e-discovery 2.0

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?”

Just as when Judge Scheindlin penned Pension Committee, her latest opinion is already garnering a ton of buzz.  In Nat. Day Laborer Org. Network v. United States Immigration and Customs Enforcement Agency (“NDLON”), 2011 WL 381625 (S.D.N.Y. Feb. 7, 2011) Judge Scheindlin boldly takes on four governmental agencies (ICE, the Department of Homeland Security, the Federal Bureau of Investigation, and the Office of Legal Counsel) over metadata production in response to FOIA demands.

In NDLON Plaintiffs submitted identical twenty-one page FOIA requests to each of the four defendant agencies.  And, after some initial missed deadlines and judicial intervention, Plaintiffs sent the defendants a proposed protocol that requested a specific format for the production of electronic records.  Significantly, the proposed protocol was based on the “format demands routinely made by two government entities-the Securities and Exchange Commission and the Department of Justice Criminal Division” (invoking the old “good for the goose” argument).

Before ruling on the protocol, Judge Scheindlin examined the parties’ efforts to cooperate and she was uniformly underwhelmed:

“As far as I can tell from the record submitted by the parties, the equivalent of a Rule 26(f) conference, at which the parties are required to discuss form of production, was not held and no agreement regarding form of production was ever reached. Nor was a dispute regarding form of production brought to the Court for resolution.”

In evaluating controlling law, the fact that “[n]o federal court has yet recognized that metadata is part of a public record as defined in FOIA” didn’t stop Judge Scheindlin from looking to both state law and the FRCP for guidance.  Next, she relied on Aguilar, which noted that the Sedona Conference abandoned an earlier presumption against the production of metadata in recognition of “‘the need to produce reasonably accessible metadata that will enable the receiving party to have the same ability to access, search, and display the information as the producing party ….’”  She then foreshadowed her subsequent ruling by concluding: “[b]y now, it is well accepted, if not indisputable, that metadata is generally considered to be an integral part of an electronic record.”

The Government, not surprisingly didn’t go down without a fight, arguing that “metadata is substantive information that must be explicitly requested and then reviewed by an agency for possible exemptions.”  In concert they also claimed that “if the requirements of FOIA and the requirements of the Rules conflict, FOIA must trump the Rules.”  Judge Scheindlin wasn’t persuaded, holding that:

“[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.”

In terms of the remedy for the government’s failure, she did cut them some slack:  “Because no metadata was specifically requested in Plaintiffs’ July 23 e-mail, and because this is an issue of first impression, I will not require Defendants to re-produce all of the records with metadata.”  But for future productions she held that the bulk of the ESI be produced in “TIFF image format but with corresponding load files, Bates stamping, and the preservation of “parent-child” relationships (i.e. the association between an attachment and its parent record)” citing the metadata list below for non-email files.

1. Identifier
2. File Name
3. Custodian
4. Source Device
5. Source Path
6. Production Path
7. Modified Date
8. Modified Time
9. Time Offset Value

So, here’s the rub.  The legal populous, not surprisingly, likes bright line rules.  So, when Judge Scheindlin writes (in Footnote 41):  “[w]hile not necessary to the holding in this case, I believe that these are the minimum fields of metadata that should accompany any production of a significant collection of ESI” it’s easy to see how the above nine fields may become a blunt instrument wielded haphazardly by requesting parties.   Not surprisingly, Judge Scheindlin is aware of her mantle and further tries to caveat her holding (in footnote 44):

“To be clear, my Order requiring the use of this Proposed Protocol for future productions-as amended by the specific metadata fields I have required and by the options I have offered the parties regarding the form of production for spreadsheets-is limited to this case. I am certainly not suggesting that the Proposed Protocol should be used as a standard production protocol in all cases. The production of individual static images on a small scale, where no automated review platform is likely to be used, may be perfectly reasonable depending on the scope and nature of the litigation.

The impact of footnote 44 was top of mind when I recently spoke to Fmr. Judge Ron Hedges who chimed in:

“Attorneys must confer with regard to production requirements, as they should before bringing any dispute before a federal court. Moreover, attorneys should recognize that, as Judge Scheindlin said in footnote 44, that the selection of metadata fields to request are case-dependent.  Any attempt to arrive at a ‘universal’ or ‘bright line’ standard for production of metadata ignores the text of Rule 34(b) and the bargaining that occurs in meets-and-confers, and the unique aspects of individual civil actions.”

Despite agreeing with Judge Hedges’ sentiment, the main question in my mind will be whether footnote 44 is given its due weight going forward.  My concern is that, as is oft discussed with her Pension Committee decision, parties may hone in on the bright line test and miss the nuances.  While it’s easy to argue against the folly of this thinking, it may not stop it from happening in the near term.

Finally, in another shout out to the Cooperation Proclamation, Judge Scheindlin takes a swipe at counsel, who forced her to rule on an “e-discovery issue that could have been avoided had the parties had the good sense to ‘meet and confer,’ ‘cooperate’ and generally make every effort to ‘communicate’ as to the form in which ESI would be produced.”

“The quoted words are found in opinion after opinion and yet lawyers fail to take the necessary steps to fulfill their obligations to each other and to the court. While certainly not rising to the level of a breach of an ethical obligation, such conduct certainly shows that all lawyers-even highly respected private lawyers, Government lawyers, and professors of law-need to make greater efforts to comply with the expectations that courts now demand of counsel with respect to expensive and time-consuming document production. Lawyers are all too ready to point the finger at the courts and the Rules for increasing the expense of litigation, but that expense could be greatly diminished if lawyers met their own obligations to ensure that document production is handled as expeditiously and inexpensively as possible. This can only be achieved through cooperation and communication.”

In the end, NDLON will continue to generate a ton of discussion (as did Zubulake and Pension Committee).  While this decision won’t single-handedly end the metadata discussion it will hopefully serve as a launching point for more clarity down the road.  For this, practitioners on both sides of the debate should be thankful.

When confronted with an almost impossible data analysis problem, a tried and true technique to solve it has been the use of sampling. The mathematical analysis behind sampling is something that has been studied for quite a number of years. Also, sampling has also been put into practice for well over seventy years, in many fields from predicting results of elections and assessing quality of electric bulbs. Why not do the same for certifying your ESI productions, while also addressing defensibility and reasonableness?

Sampling as a way to assess quality is something the Electronic Discovery Reference Model (EDRM) Search Group authors covered in detail, with a strategy in a comprehensive EDRM Search Guide (see Section 9.5 and Appendix 2). And, while much of that work is still to hit the mainstream litigation scene as a general practice, I was pleasantly surprised to see it receive attention from a fellow blogger and litigator, Nick Brestoff, who highlighted this in a very thoughtfully crafted article in Law.com, titled A Strategy to Sample All the ESI You Need. I commend his article for helping the community understand the practical difficulties in getting a certifiable result that attorneys can stand behind. And, it is highly likely that the current practice is to certify your electronic discovery without a real measure of validity behind it.

That leads us to back to the mechanics of sampling, the math behind it, and its defensibility. As the EDRM Search Guide notes, meaningful sampling can only be done by the one who has the data, i.e., the producing party. While the Federal Rules of Civil Procedures (FRCP) Rule 26(a) lists required disclosures as well as signing and certification guidelines per Rule 26 (g), there is no agreed upon way to specify sampling parameters as well as the results of sampling.It is in this context, Nick Brestoff’s article is significant – it explores practical ways in which the producing party can shift the sampling mechanics to the requesting party. I do think, however,that there is a logistical problem with this–most litigators will balk at producing the largely irrelevant and non-responsive items to the other side.

Perhaps the real need is for the requesting party to specify in their Rule 26 (b) meet and confer, that the production be certified for completeness by also including a statement on sampling and its results. A simple request such as, “Sample the data for 98% confidence level and 2% error rate, and report the number of responsive documents” could be sufficient. The producing side can perform random sampling, per the sampling goals for the above request, selecting 13526 documents (based on the sampling table of EDRM Search Guide). This allows the attorneys representing the producing party to certify and sign off on an agreed-upon target.

In addition to the EDRM Search Guide, The Sedona Conference, Working Group Commentary, Achieving Quality in the E-Discovery Process is an indispensable resource for understanding the role of sampling. This paper discusses at length, several sampling methods, their applicability for various purposes, including certifying that the results meet a certain quality criteria. In addition, a number of electronic discovery cases have mentioned sampling as a way of overcoming the explosion of data volumes.A primary application of sampling is for evaluating proportionality claims, something that has moved from a simple assertion into an informed argument, with specificity on proving cost burden. Let’s examine a few.

Referring to the well-known Zubulake v. UBS Warburg, F.R.D. 280, the courts ordered the producing party in Makrakis v. Demelis, No. 09-706-C, 2010 WL 3004337 (July 13, 2010) to essentially sample just a small number of backup tapes, at the expense of the requesting party. This is also remarkable in the cost-shifting of processing and reviewing of the sample, however small, to the requesting party. Such measures, while reducing the costs of overall e-discovery, places a greater burden on sample selection to the requesting party, forcing them to apply the reasonableness evaluation.

In Barrera v. Boughton, 2010 WL 3926070 (D. Conn. Sept. 30, 2010), the court ruled that a phased approach to ESI discovery is appropriate and quotes an earlier case, S.E.C v. Collins & Aikman Corp, 256 F.R.D. 403, 418 (S.D.N.Y. 2009), that “[t]he concept of sampling to test both the cost and the yield is now part of the mainstream approach to electronic discovery.” The sampling recommendation in this instance was both a reduction of number of custodians from forty to three, as well as a significant reduction in the date range for the search. What was initially a $60,000 ESI search and discovery effort was reduced drastically to under $13,000.

Similarly, sampling is suggested in both M. Adams & Assoc., L.L.C. v. Fujitsu Ltd., No. 1:05-CV-64, 2010 WL 1901776, and Mt. Hawley Ins. Co. v. Felman Prod., Inc. as a way to perform a small set of search terms on a smaller number of custodians so as to get a sense for the larger electronic discovery costs.Clearone Communications v. Chiang offers another example of sampling by the use of Boolean logic to combine more common search terms thereby avoiding over-inclusiveness.

Per the Sedona commentary definitions, this type of sampling is referred to as “judgmental sampling” wherein the practitioner has a general sense of which of the several custodians and date range is most likely to offer the greatest yield. As judgmental sampling becomes more widely adopted as a way of controlling costs, electronic discovery sampling can embrace the benefits of statistical sampling as well. It is a natural next step, as even with narrow sampling criteria of judgmental sampling, the cost of review can be high. One area where statistical sampling has an advantage is that quantifiable measures of error and confidence intervals are possible, while judgmental sampling has no such formal measurement. Again, if the requesting party wishes to ensure a level of completeness and quality and if the producing party needs a basis for certifying their productions, statistical sampling can be a powerful aid.

What’s next in the electronic discovery world?  Well, it’s nearly impossible to say with too much precision, but my recent e-discovery trends article attempts to peer into the crystal ball to divine some hints about the future.

The following five predictions are what I expect to create the biggest waves in e-discovery in 2011.  Most are nascent trends that we’ve seen a bit of in 2010, but that should continue to accelerate next year.  Enterprises that can prepare for and understand these areas will be well equipped to continue taking a proactive approach to the ever-changing challenges of e-discovery.

1. Changes in Forensic Best Practices: In 2011, manual forensic imaging will continue to take a backseat to more automated, forensically sound data collection techniques.  Forensic (bit for bit) images have long been the gold standard for the legally sound collection of ESI in response to legal proceedings.  And, while forensic imaging will continue to be important in a number of discrete situations (fraud, misappropriation of trade secrets cases, etc.), it will largely be seen as overkill in basic electronic discovery cases.  Since imaging is both time consuming and highly manual, automated collection tools will increasingly be used by savvy organizations to speed up and streamline the collection process.
2. Consolidation in the Electronic Discovery Industry: Consolidation in the electronic discovery sector will impact market forces and the balance of power.  The past year saw traditional, pure-play electronic discovery companies looking (sometimes successfully and sometimes not) for diversification and deep pockets.  In the upcoming year, the relative dearth of pure play EDD companies may reverse the downward price pressure that’s been seen over the past several years.
3. Proportionality Becomes Reality: Burgeoning data volumes, as seen in multi-terabyte (versus gigabyte) cases, means that the legal community will continue to search for ways to prevent electronic discovery costs from exceeding legal exposure and attorneys fees.  Groups like The Sedona Conference will continue to push for better clarification within the community surrounding “proportionality” in order to keep the electronic discovery “tail” from wagging the litigation “dog.”  If successful at all, there may be a slight respite for litigious enterprises that may be able to better scale e-discovery efforts with the risk profile of the matter at hand.
4. Collision of Cloud, Social Media and E-Discovery: The seemingly unstoppable migration of corporate data to the cloud, combined with the proliferation of social media applications, will continue to stress electronic discovery practitioners as they attempt to preserve, collect, search, and process electronically stored information (ESI) from sources that aren’t traditionally managed behind the firewall.  Proactive enterprises will increasingly evaluate the legal and compliance risks of storing data in the cloud so that they’re not painted into a corner when they need to preserve, collect, and produce offsite ESI.
5. Global E-Discovery Matures: International jurisdictions will increasingly look to the United States (and the Federal Rules of Civil Procedure) as their nascent electronic discovery paradigms are increasingly stressed by the proliferation of both ESI and discovery disputes.  The recent Goodale case out of the UK (and impending procedural changes to the e-Disclosure Practice Direction) demonstrates how the global community is rapidly maturing along the electronic discovery continuum.

While the tools and best practices designed to combat top ediscovery hurdles continue to mature, the challenges are multiplying at any equally fast rate.  In the past, the crux of most discovery matters usually centered around email and sometimes instant messaging.  In 2011, new problems will continue to crop up on the horizon, such as collecting SharePoint data from the cloud, trying to extract structured data from a range of proprietary systems and capturing ephemeral ESI from an ever changing array of social media applications.

Please let me know if you disagree with any of the predictions or have any others you’d like to share.

Recently, I moderated a panel at the Masters Conference with John Loveland, Sonya Thornton, and Bruce Markowitz entitled: How Defensible is Your E-Discovery Process? (Click here to read a summary of the panel.) It was well attended, and I think that the draw (aside from the esteemed panel) was that this topic still remains very vexing for most practitioners.

Initially, we started at ground zero with the notion that defensibility is in most instances equated with the “reasonableness” standard, which is pervasive across many areas of the EDRM spectrum… from preservation to production.  Instances include:

• Preservation — “[a]s soon as a potential claim is . . . identified, a party is under a duty to preserve evidence which it knows, or reasonably should know, is relevant to the future litigation.”
• FRE 502 (b) – the disclosure does not operate as a waiver in a Federal or State proceeding if the (2) the holder of the privilege or protection took reasonable steps to prevent disclosure;
• General Privilege Waiver — In SEC v. Badian, 2009 WL 222783 (S.D.N.Y. Jan. 26, 2009)(link), “there is no basis … to conclude that there were precautions [to prevent the disclosure], let alone whether they were reasonable.”
• FRCP 37(e) — Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.

While the foregoing isn’t exhaustive it does highlight the persistent nature of the reasonableness standard as practitioners seek a defensibility sanctuary.  The good news is that the law doesn’t require perfection and there are also a number of ways to obtain reasonable defensibility:

• Demonstrable acceptance by the opposition – here the notion is that collaboration with the opposition allows the parties to comfortably move ahead with their discovery process and even if it’s not objectively reasonable, the parties consent to the protocol will in most instances carry an imprimatur of reasonableness.
• Auditing / process transparency.  Similar to the first bullet, auditing the process and giving the opposition visibility into the process steps will often make it hard for them to lodge successful downstream challenges.
• Adherence to Local Rules (See 7th Circuit Pilot Program) or judicial order.  Another avenue than can provide some degree of safety is compliance with a discovery protocol mandated by local rules, although that compliance may ultimately be challenged.
• Statistical confidence intervals / sampling – the use of statistics as a way to bolster process defensibility is starting to come to maturity and in the future I think that detailed precision, recall and other statistical indicates will play a large role in e-discovery defensibility.

None of these steps can be guaranteed to really get you off the hook from a rapid opposing party calling foul, but using them in a “belt and suspenders” fashion will certainly help buttress any discovery process.

For more illumination on the topic please see the following video of my interview with John Loveland, who’s waxing poetically about discovery defensibility.

There are legions of Arnold Schwarzenegger quotes, including the famous “I’ll be back” from The Terminator.  Well, true to this sentiment, The Governator finally coughed up his hairball and made good on the promises to push through California’s long overdue alignment with the electronic discovery changes made by the FRCP on 12/1/2006.

Citing mysterious budgetary concerns (which still elude me), The Governator initially vetoed Assembly Bill No. 5.  But as of July 1^st, California’s new electronic discovery provisions were finally made law.  Interestingly enough, California (which tends to more progressive than most) was way behind the times in terms of adopting the new framework of the FRCP…

“The California Discovery Act hadn’t really been revised or amended since the mid-1980s,” said Patrick O’Donnell, the supervising attorney for the Judicial Council’s Office of the General Counsel who led efforts to write the state’s e-discovery law. “This is really a major step to address the changes in the world of electronic data since then. … This gives a lot more clarity and certainty in how the issue will be focused on.”

Instead of the alleged budgetary concerns it appeared that California had (and still has) bigger fish to fry and needed some extra cycles to get lawmakers, attorneys, Silicon Valley leaders and court administrators all on the same page.

The new California provisions pretty closely mirror the FRCP language with a few minor exceptions, called out by Joshua M. Briones and Anahit Tagvoryan in their recent article…

• Minor tweaks to the Rule 37 language around the safe harbor provisions broadening slightly (beyond “loss”) the California language to also preclude sanctions where ESI is “lost, damaged, altered, or overwritten.”
• No corresponding meet & confer provisions in the California statute similar to the Rule 16 and 26 sections in the FRCP.
• Inaccessibility provisions of FRCP 26(b)(2)(B) changed slightly to require producing party to file a protective order for ESI it believes is not reasonably accessible due to “undue burden or expense.”

While a long time in the offing, these provisions (despite the minor tweaks) should be a refreshing change for California practitioners who’ve been waiting too long for the other shoe to drop.  Now, case law can start to develop, which will continue the honing-in process…

Part I of this series discussed a number of approaches for reducing electronic discovery costs.  One of the approaches is to implement a document retention policy.  The popularity of document retention policies increased in the early part of the decade with the passage of new financial regulation, such as Sarbanes-Oaxley.  Data retention policy popularity has now increased again with the passage of the FRCP and the recognition of the challenge of electronic discovery costs.  How effective, though, are document retention policies in reducing electronic discovery costs?  Do they solve the electronic discovery cost problem?

It is certainly true that any policy that enforces the deletion of documents that might otherwise be discoverable should reduce electronic discovery costs.  Thus, document retention policies, just like enforced mailbox size limits, can absolutely help reduce e-discovery costs.  However, implementing a retention policy is not easy.  A recent article in the New York Law Journal by Adam Rosman is very insightful in this regard when he says, “the rub is implementation.”   Mr. Rosman outlines a conversation between a hypothetical company’s Associate General Counsel and the CTO that demonstrates that the major challenge with retention policies is not designing one.  Rather, the challenge is implementing a policy that effectively balances the needs for litigation readiness and e-discovery, regulatory compliance and knowledge management and can be cost-effectively enforced throughout a company’s IT organization and user community.  Given this, it’s not surprising that a 2006 study by Nextpage and CXO research found that “while two-thirds of the companies surveyed have a document retention policy in effect, almost half of them don’t actively enforce it” and why 39% of respondents cited implementing a standard policy and 34% percent said user compliance were major weaknesses in implementing retention policies.

Because of these implementation challenges, retention policies are not a quick way to reduce your e-discovery costs.  They are also not going to reduce enough data to solve an organization’s e-discovery cost “problem.”  First, due to the implementation challenges, retention policies are not going to delete all the electronically stored information (ESI) they should.  Second, HIPAA, Sarbanes-Oaxley (SOX) and FINRA regulations require that many documents must be retained for several years.  Finally, business users will demand many exceptions: emails, loose files, collaboration content, financial records, contracts, etc. that they want to save beyond the retention period for important business reasons.  As a result, even companies with retention policies are going to have a substantial and growing amount of discoverable ESI and the electronic discovery costs that go with that.

Document retention policies thus are a bit like taking vitamins.  They are likely going to help reduce the amount of time you are sick – although you’ll probably find some “studies” that say they do help and some that don’t.  But when you get sick, they aren’t going to make you better.  For that, you need a remedy that directly targets the specific problem.  Similarly, document retention policies, and you can say the same thing about all information management solutions to e-discovery, will help reduce e-discovery costs, but they won’t solve the e-discovery cost problem.  Specific e-discovery solutions are necessary to do that.  We’ll discuss many of these specific e-discovery solutions in the next set of posts in this series.

Lately, the electronic discovery blogosphere has been, well, a-twitter about twitter and other social media as they relate to electronic discovery. While twitter struggles to find a business model, enterprises and law firms are racing to understand the implications of this latest boomtown of user-generated content that’s being built in out on the frontier of the World Wide Web (or is that Wild Wild West?).

There’s talk of intellectual property being cast out, irrevocably, onto the Internet for all to see. Or slanderous things being uttered for which your company may be held liable. But, hold on a second: is there really anything new here? Anyone heard of e-mail? Web pages? Peer-to-peer? Google? Instant messaging? As Debra Logan astutely points out in her recent post on the topic, “everything that exists is discoverable (at least pretty much).” If you haven’t already, take a look at the FRCP’s definition of ESI and you’ll get her point. So, yes, it’s obviously important to have a common sense corporate policy around what’s appropriate and what’s not for the public Internet, but it shouldn’t be any different from the policy that you should have already had in place regarding blogs, web pages, and email.

What about the other side of the electronic discovery coin: finding information that’s responsive to a request? If anything, social media are more easily discoverable than just about any other form of user-generated content (though admittedly in some cases they can be more transient, which can post unique challenges). And, while it’s not universally true, the argument can be made that the more easily something can be discovered, the lower the cost and risk of that content to you. Worried if anyone on twitter is stealing your new idea for a router architecture? How about the top-secret approach to making coffee you were thinking about patenting? Well, if anyone twittered about it, tracking it down is a snap. Just keep in mind that because of the public nature of social media, it’s likely that the more important the information is to your company in the context of electronic discovery, the less likely it is to live out on the public Internet. Obviously, there will be exceptions. But when there are those exceptions, tracking down the relevant information will likely be a fairly straightforward and relatively inexpensive process.

However, before we dismiss social media as nothing new and something that can largely be addressed through already-existing policies and discovery techniques, let’s consider one aspect of social media that is on the upswing, but often out of the blogging limelight: enterprise applications.

Increasingly, companies are moving to advanced enterprise social media platforms such as Jive or SocialText as a way of improving internal collaboration and making projects run more smoothly and effectively. Because such enterprise platforms are often used on a company’s most important and strategic projects, having robust e-discovery capabilities to allow internal blog, wiki, and discussion content to be captured and placed into a format that can be seamlessly searched along with other more traditional documents is becoming critical to forward-thinking enterprises.

For example, I recently came across a large financial institution that uses Jive SBS as its wiki and Clearwell as its e-discovery solution. What surprised me is that this company has created its own Jive/Clearwell “adapter” that feeds Jive discussions directly into Clearwell as a conversation thread. This is just one example, but I’m sure more will follow. Over time, it will become a requirement for e-discovery platforms to integrate with enterprise social media products. And, rest assured, as that happens, we’ll be sure to tweet about it!

UPDATE: Whit Andrews of Gartner was kind enough point out his (prescient) research note on the subject of e-discovery and social networking from November, 2007. He points out that there is in fact a very important “new new thing” about social networks, which is that they may be able to be leveraged in an e-discovery context to find out more about the people relevant to an investigation. By tapping these publically-available sources of information, investigators may be able to gain better insight into private (i.e. enterprise) information stores to guide the e-discovery process. More detail on this and other insights can be found at http://www.gartner.com/DisplayDocument?id=543110&ref=g_forward&call=email.

Learn More On Electronic Discovery Litigation

I was at the Sedona Conference Working Group’s Mid Year meeting last week where 80 or so electronic discovery practitioners and judges met to discuss hot topics in bucolic Denver, Colorado.  Without getting into the particulars of any discussion, several themes continue to stay on the front burner, including the progress of the cooperation proclamation and the relatively newer issue of proportionality (as highlighted recently by The American College of Trial Lawyers Task Force on Discovery).

Aside from those overarching themes I was struck by how polarizing the discussion was around one recent case in particular.  While many notable commentators have already made this the most talked about cases of the year, Phillip M. Adams & Assoc., LLC v. Dell, Inc., 2009 WL 910801 (D. Utah Mar. 30, 2009) continues to stimulate discussion.   Adams v. Dell is a patent infringement case where the plaintiff, alleged that one of the defendants (ASUS) destroyed critical pieces of evidence and should be sanctioned accordingly.

The underlying facts and timelines are fairly complex, but in summary the dispute centered around the alleged infringement of several patents developed to resolve defects in floppy disks during in the late 80′s.  What makes this decision so vexing is that it starts out as a preservation case, but quickly confuses that concept with data retention and information management practices/policies.

So, starting with the preservation angle…  Both sides fortunately agreed about the definition for the duty to preserve evidence, which in the 10^th circuit begins when a party “knows or should know [it] is relevant to imminent or ongoing litigation.”  The triggering of the preservation duty was not surprisingly much more complicated and ASUS (the responding party) claimed that its duty to preserve wasn’t triggered until early 2005, when they received a letter warning it of potential litigation because of the alleged patent infringement.  But, the Magistrate held that “counsel’s letter is not the inviolable benchmark” and the duty to preserve was triggered much earlier (in the 1999-2000 time frame) because similar litigation was rampant in the industry, highlighted by a late 1999 suit where Toshiba paid billions of dollars in a class action settlement related to similar floppy disk issues.

Leaving the murky preservation issue by the wayside for a bit, the Magistrate then moved into ASUS’ claims that FRCP 37(e) provided a safe harbor for its alleged destruction.

“ASUS claims it can find a safe harbor against sanctions because of the recently adopted rule that sanctions may not be generally imposed for ‘failing to provide electronically stored information lost’ if a party can show the loss was ‘a result of the routine, good-faith operation of an electronic information system.’”

Nice try, but strike two for ASUS…

“ASUS provided an extensive declaration from an experienced consultant in e-discovery. While he stated the reasons for and history of ASUS’ ‘distributed information architecture,’ he did not state any opinion as to the reasonableness or good-faith in the system’s operation. And while he says ‘ASUSTeK’s data architecture relies predominantly on storage on individual user’s workstations,’ his 31-page declaration does not show he is familiar with the precise practices pointed out in the declarations of employees. Those employees’ declarations describe the practice of ASUS’ email system to overwrite old data regardless of its significance; ASUS’ reliance on employees for all email and data archiving; and the process of replacement of computers, which also relies on employees to transfer data from their old to their new computers. Neither the expert nor ASUS speak of archiving ‘policies;’ they speak of archiving ‘practices.’

The court’s distinction between “policies” and “practices” seems like a convenient (perhaps “Deus ex machina”) way to discount ASUS’ data retention activities and prevent the use of the FRCP 37(e) safe harbor.  Since in most instances, “bona fide, consistent and reasonable” document retention “policies” have been found to be presumptively valid by everyone ranging from Sedona (Guideline 3) to Carlucci v. Piper Aircraft Corp. and Arthur Andersen LLP v. United States, 125 S.Ct. 2129 (2005).  It’s not clear how he draws the important “practices” distinction and why said practices are exponentially different from presumptively valid “policies.”

It’s precisely this line of thinking that confuses the alleged failure of the duty to preserve (discussed at the outset of the opinion) with the duty to retain information.  The court seems to think it’s an “unreasonable” practice to have custodians responsible for compliance with data retention and this deficiency made the safe harbor unavailable.

“ASUS has explained that it has no centralized storage of electronic documents, email or otherwise, and relies on individual employees to archive email (which will be deleted if left on the server) and electronic documents (which reside only on individual workstations).”

Not only is this custodian-based retention practice, in and of itself, reasonable; it’s probably the most common form of data retention practices seen at corporations today.  While a number of vendors have promised intelligent retention systems that work without any significant human intervention, for the most part those solutions are still in their infancy.  Additionally, there are significant technical challenges to have an application manage *all* ESI (Electronically Stored Information) that exist for a given custodian (including desktop files, instant messaging, text messaging, social media, etc.) As such, most companies must inherently rely upon their custodians to both retain and preserve data pursuant to company policies.  The court not only seems to miss this point, but also attempts to impose an obligation that corporations must prevent the “loss of data” above and beyond specific preservation obligations.

“ASUS’ practices invite the abuse of rights of others, because the practices tend toward loss of data. The practices place operations-level employees in the position of deciding what information is relevant to the enterprise and its data retention needs. ASUS alone bears responsibility for the absence of evidence it would be expected to possess. While Adams has not shown ASUS mounted a destructive effort aimed at evidence affecting Adams or at evidence of ASUS’ wrongful use of intellectual property, it is clear that ASUS’ lack of a retention policy and irresponsible data retention practices are responsible for the loss of significant data.”

Although the exact rationale was unclear, the court held that ASUS violated their duty to preserve and that the loss of evidence could not be excused as a “routine, good faith operation of electronic information systems.” While the court ruled that sanctions were appropriate, it reserved final sanctions pending the close of discovery.   Depending on what those ultimate sanctions look like, it seems pretty likely that this decision will be subject to appellate review.  Until then, it’s probably too soon to treat this questionable holding as gospel.  Wary corporations however should continue to bolster the “reasonableness” of their information management/retention/destruction policies and practices so that in hindsight a court won’t be able to take away the FRCP electronic discovery 37(e) safe harbor by casting those “practices” as being unreasonable.

David Isom and I have collaborated a number of times over the years on a variety of electronic discovery presentations and articles.  So, when I saw that California was proposing new state electronic discovery rules that had some interesting variances vis-à-vis the FRCP, I thought David might be able to give us the benefit of his unique and sage perspective.

1. David, as the author of the definitive piece about inaccessibility under the Federal Rules of Civil Procedure (The Burden of Discovering Inaccessible Electronically Stored Information: Rules 26(b)(2)(B)& 45(d)(1)(D)), how many litigators do you think really understand and use these provisions?

I sense that litigators with a basic understanding of the new electronic discovery rules know that the inaccessibility rule exists and provides some protection for parties against unduly burdensome discovery.  Few seem to have noticed that Rule 45 contains an inaccessibility provision whose language is similar to the Rule 26(b)(2)(B) inaccessibility protection for parties, but whose protections as applied to subpoenaed nonparties are greater than the protections for parties.  Here are the three most basic and exciting (or excruciating, depending upon your side of the fence) impacts of the new inaccessibility rules:

(1) The inaccessibility rule has completely changed a nonparty’s leverage to narrow subpoenas seeking electronically stored information (ESI).  Subpoenaed nonparties now have protection against fishing expedition subpoenas that did not exist before — to narrow subpoenas, or to require the payment of costs and attorney fees in responding to broad subpoenas.

(2) Cost-shifting, for parties as well as nonparties, is now controlled by the inaccessibility rules.  Several federal courts have recently held that discovery cost-shifting is allowed only if these inaccessibility rules provide for cost-shifting under the circumstances.

(3)  The inaccessibility rules must be asserted and asserted timely if they are to provide protection.  For example, after counsel for nonparty Office of Federal Housing Enterprise Oversight spent $6 million of our money responding to a subpoena in In re Fannie Mae Securities Litigation, 552 F. 3d 814 (D.C. Cir. 2009), counsel tried to recover the money on an inaccessibility cost-shifting argument.  To which the United States District Court and the Court of Appeals for the District of Columbia said, in essence:  you might have had a good idea, and saved your client $6 million, had you raised the arguments before agreeing to produce the documents and spending all that money.  But you agreed to produce the ESI and cannot come back now and get any protection.  You should have studied the inaccessibility rule.

2. So, assuming we’re still early in the learning curve, do you think these FRCP provisions are really gaining traction either in practice or in the case law?

Judging by the number of reported decisions, the inaccessibility rules are receiving as much attention as the other new features of the federal electronic discovery rules.  Which, I suppose, is damnation by faint praise — a large percentage of the reported cases are about what should happen because lawyers didn’t understand or apply the rules properly. Cason-Merenda v. Detroit Medical Center, 2008 U.S. Dist. LEXIS 51962 (E.D. Mich. July 7, 2008) is a good example.  There, defendant’s counsel produced ESI without any objection and without pre-identifying the ESI as inaccessible.  After production, counsel tried to get their opponents to share the cost of producing the allegedly inaccessible ESI.  The court correctly held that the ESI must be identified as inaccessible in advance of the production to give the seeking party the option to decide whether the discovery is really worth the candle, especially given the prospect that the cost of production might be shifted to the seeking party.

3. What are your thoughts on the new California state provisions regarding “inaccessible” ESI where they’re proposing a different treatment and slightly different burden?  And, will this approach ultimately weaken responding parties abilities to make “inaccessible” claims successfully?

I am not an expert on California law, but am keenly interested in what the states are doing with electronic discovery.  As of this writing (May 2009), it appears that California Assembly Bill No. 5 has not yet been enacted.  Yet, here are some thoughts about how the inaccessibility provisions of this bill, if enacted, would compare to the federal rules of inaccessibility.  The bottom line is that the California bill is remarkably similar to the federal rules on inaccessibility issues.

Under the federal rules, a party seeking protection for inaccessibility initiates the process by “simply” (so far, the courts have tolerated fairly sparse identifications as satisfying this requirement) identifying the sources of information claimed to be not reasonably accessible because of undue burden or cost.  The subpoenaed nonparty seeking protecting can initiate by identifying the ESI sought as not reasonably accessible in an objection, motion to quash or motion for protective order.  In the federal system, either the seeking party or the protecting party or nonparty can move to test the issue (one by a motion to compel, the other by a motion for protective order).

The California bill is nearly identical to the federal process.  The bill provides that a person resisting a subpoena for ESI on inaccessibility grounds may “oppose” the subpoena.  If this means that such a person can either object or move to quash or move for a protective order, it appears to be the same as the federal rule.  The California bill specifies that a party resisting a production request on inaccessibility grounds initiates protection by identifying the types or categories of sources of electronically stored information that it asserts are not reasonably accessible.  This is similar to the federal rule, whose text requires identification of “sources”, but whose committee notes clarify that merely “types or categories of sources” of inaccessible, responsive ESI need be identified.  The California’s Legislative Counsel’s Digest indicates that the process for protecting inaccessible ESI, apparently for both parties and subpoenaed nonparties, can be initiated by moving for a protective order, or by opposing or objecting to the subpoena or request.

Even if there are any distinctions in the above processes, the two processes appear to merge thereafter.  In both systems, the motions to test inaccessibility must be preceded by a conference of counsel to attempt in good faith to resolve the issue, together with a certificate that such an attempt has been made.  In both, the person seeking protection has the burden of proving inaccessibility (this is even true in the federal system where the process is initiated by the seeker’s motion to compel).  In both systems, if the holding party proves inaccessibility, the burden shifts to the seeking party to show good cause for producing the ESI, despite its inaccessibility.

And in both, if good cause is shown, the court may still impose conditions upon production, including cost-shifting.  In both, the factors that the courts are to consider in determining good cause are similar — more accessible, less burdensome sources; cumulativeness of the discovery; whether the burden or expense of the discovery would outweigh the likely benefit of the discovery, considering such things as the importance of the issues, the amount in controversy and the resources of the parties.  One possible difference between the California bill and the federal rules on good cause is that the California bill requires the court to limit discovery if any of the listed factors exists, where the federal rules and committee notes seem to envision a pure balancing.

In sum, the California bill essentially adopts the federal approach.

Some confusion has arisen because California commentators have drawn a distinction between the California bill and a misinterpretation of the federal rules.  One commentator, for example, stated that “under the federal rules, if ESI is inaccessible, the responding party simply doesn’t need to produce such documents.”  This ignores the affirmative identification duty that I discussed above.

4. With the rapid advancements in ESI restoration technologies, which the Comments to the Rule anticipated, are backup tapes in your mind still “inaccessible”?

The rules make it clear that inaccessibility cannot be measured by technology category alone.  The test does not depend upon the type of technology involved, but upon the balancing of need, technology, importance, spoliation, relevance, alternative sources and potential benefit against overbreadth, burden and cost.  So, if backup tapes are the only source available for important, relevant information because more accessible relevant sources have been spoliated, backup tapes will not be deemed inaccessible.  Without spoliation, if relevant ESI is available on active sources, backup tapes may not be discoverable.

Perhaps the main reason that categories of technology cannot be deemed per se accessible or inaccessible is that the technology is changing so fast.  Many search tasks that were expensive and difficult five years ago are much more doable now.

5. Finally, what do you think the future holds for these FRCP sections?

The inaccessibility rules will continue to be the main battleground where the great debates about the value and cost of electronic discovery will be fought, since these rules are specifically tailored to balance all of the interests in that debate.

Some groups are claiming that electronic discovery is wasteful and expensive, and that the new rules exacerbate the problem.  Of course, the federal rules ought always to be analyzed for problems and need for improvement, but I haven’t heard informed, thoughtful, helpful suggestions for improvements to the federal rules in the recent debate.  Overall, I see the adoption of the federal rules as having helped reduce the cost of electronic discovery, not increased the cost.

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