Google had argued that the email was privileged under Upjohn Co. v. United States, asserting that the message reflected discussions about litigation strategy between a company engineer and in-house counsel. While acknowledging that Upjohn would protect such discussions, the court rejected that characterization of the email.  Instead, the court held that the email reflected a tactical discussion about “negotiation strategy” with Google management, not an “infringement or invalidity analysis” with Google counsel.

Getting beyond the core privilege issues, Google might have avoided this dispute had it withheld the eight earlier drafts of the email that it produced to Oracle. As we discussed in our previous post, organizations conducting privilege reviews should consider using robust, next generation eDiscovery technology such as email analytical software, that could have isolated the drafts and potentially removed them from production. Other technological capabilities, such as Near Duplicate Identification, could also have helped identify draft materials and marry them up with finals marked as privileged. As this case shows, in the fast moving era of eDiscovery, having the right technology is essential for maintaining a strategic advantage in litigation.

“Most corporations are not tracking e-discovery spending…” In what may be the most notable finding of this ESG report, 60% of survey respondents claim that they did not track annual eDiscovery spending in 2010.  The authors correctly note that the eDiscovery process, “which can be highly unpredictable due to its project-by-project nature to begin with, has historically been outsourced to service providers charging at variable rates and often billed back to companies via their law firms.”  Despite the significant challenges of tracking eDiscovery spending, it’s nevertheless irresponsible for organizations to keep their heads in the sand regarding such a significant operational expense.

As the old saw goes, “you can’t manage what you can’t measure,” so it’s almost inconceivable to think that so many organizations aren’t tracking such a significant expense category.  For organizations who want to create a repeatable business process, as opposed to the fire-drill chaos that is typically associated with eDiscovery, it’s vitally important to accurately capture core eDiscovery metrics.  For starters, it’s useful to understand basic collection parameters, such as of the typical numbers of key custodians, average data volumes per custodian, data expansion rates, de-duplication statistics, etc.  Once these metrics are in place, it then becomes possible to manage the process and reduce costs.

Katey went on to expound in an exclusive quote for EDD 2.0:

“E-discovery can be managed as a strategic business process with an understanding of costs, performance and outcomes. When there’s no basis for reporting or comparison, it’s pin the tail on the donkey.  Corporate litigants won’t ever know they’re getting their money’s worth if they don’t even know what they’re spending.”

“E-Discovery accuracy/efficiency isn’t being measured, in large part.” Similar to the failure to measure eDiscovery costs, a full two thirds of GCs (67%) aren’t tracking the “efficiency and/or accuracy of e-discovery document review.” Until corporate counsel can link expectations of competency/efficiency with oversight and performance metrics, outside law firms will likely avoid having their feet held to the fire.  This passive stance makes transparency and process improvement difficult at best.  Additionally, this model of having expectations for efficiency, with low or no accountability, doesn’t bode well for the quick adoption of enabling technologies like predictive coding, since the driver has to inherently be the need/desire for increased efficiency (which axiomatically equals lower law firm review bills).

“Corporate information governance and litigation readiness (especially defensible deletion) are a priority, but not yet a reality.” From an internal prioritization perspective, more than two thirds (69%) of respondents identified their desire to expire/delete data more consistently, “thereby limiting unnecessary data retention for future litigation requests.”  Savvy enterprises correctly recognized the “multi-prong threat of unregulated data retention: the large amounts of irrelevant data ultimately produced for legal review, the greater difficulty of hanging onto potentially litigious documents past their required retention periods.”

This finding is very encouraging, and it ties into the upward momentum the industry is seeing regarding information governance generally – particularly linking the reactive (right) side of the EDRM with the logically connected and proactive (left) side of the EDRM.  As a good first step it’s critical to see organizations now associating good information governance hygiene with lower costs and better eDiscovery response times.  The ESG finding also triangulates with results from the recent Information Retention and eDiscovery Survey, which found that companies having good information governance hygiene were often able to respond much faster and more successfully to an eDiscovery/investigation requests, often suffering fewer negative consequences.

The only downside to the positive information governance trend, as reported by the survey, was that,

“while there are great benefits to defensible deletion, internal initiatives for implementing it too often are stymied by difficulty in obtaining cross functional consensus and authorization, particularly as it touches so many other critical processes like regulatory compliance and legal hold.”

“Legal hold processes are still very manual.” Another similar question revealed that many companies are attempting to get their information governance house in order, but are still in the very early stages.  When asked about their  current legal hold notification and tracking process, a whopping 69% of organizations said that they are using a “manual process performed by internal staff using e-mail and spreadsheets, etc.”  And, another 6% said they either had no formal process or tracking mechanism.

Given the risks attendant to flaws in the preservation process this area is ripe for improvement.  The good news is that 54% of survey respondents are intending to improve their legal hold process, with 25% planning improvement within the next 12 months.  This is a healthy acknowledgement that there is risk, and with a modicum of investment (time, personnel, procedures, and technology) the legal hold area can be brought up to current best practices.

The ESG survey is a welcome temperature gauge into the state of corporate legal departments.  It notes, in conclusion, “with the staggering growth, diversity and dispersion of data, the pain e-discovery is currently causing large and serial litigants are only a symptom of the larger problem of unwieldy and under-developed information management affecting all businesses.”  With data insights from the ESG survey, it’s becoming clear that foundational information governance elements (like deploying auditable legal hold procedures, tracking eDiscovery spending, updating data maps, etc.) are desperately needed by the many organizations that want to turn eDiscovery into a repeatable business process.  The good news is that many of these organization have improvements in mind for the next 12 months, and the challenge will be to make sure these proactive projects maintain the same level of organizational urgency that it often present for more reactive tasks.

Going behind the scenes, there were a number of factors that caused respondents to predict litigation increases.  First and foremost, respondents indicated that “stricter regulation was the number one reason” for the increases, particularly with insurance, financial services, health care and retail sectors.  These concerns around regulatory compliance have been increasingly keeping GCs and corporate boards awake as the governance climate continues to heat up.  This regulation driver showed a demonstrable increase with 46% of all respondents having retained outside counsel to assist with regulatory proceedings, up from 37% in the prior year.  The Survey noted that U.S. companies facing a regulatory investigation were most likely to be under pressure from the DOJ (27%), State Attorney General (24%), OSHA (18%), the EPA (16%) and U.S. Attorney (13%).  Also on the regulatory front, U.S. respondents have increasingly begun to recognize the potential jurisdictional reach of the U.K. Bribery Act, with 25% of U.S. companies stating that they have already conducted a review of existing procedures in preparation for implementation.

In addition to managing risk, most in-house counsel are keenly concerned with controlling litigation costs.  The good news here is that associated costs are predicted to be generally flat.  Yet, eDiscovery remained the largest category targeted for increased spending, with 18% of respondents making this their top priority.  Interestingly, though, large enterprises seem to have been doing a good job of getting eDiscovery expenses under control (likely by taking expensive elements of the EDRM in-house), with these expenses declining among the largest companies, from 42% last year to 24% this year.

The Survey noted that the use of cloud computing has gained speed, with 34% of all public companies using the cloud.  And yet, only 40% of those companies using cloud computing have had “to preserve and/or collect data from the cloud in connection with actual or threatened litigation, disputes or investigations.”  This number appears curiously light, and it should definitely rise during the upcoming year as the plaintiff’s bar gets more savvy about this relatively new source of responsive electronically stored information (ESI).

On the narrower eDiscovery front, the Survey honed in on newer issues like cooperation.  Here, the Survey noted that this Sedona-sponsored concept still hasn’t completely taken hold, with nearly 40% of all respondents claiming that “their company has not made the effort to be more transparent or cooperative” due to a litigation strategy of “defending on all fronts.”  This area appears particularly muddled, with one third saying their previous attempts haven’t been reciprocated and another quarter feeling that their company was already transparent.

All in all,  the 2011 Fulbright Litigation Trends Survey notes trends that appear to be largely in line with the primary drivers of (1) managing risk and (2) lowering litigation costs.  On the risk side, compliance with an increasingly complex regulatory environment is offsetting any potential lull in the litigation environment.  And, on the cost side, eDiscovery continues to be a hot button issue, particularly with the relatively new challenges associated with ESI distributed on social media, cloud computing and mobile sources.

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

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

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

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

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

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

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

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

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

Legal Holds/Preservation. As we all know, eDiscovery sanctions (at least here in the US) are critical business/legal drivers, particularly with regard to the legal hold area (which is the riskiest part of the EDRM).  As the Gibson report points out, the actual award of sanctions has remained relatively flat (56% in the first half of 2011 versus 55% for the full year in 2010) –  but, more important than this relatively stable metric, it’s very clear that the plaintiff’s bar has caught on to the ability to win cases by revealing shoddy (or just undocumented) legal hold procedures, even in some instances where data isn’t lost.  This is why the report notes a dramatic increase in the seeking of eDiscovery sanctions – 68 at mid-year 2011 versus 31 at mid-year 2010.  This doubling of attempts to pierce an entity’s legal hold regime should be a wake-up call to in-house practitioners and chief legal officers, since the attempt and success rates will likely only increase over time.

While there is still some considerable debate, at least for those following Judge Scheindlin’s Pension Committee logic, anything less than a formal, written legal hold policy is per se negligent.  Although it’s conceivable that  a reviewing court won’t use this rigorous standard, anything less formal will strike most organizations as simply too risky.  Ongoing compliance with the legal hold process is also another difficult task for many organizations, one which is considerably easier with an automated solution that is able to track acknowledgements and send reminders over time.  It’s all too easy for companies to think that once they’ve discharged their initial legal hold duty they’re in the clear – but as these obligations morph (with more custodians/data types) and elongate (from months to years) over time, keeping on top of the legal hold processes becomes that much more important.

Sanctions. The Gibson report also importantly points out that there’s currently a split in jurisdictions where some courts can levy sanctions for bad faith, while others can merely require proof of negligence.  Here, the important take-away is that a defendant entity doesn’t typically get to forum shop and therefore they can’t really tell which type of jurisdiction they’ll end up in as a litigant.  So, they need to build their eDiscovery processes to meet the high water (i.e., most rigorous) standard.  In most cases, it’s therefore prudent to be prepared to be sanctioned for merely negligent conduct – anything less can potentially be safe but that risk calculation needs to be considered carefully.

The other perilous part of the equation is that once sanctions are deemed warranted, the court has almost unlimited discretion to levy whatever blend of sanctions it thinks is appropriate.  In Green v. Blitz, for example, the court ordered a laundry list of sanctions, some of which were pretty unfathomable:

1. Defendant had to pay plaintiff $250,000

2. Defendant had to provide a copy of the court’s order to plaintiffs “in every lawsuit proceeding against it” for the past two years

3. Defendant had to file the court’s order in every case that it is involved in for the next 5 years

The bottom line is that sanctions, despite the fear factor, can be used to drive positive proactive conduct – namely in the shape of eDiscovery best practices.

Outside Counsel Duties. Here, the Gibson report notes that outside counsel’s Zubulake duties continue to increase over time, with a number of cases continuing the trend of holding attorneys responsible for ensuring that their clients properly implement legal holds, institute sound sampling protocols and conduct sufficient quality control steps.  This line of discussion can be useful when talking to outside counsel where we’re starting to see how their increasing responsibilities can lead to malpractice exposure, as seen in the recent McDermott case.

Search/Analysis. Lately there’s been a ton of buzz about predictive coding, but (despite the hype) it still doesn’t appear ready for prime time yet.  The Gibson report noted that there were no reported cases that addressed the use of predictive coding or other advanced search technologies.  My sense is that without some semblance of judicial approval or strong client backing, outside counsel (who are concerned about their malpractice exposure, per above) aren’t quickly going to be the first ones into the pool.  Unless an enterprise client demands that they use this type of technology, most will wait for judicial approval and that’s probably still a way off.  While next generation search technologies are more promise than reality right now, there is still a mandate to implement a defensible search methodology.  These are needed initially to demonstrate transparency in the eDiscovery process and to then withstand the challenges levied by counsel in the case of an inadvertent production.

In sum, the Gibson report shows the ongoing maturation of the eDiscovery space.  But, any niche market led by case law and/or attorneys deciding to adopt new technologies won’t be quick to change.  In many instances, therefore, the best practices will be decided a combination of standards bodies and vendors who are being pushed by their more forward thinking clients to get and stay on the cutting edge.