe you’ll be a believer after reading my interpretation of how some of Mr. Sheen’s most popular quotes can serve as an e-discovery 101 guidebook.

“It was so gnarly I can’t remember.”

It’s hard to remember that the first Zubulake decision was penned by Judge Scheindlin long ago in 2003, but the gnarly $29.2 million jury verdict against UBS Warburg by a single plaintiff, in a fairly routine employment lawsuit, is one that most legal departments in Corporate America won’t soon forget.[1] Many industry experts feel the jury’s massive verdict could have been avoided if it wasn’t for repeated electronic discovery errors that resulted in the jury receiving an adverse jury instruction about UBS Warburg’s failure to produce emails. Eight years later, the incredible growth of electronic information continues to present e-discovery challenges for organizations, even though clearer guidelines have evolved.

“Sorry man, didn’t make the rules.”

Prior to Zubulake, the Federal Rules of Civil Procedure (FRCP) did not squarely address the unique challenges of electronic evidence. Although she didn’t actually make the rules, Judge Scheindlin served as a member of the committee that helped draft the 2006 amendments to the FRCP. The amendments address many electronic evidence challenges faced by legal departments, and topics such as data sampling, proportionality, and data accessibility that were tackled in Zubulake, ultimately made their way into the notes or text of the amendments.

The amendments seek to minimize discovery disputes and provide clarity by, among other things, requiring parties to “discuss any issues about preserving discoverable information” and by outlining a protocol for dealing with electronically stored information (ESI) characterized as “not reasonably accessible because of undue burden or cost.”[2] Despite these guidelines, the rules are not always bright line instructions so the conduct of the parties is typically evaluated based on “reasonableness” standards when a discovery dispute arises. Some are lobbying for further clarification regarding issues such as when the duty to preserve electronic evidence is triggered and there seems to be a movement afoot that could lead to additional Rule amendments as evidenced by last year’s Civil Litigation Review Conference at Duke University.[3]

“Your perimeter’s been breached.  You got work to do bro.”

No lawyer wants to be responsible for having the organization’s perimeter breached as a result of data spoliation. However, failing to take proper data preservation steps continues to be the number one reason organization’s face e-discovery sanctions.[4] In Zubulake IV, Judge Scheindlin explained that an organization has work to do when it “reasonably anticipates” litigation since the anticipation of litigation is enough to trigger counsel’s duty to issue a litigation hold notice to employees.[5] The duty is easy to understand, but determining the “triggering” event and the best approach for preserving data can be challenging. To minimize the risk of spoliation, many organizations are moving away from using email notifications and spreadsheets to track when, who, how, and why employees are notified of a litigation hold in favor of more automated solutions and repeatable workflows. Automated solutions allow notices, reminders, and surveys to be created with easy-to-use templates and the “reasonableness” of the entire litigation hold process can be illustrated since reports can be automatically generated with the click of a button.

“I’ve got tiger blood and Adonis DNA”

Although the line between “reasonable” and “unreasonable” conduct can be very blurry in some cases, in other situations the offending party simply chooses to flagrantly disregard the rules as if they have tiger blood and Adonis DNA. For example, in Daylight, LLC v. Mobilight Inc., the Utah Appellate court upheld the lower court’s entry of a default judgment after defendants threw a laptop off a building, ran it over with a vehicle and stated: “if this gets us into trouble, I hope we’re prison buddies.”[6] Uh, sorry Charlie….

Typically, most parties are not so cavalier about disregarding their legal obligations and the judge’s decision to issue sanctions when evidence is lost or deleted is not a slam dunk. One challenge is that the 2006 FRCP Amendments allow litigants to request any “Electronically Stored Information” stored in “any medium” that is reasonably calculated to lead to the discovery of admissible evidence.[7] That means the scope of the duty to preserve, collect, and produce information as part of litigation may be very broad and very complicated, even though data growth continues to increase exponentially and corporate information technology systems continue to become increasingly complex.

To meet these burdens, many organizations are demanding technology solutions that do more than manage the legal hold process because they also need to collect, analyze, and review ESI to evaluate the case. The holy grail of e-discovery is being able to leverage a single technology solution to manage all these tasks as well as the litigation hold process. The value is twofold. First, automating e-discovery steps related to preservation and collection that have traditionally been managed manually minimizes the risk of human error and makes it easier to demonstrate a repeatable process that is defensible. Second, using the same technology solution to filter, analyze, and review key documents faster results in significant cost savings and strategic advantages.

“You make a choice to win, and you win”

Despite the fact that organizations continue to make e-discovery mistakes, smart organizations choose to leverage a combination of repeatable workflows and legal technology solutions to help them win. Although the new technological era we live in has created new discovery challenges, legal technology can be used to streamline data preservation, collection, processing, and review. Legal technology can also be used to quickly find important documentary evidence earlier in the case, thereby resulting in strategic advantages so smart organizations can “just keep winning.”

[2] See Fed. R. Civ. P. 26(f)(2) and Fed. R. Civ. P. 26(b)(2)

[3] John G. Koeltl, 2010 Civil Litigation Review Conference Introduction: Progress in the Spirit of Rule 1, 60 Duke L.J. 537 (2010).

[4] See Dan H. Willoughby, Jr., Rose Hunter Jones, and Gregory R. Antine, SANCTIONS FOR E-DISCOVERY VIOLATIONS: BY THE NUMBERS, 60 Duke L.J. 789 (2010), at 803 stating (“FAILURE TO PRESERVE ESI IS THE MOST PREVALENT SANCTIONABLE CONDUCT”

[5] Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003)

[6] Daylight, LLC v. Mobilight Inc., 2011 UT App. 28 (2011)

[7] Fed. R. Civ. P. 34(a)(1)(A).

It seems like just yesterday that I wrote a post discussing Judge Scheindlin’s latest electronic discovery opinion in Nat. Day Laborer Org. Network v. United States Immigration and Customs Enforcement Agency (“NDLON”).  One of the issues that jumped out at me when I read the original opinion was Judge Scheindlin’s application of FRCP principles, rejecting the government’s claim  that “if the requirements of FOIA and the requirements of the Rules conflict, FOIA must trump the Rules.”  Needless to say, she didn’t buy the “trump” argument:

“[T]here is no need to decide this question because FOIA does not conflict with the Rules. FOIA is silent with respect to form of production, requiring only that the record be provided in ‘any form or format requested by the person if the record is readily reproducible by the agency in that form or format.’… Defendants’ productions to date have failed to comply with Rule 34or with FOIA.”

Now that the government has appealed Judge Scheindlin’s ruling I thought I’d consult with a legal guru (in the form of Ralph Losey) to see how he thinks the chips will fall on both the request for a stay and the appeal.  Here’s what started as an impromptu email exchange, which is now paraphrased for your reading enjoyment:

Dean:  ”Ralph, how likely is the government to get stay in the first place?  After all, if they have to produce the metadata (as ordered) winning a downstream appeal won’t help much in the NDLON case?”

Ralph:  ”An interlocutory appeal to the Circuit Court on a discovery issue is always a long shot. Appeals courts usually do not accept appeals of non-final discovery orders. The appellant has to show irreparable harm. Still, this is an unusual case as production of documents goes to the merits of the case itself. They may well take it. I really don’t know. I might depend on someone’s breakfast.”

Dean:  “So, maybe the government loses this initial battle, but my guess would be that they’re still keenly interested in winning the war, since Judge Scheindlin’s metadata production standards will have far reaching affects across any entity responding to FOIA requests.  As an aside, a given agency may handle a multitude of FOIA requests ranging from dozens on the low end to thousands on the high end – so a change in any production protocol is guaranteed to have a material and long lasting impact.”

Ralph:  “Could be, but then again, maybe some agencies are already producing metadata. If they give actual native copies, then they certainly are. I don’t have statistics on that. Certainly, they should have seen this coming. The states that have looked at this all require reasonable metadata production. I probably don’t appreciate the governments real problems here, since in my world, metadata is produced between private parties all of the time without a fuss. Do the feds really have state secrets stashed away in metadata? I seriously doubt it. In my experience, searching for secrets in metadata is usually a big waste of time. It is a fear based on myth, not fact.”

Dean:  “The Supremes issued a ruling recently in Milner v. Dept. of Navy which effectively reigned in an expansionist construction of FOIA Exemption 2.  Aside from containing my new, favorite quote [“Our construction of the statutory language simply makes clear that Low 2 is all of 2 (and that High 2 is not 2 at all).”] do you think this ruling will have any impact on the NDLON outcome?”

Ralph:  “Honestly I don’t know. I consider myself somewhat educated about metadata and production of various metadata fields in load files, but not meta-foia, and I mean that literally, not “metafoicaly” <ouch!>”

Dean:  “Finally, do you think that the Plaintiff’s argument in NDLON that these very agencies ask producing parties for metadata (sometimes in more onerous fashion) will hamper their cause?  Or, is FOIA a different enough creature to throw out the ’good for the goose’ argument?”

Ralph:  “I am reminded of one of my favorite old sayings, ’hoisted by his own petard.’ Certainly many, if not most federal agencies require metadata production to them in e-discovery. Why should the federal government be any different?”

E-discovery does not get much mainstream media coverage. Maybe once a year, either Fortune or the Wall Street Journal writes about it. The vendors included in the story get excited, but no one else notices.

So John Markoff’s story on March 4 in The New York Times about “Armies of Expensive Lawyers, Replaced by Cheaper Software” was remarkable on several fronts. First off, The New York Times is country’s leading newspaper, with a far larger readership than any publication which has written about e-discovery before. Second, the New York Times placed the story above the fold on its home page, ensuring all readers saw it. Third, and perhaps most important, readers responded and the story went viral, becoming the paper’s “most emailed” story for the next two days. It zoomed around the Twitter-sphere, Facebook, and LinkedIn, and prompted a flurry of thoughtful responses, most notably from Ralph Losey, Chris Dale, Posse List, and Jerome Kowalski.

Over the past 10 days or so, I’ve spoken to several corporations and law firms who are learning about e-discovery technology for the first time from this article. It’s been striking to feel their curiosity, excitement, and complete lack of concern about [allegedly] being automated out of a job. Corporate legal departments see the opportunity to get control over the process by using technology to bring e-discovery in-house; and law firms see it as a critical part of their role as trusted advisors to help their clients make well-informed decisions about e-discovery. Neither has any fear about leveraging e-discovery software where they can, because they know e-discovery is not as simple as self-checkout at the grocery store. As many commentators have pointed out, along with great technology, you still need smart people to operate that technology and make important judgment decisions.

In my view, what’s more important than the specific content of the story is the fact that the story was written, published, and read by so many people, who reacted to it in a profound way – by wanting to learn more.

As the industry grows, and the impact of e-discovery software is more widely recognized, there will no doubt be more many more articles about it in the mainstream media. But this was the first one to capture the popular imagination and – in the minds of many – put e-discovery on the map.

The amazing thing about the litigation hold process is that everyone is doing it, but the vast majority of people are still doing it manually.

Every company in every case has a duty to preserve, and the only way to meet that obligation is to send out litigation hold notices, track responses, and monitor compliance. To help companies do this, software vendors like PSS (now part of IBM) and Exterro have had products on the market for years. But, despite being good applications with several happy customers, they have only been adopted by about 100-200 customers in aggregate, which is a tiny fraction of the thousands of companies struggling to manage the litigation hold process. Why the low penetration rate?

Well, it turns out there are several good reasons. First and foremost, these applications are expensive, and usually cost over $250K in software licenses, hardware, and implementation services. Second, they take a long time to deploy, often requiring services engagements lasting more than 6 months. Finally, they are pure workflow solutions which are disconnected from the data. That makes it hard to keep them up to date, and means you cannot use them for later stages of the e-discovery process such as collecting data or then processing it. So the audit trail, which is important for defensibility, is often incomplete, and there’s the real risk of “disconnects” between different phases of the e-discovery process.

At Clearwell, we find this type of situation – where there’s a clear market need that’s unaddressed by existing solutions – absolutely fascinating. It led us to ask: what if there was an inexpensive litigation hold solution that’s easy to deploy AND is tightly integrated with identification, collection, processing, ECA, and review? For the past few months, we’ve been working closely with a large number of our customers to answer that question. Our goal was to design a product that will meet the needs of the mass market, which today is still using spreadsheets to track its litigation holds.

The result is Clearwell’s new Litigation Hold Module, which we announced on Monday and is available this month. It brings Clearwell’s trademark ease-of-use and quick time-to-value to the preservation stage of EDRM, and enables customers to manage all their cases from cradle (preservation) to grave (production) within a single product. From the initial conversations with customers, the response has been incredibly positive. Prior to the product shipping, it has been purchased by CA Technologies, Exterran, Flowserve Corporation, and several others, with many more evaluating it for purchase this month. As with all our products, we offer free evaluations and I encourage anyone responsible for managing the litigation hold process to give it a try.

For those who are keeping count, this is Clearwell’s fourth module, all built as a single integrated product. We first came to market in 2006 with processing and ECA. In 2009, we expanded to the right of the EDRM model by adding a module for review and production. The following year, in 2010, we moved left (in EDRM terms) by releasing a module for identification and collection. Now in 2011, this new module for preservation and managing the litigation hold process completes the picture. It makes Clearwell the only fully integrated, end-to-end e-discovery product suite, since other vendors either offer a narrower product footprint or have cobbled together disparate products via acquisition.

Coming on the heels of Transparent Concept Search, this is our second major product announcement of the year – and there will be more to come. The product development team is bursting with new ideas, and we have a rich pipeline of new technologies and products slated for release in the coming months.

(Editor’s note: This special guest post was written by Teddy Cha, Clearwell Senior Product Manager, MIT alum, and coffee connoisseur. Teddy was a key member of the team that developed our Legal Hold Module and has worked tirelessly with our engineering team and lead customers to bring the product to market. – Kurt)

Legal hold is a critical first step to any e-discovery process, but as recent experience has shown, enterprises are still struggling to perform them in a defensible and repeatable way. A judicial warning was heard as early as 2003 with Judge Sheindlin’s ruling in Zubulake v. UBS (and most recently in Pension Committee).  The need for change is not coming from only a single judge, however.  In 2010, the Duke Law Journal studied the level of sanctions compared to previous years and found that:

1. Sanctions are at an all-time high (up 271% since 2005)
2. Damages were as high as almost $9 million
3. The most common misconduct was the failure to preserve data

Sending legal hold notices can start out simple, but it can quickly become unwieldy if not managed correctly. It’s like taxes. Everybody has to do them, and it typically starts out as a “simple” process. But as your assets grow, you may want to invest in more complex software or an online service to maintain efficiency. And once you start a family (or a small business), you’ll need to graduate to a much more robust process.

As companies grow their legal hold process evolves in the same way. Their progression can be described in the following distinct three stages:

Stage 1: Manual Legal Hold Process

Sending a litigation hold notification is as easy as…well, sending an email. But tracking these litigation matters and their responses in spreadsheets quickly grows out of hand once a poor paralegal has to manage a 10th, 20th and 50th simultaneous legal matter (or even multiple holds in a single case).  This manual process is difficult to repeat, error-prone, and likely doesn’t reflect the real-time status of compliance the second the spreadsheet is saved. Typical corporations are concurrently managing hundreds active legal holds, involving thousands of custodians, across multiple business units and groups. It becomes quickly apparent that a better solution is required.

Stage 2: Stand-Alone Legal Hold Software

Legal Hold solutions have been in the marketplace for a number of years. Typically they fall into two categories:

1. Matter Management or Information Governance systems that help enterprises construct workflows and integrate record management policies and controls. Legal Hold notification capabilities are an appended component to these ambitious and holistic solutions. These systems are typically expensive and have long implementation cycles.
2. Narrowly focused offerings aimed at managing just legal hold notification and survey tracking. These solutions typically cost less than the above and are delivered as a hosted service (SaaS).

Stand-alone legal hold software products are certainly an improvement on the Stage 1 manual process. But despite virtually all major enterprises needing some sort of legal hold process, they have not yet raced to embrace these Stage 2 solutions yet. Why not?

Following a typical e-discovery case quickly uncovers the problem. Sending and tracking legal holds is a necessary part of the e-discovery process, but it is only the first step. Soon after custodians are notified of their obligation, e-discovery teams must separately collect, process, analyze, review, and produce that data using other solutions. Stage 2 legal hold solutions are stuck just managing the holds.

This is where purchasing a stand-alone legal hold solution is a bit like buying an iPhone without the network plan: You can’t really do much with it (well, you could play Angry Birds, but only if you download it over a WiFi connection). You can’t obtain your goal of mobile communication without a phone and a network plan.

Stage 3: Integrated Legal Hold Software

To address to drawbacks of Stage 2, many companies today are looking for a more integrated approach – one that marries legal hold with the rest of the e-discovery process. This is where Clearwell’s new solution can help. Once custodians have acknowledged the legal hold notice, Clearwell can immediately reach across the enterprise network and collect those custodians’ data. Once the data is collected, a few clicks of the mouse prepare it for early case assessment (ECA), analysis, and review.

As any experienced corporate IT and legal executive will tell you, such a comprehensive solution has long been promised, but has not come with fast implementation (i.e., up and running in a day), ease of use (i.e., no training required), or in a single platform  (i.e., one login for users and no exporting or importing of data between e-discovery phases). With this in mind, we are delighted to announce the Clearwell Legal Hold Module, now available as part of the Clearwell E-Discovery Platform. Combined with Clearwell’s Identification & Collection, Processing & Analysis, and Review & Production modules, companies can now leverage a truly integrated e-discovery solution to lower the cost and risks of e-discovery. Key features of the new Module include:

• Hold Notices: Hold notices can be quickly created and sent to relevant custodians and system administrators via email. Different notices can be sent to custodians and system administrators, streamlining the notification process. Notices can be sent immediately or scheduled for delivery.
• Auto-Reminders and Auto-Escalations:  Reminders and escalation notices can be scheduled for delivery to non-responsive custodians, eliminating the need for manual follow-up.
• Custodian Surveys: Surveys containing single-choice, multiple-choice, or free form text questions can be created and issued to key custodians so administrators can easily capture information critical to a case, thereby expediting the interview process. Surveys can also be saved as templates to the Notice Library and reused.
• Automated Tracking and Reporting: Administrators have immediate visibility into the status of all legal hold notices across all cases through a single pane of glass. Administrators can drill-down by case to view the status across all custodians, including those who have received and responded to their hold notices, and those who haven’t.

Until today, corporations have been making do with manual or stand-alone legal hold solutions that are neither scalable nor integrated with the rest of the e-discovery process, assuming more and more risk and incurring greater costs – never an ideal combination. Fortunately, it no longer needs to be that way.

(Teddy Cha is a Senior Product Manager at Clearwell Systems and the lead Product Manager for Clearwell’s Legal Hold and Identification & Collection Modules.)