e-discovery 2.0

The recent case of Danny Lynn Electrical v. Veolia Es Solid Waste (2012 WL 786843, March 9, 2012) showcases the value of an information archive from a compliance and eDiscovery perspective. In Danny Lynn Electrical the plaintiff sought sanctions against the defendant for the spoliation of electronic evidence, including the usual blend of monetary sanctions, adverse evidentiary inferences and the striking of affirmative defenses. Plaintiff argued that the defendant “blatantly disregarded their duty to preserve electronic information” by failing to implement an effective legal hold policy and deleting email after litigation began. In rejecting plaintiff’s claims, the court concluded that sanctions on the basis of spoliation of evidence were not warranted.

The court, in a harbinger of good things to come for the defendant, questioned “whether any spoliation of electronic evidence has actually occurred.” In finding that there wasn’t any spoliation, the court relied heavily on the fact that the defendant had recently deployed an email archive:

“[T]here is no evidence that any of the alleged emails, with the exception of the few that were accidentally deleted due to a computer virus or other unforseen [sic] circumstance, were permanently deleted from the defendants’ computer system. … VESNA began using a new software system which archives all emails on the VESNA network. Therefore, it is clear to the court that the defendant preserved email from its custodians in a backup or archive system.”

In combination with the deployed archive, the court also noted that plaintiff’s arguments were devoid of substantive evidence to support their spoliation claims:

“In order to impose sanctions against the defendants, this court ‘would have to substitute Plaintiffs’ speculation for actual proof that critical evidence was in fact lost or destroyed.”

The rejection of plaintiff’s spoliation claims in Danny Lynn Electrical reinforces the long held notion that information archives[i] have tremendous utility beyond the data management/minimization benefits that were the early drivers of archive adoption. This prophylactic, information governance benefit is particularly useful when the archive goes beyond email to additionally capture loose files, social media and other unstructured content.

As we said in 2011, organizations are already finding that other sources of electronically stored information (ESI) like documents/files and unstructured data are rivaling email in importance for eDiscovery requests, and this trend shows no signs of abating, particularly for regulated industries. This increasingly heterogeneous mix of ESI certainly results in challenges for many organizations, with some unlucky ones getting sanctioned (unlike the defendant Danny Lynn Electrical ) because they ignored these emerging data types.

The good news is that modern day archives have the ability to manage (preserve, categorize, defensibly delete, etc.) ESI from a wide range of sources beyond just email. Given cases like Danny Lynn Electrical it’s increasingly a layup to build the business case for an archive project (assuming your organization doesn’t have one deployed already). Further pushing the archiving play to the top of the stack is the ability to deploy in the cloud context, in addition to traditional on premise deployments.

The Danny Lynn Electrical case also shows how an upstream, proactive information governance program can have an impact in the downstream, reactive eDiscovery context. It is the linking of the yin and yang of the proactive and reactive concepts where an end to end paradigm starts to fulfill the long anticipated destiny of true information governance. As the explosion of data continues to mushroom unabated, it’s only this type of holistic information management regime that will keep eDiscovery chaos at bay.

The increase in globalization continues to erase borders throughout the world economy. Organizations now routinely conduct business in countries that were previously unknown to their industry vertical.  The trend of global integration is certain to increase, with reports such as the Ernst & Young 2011 Global Economic Survey confirming that 74% of companies believe that globalization, particularly in emerging markets, is essential to their continued vitality.

Not surprisingly, this trend of global integration has also led to a corresponding increase in cross-border litigation. For example, parties to U.S. litigation are increasingly seeking discovery of electronically stored information (ESI) from other litigants and third parties located in the United Kingdom and Continental Europe. Since traditional methods under the Federal Rules of Civil Procedure (FRCP) may be unacceptable for discovering ESI in those forums, the question then becomes how such information can be obtained.

At this point, many clients and their counsel are unaware how to safely navigate these treacherous international waters. The short answer for how to address these issues for much of Europe would be to resort to the Hague Convention of March 18, 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters (Hague Convention). Simply referring to the Hague Convention, however, would ignore the complexities of electronic discovery in Europe. Worse, it would sidestep the glaring knowledge gap that exists in the United States regarding the cultural differences distinguishing European litigation from American proceedings.

The ability to bridge this gap with an awareness of the discovery processes in Europe is essential. Understanding that process is similar to holding a valid passport for international travel. Just as a passport is required for travelers to successfully cross into foreign lands, an “eDiscovery Passport™” is likewise necessary for organizations to effectively conduct cross-border discovery.

The Playing Field for Discovery in Europe

Litigation in Europe and the United Kingdom is culturally distinct from American court proceedings. “Discovery,” as it is known in the United States, does not exist in Europe. Instead, European countries generally allow only a limited exchange of documents. Typically referred to as “disclosure,” parties are obligated to disclose only that information that supports their claims. Interrogatories, categorical document requests and requests for admissions are simply unavailable as European disclosure devices.

The U.S. Court of Appeals for the Seventh Circuit recently commented on this key distinction between European disclosure and American discovery when it observed that “the German legal system . . . does not authorize discovery in the sense of Rule 26 of the Federal Rules of Civil Procedure.” The court went on to explain that “[a] party to a German lawsuit cannot demand categories of documents from his opponent. All he can demand are documents that he is able to identify specifically—individually, not by category.” Heraeus Kulzer GmbH v. Biomet, Inc., 633 F.3d 591, 596 (7th Cir. 2011). Indeed, only in the United Kingdom may a party be required to disclose to the other side information adverse to its claims. And such an obligation does not arise until after a court issues a standard disclosure order.

Another key distinction to disclosure in Europe is the lack of rules or case law requiring the preservation of ESI or paper documents. This stands in sharp contrast to American jurisprudence, which typically requires organizations to preserve information as soon as they reasonably anticipate litigation. See, e.g., Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311, 1320 (Fed.Cir. 2011). While an implied preservation duty could arise if a court ordered the disclosure of certain materials, the penalties for European non-compliance are typically not as severe as those issued by American courts.

Only in the United Kingdom has it been suggested that parties should take affirmative steps to prepare for litigation. According to the High Court in Earles v Barclays Bank Plc [2009] EWHC 2500 (Mercantile) (08 October 2009), this includes having “an efficient and effective information management system in place to provide identification, preservation, collection, processing, review analysis and production of its ESI in the disclosure process in litigation and regulation.” For organizations looking to better address these issues, a strategic and intelligent information governance plan offers perhaps the best chance to do so.

Given this cultural hostility to pre-trial discovery, it should come as no surprise that international eDiscovery requests made pursuant to the Hague Convention are frequently denied. Requests are often rejected because they are overly broad and violate the principle of proportionality that governs litigation throughout Europe.  In addition, some countries such as Italy simply refuse to honor requests for pre-trial discovery from “common law countries” like the United States. Moreover, other countries like Austria are not signatories to the Hague Convention and will not accept requests made pursuant to that treaty. To obtain ESI from those countries, litigants must take their chances with the cumbersome and time-consuming process of submitting letters rogatory through the U.S. State Department. Finally, requests for information that seek email or other “personal information” (i.e., information that could be used to identify a person) must additionally satisfy a patchwork of strict European data protection rules.

Obtaining an eDiscovery Passport

This backdrop of complexity underscores the need for both lawyers and laymen to understand the basic principles governing eDisclosure in Europe.  Such a task should not be seen as daunting. There are resources that provide straightforward answers to these issues at no cost to the end-user. For example, Symantec has just released a series of eDiscovery Passports™ that touch on the basic issues underlying disclosure and data privacy in the United Kingdom, France, Germany, Holland, Belgium, Austria, Switzerland, Italy and Spain. Organizations such as The Sedona Conference have also made available materials that provide significant detail on these issues, including its recently released International Principles on Discovery, Disclosure and Data Protection.

These resources can provide valuable information to clients and counsel alike and better prepare litigants for the challenges of pursuing legal rights across international boundaries. By so doing, organizations can moderate the effects of legal risk and more confidently pursue their globalization objectives.

Shortly after arriving in Wellington, New Zealand, I picked up the Dominion Post newspaper and read its lead article: a story involving U.S. jurisdiction being exercised over billionaire NZ resident Mr. Kim Dotcom. The article reinforced the challenges we face with blurred legal and data governance issues presented by the globalization of the economy and the expansive reach of the internet. Originally from Germany, and having changed his surname to reflect the origin of his fortune, Mr. Dotcom has become all too familiar in NZ of late. He has just purchased two opulent homes in NZ, and has become an internationally controversial figure for internet piracy. Mr. Dotcom’s legal troubles arise out of his internet business that enables illegal downloads of pirated material between users, which allegedly is powering the largest copyright infringement in global history. It is approximated that his website constitutes 4% of the internet traffic in the world, which means there could be tons of discovery in this case (or, cases).

The most recent legal problems Mr. Dotcom faces are with U.S. authorities who want to extradite him to face copyright charges worth $500 million by his Megaupload file-sharing website. From a criminal and record-keeping standpoint, Mr. Dotcom’s issues highlight the need for and use of appropriate technologies. In order to establish a case against him, it’s likely that search technologies were deployed by U.S. intelligence agencies to piece together Mr. Dotcom’s activities, banking information, emails and the data transfers on his site. In a case like this, where intelligence agencies would need to collect, search and cull email from so many different geographies and data sources down to just the relevant information, using technologies that link email conversation threads and give insight into a data collection set from a transparent search point of view would provide immense value. Additionally, the Immigration bureau in New Zealand has been required to release hundreds of documents about Mr. Dotcom’s residency application that were requested under the Official Information Act (OIA). The records that Immigration had to produce were likely pulled from their archive or records management system in NZ, and then redacted for private information before production to the public.

The same tools are needed in Australia and New Zealand to build a criminal case or to comply with the OIA that we use here in the U.S for investigatory and compliance purposes, as well as for litigation. The trend in information governance technology in APAC is trending first toward government agencies who are purchasing archiving and eDiscovery technologies more rapidly than private companies. Why is this? One reason could be that because the governments in APAC have a larger responsibility for healthcare, education and the protection of privacy; they are more invested in the compliance requirements and staying off the front page of the news for shortcomings. APAC private enterprises that are small or mid-sized and are not yet doing international business do not have the same archiving and eDiscovery needs large government agencies do, nor do they face litigation in the same way their American counterparts do. Large global companies should assume no matter where they are based, that they may be availed to litigation where they are doing business.

An interesting NZ use case on the enterprise level is that of Transpower (the quasi-governmental energy agency), where compliance with both the “private and public” requirements are mandatory. Transpower is an organisation that is government-owned, yet operates for a profit. Sally Myles, an experienced records manager that recently came to Transpower to head up information governance initiatives, says,

“We have to comply with the Public Records Act of 2005, public requests for information are frequent as we and are under constant scrutiny about where we will develop our plants. We also must comply with the Privacy Act of 1993. My challenge is to get the attention of our leadership to demonstrate why we need to make these changes and show them a plan for implementation as well as cost savings.”

Myles’ comments indicate NZ is facing many of the same information challenges we are here in the US with storage, records management and searching for meaningful information within the organisation.

Australia, New Zealand and U.S. Commonalities

In Australia and NZ, litigation is not seen as a compelling business driver the same way it is in the U.S. This is because many of the information governance needs of organisations are driven by regulatory, statutory and compliance requirements and the environment is not as litigious as it is in the U.S. The Official Information Act in NZ, and the Freedom of Information in Australia, are analogous to the Freedom of Information Act (FOIA) here in the U.S. The requirements to produce public records alone justify the use of technology to provide the ability to manage large volumes of data and produce appropriately redacted information to the public. This is true regardless of litigation. Additionally, there are now cases like DuPont or Mr. Dotcom’s, that legitimatize the risk of litigation with the U.S. The fact that implementing an information governance product suite will also enable a company to be prepared for litigation is a beneficial by-product for many entities as they need technology for record keeping and privacy reasons anyway. In essence, the same capabilities are achieved at the end of the day, regardless of the impetus for implementing a solution.

The Royal Commission – The Ultimate eDiscovery Vehicle

One way to think about the Australian Royal Commission (RCs) is to see it as a version of the U.S.’ government investigation. A key difference, however, is that in the case of the U.S. government, an investigation is typically into private companies. Conversely, a Royal Commission is typically an investigation into a government body after a major tragedy and it is initiated by the Head of State. A RC is an ad-hoc, formal, public inquiry into a defined issue with considerable discovery powers. These powers can be greater than those of a judge and are restricted to the scope and terms of reference of the Commission. RCs are called to look into matters of great importance and usually have very large budgets. The RC is charged with researching the issue, consulting experts both within and outside of government and developing findings to recommend changes to the law or other courses of actions. RCs have immense investigatory powers, including summoning witnesses under oath, offering of indemnities, seizing of documents and other evidence (sometimes including those normally protected, such as classified information), holding hearings in camera if necessary and—in a few cases—compelling government officials to aid in the execution of the Commission.

These expansive powers give the RC the opportunity to employ state of the art technology and to skip the slow bureaucratic decision making processes found within the government when it comes to implementing technological change. For this reason, initially, eDiscovery will continue to increase in the government sector at a more rapid pace than in the private in the Asia Pacific region. This is because litigation is less prevalent in the Asia Pacific, and because the RC is a unique investigatory vehicle with the most far-reaching authority for discovering information. Moreover, the timeframes for RCs are tight and their scopes are broad, making them hair on fire situations that move quickly.

While the APAC information management environment does not have the exact same drivers the U.S. market does, it definitely has the same archiving, eDiscovery and technology needs for different reasons. Another key point is that the APAC archiving and eDiscovery market will likely be driven by the government as records, search and production requirements are the main compliance needs in Australia and NZ. APAC organisations would be well served by beginning to modularly implement key elements of an information governance plan, as globalization is driving us all to a more common and automated approach to data management. 

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