e-discovery 2.0

We’ve all heard the phrase that “everything is bigger in Texas” and the little “mini-conference” held in Dallas, TX last Friday was no exception.  The Discovery Subcommittee held a small, one-day conference to tackle some big issues related to preservation and sanctions that could ultimately lead to amendments to the Federal Rules of Civil Procedure (Rules).

The Subcommittee’s primary purpose was to discuss “preservation and sanctions issues” by using the following topics as guidelines:

• The nature and scope of the current “problem”
• The role of technology
• Possible solutions to the problem

Counsel from large companies like Google, General Electric, and Exxon Mobil participated side by side with outside counsel from both plaintiffs’ and defense bar to discuss what some characterized as a lack of clear direction in the current Rules.  Government lawyers, academics, and federal judges including Judges David Campbell (D. Az.), Shira Scheindlin (S.D.N.Y.), Paul Grimm (D. Md.), John Facciola (D.D.C.), Lee Rosenthal (S.D. Tx.), Michael Mosman (D. Ore.), and Nan Nolan (N. D. Ill.) helped round out the field to make for a lively discussion with multiple perspectives represented.  The following summary highlights some of the key viewpoints and areas of contention debated throughout the day.[1]

The nature and scope of the problem

An underlying theme throughout the day was whether or not preservation and sanctions challenges warrant amending the Rules.  Not surprisingly, counsel for large organizations that commonly bear the brunt of large and frequent document requests lobbied for rule amendments that provide more certainty around when the duty to preserve evidence is triggered, the scope of that duty, and how sanctions are applied.

In support of this position, some corporate attorneys argued that the lack of certainty in the current Rules unfairly requires organizations to err on the side of preserving evidence early and broadly to avoid the risk of sanctions.  Since preserving evidence can be extremely expensive and the duty may be triggered before litigation even begins, they argue that changes to the Rules are necessary.  One corporate attorney framed the issue by providing specific details about costs associated with preserving data for different cases.  He explained that in one situation, his organization has spent more than $5 million to locate, collect, preserve, and maintain data for an ongoing matter even though a complaint has never been filed.  He went on to explain the dilemma by stating: “not preserving asks us to take a chance with our reputation.”

In response, a few attendees questioned how preservation related expenses could spiral so high even before attorney review.  Others pointed out that if the current Rules were better utilized, specifically the meet-and-confer provisions of Rule 26(f), then many preservation challenges could be minimized.  Supporters of better Rule 26(f) engagement complained that counsel for large organizations often refuse to discuss preservation related issues and thereby fuel problems related to the scope of preservation themselves.   Others suggested that if organizations enforced better information management policies instead of keeping “everything forever”, then the magnitude of the problem could be reduced.

Technology

The Subcommittee members generally agreed that the evolution of technology has led to massive data growth which creates new electronic data challenges.  Electronically stored information (ESI) is often duplicative, typically resides in many different technology systems, and can be difficult to locate on a case by case basis.  There was some thoughtful discussion about how data archiving and cloud computing technology are important tools for helping organizations manage these information problems more effectively.  Another commentator acknowledged that although “predictive coding” may be helpful for “reviewing” data, it requires significant human involvement and simply does not solve the problem at hand.

Surprisingly, aside from the comments above, the technology discussion focused mainly on the issue of what constitutes “possession, custody or control” under Rule 34 in today’s environment of social media, cloud computing, and mobile devices.  Unfortunately, there was no discussion of either the role legal technology solutions play in minimizing risk and cost or of the impact the current Rules have on public policy.  For example, the Subcommittee did not address whether organizations that invest in technology in order to automate their internal data management and electronic discovery process should be afforded more protection under Rule 26(b)(2)(B) (“not reasonably accessible because of undue burden or cost”) than organizations that choose not to invest in technology.  If an organization’s technology investment (or lack thereof) is not a factor, does Rule 26(b)(2)(B) have the unintended effect of stifling meaningful legal technology investment by some organizations?  Similarly, do advancements in legal technology diminish the need for a Rule amendment that, at its core, is geared toward reducing costs?  In my opinion, the manner in which organizations are using technology today is an important factor that warrants deeper discussion and a subject I intend to address in a future publication soon.  Stay tuned.

Possible solutions

Discussion about possible solutions to the problem revealed more about the contrasting viewpoints in the room.  Notably, the Department of Justice representatives and those typically aligned with the plaintiffs’ bar tended to lobby for better adherence to the framework contained in the existing Rules in lieu of drafting new Rules.  These folks generally appeared to fall into the “No New Rule” or “Not Yet” camp, and cited the relative newness of the 2006 Rule Amendments and the fact that only about one percent of federal cases involve sanctions in support of their position that Rule amendments are premature or not needed.  Along the same lines, many called for further study and evaluation of the issues through organizations such as The Sedona Conference and the 7th Circuit Electronic Discovery Pilot Program.  Others referenced the importance of looking to evolving case law for more guidance before moving forward with Rule amendments.

In stark contrast, those on the other side of the aisle that typically represent large organizations, lobbied for bright line rules or at least “guideposts” to provide more certainty regarding preservation.  For example, one participant suggested that the duty to preserve evidence should begin when a complaint is served.  Another suggested that the duty should be triggered when a potential litigant is “reasonably certain to be a party to litigation” – a standard that is arguably narrower than the commonly applied “reasonably anticipates litigation” standard articulated in Judge Scheindlin’s frequently cited Zubulake v. UBS Warburg line of decisions.

Those calling for more certainty regarding triggering events also provided recommendations for addressing the scope of the preservation duty and the application of sanctions.  A suggestion to incorporate language that presumptively limits the number of custodians (10) and documents (by age) met resistance on the grounds that trying to apply a one-size-fits-all rule fails to acknowledge that the facts and circumstances of every case are different and so too are the litigants.  Similarly, recommendations to limit sanctions for evidence spoliation to situations where a litigant’s conduct is “intentional” or “willful” were met with a chilly reception by those favoring better adherence to the current Rules.

Conclusion

Time did not permit comprehensive discussion and analysis of every perspective, but the mini-conference highlighted the complexity surrounding preservation and sanctions issues and revealed some polarized viewpoints about how to solve those issues.  Perhaps one glimmer of consensus was the acknowledgement that “pre-litigation” obligations to preserve evidence before service of a complaint is often challenging for large organizations.  However, whether this and other issues should be addressed through better education, more stringent enforcement of existing rules, or by modifying the existing rules to include more “guideposts” remains unsettled.

What do you think?  Please respond to the poll, above right, to let us know whether you think amending the Federal Rules of Civil Procedure (FRCP) is necessary to address some of the preservation and sanctions issues discussed above.

To join the conversation and receive automatic updates when new information is posted to this blog, please subscribe to e-discovery 2.0.

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[1] A more exhaustive list of participants and sample questions was incorporated into the Federal Rules Advisory Committee’s June 29, 2011 memorandum announcing the mini-conference.  Similarly, the events leading up to the mini-conference are described in more detail as part of my previous postings on the same subject.

In past years we’ve covered Gibson Dunn’s Mid-Year E-Discovery Report which is always a good read, chock full of take-aways about the eDiscovery market.  In my mind, they do an excellent job of synthesizing the ever-expanding volume of case law and comparing those trends with historical averages.  This year’s report is no exception, and for those who don’t get to read all the cases, this is a stellar way to keep up on eDiscovery trends.  Without trying to summarize the entire 23 page document, there were a number of findings that stood out and should be perused by anyone with even a passing interest in the space.

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.

Is there a place in eDiscovery today for hard drive imaging and bit by bit copies, which collect deleted items or slack/unused hard disk space?  The answer is yes with some important limitations.  For the vast majority of matters, ESI can be collected without imaging drives or utilizing proprietary container files.  However, I occasionally still encounter folks who are victims of the dated and costly misconception that eDiscovery always requires the bit-level imaging of hard drives.

There are situations, though, where the existence of data (as opposed to its content) is central to the matter – when companies suspect employees of stealing proprietary information or when employees leave a company under suspicious circumstances.  In these and other similar situations, it may make sense to have the employee’s workstation hard drive imaged for full forensic analysis.  Even in these scenarios, I find that companies are more likely to hire an external investigator to perform this task to allay suspicions of tampering or bias, and the company generally would prefer that this investigator be the one to testify about this sensitive data acquisition.  Then, for ESI beyond the target employee’s hard drive, other collection methods may be used.  As we’re now midway through 2011 – a year in which I expect to see eDiscovery fully embraced by many corporations as a true business process – I wanted to analyze why the forensic disk image myth still exists, where it came from, and what the law really requires of an eDiscovery collections process.

Traditionally, cases that mentioned full forensic imaging of hard drives began their captions with United States v. or State v. because they were criminal matters.  In traditional civil litigation – even the behemoth eDiscovery cases that get all the bloggers blogging – forensic imaging simply is not required or needed.  In fact, in most cases, it will dramatically increase the cost associated with electronic discovery – this process adds unnecessary complexity in downstream phases of eDiscovery and leads to vast over-collection.  Why collect the Microsoft Office suite 50 times when what you are really required to preserve and collect are the files created with those programs?  When using disk imaging, program files are collected which drives up storage costs and requires the post-collection step of deNISTing (removing system files based on the NIST list).  Why not leave those system files behind and perform a targeted collection of only user-created content?    In addition, the primary rules governing civil litigation – the Federal Rules of Civil Procedure and Federal Rules of Evidence – simply do not require exact duplication of electronic files.  I am amazed that there are so many experts who are still pushing full forensic imaging and duplication in every case.  In fact, this goes against best practices published by The Sedona Conference, EDRM, and in the E-Discovery textbook co-authored by Judge Shira A. Sheindlin.

In comment 8c of the Sedona Principles, the authors call making forensic image backups of computers “the first step of an expensive, complex, and difficult process of data analysis that can divert litigation into side issues and satellite disputes involving the interpretation of potentially ambiguous forensic evidence.”  The comment goes on to say that “it should not be required unless exceptional circumstances warrant the extraordinary cost and burden.”  In a whitepaper authored for EDRM by three eDiscovery experts from KPMG, LLC, the authors discussed the high cost of forensic bit-level imaging and, instead, suggested that targeted collection of ESI would be sufficient in the vast majority of non-criminal matters.  They state, “[t]he challenge of Smart EDM [Evidence and Discovery Management] is to obtain targeted files in a forensically sound manner – chain-of-custody established, proven provenance, and metadata intact – without having to resort to drive imaging.”

In Electronic Discovery and Digital Evidence: Cases and Materials, written by Judge Shira A. Scheindlin, Daniel J. Capra, and The Sedona Conference, the authors state that,

“because imaging software is commonly available, and because the vast majority of training programs in the field of electronic discovery revolve around forensics, there is a growing tendency to want to ‘image everything.’  But unless an argument can be made that the matter at hand will benefit from a forensic collection and additional examination, there is no reason to do a forensic collection just because the technology exists to do it.”

So, with the top experts in the field saying the days of “image everything” should be over, why does it still happen?  Why are the victims of this antiquated workflow still paying the exorbitant costs of a solution that does not really meet their requirements?  Perhaps a historical perspective will be helpful in explaining.

Why Drive Imaging and Proprietary Containers?

I do not think there is any debate on the benefit of having a bit-level image of a hard drive in a criminal investigation.  However, traditionally, the investigators using these methods needed a way to get the imaged drive safely back to a lab for further analysis.  Companies or law enforcement agencies that hired third-party investigators to image drives had to transport the data, maintaining chain of custody, and preserving all contents in an un-alterable state through several phases of the investigation.  And, in criminal matters, it was especially important to maintain the integrity of the evidence when the electronic evidence was central to the government’s case.  Remember, the burden of proof in a criminal matter is “beyond a reasonable doubt” (along with a host of constitutional considerations).  Alteration of key evidence could certainly create reasonable doubt and hose the prosecution’s case (or, worse, the evidence gets tossed by the Court before the trial even begins).  The container file ensures that no matter who handles the evidence, checksums can prove that the contents were not altered since the initial imaging.

Many vendors now offer logical image containers as an alternative to doing a full bit-level image of the drive.  However, in corporate eDiscovery, this is still overkill because the tools and solutions being used downstream still have to unpack or parse these proprietary container formats for processing and analysis.  In fact, even software from the vendors who created these container formats must “crack them open” to get to the contents within.  This seems to add a layer of complexity that has not been needed since the days of the external examiner coming in with her forensic toolkit to do drive images. The format was created to solve a very specific problem, and little thought was given to the use of this format in a holistic process like what is typically seen in civil eDiscovery.   There is no longer a need for a container for portability of evidence because it is most likely going to be processed in place after collection while residing on a secure evidence store on the company’s network.  I have heard “what if our collections methods are challenged?”  And to that, I would respond that we are not in criminal court and that the requirement in civil court is reasonableness, not perfection.  Now, if an employee is suspected of wrongdoing and the potential deletion of files will dramatically alter the case, then by all means, hire a forensic investigator and follow all of the protocols established over the last several decades in computer forensic science.

Fast forward to the 21^st century

Corporations are bringing eDiscovery in-house; they are building a business process around it to minimize risk and drive enormous cost savings, and in today’s world of civil litigation, there simply is not a need for these drive images or proprietary containers.  First of all, the burden of proof in a civil matter is “by a preponderance of the evidence.”  What this means is that the burden is satisfied if there is greater than 50% chance that a proposition is true.  This is a much lower standard than in criminal cases.  But, burden of proof goes more to the weight evidence is given by the court or jury.  Before that is even considered, evidence must pass several hurdles of admissibility.  As we will explore, these standards of admissibility have also been the recipients of significant bolstering from vendors over the years.

The Path to Admissibility

There are several hurdles to admissibility for any type of evidence, and because they are not within the scope of this post, I will forego any discussion of relevance, FRE 403, or the hearsay rules.  I will focus on the issues that tend to be associated with electronic evidence: authentication and the “best evidence rule”.  There are some examiners and perhaps even vendors that would argue electronic evidence is simply not admissible if not collected using bit-level imaging (and sometimes 2 copies – one that is referred to by examiners as the “best evidence” copy and another “working copy” to be analyzed).  This is simply not true.  What we will find is that the collection method will go more to the weight of the evidence rather than the minimum showing needed for admissibility (hence, the discussion of burden of proof above).

All evidence must be authenticated pursuant to FRE 901.  This is a “don’t pass Go” threshold requirement for admissibility.  FRE 901 is satisfied by “evidence sufficient to support a finding that the matter in question is what its proponent claims.”  Notwithstanding a “self-authenticating” piece of evidence pursuant to FRE 902, the proponent must establish the identity of the exhibit by stipulation, circumstantial evidence, or the testimony of a witness with knowledge of its identity and authorship.  Typically, objections to this process would tend to go toward whether the exhibit is an original, was altered, or the witness with whom the proponent is attempting to authenticate the exhibit is not able to so based on lack of personal knowledge or some other defect.  Mostly these objections deal with the authenticity of the contents of the exhibit, and the rules in Article X of the FRE are helpful here.  Rule 1001 defines an “original” with respect to data stored in a computer or similar device as “any printout or other output readable by sight, shown to reflect the data accurately.”  This is a far cry from a bit-by-bit forensic image!  Rule 1002 – often referred to as the “Best Evidence Rule” – requires that “[t]o prove the content of a writing, recording, or photograph, the original writing, recording, or photograph is required, except as otherwise provided in these rules or by Act of Congress.”  Not only do these rules not require exact duplication of the electronic files, but they do not require imaging the entire 80GB hard drive to collect the 100MB of files that are potentially relevant to the case.  What they do require, though, is the ability to show that a document being proffered is the same document that was originally created.  In Re Vee Vinhnee, 336 B.R. 437, 444 (B.A.P. 9th 2005). Also, Judge Grimm sets out an extremely comprehensive analysis of what is required for the admissibility of electronic evidence in civil litigation in Lorraine v. Markel American Insurance Company, 241 F.R.D. 534 (D.Md. May 4, 2007).  In Lorraine, he notes that In Re Vee Vinhee may set out the most demanding test for admissibility of ESI.

Maintaining Forensic Integrity

So, how do I combat the claims that “they must have altered that document” or “Your, honor, I swear that line about ‘acceptable losses’ was not in the safety memo when I created it”?  This is where hash value becomes a wonderful thing.  Computing the hash of an electronic file, or computing a hexadecimal checksum based on analysis of the contents of an electronic document, is essentially like recording the DNA of an electronic file.  If the file is altered, its hash value would be different.  So, by computing the hash value at the source, in transit, and at the destination, I can ensure that the electronic file is in exactly the same state as it was at the source (or, that the collected document is the same as the document originally created).  Now, add the ability to report on that information and those container files and full forensic disk images really do become extreme overkill.

The important distinction here is that the term “forensic” does not refer to a type of technology or the products of a specific vendor – despite claims and propaganda to the contrary.  Forensic refers to the methodology used by the person collecting the evidence – whether it is finger prints from a weapon or electronic files from an employee’s laptop.  Forensic imaging, however, refers to the process by which an entire hard disk is copied bit by bit to create an exact duplicate of that hard drive in a forensic manner.  It is entirely possible for a collection of ESI to be “forensically sound” by simply employing the technique described above of taking hash values at each stage of the process to be able to prove that the files were not altered during collection.  As long as chain of custody is also maintained (much easier to do now that we are not using multiple tools, vendors, locations, and people to do the job), then the process should meet the threshold admissibility requirements of the Federal Rules of Evidence.

Opponents will still bring up claims that the evidence must have been altered, or the expert familiar only with forensic imaging technologies will try to use the argument that only vendor X’s technology is “court vetted,” so any other method is not acceptable.  But, to these opponents, I would argue two points:

1. No technology is “court vetted”.  The operator’s use of the technology in the specific case (in a specific jurisdiction) was acceptable to the court to meet the threshold showings required by FRE 901, 1001, and 1002 – as well as any rules of procedure governing the production of discovery in either a civil or criminal matter.  Wow – that would be a very long footnote on a marketing slide…probably why it is not usually mentioned.
2. The process is forensically sound, and you can prove that the documents were not altered from collection through production by referencing the hash value and maintaining copies of the original native files analyzed on a secured preservation store.  This would exceed the requirements of FRE 901, 1001, and 1002 – but would provide protection against claims going to the “weight” of the evidence by opponents who would cry foul.

What Now?

So, where does all of this leave us?  First, in the vast majority of civil litigation matters where electronic discovery is being performed, forensic bit by bit imaging of computer hard drives is simply not required.  Vendors have promoted this practice over the years, but all this has done is over-complicate the eDiscovery process for many unsuspecting litigants and dramatically increase costs because the model simply does not scale.  Moreover, the effort and cost required to deal with these full drive images downstream in the process is often overlooked by these vendors and overzealous consultants.  Next, we now know there is a better way – targeted, forensically-sound collection of ESI using streamlined and automated solutions that maintain custodian relationship – even for shared data sources – throughout the eDiscovery lifecycle, preventing form of production disputes and other calamities that have plagued this industry for the last decade.  There is a better way to collect ESI that will provide exponential cost savings all the way to production.

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

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

“It was so gnarly I can’t remember.”

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

“Sorry man, didn’t make the rules.”

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

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

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

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

“I’ve got tiger blood and Adonis DNA”

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

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

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

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

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

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[1] Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309 (S.D.N.Y. 2003)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Stage 1: Manual Legal Hold Process

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

Stage 2: Stand-Alone Legal Hold Software

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

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

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

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

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

Stage 3: Integrated Legal Hold Software

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

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

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

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

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

When it comes to e-discovery projects, the debate about how to improve the Identification and Collection steps are often at the forefront. Why so? There are several factors – the gap between legal and IT, the desire to cut costs by using manual processes, and just not being aware of the risks involved. My colleague Dean Gonsowski’s recent post Manual Collections of ESI in Electronic Discovery Come under Fire discusses manual collections at lengthand what counsel needs to supplement it. The alternative is obviously to enable automated collections, which organizations may balk at, citing large technology and IT costs. In this post, I would like to examine the critical considerations and advantages of automating the collection process within an enterprise.

It is generally the case that with automation, you achieve a certain level of repeatability and quality control, which leads to better management of risks. In Ford Motor Co. v. Edgewood Properties Inc., 257 F.R.D. 418 (D.N.J. 2009), the opinion suggests that manual collections are permissible. However, is that a wise decision, considering the exposure that offered the plaintiffs in the case? A counter point is the Judge Shira Scheindlin’s Zubulake Revisited, Pension Comm. of the Univ. of Montre­al Pension Plan v. Banc of America Sec. opinion that certain plaintiffs’ collection efforts warranted a sanction for spoliation of evidence because, among other defects, the plaintiffs relied solely on their employees to search and select what they believed to be responsive information without adequate attorney direction and supervision.

So, what are the critical elements and advantages of automating the collection process within an enterprise? Most important is closing the gap between legal and IT teams that are involved in the matter. The legal team is often involved at the start of an e-discovery project and hasthe insight into possible custodians who are potentialtargets of ESI collections. However, they have very little visibility into the information assets that actually belong to the named custodians. A key step in automation is identifying the custodians and their ESI. This is where legal teams and IT teams need to collaborate. Once this is completed, you now have the need to specify collection parameters and apply them methodically for all custodians in the context of a matter.

Specifying what to collect from a large IT infrastructure of a typical organization can be a daunting task. This is where automation steps need to account for variability in collection targets. Flexible specification of collection parameters is essential for consistent collections from varied data sources. As an example, desktops store documents in special folders that are unique for the type of desktop, and being able to specify collections of potentially relevant ESI from all systems and devices regardless of the type of device is very important.

An aspect of interest is the scope of collections for e-discovery purposes.While required for a small percentage of cases, typically criminal cases, the traditional approach of always using forensic tools to image disks is often too heavy handed. At the same time, applying keyword-level culling at the point of collection is also too granular. Keyword based filtering at the point of collection requires deep analysis of every possible file type, and such analysis would add large processing load on the system being collected. Moreover, such coarse level culling introduces significant risk of accidentally excluding relevant content. It is preferable to apply defensible filters such as well-known operating system files and application programs (such as from the NIST files), as well as date ranges and file types. Anything beyond that adds risk to your collections.

Another requirement during collections is securely transporting the collected ESI from one or more custodians into a preservation area for further analysis as well as for implementing a preservation hold. Again, given that collections are performed over a wide swath of systems, desktops, archives and message stores, some form of automation is critical, especially if you wish to maintain and prove defensibility. One challenge is collections from offsite laptops and fileshares in remote offices. You need flexible options to either collect to a local portable drive, or, if there is network connectivity, push the collection to a secure store, usually a remote file share.

A final step in the process is to accurately document who actually performed the collections, what was collected, and more importantly, what was not collected. By automating these steps, and by providing visibility and defensibility, one can increase collaboration between legal and IT teams with the end goal of successful collections. Automation, while decreasing costs will also reduce risk by making the process much more defensible. This is especially so if manual collections require supervision by experts for it to be defensible. Imagine the costs of sending your legal e-discovery expert with your IT staff for every collection station as suggested by Judge Scheindlin in Pension.

Jason R. Baron was a keynote speaker at a recent electronic discovery summit and he mentioned an electronic data discovery topic that “ought to be blogged about.”  So, with that kind of softball I had to take a swing, particularly because it’s been a topic we (at e-discovery 2.0) have been discussing lately.

The genesis of this blog (per Jason) is the recent “skepticism” evidenced by the bench regarding the defensibility of custodian based collections.  ARMA has a good piece on this very topic, entitled “Is ‘Manual’ Collection of ESI Defensible?”  The core notion is that the tried and true practice of custodian based ESI collection is now under fire by courts, which appear to be looking at this practice with an increasing level of distrust.

“While it is common for companies to use automated data-collection software and hardware, some corporate litigants opt for more informal, “manual” collection methods (i.e., searches performed by individual records custodians) when responding to ESI requests. Companies may choose the manual collection of ESI to reduce costs, particularly if they have limited levels of litigation or lower risk levels posed by the litigation itself.”

While there’s no dispute that the “automated” collection methods available in litigation software referenced above have a number of features that make this approach more efficient, the question is whether a “manual” (i.e., custodian based) collection process is somehow less defensible.  If this is truly the case, then many midsized companies without the budget to purchase such e-discovery applications will inherently be found deficient – which is a daunting notion.

Take the recent case of Ford Motor Co. v. Edgewood Properties Inc., 257 F.R.D. 418 (D.N.J. 2009) where the dispute arose out of the demolition of a Ford assembly plant in New Jersey.  Ford and Edgewood entered into a contract whereby Ford agreed to provide 50,000 cubic yards of concrete to Edgewood in exchange for Edgewood removing it from the site.  When the concrete turned out to be contaminated, the dispute started in earnest.

The crux of Edgewood’s complaint was that it was unhappy with Ford’s production and somehow suspected that the dearth of documents was due to the electronic data collection process.  Edgewood sought to “’confirm the adequacy of Ford’s manual document collection process’ by using a third-party vendor to perform keyword searches on documents not in the existing repository of ESI, but instead, documents within the possession of certain Ford custodians.”

To reconcile the dispute the court looked to the Sedona Conference’s work in the area:

“In The Sedona Conference Best Practices Commentary on the Use of Search and Information Retrieval Methods in E-Discovery, Practice Point 1 states that “[i]n many settings involving electronically stored information, reliance solely on a manual search process for the purpose of finding responsive documents may be infeasible or unwarranted. In such cases, the use of automated search methods should be viewed as reasonable, valuable, and even necessary.”(emphasis added). Once again, the Court confronts this peculiar situation insofar as Edgewood has a point that the document collection method used by Ford is not necessarily contemplated under the Sedona Principles, but that agreement by the parties at the outset as to the mode of collection would have been the proper and efficacious course of action.  However, “[a]bsen[t] agreement, a [responding] party has the presumption, under Sedona Principle 6, that it is in the best position to choose an appropriate method of searching and culling data.”

Accordingly, the court found that the lack of agreement coupled with Ford being in the best position to make a call about the methodology, was a deciding factor in generally upholding Ford’s manual collection process.

“It would be improvident at this juncture to grant Edgewood the relief it seeks when it has not shown any indicia of bad faith on the part of Ford. To countenance such a holding would unreasonably put the shoe on the other foot and require a producing party to go to herculean and costly lengths (especially in a document-heavy case such as this) in the face of mere accusation to rebut a claim of withholding. This scenario is not contemplated by the Federal Rules.”

While Ford wasn’t penalized for its manual collection, this practice has come under fire in several other opinions.  In the highly controversial case of Phillip M. Adams & Assoc., LLC v. Dell, Inc., 621 F. Supp. 2d 1173 (D. Utah 2009) custodian based collection/preservation policies were similarly under fire.

“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.”

Adams was in fact cited by Judge Scheindlin in her latest opus – Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of America Sec. LLC, No. 05 Civ. 9016, 2010 U.S. Dist. Lexis 4546, at *1 (S.D.N.Y. Jan. 15, 2010), where she found fault with the Plaintiff’s reliance on manual collections:

“This instruction does not meet the standard for a litigation hold. It does not direct employees to preserve all relevant records–both paper and electronic-nor does it create a mechanism for collecting the preserved records so that they can be searched by someone other than the employee.  Rather, the directive places total reliance on the employee to search and select what that employee believed to be responsive records without any supervision from Counsel.

From the foregoing, it’s probably too early to call the skepticism over manual collection a trend per se.  Certainly, lobbing a preservation notice over the proverbial wall to custodians without the requisite level of supervision is a recipe for disaster.  Education (about the matter and the required tasks), compliance (with the preservation instructions) and ongoing monitoring (to ensure that compliance continues over time) are all critical responsibilities that must be thoughtfully undertaken by counsel for a defensible ediscovery process.

The question then becomes, is the problem here really about the “manual” collection efforts by the custodians or more simply the fact that they aren’t supervised with the requisite degree of care?  If this is the case, which I’d opine that it is, then “properly executed” manual collections should be fine (i.e., defensible).

But, as Ford indicates, if your company is going to rely upon a manual collection modus operandi, then it may be advisable to let the opposition in on the use of this tactic.  This approach may be mandated by local rule or it may just be the type of transparent cooperation that’s all the rage these days.

Learn More On Litigation Support Software & Electronic Discovery Litigation

While not quite rising to the level of the Tiger Woods affair, the 2008 Qualcomm v. Broadcom brouhaha was the leading electronic  discovery scandal for two years.  Finally, the other shoe has dropped and despite all the handwringing and speculation, nobody will be disbarred.  Even so, there are many lessons to be learned from this case, but first a quick summary of the latest ruling.

On appeal, United States Magistrate Judge Barbara Major provided a quick summary for those who haven’t been following the trials and tribulations closely.  During the initial hearings, Judge Major found that Qualcomm “intentionally withheld tens of thousands of documents” during discovery.  In reaching this conclusion she also stressed the “quantity of suppressed documents, the ease with which Qualcomm ultimately was able to locate the documents, the simplicity and relevancy of the search terms and search locations that led to the discovery of the documents, and the lack of evidence indicating that Qualcomm had engaged in any meaningful oversight of its document production.”

As to finding the scapegoats, and levying $8.5M in sanctions, Judge Major held that six attorneys assisted Qualcomm in withholding the critical documents by “failing to conduct a reasonable inquiry into the adequacy of Qualcomm’s document production.”  She specifically identified several inadequacies in Qualcomm’s document search, including “the failure to search the computers belonging to, or used by, deponents and trial witnesses, the failure to adequately investigate when significant, relevant, and unproduced documents were discovered, and the failure to ensure there was a legitimate factual basis for the legal arguments made to the Court before making them.”

After her initial sanctions order was set aside, on remand Judge Major provided the responding attorneys with “an almost unlimited opportunity to conduct discovery,” and during fifteen months, the parties undertook a massive discovery effort – including searching and reviewing over 1.6 million documents.  In resolving the Order to Show Cause, Judge Major reversed tracks despite concluding “this massive discovery failure resulted from significant mistakes, oversights, and miscommunication on the part of both outside counsel and Qualcomm employees.”  Yet, the testimony “also revealed that the Responding Attorneys made significant efforts to comply with their discovery obligations,” causing the Court to ultimately decline to sanction any of the Responding Attorneys.

Judge Major, in an effort to better educate the bar, goes on to detail some of the many electronic data discovery abuses. This provides a set of important lessons that for anyone in the practice of e-discovery:

1. “The fundamental problem in this case was an incredible breakdown in communication. The lack of meaningful communication permeated all of the relationships (amongst Qualcomm employees (including between Qualcomm engineers and in-house legal staff), between Qualcomm employees and outside legal counsel, and amongst outside counsel) and contributed to all of the other failures.” The communication issue has been raised by many including Judge Scheindlin (who quoted Cool Hand Luke) and is one of the many reasons that Sedona had pushed for more cooperation in the discovery process.  I cannot stress the important of transparent communication in the e-discovery process.  Not only is it mandated, it’s simply a wise practice.
2. “Moreover, outside counsel did not obtain sufficient information from any source to understand how Qualcomm’s computer system is organized: where emails are stored, how often and to what location laptops and personal computers are backed up, whether, when and under what circumstances data from laptops are copied into repositories, what type of information is contained within the various databases and repositories, what records are maintained regarding the search for, and collection of, documents for litigation, etc.” This failure too, first widely articulated in Zubulake V (and followed by Phoenix Four, Inc.,) requires counsel to discover all sources of relevant information involving substantial communicating with information technology personnel and key players in the litigation to understand how electronic information is stored.  Failure here (even absent spoliation) is grounds for sanctions.  See, In re A&M Fla. Props. II, LLC, 2010 WL 1418861 (Bankr. S.D.N.Y. Apr. 7, 2010)
3. “Finally, no attorney took supervisory responsibility for verifying that the necessary discovery had been conducted (including ensuring that all of the correct locations, servers, databases, repositories, and computers were correctly searched for potentially relevant documents) and that the resulting discovery supported the important legal arguments, claims, and defenses being presented to the court.” Where does the buck stop? It’s clear that a supervisory role with the proper experience in e-discovery is a critical component to an efficient and defensible e-discovery process.
4. Another factor that contributed to the discovery failure was a lack of agreement amongst the participants regarding responsibility for document collection and production. See previous comments about the importance of cooperation and communication.

So despite all those blunders Judge Major wasn’t able to find any evidence that the involved attorneys acted in bad faith, which allowed her to rationalize her change of heart.  But, if I were counsel reading the opinion I wouldn’t take this reversal as a license to conduct shoddy legal discovery because the bar (pun intended) is quickly rising such that missteps occurring two years ago probably won’t be tolerated today (see Judge Scheindlin’s latest opinion – Pension Committee).

Qualcomm is still a wake-up call, but just one that (fortunately for the involved attorneys) won’t end up an enduring disaster.

Learn More On Litigation Software & Litigation Support Software.

Judge Shira Scheindlin is famous for a number of things in her electronic data discovery opinions, but one notable aspect is her use of quotes to set the tone for her landmark decisions.  In Zubulake she quoted Cool Hand Luke (“What we’ve got here is a failure to communicate.”) and in her latest opinion she quotes George Santayana (“[t]hose who cannot remember the past are condemned to repeat it.”).

Pension Committee of the Univ. of Montreal Pension Plan, et al., v. Banc of America Securities, LLC, et al. (“Pension Committee”) is generating a lot of buzz and reminds me of the Yogi Berra quote: “this is like déjà vu all over again” … particularly when thinking back to her landmark Zubulake decisions.  In this opinion, Judge Scheindlin of the Southern District of New York pens another potential electronic discovery classic, while simultaneously paying homage to her past opus.

Before we get into the “how” and “what” of the 85 page opinion, it’s probably reasonable to posit the “why” question, particularly when Judge Scheindlin and her team spent 300 hours on the mammoth undertaking.

“I, together with two of my law clerks, have spent an inordinate amount of time on this motion. We estimate that collectively we have spent close to three hundred hours resolving this motion. I note, in passing, that our blended hourly rate is approximately thirty dollars per hour (!) well below that of the most inexperienced paralegal, let alone lawyer, appearing in this case. My point is only that sanctions motions, and the behavior that caused them to be made, divert court time from other important duties-namely deciding cases on the merits.”

So, why was this fact pattern worthy of the inordinate amount of briefing time (regardless of the inconceivably low $9,000 fee)?  A skeptic might postulate that Judge Scheindlin has been out of the limelight lately, often being eclipsed by Judges Peck and Grimm.  It’s also been a year since her Securities and Exchange Commission v. Collins & Aikman Corp., opinion and it’s likely that she wanted to hearken back to the good ole Zubulake days, where she had the ear of the entire electronic discovery world.  Her tribute is less than subtle, as she even subtitles Pension Committee: “Zubulake Revisited: Six Years Later.”

Less skeptically, however, she likely sees a host of matters rife with electronic data discovery disputes caused by the bar’s lack of e-discovery savvy.  It seems plausible that Pension Committee is a way for her to coalesce leanings from Zubulake (and beyond) into one, clear expression of legal duties.

Given the length of her opus, we won’t dissect the entire opinion as Ralph Losey did (chockablock with flying gerbils), but will instead focus in on the enduring and potentially controversial sections.  As way of background, the dispute at hand focused on claims by a group of investors who brought an action to recover losses of 550 million dollars stemming from the liquidation of two British Virgin Islands based hedge funds.  Unlike many typical e-discovery disputes, this instant action focused on the conduct of the plaintiffs as they attempted to deal with the often murky landscape of ESI preservation, collection and production.  Fortunately, Judge Scheindlin provided much needed foreshadowing to both readers and bloggers alike in her opening comments:

“Because this is a long and complicated opinion, it may be helpful to provide a brief summary up front. I begin with a discussion of how to define negligence, gross negligence, and willfulness in the discovery context and what conduct falls in each of these categories. I then review the law governing the imposition of sanctions for a party’s failure to produce relevant information during discovery. This is followed by factual summaries regarding the discovery efforts–or lack thereof–undertaken by each of the thirteen plaintiffs against whom sanctions are sought, and then by an application of the law to those facts. Based on my review of the evidence, I conclude that all of these plaintiffs were either negligent or grossly negligent in meeting their discovery obligations. As a result, sanctions are required.”

The finding of sanctions aside, Judge Scheindlin goes out of her way to crystallize duties and identify the type of conduct can cause an e-discovery breach.  Despite significant caveats about the fact intensive nature of each discovery dispute, she nevertheless proffers the following synthesis, which has caused no shortage of consternation amongst electronic discovery practitioners and commentators:

“After a discovery duty is well established, the failure to adhere to contemporary standards can be considered gross negligence. Thus, after the final relevant Zubulake opinion in July, 2004, the following failures support a finding of gross negligence, when the duty to preserve has attached:

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

[bullets added]

Assuming Pension Committee is followed beyond the bounds of the Southern District of New York, which is still speculative at this stage, it certainly means sleepless nights for corporate legal departments with litigation hold and preservation processes that are less than “contemporary.” While it’s hard to argue with the theoretical appropriateness of the above items, it’s questionable how practical these steps are, particularly for large enterprises that may have dozens (or hundreds) of litigation holds in place at any one point in time.  Multiply the numbers of holds times the disparate types of ESI and the complexities of the IT infrastructures and Judge Scheindlin’s seemly innocuous mandate can quickly become a tactical minefield, rife with sanctions possibilities.  Unfortunately, with the rapid proliferation of social media usage and cloud computing, this already complex paradigm is only going to become more vexing in the near term.

Given that the number of struggling enterprises is legion, it does certainly beg the question whether more folks than not can live up to this new “reasonableness” standard.  If not, this articulation may materially raise the bar and result in a demonstrable increase in spoliation motions, if that were possible.  Already, spoliation charges are often referred to as a “case within the case” by many, something which Judge Scheindlin reluctantly acknowledges.

“Finally, I note the risk that sanctions motions, which are very, very time consuming, distracting, and expensive for the parties and the court, will be increasingly sought by litigants. This, too, is not a good thing. For this reason alone, the most careful consideration should be given before a court finds that a party has violated its duty to comply with discovery obligations and deserves to be sanctioned. Likewise, parties need to anticipate and undertake document preservation with the most serious and thorough care, if for no other reason than to avoid the detour of sanctions.”

[Footnotes omitted]

Perhaps ratcheting up of the e-discovery standard of care can be rationalized as aspiration in nature.  Yet, it is hard to see how it reflects the actual business practices of many in corporate legal departments, particularly when the actions/inactions occurred (as in this case) several years ago when nascent notions about best practices were still evolving.

“The age of this case requires a dual analysis of culpability–plaintiffs’ conduct before and after 2005. The Citco Defendants contend that plaintiffs acted willfully or with reckless disregard, such that the sanction of dismissal is warranted.  Plaintiffs admit that they failed to institute written litigation holds until 2007 when they returned their attention to discovery after a four year hiatus. Plaintiffs should have done so no later than 2005, when the action was transferred to this District. This requirement was clearly established in this District by mid2004, after the last relevant Zubulake opinion was issued. Thus, the failure to do so as of that date was, at a minimum, grossly negligent.”

[Footnotes omitted]

Perhaps my biggest issue with this decision is that it (perhaps myopically) places an inordinate level of importance and awareness of the Zubulake decisions, particularly for those outside Judge Scheindlin’s district.  This lawsuit was initially brought in Florida and “[w]hile a duty to preserve existed in the Southern District of Florida at the time this action was filed, no court in the Eleventh Circuit articulated a ‘litigation hold’ requirement until 2007.”  In my mind, it hardly seems fair to retroactively imbue the Plaintiffs with this type of comprehension and duty.

At the end of the day, and despite quibbling with the equities involved, Judge Scheindlin has largely succeeded in moving the e-discovery ball forward.  The opinion will likely be one of the most widely read cases in 2010 and deservedly so since it describes with precision and clarity the burdens and penalties in the evolving area of ESI spoliation.  The main question will be to what extent will other jurisdictions adopt the same culpability framework and extend the reach of Pension Committee just as happened with the Zubulake line of cases.

Certainly, it could be “déjà vu all over again.”

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