e-discovery 2.0

2012 is the Year of the Dragon – which is fitting, since no other Chinese Zodiac sign represents the promise, challenge, and evolution of predictive coding technology more than the Dragon.  The few who have embraced predictive coding technology exemplify symbolic traits of the Dragon that include being unafraid of challenges and willing to take risks.  In the legal profession, taking risks typically isn’t in a lawyer’s DNA, which might explain why predictive coding technology has seen lackluster adoption among lawyers despite the hype.  This blog explores the promise of predictive coding technology, why predictive coding has not been widely adopted in eDiscovery, and explains why 2012 is likely to be remembered as the year of predictive coding.

What is predictive coding?

Predictive coding refers to machine learning technology that can be used to automatically predict how documents should be classified based on limited human input.  In litigation, predictive coding technology can be used to rank and then “code” or “tag” electronic documents based on criteria such as “relevance” and “privilege” so organizations can reduce the amount of time and money spent on traditional page by page attorney document review during discovery.

Generally, the technology works by prioritizing the most important documents for review by ranking them.  In addition to helping attorneys find important documents faster, this prioritization and ranking of documents can even eliminate the need to review documents with the lowest rankings in certain situations. Additionally, since computers don’t get tired or day dream, many believe computers can even predict document relevance better than their human counterparts.

Why hasn’t predictive coding gone mainstream yet?

Given the promise of faster and less expensive document review, combined with higher accuracy rates, many are perplexed as to why predictive coding technology hasn’t been widely adopted in eDiscovery.  The answer really boils down to one simple concept – a lack of transparency.

Difficult to Use

First, early predictive coding tools attempt to apply a complicated new technological approach to a document review process that has traditionally been very simple.  Instead of relying on attorneys to read each and every document to determine relevance, the success of today’s predictive coding technology typically depends on review decisions input into a computer by one or more experienced senior attorneys.  The process commonly involves a complex series of steps that include sampling, testing, reviewing, and measuring results in order to fine tune an algorithm that will eventually be used to predict the relevancy of the remaining documents.

The problem with early predictive coding technologies is that the majority of these complex steps are done in a ‘black box’.  In other words, the methodology and results are not always clear, which increases the risk of human error and makes the integrity of the electronic discovery process difficult to defend.  For example, the methodology for selecting a statistically relevant sample is not always intuitive to the end user.  This fundamental problem could result in improper sampling techniques that could taint the accuracy of the entire process.  Similarly, the process must often be repeated several times in order to improve accuracy rates.  Even if accuracy is improved, it may be difficult or impossible to explain how accuracy thresholds were determined or to explain why coding decisions were applied to some documents and not others.

Accuracy Concerns

Early predictive coding tools also tend to lack transparency in the way the technology evaluates the language contained in each document.  Instead of evaluating both the text and metadata fields within a document, some technologies actually ignore document metadata.  This omission means a privileged email sent by a client to her attorney, Larry Lawyer, might be overlooked by the computer if the name “Larry Lawyer” is only part of the “recipient” metadata field of the document and isn’t part of the document text.  The obvious risk is that this situation could lead to privilege waiver if it is inadvertently produced to the opposing party.

Another practical concern is that some technologies do not allow reviewers to make a distinction between relevant and non-relevant language contained within individual documents.  For example, early predictive coding technologies are not intelligent enough to know that only the second paragraph on page 95 of a 100-page document contains relevant language.  The inability to discern what language  led to the determination that the document is relevant could skew results when the computer tries to identify other documents with the same characteristics.  This lack of precision increases the likelihood that the computer will retrieve an over-inclusive number of irrelevant documents.  This problem is generally referred to as ‘excessive recall,’ and it is important because this lack of precision increases the number of documents requiring manual review which directly impacts eDiscovery cost.

Waiver & Defensibility

Perhaps the biggest concern with early predictive coding technology is the risk of waiver and concerns about defensibility.  Notably, there have been no known judicial decisions that specifically address the defensibility of these new technology tools even though some in the judiciary, including U.S. Magistrate Judge Andrew Peck, have opined that this kind of technology should be used in certain cases.

The problem is that today’s predictive coding tools are difficult to use, complicated for the average attorney, and the way they work simply isn’t transparent.  All these limitations increase the risk of human error.  Introducing human error increases the risk of overlooking important documents or unwittingly producing privileged documents.  Similarly, it is difficult to defend a technological process that isn’t always clear in an era where many lawyers are still uncomfortable with keyword searches.  In short, using black box technology that is difficult to use and understand is perceived as risky, and many attorneys have taken a wait-and-see approach because they are unwilling to be the guinea pig.

Why is 2012 likely to be the year of predictive coding?

The word transparency may seem like a vague term, but it is the critical element missing from today’s predictive coding technology offerings.  2012 is likely to be the year of predictive coding because improvements in transparency will shine a light into the black box of predictive coding technology that hasn’t existed until now.  In simple terms, increasing transparency will simplify the user experience and improve accuracy which will reduce longstanding concerns about defensibility and privilege waiver.

Ease of Use

First, transparent predictive coding technology will help minimize the risk of human error by incorporating an intuitive user interface into a complicated solution.  New interfaces will include easy-to-use workflow management consoles to guide the reviewer through a step-by-step process for selecting, reviewing, and testing data samples in a way that minimizes guesswork and confusion.  By automating the sampling and testing process, the risk of human error can be minimized which decreases the risk of waiver or discovery sanctions that could result if documents are improperly coded.  Similarly, automated reporting capabilities make it easier for producing parties to evaluate and understand how key decisions were made throughout the process, thereby making it easier for them to defend the reasonableness of their approach.

Intuitive reports also help the producing party measure and evaluate confidence levels throughout the testing process until appropriate confidence levels are achieved.  Since confidence levels can actually be measured as a percentage, attorneys and judges are in a position to negotiate and debate the desired level of confidence for a production set rather than relying exclusively on the representations or decisions of a single party.  This added transparency allows the type of cooperation between parties called for in the Sedona Cooperation Proclamation and gives judges an objective tool for evaluating each party’s behavior.

Accuracy & Efficiency

2012 is also likely to be the year of transparent predictive coding technology because technical limitations that have impacted the accuracy and efficiency of earlier tools will be addressed.  For example, new technology will analyze both document text and metadata to avoid the risk that responsive or privileged documents are overlooked.  Similarly, smart tagging features will enable reviewers to highlight specific language in documents to determine a document’s relevance or non-relevance so that coding predictions will be more accurate and fewer non-relevant documents will be recalled for review.

Conclusion - Transparency Provides Defensibility

The bottom line is that predictive coding technology has not enjoyed widespread adoption in the eDiscovery process due to concerns about simplicity and accuracy that breed larger concerns about defensibility.  Defending the use of black box technology that is difficult to use and understand is a risk that many attorneys simply are not willing to take, and these concerns have deterred widespread adoption of early predictive coding technology tools.  In 2012, next generation transparent predictive coding technology will usher in a new era of computer-assisted document review that is easy to use, more accurate, and easier to defend. Given these exciting technological advancements, I predict that 2012 will not only be the year of the dragon, it will also be the year of predictive coding.

It’s already a few weeks into the new year and it’s easy to spot the big lines at the gym, folks working on fad diets and many swearing off any number of vices.  Sadly perhaps, most popular resolutions don’t even really change year after year.  In the corporate world, though, it’s not good enough to simply recycle resolutions every year since there’s a lot more at stake, often with employee’s bonuses and jobs hanging in the balance.

It’s not too late to make information governance part of the corporate 2012 resolution list.  The reason is pretty simple – most companies need to get out of the reactive firefighting of eDiscovery given the risks of sloppy work, inadvertent productions and looming sanctions.  Yet, so many are caught up in the fog of eDiscovery war that they’ve failed to see the nexus between the upstream, proactive good data management hygiene and the downstream eDiscovery chaos.

In many cases the root cause is the disconnect between differing functional groups (Legal, IT, Information Security, Records Management, etc.).  This is where the emerging umbrella concept of Information Governance comes to play, serving as a way to tackle these information risks along a unified front. Gartner defines information governanceas the:

“specification of decision rights, and an accountability framework to encourage desirable behavior in the valuation, creation, storage, use, archiving and deletion of information, … [including] the processes, roles, standards, and metrics that ensure the effective and efficient use of information to enable an organization to achieve its goals.”

Perhaps more simply put, what were once a number of distinct disciplines—records management, data privacy, information security and eDiscovery—are rapidly coming together in ways that are important to those concerned with mitigating and managing information risk. This new information governance landscape is comprised of a number of formerly discrete categories:

• Regulatory Risks – Whether an organization is in a heavily regulated vertical or not, there are a host of regulations that an organization must navigate to successfully stay in compliance.  In the United States these include a range of disparate regimes, including the Sarbanes-Oxley Act, HIPPA, the Securities and Exchange Act, the Foreign Corrupt Practices Act (FCPA) and other specialized regulations – any number of which require information to be kept in a prescribed fashion, for specified periods of time.  Failure to turn over information when requested by regulators can have dramatic financial consequences, as well as negative impacts to an organization’s reputation.

• Discovery Risks – Under the discovery realm there are any number of potential risks as a company moves along the EDRM spectrum (i.e., Identification, Preservation, Collection, Processing, Analysis, Review and Production), but the most lethal risk is typically associated with spoliation sanctions that arise from the failure to adequately preserve electronically stored information (ESI).  There have been literally hundreds of cases where both plaintiffs and defendants have been caught in the judicial crosshairs, resulting in penalties ranging from outright case dismissal to monetary sanctions in the millions of dollars, simply for failing to preserve data properly.  It is in this discovery arena that the failure to dispose of corporate information, where possible, rears its ugly head since the eDiscovery burden is commensurate with the amount of data that needs to be preserved, processed and reviewed.  Some statistics show that it can cost as much as $5 per document just to have an attorney privilege review performed.  And, with every gigabyte containing upwards of 75,000 pages, it is easy to see massive discovery liability when an organization has terabytes and even petabytes of extraneous data lying around.

• Privacy Risks – Even though the US has a relatively lax information privacy climate there are any number of laws that require companies to notify customers if their personally identifiable information (PII) such as credit card, social security, or credit numbers have been compromised.  For example, California’s data breach notification law (SB1386) mandates that all subject companies must provide notification if there is a security breach to the electronic database containing PII of any California resident.  It is easy to see how unmanaged PII can increase corporate risk, especially as data moves beyond US borders to the international stage where privacy regimes are much more staunch.

• Information Security Risks – Data breaches have become so commonplace that the loss/theft of intellectual property has become an issue for every company, small and large, both domestically and internationally.  The cost to businesses of unintentionally exposing corporate information climbed 7 percent last year to over $7 million per incident.  Recently senators asked the SEC to “issue guidance regarding disclosure of information security risk, including material network breaches” since “securities law obligates the disclosure of any material network breach, including breaches involving sensitive corporate information that could be used by an adversary to gain competitive advantage in the marketplace, affect corporate earnings, and potentially reduce market share.”  The senators cited a 2009 survey that concluded that 38% of Fortune 500 companies made a “significant oversight” by not mentioning data security exposures in their public filings.

Information governance as an umbrella concept helps organizations to create better alignment between functional groups as they attempt to solve these complex and interrelated data risk challenges.  This coordination is even more critical given the way that corporate data is proliferating and migrating beyond the firewall.  With even more data located in the cloud and on mobile devices a key mandate is managing data in all types of form factors. A great first step is to determine ownership of a consolidated information governance approach where the owner can:

• Get C-Level buy-in
• Have the organizational savvy to obtain budget
• Be able to define “reasonable” information governance efforts, which requires both legal and IT input
• Have strong leadership and consensus building skills, because all stakeholders need to be on the same page
• Understand the nuances of their business, since an overly rigid process will cause employees to work around the policies and procedures

Next, tap into and then leverage IT or information security budgets for archiving, compliance and storage.  In most progressive organizations there are likely ongoing projects that can be successfully massaged into a larger information governance play.  A great place to focus on initially is information archiving, since this one of the simplest steps an organization can take to improve their information governance hygiene.  With an archive organizations can systematically index, classify and retain information and thus establish a proactive approach to data management.  It’s this ability to apply retention and (most importantly) expiration policies that allows organizations to start reducing the upstream data deluge that will inevitably impact downstream eDiscovery processes.

Once an archive is in place, the next logical step is to couple a scalable, reactive eDiscovery process with the upstream data sources, which will axiomatically include email, but increasingly should encompass cloud content, social media, unstructured data, etc.  It is important to make sure  that a given  archive has been tested to ensure compatibility with the chosen eDiscovery application to guarantee that it can collect content at scale in the same manner used to collect from other data sources.  Overlaying both of these foundational pieces should be the ability to place content on legal hold, whether that content exists in the archive or not.

As we enter 2012, there is no doubt that information governance should be an element in building an enterprise’s information architecture.  And, different from fleeting weight loss resolutions, savvy organizations should vow to get ahead of the burgeoning categories of information risk by fully embracing their commitment to integrated information governance.  And yet, this resolution doesn’t need to encompass every possible element of information governance.  Instead, it’s best to put foundational pieces into place and then build the rest of the infrastructure in methodical and modular fashion.

The New Year has now dawned and with it, the certainty that 2012 will bring new developments to the world of eDiscovery.  Last month, we spotlighted some eDiscovery trends for 2012 that we feel certain will occur in the near term.  To understand how these trends will play out, it is instructive to review some of the top eDiscovery cases from 2011.  These decisions provide a roadmap of best practices that the courts promulgated last year.  They also spotlight the expectations that courts will likely have for organizations in 2012 and beyond.

Issuing a Timely and Comprehensive Litigation Hold

Case: E.I. du Pont de Nemours v. Kolon Industries (E.D. Va. July 21, 2011)

Summary: The court issued a stiff rebuke against defendant Kolon Industries for failing to issue a timely and proper litigation hold.  That rebuke came in the form of an instruction to the jury that Kolon executives and employees destroyed key evidence after the company’s preservation duty was triggered.  The jury responded by returning a stunning $919 million verdict for DuPont.

The spoliation at issue occurred when several Kolon executives and employees deleted thousands emails and other records relevant to DuPont’s trade secret claims.  The court laid the blame for this destruction on the company’s attorneys and executives, reasoning they could have prevented the spoliation through an effective litigation hold process.  At issue were three hold notices circulated to the key players and data sources.  The notices were all deficient in some manner.  They 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 ameliorate the spoliation.

The Lessons for 2012: The DuPont case underscores the importance of issuing a timely and comprehensive litigation hold notice.  As DuPont teaches, organizations should identify what key players and data sources may have relevant information.  A comprehensive notice should then be prepared to communicate the precise hold instructions in an intelligible fashion.  Finally, the hold should be circulated immediately to prevent data loss.

Organizations should also consider deploying the latest technologies to help effectuate this process.  This includes an eDiscovery platform that enables automated legal hold acknowledgements.  Such technology will allow custodians to be promptly and properly apprised of litigation and thereby retain information that might otherwise have been discarded.

Another Must-Read Case: Haraburda v. Arcelor Mittal U.S.A., Inc. (D. Ind. June 28, 2011)

Suspending Document Retention Policies

Case: Viramontes v. U.S. Bancorp (N.D. Ill. Jan. 27, 2011)

Summary: The defendant bank defeated a sanctions motion because it modified aspects of its email retention policy once it was aware litigation was reasonably foreseeable.  The bank implemented a retention policy that kept emails for 90 days, after which the emails were overwritten and destroyed.  The bank also promulgated a course of action whereby the retention policy would be promptly suspended on the occurrence of litigation or other triggering event.  This way, the bank could establish the reasonableness of its policy in litigation.  Because the bank followed that procedure in good faith, it was protected from court sanctions under the Federal Rules of Civil Procedure 37(e) “safe harbor.”

The Lesson for 2012: As Viramontes shows, an organization can be prepared for eDiscovery disputes by timely suspending aspects of its document retention policies.  By modifying retention policies when so required, an organization can develop a defensible retention procedure and be protected from court sanctions under Rule 37(e).

Coupling those procedures with archiving software will only enhance an organization’s eDiscovery preparations.  Effective archiving software will have a litigation hold mechanism, which enables an organization to suspend automated retention rules.  This will better ensure that data subject to a preservation duty is actually retained.

Another Must-Read Case: Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011)

Managing the Document Collection Process

Case: Northington v. H & M International (N.D.Ill. Jan. 12, 2011)

Summary: 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 legal and IT were not involved in the collection process.  For example, counsel was not actively engaged in the critical steps of preservation, identification or collection of electronically stored information (ESI).  Nor was IT brought into the picture until 15 months after the preservation duty was triggered. By that time, rank and file employees – some of whom were accused by the plaintiff of harassment – stepped into this vacuum and conducted the collection process without meaningful oversight.  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 Lesson for 2012: An organization does not have to suffer the same fate as the company in the Northington case.  It can take charge of its data during litigation through cooperative governance between legal and IT.  After issuing a timely and effective litigation hold, legal should typically involve IT in the collection process.  Legal should rely on IT to help identify all data sources – servers, systems and custodians – that likely contain relevant information.  IT will also be instrumental in preserving and collecting that data for subsequent review and analysis by legal.  By working together in a top-down fashion, organizations can better ensure that their eDiscovery process is defensible and not fatally flawed.

Another Must-Read Case: Green v. Blitz U.S.A., Inc. (E.D. Tex. Mar. 1, 2011)

Using Proportionality to Dictate the Scope of Permissible Discovery

Case: DCG Systems v. Checkpoint Technologies (N.D. Ca. Nov. 2, 2011)

The court adopted the new Model Order on E-Discovery in Patent Cases recently promulgated by the U.S. Court of Appeals for the Federal Circuit.  The model order incorporates principles of proportionality to reduce the production of email in patent litigation.  In adopting the order, the court explained that email productions should be scaled back since email is infrequently introduced as evidence at trial.  As a result, email production requests will be restricted to five search terms and may only span a defined set of five custodians.  Furthermore, email discovery in DCG Systems will wait until after the parties complete discovery on the “core documentation” concerning the patent, the accused product and prior art.

The Lesson for 2012: Courts seem to be slowly moving toward a system that incorporates proportionality as the touchstone for eDiscovery.  This is occurring beyond the field of patent litigation, as evidenced by other recent cases.  Even the State of Utah has gotten in on the act, revising its version of Rule 26 to require that all discovery meet the standards of proportionality.  While there are undoubtedly deviations from this trend (e.g., Pippins v. KPMG (S.D.N.Y. Oct. 7, 2011)), the clear lesson is that discovery should comply with the cost cutting mandate of Federal Rule 1.

Another Must-Read Case: Omni Laboratories Inc. v. Eden Energy Ltd [2011] EWHC 2169 (TCC) (29 July 2011)

Leveraging eDiscovery Technologies for Search and Review

Case: Oracle America v. Google (N.D. Ca. Oct. 20, 2011)

The court ordered Google to produce an email that it previously withheld on attorney client privilege grounds.  While the email’s focus on business negotiations vitiated Google’s claim of privilege, that claim was also undermined by Google’s production of eight earlier drafts of the email.  The drafts were produced because they did not contain addressees or the heading “attorney client privilege,” which the sender later inserted into the final email draft.  Because those details were absent from the earlier drafts, Google’s “electronic scanning mechanisms did not catch those drafts before production.”

The Lesson for 2012: Organizations need to leverage next generation, robust technology to support the document production process in discovery.  Tools such as email analytical software, which can isolate drafts and offer to remove them from production, are needed to address complex production issues.  Other technological capabilities, such as Near Duplicate Identification, can also help identify draft materials and marry them up with finals that have been marked as privileged.  Last but not least, technology assisted review has the potential of enabling one lawyer to efficiently complete the work that previously took thousands of hours.  Finding the budget and doing the research to obtain the right tools for the enterprise should be a priority for organizations in 2012.

Another Must-Read Case: J-M Manufacturing v. McDermott, Will & Emery (CA Super. Jun. 2, 2011)

Conclusion

There were any number of other significant cases from 2011 that could have made this list.  We invite you to share your favorites in the comments section or contact us directly with your feedback.

For more on the cases discussed above, watch this video:

Few people on the planet know more about federal rulemaking than John Rabiej, The Sedona Conference’s Director for Judicial Outreach.  John’s experience is the result of serving as the Chief of the Rules Committee Support Office for nearly two decades, where he routinely worked with federal judges, including current Chief Justice of the U.S. Supreme Court, John Roberts.  A key part of supporting the rulemaking process included building consensus among many different groups and individuals who sometimes held vastly different notions of whether and how rules should be changed.

In addition to his role with The Sedona Conference, John is an accomplished author who has written extensively on rules related issues.  His publications include contributions to Moore’s Federal Practice, the Federal Lawyer, and Weinsten’s Federal Evidence.  I’m pleased to provide John’s take on the increasingly public debate about whether or not the Federal Rules of Civil Procedure (FRCP) should be amended.

Nelson: You are recognized as one of the leading experts on the Federal Rule making process.  How did you gain that experience and notoriety?

Rabiej: I established the rules committee office within the Administrative Office of United States Courts nearly two decades ago to provide staff support to the Judicial Conference Committee on Rules of Practice and Procedure and its five advisory rules committees.  In this capacity, I had the privilege and honor of working very closely with 31 federal circuit, district, and bankruptcy judges who chaired a rules committee. These chairs were personally selected by the Chief Justice and represented the very best of the federal judiciary.  I learned from each of them and put their wise counsel to good use when I, in turn, provided advice to their successors.  At the same time, I worked closely with the committee reporters, who are each stellar academics with national reputations for excellence.  Over the years, I built up an institutional knowledge of rule amendments based on first-hand experiences.

I soon realized that rulemaking is a transparent, formal, quasi-legislative process, which typically requires a great deal of information gathering, consultation with interested groups, and consensus building.  I played a unique role because I coordinated the rules work among the rules committees, other Judicial Conference committees, members of the Judicial Conference, Supreme Court staff, Congressional members and staff, Executive Branch officials, major bar organizations, academics, and interest groups.  Because the federal rules have the force of law, buy-in from all these various major actors was a critical component of success.  And many of my responsibilities were to ensure that the rules committees were advised of the concerns and different points of view of these various individuals and entities.

Nelson: Are there any interesting stories or life lessons you can share about working with any of the committee chairs and members?

Rabiej: Without exception, every rules committee chair in my experience has not only been exceptionally bright and intelligent, but also considerate and kind on a personal human level. They each displayed the highest level of judicial temperament.  A good example is Chief Justice (then Judge) John Roberts’ patience in handling a particularly difficult public hearing.  Several years ago, an elderly lawyer requested to testify on a proposed amendment to the Appellate Rules.  I was unable to persuade the lawyer to withdraw the request, even though his request was the only one.  Judge Roberts generously agreed to preside over the hearing by himself on the committee’s behalf.  Witnesses testifying at rules hearings typically are given 10 minutes to make their presentations.  With only Judge Roberts, a stenographer, and me in the hearing room, the lawyer made a 30-minute rambling presentation, which solely addressed a local incident allegedly involving criminal misconduct.  It had absolutely nothing to do with the procedural appellate rule proposal under consideration.  Judge Roberts never interrupted the lawyer.  He patiently listened, genuinely was interested in the lawyer’s story, and responded with courtesy to all the lawyer’s questions.  At the end, the lawyer was satisfied that he had his day in “court” and walked away content.  This is only one of many examples of my experiences with rules committee judges acting in the finest traditions of the federal judiciary.

Nelson: Who is lobbying for changes to the Federal Rules of Civil Procedure (“Rules”) and why?

Rabiej: Most rule amendment proposals are not controversial and are supported by general consensus.  But a few have been especially contentious.  Though rules are designed to apply to all parties in a neutral fashion, they can and do affect parties differently.  When large amounts of money hang in the balance, parties and their representatives go to great pains to make sure that the rules committees take into consideration their concerns and points of view. The current debate on preservation and sanctions issues is the most recent example.  The rules committees welcome such attention and close scrutiny because it leads to better and more informed rulemaking and greater buy-in from the affected parties and interest groups.

A loose coalition of officers from large corporations, corporate counsel, lawyers from large law firms, and interest groups, including Lawyers for Civil Justice, representing corporate and business clientele, is forming to advocate bold changes to the scope of discovery, which would narrow a party’s preservation obligations and limit a party’s vulnerability to spoliation sanctions.  They argue that the cost of preservation is skyrocketing and that the vast bulk of information preserved is unnecessary and has little to do with the merits of a case. They contend that all too often they are compelled by law to preserve voluminous information even though a law suit will never be filed. Opposing them is a similarly loose coalition of plaintiffs’ lawyers, law firms, and interest groups, including the Association for American Justice, representing interests of plaintiff lawyers, who defend the rules’ status quo, contending that little, if any, change is necessary and that any narrowing of the preservation obligation or discovery scope would deny the rights of their clients.  They contend that corporations are obligated under many different sources of law and regulations to preserve records irrespective of litigation demands.  They also contend that any change to the rules would unnecessarily increase the risk of destruction of evidence that is critical to the merits of the case.

Nelson: Are there viable alternatives to changing the Rules?

Rabiej: Lawyers in many cases do not raise any preservation or spoliation sanction issues with the court.  It is unclear to me whether such inaction in an individual case is a consequence of the lawyers’ ignorance of potential eDiscovery issues or of the lawyers’ cooperation in addressing eDiscovery issues before they become problems, which The Sedona Conference® strongly advocates.  (See The Sedona Conference® Cooperation Proclamation).  In wrestling with preservation and spoliation sanction issues, the rules committees recognize that rules rarely provide the entire answer and, in fact, rules typically have only a very limited effect.  Instead, judicial education, training of the bar, and changes in litigation culture offer more promising and permanent solutions.   The rules committees are actively exploring each of these avenues with outside groups, including the Federal Judicial Center and The Sedona Conference® among others, to promote such solutions.

Though the Judicial Conference of the United States strongly opposes direct amendment of the rules by legislation, it recognizes the Congressional prerogative to do so.  Congress has rarely exercised its prerogative, however, giving due deference to the rulemaking process and recognizing that the rules produced under the process are the best.  At the same time, rules committees understand that the Rules Enabling Act limits their authority to promulgating only procedural rules, which do “not abridge, enlarge or modify any substantive right.”  Rules committees are very circumspect about their rulemaking authority.  They are justifiably reluctant to pursue rules proposals that might be viewed by some to exceed their authority and encroach on Congress’s domain.  This “Rules Enabling Act” issue has been raised regarding some aspects of the preservation proposals under consideration. So the rules committees are confronted with issues that raise several exquisitely delicate questions of policy and comity.

Nelson: You’ve been involved in a lot of discussions regarding Rule amendments throughout your career.  How does the current discussion rate in terms of importance?

Rabiej: The current debate on preservation and spoliation sanctions raises issues about the scope of discovery, a major litigation cost.  Because the preservation costs incurred in some cases can be extremely large, the extent of spoliation sanctions for failing to preserve relevant information can be damaging, and the destruction of potentially critical evidence devastating.  It is not surprising that representatives of both plaintiffs and defendants are so passionately pressing their positions before the rule committees.  In my experience, the level of interest in these issues equals the interest shown in only a very few past controversial amendments, including proposals affecting class actions, Daubert evidentiary procedures, and the earlier discovery scope amendments in 2000.   The keen degree of interest in the issues under consideration is reflected by the extent of Congressional participation.  Five House Judiciary Committee members of the minority and majority staffs attended the recent Civil Rules Committee meeting on preservation-related amendments in Washington DC in November.  A hearing before the House Judiciary Subcommittee on the Constitution on preservation costs was recently scheduled, but later postponed until December 13, 2012.  It is clear to me that Congress will take a hard look at preservation costs and burdens.  The rules committees are not blind to Congressional interest.  The rulemaking process is a responsibility shared with Congress and the Executive Branch, and the rules committees give the views of the other two Branches due respect in their deliberations.

John Rabiej is an attorney, The Sedona Conference’s Director for Judicial Outreach, and former Chief of the Rules Committee Support Office.  To learn more about FRCP developments email Matt Nelson at Matt_Nelson@Symantec.com or follow Matt on Twitter at @InfoGovlawer.

Outcry from many in the legal community has caused a number of groups to consider whether the Federal Rules of Civil Procedure (FRCP) should be amended.  The dialogue began in earnest a year ago at the Duke Civil Litigation Conference and picked up speed following an eDiscovery “mini-conference” held in Dallas last month (led by the Discovery Subcommittee –  appointed by the Advisory Committee on Civil Rules).  The rules amendment topic is so hot that the Sedona Conference (WG1) spent most of its two day annual meeting discussing the need for amendments and evaluating a range of competing proposals.

During this dialogue (which I can’t quote verbatim) a number of things became clear to me…

1.  This rules amendment quandary is a bit of a chicken and egg riddle — meaning that it’s hard to cast support wholeheartedly for a rules change if there isn’t a good consensus for what a particular change would accomplish and what the long term consequences might be as technology quickly morphs.  As an example, if there was a redefined preservation trigger that started the duty to preserve when there was a reasonable “certainty” of litigation (versus a mere “likelihood”), would this really make a material impact?  Or, would this inquiry still be as highly fact specific as it is today?  Would this still be similarly prone to the 20/20 hindsight judgment that’s inevitable as well?

2. While it is clear that preservation has become a more complex and risk laden process, it’s not clear that this “pain” is causally related to the FRCP.  In the notes from the Dallas mini-conference, a pending Sedona survey was quoted, referencing the fact that preservation challenges were overwhelmingly increasing:

“[S]ome trends can be noted. 95% (of the surveyed members) agreed that preservation issues were more frequent. 75% said that development was due to the proliferation of information.”

3. Another camp of stakeholders complain that the existing rules (as amended in 2006) aren’t being followed by practitioners or understood by the judiciary.  While this may be the case, it then begs the critical question: If folks aren’t following the amended rules (utilizing proportionality, leveraging FRE 502, etc.) is it really reasonable to think that any new rules would be followed this time around?

4. The role of technology in easing the preservation burden represents another murky area for debate.  For example, it could be argued that preservation pains (i.e., costs) are only really significant for organizations that haven’t deployed state of the art information governance solutions (e.g., legal hold solutions, email archives, records retention software, etc.) to make the requisite tasks less manual.

5. And finally, even assuming that the FRCP is magically re-jiggered to ease preservation costs, this would only impact organizations with litigation in Federal court. This leaves many still exposed to varying standards for the preservation trigger, scope and associated sanctions.

So, in the end, it’s unclear what the future holds for an amended FRCP landscape.  Given the range of divergent perspectives, differing viewpoints on potential solutions and the time necessary to navigate the Rules Enabling Act, the only thing that’s clear is that the cavalry isn’t coming to the rescue any time soon.  This means that organizations with significant preservation pains should endeavor to better utilize the rules that are on the books and deploy enabling technologies where possible.

A federal jury returned a stunning, $919 million verdict yesterday for DuPont in a trade secret theft case.  In E.I. du Pont de Nemours v. Kolon Industries, the verdict was the culmination of a two-and-a-half year battle that DuPont waged against Kolon Industries to prove that Kolon had misappropriated key aspects of its formula for Kevlar®.

The court delivered a decisive blow shortly before trial when it found that Kolon had destroyed emails and other electronically stored information linking it to the trade secret theft.  The sanction for that spoliation was an instruction to the jury that Kolon executives and employees had deleted key evidence after the company’s preservation duty was triggered.

The verdict against Kolon is just the beginning of its problems.  DuPont will now request over $50 million in punitive damages from Kolon, another $30 million for reimbursement of its attorney fees and a permanent injunction forbidding Kolon from using the stolen trade secrets.  Not surprisingly, Kolon’s stock dropped 15% after news of the verdict reached the markets today.

The eDiscovery sanctions order and corresponding verdict make it clear that organizations should invest the time and effort to properly prepare for litigation and discovery.  As we argued in our previous post on the DuPont case, having the right tools in place could have prevented much of the spoliation – and the resulting instruction to the jury – that occurred in the DuPont case.

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.

A famous quote from intellectual George Santayana provides an appropriate backdrop for organizations to better understand why they should deploy technology to strengthen their litigation response effort.  As Santayana explained in The Life of Reason: Reason in Common Sense, “[t]hose who cannot remember the past are condemned to repeat it.”

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.

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

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

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

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

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

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

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

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

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

Magistrate Alba was not convinced:

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

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

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

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

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

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

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

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

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

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

“It was so gnarly I can’t remember.”

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

“Sorry man, didn’t make the rules.”

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

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

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

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

“I’ve got tiger blood and Adonis DNA”

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

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

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

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

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

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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).