e-discovery 2.0

The Chinese philosopher, Lao-tzu, once said “a journey of a thousand miles begins with a single step.”  This truism has been applied in a myriad of ways over the years, but it applies with equal measure to the process of taming the multifaceted challenge that is electronic discovery.  Simply put, conquering e-discovery is always a journey.  And for enterprises like The Home Depot, they know first hand that you can’t simply look at the end result and wish for the journey to be complete.  Instead, it’s paramount to embrace all the steps along the path and develop good habits that work both for the first and the last mile.

Many enterprises clearly understand the benefits of in-house discovery that include lower processing and review costs, earlier access to case facts, better control over the processes, etc.  But some struggle with how to begin their journey, for any number of reasons (lack of knowledgeable staff, failure to get executive buy-in, inability to build a compelling business case, etc.).  Fortunately, the folks at Home Depot have recently completed their journey and have offered to share secrets they leveraged throughout the process.

In a similar fashion to best selling author’s Stephen R. Covey’s “The 7 Habits of Highly Effective People” David Steel, Sr. Counsel and Barbara Squires, Paralegal at The Home Depot will host a web seminar to walk us through the some of the e-discovery habits that helped them successfully navigate their way through the process.  The web seminar is titled “5 Habits to Create a Highly Effective In-House E-Discovery Process” and it’s free to attend. Since we don’t want to steal their thunder, we won’t divulge their habits now, but suffice it to say that every company can learn from their experiences.  And, after the web seminar I’ll devote more blog time to further expansion of each habit.

Since it’s our raison d’être to help companies complete their e-discovery journey, we’re excited to have The Home Depot on to share stories from their journey, all in the hope that others, just embarking on their own expedition, can be just as successful.

When I first started working in the electronic discovery industry, I quickly learned two things about Summation: it has a huge installed base of law firm customers, and they all dislike using Summation’s products. It was feedback from these unhappy customers that led companies like Clearwell and kCura/Relativity to enter the review market, and the results are plain to see. While Clearwell and kCura/Relativity are both growing rapidly, Summation has suffered years of declining revenue.

Several people have pointed to poor marketing as the problem, and it’s true most customers are confused. Summation’s products all have different names (iBlaze, Discovery Cracker, CaseVault, CaseVantage), and it is unclear how they relate to one another. But the problem is more fundamental than just marketing. There has been no innovation from Summation for years; its products are difficult to use; and, they don’t integrate with each other. So, naturally, customers switch to more compelling solutions, revenue declines, management cuts costs, talented people leave, service levels deteriorate, more customers defect, and the cycle repeats.

As the management teams at Silicon Graphics, Siebel, or Yahoo! can tell you, once a technology company faces this death spiral, it’s very, very hard to turn things around. But that’s exactly what AccessData must do for its recent acquisition of Summation to work.

On the face of it, you would not expect AccessData to be capable of addressing Summation’s problems. As the #2 player in the forensics market to Guidance Software, it has no experience in legal review. Its customers are enterprises and government agencies, not law firms or litigation support service providers. Its headquarters is in Lindon (Utah), whereas Summation based is in San Francisco. But AccessData has a capable team, and must have some plan in mind. What is it likely to do? My guess is as follows:

• Claim “end-to-end” in the enterprise market: AccessData will likely bundle the iBlaze review platform with its own forensic collection products (FTK) and claim end-to-end coverage of the EDRM model. The products obviously don’t integrate with one another, or even have the same UI, but some customers may not realize how important that is until after they have purchased. This is the same strategy used by Autonomy, which also puts together disparate products (Aungate, Introspect, etc.) and markets them as an integrated package.

• Promote CaseVault and CaseVantage in the law firm market: These hosted review platforms are not widely used. AccessData will be hoping that with better marketing and sales execution, it can drive adoption of them by law firms and litigation support service providers. But most providers today seem pretty happy with Clearwell and/or kCura Relativity, so it’s unclear why they would switch away to CaseVault / CaseVantage.

• Cut costs: On the day the acquisition closed last month, AccessData fired most of Summation’s engineers. That’s understandable, given the shrinking revenue. But it only accelerates the death spiral. With no engineers, it’s impossible to innovate or improve the products.

• Sunset iBlaze product lines: This sounds radical since, according to Katey Wood at the451 Group, iBlaze accounts for 70% of Summation’s revenue. But AccessData may decide to focus its development efforts on CaseVault and CaseVantage, ceasing all investment in iBlaze. Effectively, this means it would “milk” the law firms using iBlaze, and pitch enterprises a product with no real roadmap for improvement. Given how far iBlaze has fallen behind, there is a strong argument that further investments are probably just throwing good money after bad.

It will take a few months before we can say for sure whether these, or other, changes will make any difference. If the experience of other companies is any guide, they may slow the decline for a while, but not reverse it. After all, there may be some people out there using Silicon Graphics computers to access their Siebel CRM systems or search the web on Yahoo, just like there will be some using Summation’s products for document review. But there are fewer and fewer every day.

August just wouldn’t be August without lazy days at the beach spent playing in the sand, frolicking in the surf, and immersing yourself in the LTN executive summary of the latest Socha-Gelbmann Electronic Discovery report (in this case, the hot-off-the-presses 2010 edition).

Even with the lure of the big waves beckoning you out into the water, if you follow electronic discovery you likely have a hard time pulling yourself away from the report, and this year is no exception. In fact, this year’s report is especially insightful, as George and Tom seem to have done a particularly impressive job of getting the pulse of not just what’s going on in the law firm and service provider parts of the market, but the enterprise as well.

This is a big change from just a couple of years ago. Go back and review the executive summary from 2008, and you’ll notice a very different feel to the findings. In 2008, much of the talk was around the dynamics of the service provider market, with relatively little discussion of trends related to the e-discovery process and technological innovation in the space. In 2008, it felt like e-discovery was something you had other people do for you: the word “consumer” appeared 12 times in the executive summary. In 2010, two short years later? Just five times. Why? The language may be telling. “Cost” appeared seven times in the 2008 report. In the 2010 report? 16… more than twice as often.

What seems to have happened is that the recession has been something of a refining fire for the electronic discovery market. In order to reduce costs and manage risks, enterprises are behaving much less like consumers and more like real customers with skin (and money) in the game. Not surprisingly, they’ve gotten extremely aggressive about bringing  innovative cost-containing measures to bear on the process. Socha and Gelbmann highlight three:

• More targeted preservation and collection of ESI
• More focused review and analysis of the data
• More effective use of technology to speed up the efforts, improve quality, and reduce costs

This is great news for innovative software companies in the e-discovery space — and their customers. What one would expect to occur in a maturing market is that it would move from a period of rapid innovation to a lower-innovation, consolidation phase. However, that’s not the case here. While there is consolidation occurring,  what’s remarkable about e-discovery right now isn’t really all the acquisition press releases in your twitter feed (mainly from vendors saddled with prior-generation point solutions who are trying to acquire their way toward a complete offering). Rather, it’s how leading enterprises are increasingly seeking, and finding, cutting-edge solutions to solve cost, efficiency, and risk management problems associated with e-discovery that simply weren’t available prior to the meltdown.

As in-house legal and IT e-discovery spending starts to gain steam, look for enterprises purchasing in-house solutions to demand many of the innovations that have been developed over the last couple of years (most of which are highlighted by the Socha-Gelbmann survey):

• Targeted collection: Products better able to strategically target the collection of ESI, rather than attempting to boil the ocean, are more suited to the mindset and approach of cost-conscious enterprises
• Iterative discovery: Products that are able to provide “to the left” functionality while still providing enterprise-class, intuitive processing, analysis, review, and production functionality
• Support for small and big cases: In discussing “small is the new big”, Socha and Gelbmann highlight how “the aggregate of small cases dwarfs the combined large cases.” Successful products must simultaneously handle high numbers of smaller cases while still scaling to the largest matters
• Integrated analytics: Products must bring to bear powerful analytics across all stages of the e-discovery process, focused not just on document review, but also looking at aggregates of data from many different angles and allowing you to see the big picture across the entire case for effective information and cost management

Is the EDD space maturing? Yes, as Socha and Gelbmann rightfully point out. But it’s doing so in surprising, innovative ways that, when it’s all over, may well prove to be a silver lining to the cloud of challenges the industry has faced over the last two years.

On April 1^st, we had some fun by revealing the magical properties of “Clearwell for the iPad.” In truth though, we were only half joking because, at the time, we actually had an application for the iPhone and the iPad in development.

As Clearwell’s user base grew, and we became a mission-critical application to so many people, we learned that our users want access to the product from anywhere, not just when at their desks. In particular, for Clearwell administrators, it’s a lot more convenient logging into cases or checking the status of processing on an iPhone than it is being tied to a computer. So we created this companion application for the iPhone and iPad so they could do just that, as well as view job details, email logs, and generally manage their Clearwell appliances while on the go.

The driving force behind this new application, which we call “iClearwell”, is one of our developers, Gim, who drove its development. Gim also created a video to explain exactly what iClearwell does, which you can see below (yes, it really is his voice – and his pulsating finger).

iClearwell is available for free at Apple’s App Store. I have it on my iPad, and it rocks!

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.

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.

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.

One of the new buzz words of the last few years in computing has been Cloud Computing. After the initial hype, and the subsequent shakeout of its potential, everyone is beginning to recognize that it represents a paradigm shift in how we purchase, deploy, and utilize computing resources. The general impetus for the cloud has been its potential to reduce capital costs, offer flexibility in purchasing computing resources, and reduce operational costs in maintaining hardware resources.

A lot of what the cloud offers is achievable using existing technologies, but repurposed in new and innovative ways. Several forms of the cloud, with specific benefits to customers, are being packaged and promoted. The offerings are delivered as cloud services, such as Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Software as a Service (SaaS). Without getting into specifics, each service offering comes with a set of service agreements between the purchaser and provider of the cloud services.

As with any new initiative, there are new challenges to contend with including security and compliance with corporate policies and industry regulations.  Although these issues are substantial, for this article, let us consider the legal implications as it relates to electronic discovery. We all know that sooner or later, every organization faces litigation, and increasingly, fair number of them involves e-discovery. Traditionally, in house legal and IT teams have had an understanding of how to respond to legal requests and have focused on litigation readiness. But, how do these translate to the new cloud computing paradigm? I’ll examine some of the challenges in a series of posts on e-discovery and the cloud. For starters, let’s analyze the challenges and considerations inherent with the duty to preserve electronically stored information (ESI).

Duty to Preserve ESI

Before we get to the mechanics of electronic discovery and actual preparation for Rule 26(f) conference, the duty to preserve arises. The duty to preserve may be triggered when a legal proceeding is “reasonably anticipated” and increases in importance on receipt of pre-litigation correspondence or a similar trigger event. Traditionally, such duty to preserve is reflected by placing litigation holds. It is often the case that litigation holds are placed on at least a portion of the ESI well ahead of an actual triggering event. See Adams v. Dell as perhaps an extreme example. In fact, some organizations invest in litigation support software technologies for classifying data and placing holds on the most reasonable subset.

How does such a litigation hold translate into the cloud? As a customer of a cloud, one should craft service agreements to dedicate certain cloud-resident data, in the form of folders or other broad categories, to be preserved. If the cloud provider has deployed technology to ensure that no party within the customer’s user community can delete the preserved data, it is well and good. However, placing such restrictive access impedes normal running of the business, and becomes impractical. Essentially, data in the cloud that is available for normal course of business is in the hands of user-custodians. If they then delete the data either deliberately, or inadvertently, or through normal business functions, that data deletion is subject to spoliation claims. Even though the “safe harbor” from spoliation sanctions of Rule 37(f) applies when information is lost due to the “routine, good faith” operation of electronic information systems, when preservation order is in place, shelter under 37(f) is not possible. Thus, the actual implementation of litigation hold comes under scrutiny. Because of this, many implementations adopt preservation using a “copy and preserve” model. However, this model is at odds with live business data that is constantly evolving. Even if the latest point-in-time snapshot technology at the physical volume is employed, the result is inadequate – you end up preserving massive volumes of data in the cloud, unrelated to actual logical messages or files that need to be preserved. What is needed is some smartness in the form of an application in the cloud itself that can translate a litigation hold request into specific ESI in the cloud. Who owns and manages this application and what the service levels are for this application is a significant issue.

Now, the view from the cloud provider’s perspective is very different. In light of the flexible data management architectures available, there is a great temptation to share both data with a litigation hold and data without a litigation hold on the same physical infrastructure. As a result, the cloud provider   preserves all data from every customer that is resident on that infrastructure – a very conservative approach. As a consequence, this would preserve another customer’s ESI accidentally and that data is now discoverable, in the context of a different litigation, despite the second customer’s active management of the data. Preserving a set of live, constantly changing data in the context of a single enterprise is technically difficult; doing so across multiple customers, sharing the data infrastructure is exponentially harder.

Another related issue with preservation is the need for the ability to release preservation holds. Typically, when the litigation response team determines that the legal hold is not necessary, the hold is released. In the “copy and preserve” model of litigation hold, one has to verify that the released ESI does not overlap with other litigation holds and is marked for destruction. One of the benefits of the cloud is the flexibility in storing bits and pieces of data wherever data capacity is available. Applying the release can again be tricky for both cloud customer and the cloud provider.

Given these additional complexities of evidence in the cloud and the fact that the duty to preserve may arise well before the trigger event of litigation, the costs associated with the duty to preserve can add up very quickly. It’s essential to understand three critical items related to the duty to preserve in the cloud: 1) what the cloud provider would charge for ongoing preservation, 2) whether agreements with the cloud provider cover the legal issues raised by the duty to preserve and 3) what the cloud provider offers in terms of a flexible workflow for applying and releasing legal holds.

To me, litigation holds in electronic discovery are like Federal sentencing.  Most Federal criminal cases end in a plea agreement, so very few are ever tried in front of a jury, but sentencing must occur in 100% of the cases.  Preservation is very similar – although you are likely to collect and produce in only a subset of cases, you must preserve in 100% of the cases.  So, just as sentencing law is extremely important to the Federal criminal bar, preservation is one of the most important phases of e-discovery to corporate or litigation counsel.  Naturally, I am surprised when I talk to corporate law departments that do not have a documented, repeatable process for legal holds that also includes standard procedures for IT.  Simply emailing a hold notice to a custodian and recording the hold on a spreadsheet is not enough given Judge Shira Sheindlin’s recent opinion in Pension Committee v. Banc of America Securities.

So, what is a defensible litigation hold strategy, and how do you get it done?  It is important to remember that the ultimate goal is preservation of any and all evidence that may be relevant to the matter at hand.  There are no hard and fast rules or checklists – only opinions from the bench of what is not enough.  The keys to defensibility are consistency, standardization, documentation, and diligence.  The place to start is with standardized policies and procedures as well as a person (or a portion of a resource) designated within the enterprise as the single point of contact for all issues related to preservation of evidence (read: project management).  Technology can help, but a great preservation strategy can be developed without an expensive or vast technology investment.  So, how do you get this done?  Here are four steps you should take now:

I. Define the Process (You cannot execute a plan that does not exist):

The first step to creating a great litigation hold strategy is defining a process or set of procedures that can be followed repeatedly.  This process could include setting up tiers for ESI sources, with tier one sources always being preserved (these might include frequently requested sources like email, file servers, and perhaps computers of key custodians), tier two sources being preserved on a case by case basis (including sources that are more industry-specific to the enterprise and therefore not always relevant in routine employment litigation or contract disputes), and finally tier three sources which include everything else.  By tiering ESI sources, the enterprise can focus on developing detailed preservation protocols for the tier one and tier two sources while developing a less detailed protocol for tier three sources which would include simply naming IT subject matter experts who would be consulted in the event that those sources were ever subject to preservation requirements.  This approach would allow the enterprise to prioritize data mapping and cataloging efforts on the tier one and tier two sources first.  Data mapping can be an enormous undertaking, so the enterprise might do well to know as much as it can about the email system rather than spending critical time focusing on ESI that may never be subject to any preservation requirement.

II. Dedicate Resources Appropriately and Engage Them Early:

Personnel are a key concern for preservation.  Allowing too many people to initiate and manage litigation holds could lead to confusion for IT and will certainly yield different results across multiple matters.  A single person or team should be appointed to manage litigation holds for the enterprise, and that person or team should develop a sound relationship with IT, paying particular attention to the subject matter experts who manage tier one data sources.  By forging the relationship early, communication and expectations will align before mistakes are made or spoliation occurs.  Of course, consistency is a key component of defensibility, and this cannot be achieved with a reactive, undocumented approach.  IT must understand the scope and consequences of spoliation, and they must be alerted early enough to halt routine destruction of ESI from the company’s systems.  Most corporate law departments have policies in place for “opening files” when new matters occur; it would be relatively easy to include a step in this procedure for engaging the appropriate personnel to begin preserving ESI at this early stage.  Leaving it up to individual attorneys or paralegals could cause preservation procedures to get implemented at various stages in the litigation, exposing the corporation to unpredictable and varying degrees of liability.

III. Audit, Log, and then Audit the Log:

Auditing the process is also critical to defensibility.  When ESI is moved, the process must be documented (even retaining shipping receipts for ESI that must be transported), and all conversions or alterations of the ESI must be documented (preferably with a procedure for commonly-encountered issues and then in a log as performed).  Log every step along the preservation path – including correspondence with custodians, when litigation hold reminders are sent, and any action performed on the preserved ESI (throughout the duration of the litigation).

IV. Talk to Your Custodians!

Interviews with custodians can go a long way toward achieving the diligence element of defensibility.  Acknowledgment by the custodian that they understand the preservation requirement being placed upon them and that they agree to preserve ESI is critical.  Often, custodians can also provide information about additional custodians who should be contacted or ESI sources that may not have been considered.  These and other matter-specific questions should be asked of the key custodians at a minimum.  This information may also prove useful when developing keywords for early case assessment or meet and confer preparation.

As you may have noticed, I have not mentioned any technology yet.  That is because a sound preservation strategy begins with sound policy, not simply purchasing a technology solution that purports to solve all of your problems.  Invest time in analyzing your litigation history, open matters, ESI sources, and personnel.  From there, processes can be developed, and where there are processes, there are then opportunities for automation and optimization through technology.  Simply defining the process is not enough – it must be repeatable and implemented consistently.  One of the best ways to ensure that a process is repeated is to automate it, removing the potentially error-prone manual work  where it is not required.

Following these steps should help jumpstart the development of a defensible preservation strategy, and once developed, you may be surprised to find that existing technology can help automate many of the procedures you have created.  Where existing technology investments fall short, venture into the market place informed and with the keys to defensibility in mind: consistency, standardization, documentation, and diligence.

The New York state court looked in the mirror recently and they didn’t like what they saw.  While it’s hard to imagine the self-dubbed “center of the universe” finding flaws with anything… apparently e-discovery has caused the big apple to take serious stock of the situation.  In a report entitled ELECTRONIC DISCOVERY in the NEW YORK STATE COURTS, Chief Judge Jonathan Lippman and Chief Administrative Judge Ann Pfau do an excellent job laying out the nature of the problem in a 24 page report.  Their initial findings in many ways mirror those of the American College of Trial Lawyers Task Force on Discovery (”Task Force”) and their survey of the Fellows of the American College of Trial Lawyers (”ACTL”).

“Electronic discovery (“e-discovery”) has for some time been changing the face of modern litigation. It is a major, if not the predominant, factor behind rising litigation costs and delays and presents serious challenges to the court system’s ability to resolve disputes ranging from commercial matters to personal injury cases, in an efficient, cost-effective manner.”

Fortunately, the Report recognizes the ubiquity of the vexing e-discovery challenges.

“[T]he volume of electronically stored information (“ESI”) has increased exponentially over the last decade, along with the amount of ESI potentially relevant to legal disputes. But while it is inexpensive to store immense quantities of ESI, it can be extremely expensive in the context of litigation to identify, preserve, and collect potentially relevant ESI and to have it reviewed for responsiveness and privilege by attorneys and paralegals prior to production to another party.”

But surprisingly, they’ve taken their shortcomings personally, and the seriousness apparently threatens New York’s standing in the legal community.

“Interviews with leading judges, law clerks, and practicing lawyers from around the state strongly suggest that the New York court system’s standing as a leading forum of both national and international litigation is at stake. … Those same parties and lawyers appear to be turning away from New York State courts for the greater sense of certainty and ability to handle massive e-discovery disputes that the Federal courts, and to a lesser extent, other state courts with more developed e-discovery practices, can provide.”

The report founded upon “extensive research and interviews with experts in electronic discovery”, addresses the problems of electronic discovery, including cost and delay, and provides several recommendations on how “the courts can manage e-discovery in a more expert, efficient and cost-effective manner within the framework of existing law.”

1. Establish an E-Discovery Working Group

This proposed step is one of the more interesting since the goal is to create “a working group of e-discovery experts that would serve as a resource for the court system and support its efforts to improve the management of e-discovery.”  This Working Group would have a very expansive (perhaps too much so) roster:

• Judges, court attorneys, and court clerks drawn from both the Commercial Division and other courts around the state that handle electronic discovery issues (and perhaps one or more judges/court personnel with little or no e-discovery experience);
• Lawyers with extensive experience litigating cases involving large volumes of ESI;
• One or more CPLR Advisory Committee members with an electronic discovery background;
• Medical malpractice, matrimonial, criminal, mass tort, and employment law practitioners, because of the increasing frequency and importance of electronic discovery in these practice areas;
• General counsel familiar with the issues affecting corporate clients who are heavy-ESI producers, particularly in the financial services and health care industries;
• Forensic computer/e-discovery specialists who typically are hired for large electronic discovery productions, but can share their substantive technical knowledge and familiarity with the latest technological/forensic trends;
• A mix of newer and more experienced practitioners, including one or two more experienced practitioners with limited technical proficiency;
• Bar association representatives who have studied and issued reports on electronic discovery;
• Federal practitioners and/or federal magistrates to offer the federal courts’ perspective;
• An academic who has studied and written about electronic discovery;
• Representatives of the Advisory Group to the New York State and Federal Judicial Council, which works to promote awareness about differences and commonalities in law practice between the state and federal judiciaries;
• A member of The Sedona Conference®, a national group of jurists, lawyers, experts and academics considered to be at the cutting edge of electronic discovery issues;
• Representatives of the Attorney General’s and/or District Attorneys’ Offices who are familiar with how electronic discovery is affecting their caseloads.

Assuming they can put together this dream team, the next challenge (beyond finding times to meet) would be to harmonize all the differing perspective, which certainly won’t be easy.

2. Improve the Preliminary Conference

The Preliminary conference was roundly felt to have value, but there were both short term and long term recommendations for change.  In the near term, the Report concludes that new language should be added to Commercial Division Uniform Rule 1 and to Rule 202.12(c)(3) adding in a new language stating that:

“Counsel appearing at the PC should be sufficiently versed in matters relating to their client’s technological systems to competently discuss with the court and opposing counsel all issues relating to e-discovery. Counsel may, in appropriate cases, supplement their ability to address these issues at the PC by bringing a client representative or outside expert with such knowledge.”

Assuming the short term fixes don’t remediate things completely, the Report recommends two additional steps, each to be piloted.  First, one pilot project should require an Initial Disclosure (similar FRCP Procedure 26[a][1]) for all parties relating to electronic discovery issues, which would require the parties to detail the following, in advance of the PC:

• Who the party’s key IT people are;

• Whether, and to what extent, the party has implemented preservation measures to avoid spoliation of the information relevant to this case;

• Which substantive witnesses the party is likely to call who are likely to possess ESI, and the location of that ESI (e.g., laptops, wireless handheld devices);

• What types of computer systems (including e-mail, word processing and spreadsheet software) and other technologies the party uses that may have created documents relevant to the litigation; and

• Whether the party expects to claim that certain ESI relevant to the case is inaccessible due to the form in which it is maintained (e.g., disaster recovery backup tapes, legacy data).

The other pilot program would require an “Affirmation of E-Discovery Compliance” that would be jointly signed and certified by the lawyers for each party, and provide the court with three lists.

“The first list would contain those e-discovery matters, contained in Rule 8(b) or Rule 202.12(c)(3), which the parties were able to meet-and-confer about and resolve. The second list would contain similar matters that, despite meeting and conferring, the parties could not agree upon or resolve and that need the court’s involvement. The third list would be any additional issues that, because of the disagreements described in the second list, the parties could not yet reach and resolve. The document would also chronicle the parties’ attempts to meet-and-confer, and indicate whether, and to what extent, client personnel and IT specialists were involved.

While there are a few other minor suggestions, one of the most interesting is the shout out to the The Sedona Conference®.  The Report concludes that “judges and practitioners applauded the work of The Sedona Conference®, particularly its emphasis on changing the litigation culture and fostering dialogue, cooperation, and transparency in e-discovery.”  The Report recommends an appointment of a representative to The Sedona Conference® which despite the foregoing “should not be interpreted to mean that the court system necessarily endorses that organization’s work and proposals. Rather, the court system’s appointee would bring back materials for consideration here in New York, to be accepted, rejected, or modified, as appropriate.”

All in all, the New York state court appears to have taken a reasoned and measured approach to address their candid shortcomings.  This type of critical analysis should be taken by more jurisdictions to determine where process gaps still exist.  Only then can a better future state be divined.