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Fulbright Litigation Survey Calls Out Need for More Proportionality/Rules Changes

Thursday, November 11th, 2010

Fulbright & Jaworski recently issued its “7th Annual Litigation Trends Survey Report” and there were several interesting trends worth noting.   Not surprisingly, the general pace of litigation is forecast to increase upwards, relatively unabated, with more than 25% of respondents expecting their companies’ disputes to increase in the next 12 months.

Beyond this trend it’s clear that there’s also groundswell of support for a movement towards more e-discovery proportionality.  While also a big topic at Sedona’s annual conference (and discussed in the recent Moody case), a whopping 79% of US respondents think the “US Rules of Civil Procedure should be modified in some way to limit e-discovery in civil cases.”  While I haven’t heard of any specific proposals for a rules amendment, it’s clear that folks aren’t happy with the status quo, particularly with the increasing discovery burden facing enterprises dealing with unilateral disputes.   This discontent is likely tied to the fact that costs continue to escalate, with the survey indicating that more than 40% of the largest US companies (over $1B in Revenue) plan to “increase their spending on e-discovery in the next 12 months.”

Finally, the survey also focused on an area that’s getting an increasing level of scrutiny.   Fulbright asked “when preserving potentially relevant information in litigation or an investigation, what methods do you use most frequently for preserving electronically stored information?”  Leading the pack, with 55% of vote, was “rely on individual custodians to identify and preserve their own information.”  Custodian based collections have been discussed recently as being under fire in blogs and other recent cases such as Pension Committee and Ford Motor Co. v. Edgewood Properties Inc. The notion is that under- or un-supervised collection methodologies are dangerous because it’s relatively easy to paint the custodians at issue as either being motivated to hide responsive data or relatively unconcerned with compliance.  Nevertheless, it’s clear that (as of now) custodian-based collections are still somewhat “reasonable” given that more than 50% of the populous collects data this way.

On the other side of the spectrum from custodian based ESI collections, there are automated data collection tools and methods that can be considered too.  There are undoubtedly advantages (risk reduction, speed, audit trails, etc.)  to using “automated search software” for the collection of data (like 43% of the respondents did in the Fulbright survey).  Yet, it’s clear this isn’t a zero sum game – meaning there’s currently a place for both methodologies in the legal landscape.  For many organizations it becomes a risk management exercise as summarized in a recent  ARMA article entitled “Is ‘Manual’ Collection of ESI Defensible?”: “Companies may choose the manual collection of ESI to reduce costs, particularly if they have limited levels of litigation or lower risk levels posed by the litigation itself.”

In the end, like so many aspects of electronic discovery, almost any well thought out, well documented methodology *can* be defensible, but the onus is on the preserving/collecting party to buttress whatever poison they pick.  Defaulting into a method without preparation, auditing and follow-through is a recipe for disaster.

Manual Collections of ESI in Electronic Discovery Come under Fire

Monday, May 17th, 2010

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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