e-discovery 2.0

Unless you’re an octogenarian living in rural Uzbekistan[i] you’ve likely seen the meteoric rise of social media over the last decade. Even beyond hyper-texting teens, businesses too are taking advantage of this relatively new form function to engage with their more technically savvy customers. Recently, Symantec held its first “Twitter Chat” on the topic of information governance (fondly referred to on Twitter as #InfoGov). For those not familiar with the concept, a Twitter Chat is a virtual discussion held on Twitter using a specific hashtag – in this case #IGChat. At a set date and time, parties interested in the topic log into Twitter and start participating in the fireworks on the designated hashtag.

“Fireworks” may be a bit overstated, but given that the moderators (eDiscovery Counsel at Symantec) and participants were limited to 140 characters, the “conversation” was certainly frenetic. Despite the fast pace, one benefit of a Twitter Chat is that you can communicate with shortened web links, as a way to share and discuss content beyond the severely limited word count. During this somewhat staccato discussion, we found the conversation to take some interesting twists and turns, which I thought I’d excerpt (and expound upon[ii]) in this blog.

Whether in a Twitter Chat or otherwise, once the discussion of information governance begins everyone wants to know where to start. The #IGChat was no different.

• Where to begin?  While there wasn’t consensus per se on a good starting place, one cogent remark out of the blocks was: “The best way to start is to come up with an agreed upon definition — Gartner’s is here t.co/HtGTWN2g.” While the Gartner definition is a good starting place, there are others out there that are more concise. The eDiscovery Journal Group has a good one as well:  “Information Governance is a comprehensive program of controls, processes, and technologies designed to help organizations maximize the value of information assets while minimizing associated risks and costs.”  Regardless of the precise definition, it’s definitely worth the cycles to rally around a set construct that works for your organization.

• Who’s on board?  The next topic centered around trying to find the right folks organizationally to participate in the information governance initiative. InfoGovlawyer chimed in: “Seems to me like key #infogov players should include IT, Compliance, Legal, Security reps.” Then, PhilipFavro suggested that the “[r]ight team would likely include IT, legal, records managers, pertinent business units and compliance.” Similar to the previous question, at this stage in the information governance maturation process, there isn’t a single, right answer. More importantly, the team needs to have stakeholders from at least Legal and IT, while bringing in participants from other affected constituencies (Infosec, Records, Risk, Compliance, etc.) – basically, anyone interested in maximizing the value of information while reducing the associated risks.

• Where’s the ROI?  McManusNYLJ queried: “Do you think #eDiscovery, #archiving and compliance-related technology provide ample ROI? Why or why not?”  Here, the comments came in fast and furious. One participant pointed out that case law can be helpful in showing the risk reduction:  “Great case showing the value of an upstream archive – Danny Lynn t.co/dcReu4Qg.” AlliWalt chimed in: “Yes, one event can set your company back millions…just look at the Dupont v. Kolon case… ROI is very real.” Another noted that “Orgs that take a proactive approach to #eDiscovery requests report a 64% faster response time, 2.3x higher success rate.” And, “these same orgs were 78% less likely to be sanctioned and 47% less likely to be legally compromised t.co/5dLRUyq6.” ROI for information governance seemed to be a nut that can be cracked any number of ways, ranging from risk reduction (via sanctions and adverse legal decisions) to better preparation. Here too, an organization’s particular sensitivities should come into play since all entities won’t have the same concerns about risk reduction, for example.

• Getting Granular. Pegduncan, an active subject matter expert on the topic, noted that showing ROI was the right idea, but not always easy to demonstrate: “But you have to get their attention. Hard to do when IT is facing funding challenges.” This is when granular eDiscovery costs were mentioned: “EDD costs $3 -18k per gig (Rand survey) and should wake up most – adds up w/ large orgs having 147 matters at once.” Peg wasn’t that easily convinced: “Agreed that EDD costs are part of biz case, but .. it’s the problem of discretionary vs non-discretionary spending.”
• Tools Play a Role. One participant asked: “what about tools for e-mail thread analysis, de-duplication, near de-duplication – are these applicable to #infogov?” A participant noted that “in the future we will see tools like #DLP and #predictivecoding used for #infogov auto-classification – more on DLP here: t.co/ktDl5ULe.” Pegduncan chimed in that “DLP=Data Loss Prevention. Link to Clearwell’s post on Auto-Classification & DLP t.co/ITMByhbj.”

With a concept as broad and complex as information governance, it’s truly amazing that a cogent “conversation” can take place in a series of 140 character tweets. As the Twitter Chat demonstrates, the information governance concept continues to evolve and is doing so through discussions like this one via a social media platform. As with many of the key information governance themes (Ownership, ROI, Definition, etc.) there isn’t a right answer at this stage, but that isn’t an excuse for not asking the critical questions. “Sooner started, sooner finished” is a motto that will serve many organizations well in these exciting times. And, for folks who say they can’t spare the time, they’d be amazed what they can learn in 140 characters.

Mark your calendars and track your Twitter hashtags now: The next #IGChat will be held on July 26 @ 10am PT.

Those old enough to have watched TV in the early eighties will undoubtedly remember the FRAM oil slogan where the mechanic utters his iconic catchphrase: “You can pay me now, or pay me later.”  The gist of the vintage ad was that the customer could either pay a small sum now for the replacement of oil filter, or a far greater sum later for the replacement of the car’s entire engine.

This choice between two unpleasant alternatives is sometimes called a Morton’s Fork (but typically only when both choices are equal in difficulty).  The saying (not to be confused with the equally colorful Hobson’s Choice) apparently originated with the collection of taxes by John Morton (the Archbishop of Canterbury) in the late 15th century.  Morton was apparently fond of saying that a man living modestly must be saving money and could therefore afford to pay taxes, whereas if he was living extravagantly then he was obviously rich and could still afford them.[i]

This “pay me now/pay me later” scenario perplexes many of today’s organizations as they try to effectively govern (i.e., understand, discover and retain) electronically stored information (ESI).  The challenge is similar to the oil filter conundrum, in that companies can often make rather modest up-front retention/deletion decisions that help prevent monumental, downstream eDiscovery charges.

This exponential gap has been illustrated recently by a number of surveys contrasting the cost of storage with the cost of conducting basic eDiscovery tasks (such as preservation, collection, processing, review and production).  In a recent AIIM webcast it was noted that “it costs about 20¢/day to buy 1GB of storage, but it costs around $3,500 to review that same gigabyte of storage.” And, it turns out that the $3,500 review estimate (which sounds prohibitively expensive, particularly at scale) may actually be on the conservative side.  While the review phase is roughly 70 percent of the total eDiscovery costs – there is the other 30% that includes upstream costs for preservation, collection and processing.

Similarly, in a recent Enterprise Strategy Group (ESG) paper the authors noted that eDiscovery costs range anywhere from $5,000 to $30,000 per gigabyte, citing the Minnesota Journal of Law, Science & Technology.  This $30,000 figure is also roughly in line with other per-gigabyte eDiscovery costs, according to a recent survey by the RAND Corporation.  In an article entitled “Where the Money Goes — Understanding Litigant Expenditures for Producing Electronic Discovery” authors Nicholas M. Pace and Laura Zakaras conducted an extensive analysis and concluded that “… the total costs per gigabyte reviewed were generally around $18,000, with the first and third quartiles in the 35 cases with complete information at $12,000 and $30,000, respectively.”

Given these range of estimates, the $18,000 per gigabyte metric is probably a good midpoint figure that advocates of information governance can use to contrast with the exponentially lower baseline costs of buying and maintaining storage.  It is this stark (and startling) gap between pure information costs and the expenses of eDiscovery that shows how important it is to calculate latent “information risk.”  If you also add in the risks for sanctions due to spoliation, the true (albeit still murky) information risk portrait comes into focus.  It is this calculation that is missing when legal goes to bat to argue about the necessity of information governance solutions, particularly when faced with the host of typical objections (“storage is cheap” … “keep everything” … “there’s no ROI for proactive information governance programs”).

The good news is that as the eDiscovery market continues to evolve, practitioners (legal and IT alike) will come to a better and more holistic understanding of the latent information risk costs that the unchecked proliferation of data causes.  It will be this increased level of transparency that permits the budding information governance trend to become a dominant umbrella concept that unites Legal and IT.

It’s no surprise that the eDiscovery frenzy gripping the American legal system over the past decade has become increasingly expensive.  Particularly costly to organizations is the process of preserving and collecting documents, a fact repeatedly emphasized by the Advisory Committee in its report regarding the 2006 amendments to the Federal Rules of Civil Procedure (FRCP).  These aspects of discovery are often lengthy and can be disruptive to business operations.  Just as troubling, they increase the duration and expense of litigation.

Because these costs and delays affect the courts as well as clients, it comes as no surprise that judges have now heightened their expectation for how organizations store, manage and discover their electronically stored information (ESI).  Gone are the days when enterprises could plead ignorance for not preserving or producing their data in an efficient, cost effective and defensible manner.  Organizations must now follow best practices – both during and before litigation – if they are to safely navigate the stormy seas of eDiscovery.

The importance of deploying such practices applies acutely to those organizations that are exploring “cloud”-based alternatives to traditional methods for preserving and producing electronic information.  Under the right circumstances, the cloud may represent a fantastic opportunity to streamline the eDiscovery process for an organization.  Yet it could also turn into a dangerous liaison if the cloud offering is not properly scrutinized for basic eDiscovery functionality.  Indeed, the City of Los Angeles’s recent decision to partially disengage from its cloud service provider exemplifies this admonition to “look before you leap” to the cloud.  Thus, before selecting a cloud provider for eDiscovery, organizations should be particularly careful to ensure that a provider has the ability both to efficiently retrieve data from the cloud and to issue litigation hold notices.

Effective Data Retrieval Requires Efficient Data Storage

The hype surrounding the cloud has generally focused on the opportunity for cheap and unlimited storage of information.  Storage, however, is only one of many factors to consider in selecting a cloud-based eDiscovery solution.  To be able to meet the heightened expectations of courts and regulatory bodies, organizations must have the actual – not theoretical – ability to retrieve their data in real time.  Otherwise, they may not be able to satisfy eDiscovery requests from courts or regulatory bodies, let alone the day-to-day demands of their operations.

A key step to retrieving company data in a timely manner is to first confirm whether the cloud offering can intelligently organize that information such that organizations can quickly respond to discovery requests and other legal demands.  This includes the capacity to implement and observe company retention protocols.  Just like traditional data archiving software, the cloud must enable automated retention rules and thus limit the retention of information to a designated time period.  This will enable data to be expired once it reaches the end of that period.

The pool of data can be further decreased through single instance storage.  This deduplication technology eliminates redundant data by preserving only a master copy of each document placed into the cloud.  This will reduce the amount of data that needs to be identified, preserved, collected and reviewed as part of any discovery process.  For while unlimited data storage may seem ideal now, reviewing unlimited amounts of data will quickly become a logistical and costly nightmare.

Any viable cloud offering should also have the ability to suspend automated document retention/deletion rules to ensure the adequate preservation of relevant information.  This goes beyond placing a hold on archival data in the cloud.  It requires that an organization have the ability to identify the data sources in the cloud that may contain relevant information and then modify aspects of its retention policies to ensure that cloud-stored data is retained for eDiscovery.  Taking this step will enable an organization to create a defensible document retention strategy and be protected from court sanctions under the Federal Rule of Civil Procedure 37(e) “safe harbor.”  The decision from Viramontes v. U.S. Bancorp (N.D. Ill. Jan. 27, 2011) is particularly instructive on this issue.

In Viramontes, the defendant bank defeated a sanctions motion because it timely modified aspects of its email retention policy.  The bank implemented a policy that kept emails for 90 days, after which the emails were deleted.  That policy was promptly suspended, however, once litigation was reasonably foreseeable.  Because the bank followed that procedure in good faith, it was protected from sanctions under Rule 37(e).

As the Viramontes case shows, an organization can be prepared for eDiscovery disputes by appropriately suspending aspects of its document retention policies.  By creating and then faithfully observing a policy that requires retention policies be suspended on the occurrence of litigation or other triggering event, an organization can develop a defensible retention procedure. Having such eDiscovery functionality in a cloud provider will likely facilitate an organization’s eDiscovery process and better insulate it from litigation disasters.

The Ability to Issue Litigation Hold Notices

To be effective for eDiscovery purposes, a cloud service provider must also enable an organization to deploy a litigation hold to prevent users from destroying data. Unless the cloud has litigation hold technology, the entire discovery process may very well collapse.  For electronic data to be produced in litigation, it must first be preserved.  And it cannot be preserved if the key players or data source custodians are unaware that such information must be retained.  Indeed, employees and data sources may discard and overwrite electronically stored information if they are oblivious to a preservation duty.

A cloud service provider should therefore enable automated legal hold acknowledgements.  Such technology will allow custodians to be promptly and properly notified of litigation and thereby retain information that might otherwise have been discarded.  Inadequate litigation hold technology leaves organizations vulnerable to data loss and court punishment.

Conclusion

Confirming that a cloud offering can quickly retrieve and efficiently store enterprise data while effectively deploying litigation hold notices will likely address the basic concerns regarding its eDiscovery functionality. Yet these features alone will not make that solution the model of eDiscovery cloud providers. Advanced search capabilities should also be included to reduce the amount of data that must be analyzed and reviewed downstream. In addition, the cloud ought to support load files in compatible formats for export to third party review software. The cloud should additionally provide an organization with a clear audit trail establishing that neither its documents, nor their metadata were modified when transmitted to the cloud.  Without this assurance, an organization may not be able to comply with key regulations or establish the authenticity of its data in court. Finally, ensure that these provisions are memorialized in the service level agreement governing the relationship between the organization and the cloud provider.

The EDGE Summit this week is one of the most prestigious eDiscovery events of the year as well as arguably the largest for the government sector. This year’s topics and speakers are top notch. The opening keynote speaker will be the Director of Litigation for the National Archives and Records Administration (NARA), Mr. Jason Baron. The EDGE Summit will be the first appearance for Mr. Baron since the submission deadline for the 480 agencies to submit their reports to his Agency in order to construct the Directive required by the Presidential Mandate. Attendees will be eager to hear what steps NARA is taking to implement a Directive to the government later this year, and the potential impact it will have on how the government approaches its eDiscovery obligations. The Directive will be a significant step in attempting to bring order to the government’s Big Data challenges and to unify agencies with a similar approach to an information governance plan.

Also speaking at EDGE is the renowned Judge Facciola who will be discussing the anticipated updates the American Bar Association (ABA) is expected to make to the Model Rules of Professional Conduct. He plans to speak on the challenges that lawyers are facing in the digital age, and what that means with regard to competency as a practicing lawyer. He will focus as well on the government lawyer and how they can better meet their legal obligations through education, training, or knowing when and how to find the right expert. Whether it is the investigating party for law enforcement, producing party under the Freedom of Information Act (FOIA), or defendant in civil litigation, Judge Facciola will also discuss what he sees in his courtroom every day and where the true knowledge gaps are in the technological understanding of many lawyers today.

While the EDGE Summit offers CLE credit, it also has a very unique practical aspect as well. There will be a FOIA-specific lab, a lab on investigations, one on civil litigation and early case assessment (ECA) and also one on streamlining the eDiscovery workflow process. Those that plan on attending the labs will get the hands-on experience with technology that few educational events offer. It is rare to get in the driver’s seat of the car on the showroom floor and actually drive, which is what EDGE is providing for end users and interested attendees. When talking about the complex problems government agencies face today with Big Data, records management, information governance, eDiscovery, compliance, security, etc. it is necessary to give users a way to  truly visualize how these technologies work.

Another key draw at the Summit will be the panel discussions which will feature experienced government lawyers who have been on the front lines of litigation and have very unique perspectives. The legal hold panel will cover some exciting aspects of the evolution of manual versus automated processes for legal hold. Mr. David Shonka, the Deputy General Counsel of the Federal Trade Commission, is on the panel and he will discuss the defensibility of the process the FTC used and the experience his department had with two 30 (b) (6) witnesses in the Federal Trade Commission v. Lights of America, Inc (CD California, Mar 2011). The session will also cover how issuing a legal hold is imperative once the duty to preserve has been triggered. There are a whole new generation of lawyers that are managing the litigation hold process in an automated way, and it will be great to discuss both the manual and automated approaches and talk about best practices for government agencies. There will also be a session on predictive coding and discussion about the recent cases that have involve the use of technology assisted review. While we are not at the point of mainstream adoption for predictive coding, it is quite exciting to think about the government going from a paper world straight into solutions that would help them manage their unique challenges as well as save them time and money.

Finally, the EDGE Summit will conclude with closing remarks from The Hon. Michael Chertoff, former Secretary of the U.S. Department of Homeland Security from 2005 to 2009. Mr. Chertoff presently consults with high-level strategic counsel to corporate and government leaders on a broad range of security issues, from risk identification and prevention to preparedness, response and recovery. All of these issues now involve data and how to search, collect, analyze, protect and store it. Security is one of the most important aspects of information governance. The government has unique challenges including size and many geographical locations, records management requirements, massive data volume and case load, investigations, heightened security and defense intelligence risks. This year, in particular, will be a defining year; not only because of the Presidential Mandate, but because of the information explosion and the stretch of global economy. This is why the sector needs to come together to share best practices and hear success stories.  Otherwise, they won’t be able to keep up with the data explosion that’s threatening private and public sectors alike.

It is fortunately becoming clearer that organizations do not need to preserve information until litigation is “reasonably anticipated.” In Brigham Young University v. Pfizer (D. Utah Apr. 16, 2012), the court denied the plaintiff university’s fourth motion for discovery sanctions against Pfizer, likely ending its chance to obtain a “game-ending” eDiscovery sanction. The case, which involves disputed claims over the discovery and development of prominent anti-inflammatory drugs, is set for trial on May 29, 2012.

In Brigham Young, the university pressed its case for sanctions against Pfizer based on a vastly expanded concept of a litigant’s preservation duty. Relying principally on the controversial Phillip M. Adams & Associates v. Dell case, the university argued that Pfizer’s “duty to preserve runs to the legal system generally.” The university reasoned that just as the defendant in the Adams case was “sensitized” by earlier industry lawsuits to the real possibility of plaintiff’s lawsuit, Pfizer was likewise put on notice of the university’s claims due to related industry litigation.

The court rejected such a sweeping characterization of the duty to preserve, opining that it was “simply too broad.” Echoing the concerns articulated by the Advisory Committee when it framed the 2006 amendments to the Federal Rules of Civil Procedure (FRCP), the court took pains to emphasize the unreasonable burdens that parties such as Pfizer would face if such a duty were imposed:

“It is difficult for the Court to imagine how a party could ever dispose of information under such a broad duty because of the potential for some distantly related litigation that may arise years into the future.”

The court also rejected the university’s argument because such a position failed to appreciate the basic workings of corporate records retention policies. As the court reasoned, “[e]vidence may simply be discarded as a result of good faith business procedures.” When those procedures operate to inadvertently destroy evidence before the duty to preserve is triggered, the court held that sanctions should not issue: “The Federal Rules protect from sanctions those who lack control over the requested materials or who have discarded them as a result of good faith business procedures.”

The Brigham Young case is significant for a number of reasons. First, it reiterates that organizations need not keep electronically stored information (ESI) for legal or regulatory purposes until the duty to preserve is reasonably anticipated. As American courts have almost uniformly held since the 1997 case of Concord Boat Corp. v. Brunswick Corp., organizations are not required to keep every piece of paper, every email, every electronic document and every back up tape.

Second, Brigham Young emphasizes that organizations can and should use document retention protocols to rid themselves of data stockpiles. Absent a preservation duty or other exceptional circumstances, paring back ESI pursuant to “good faith business procedures” (such as a neutral retention policy) will be protected under the law.

Finally, Brigham Young narrows the holding of the Adams case to its particular facts. The Adams case has been particularly troublesome to organizations as it arguably expanded their preservation duty in certain circumstances. However, Brigham Young clarified that this expansion was unwarranted in the instant case, particularly given that Pfizer documents were destroyed pursuant to “good faith business procedures.”

In summary, Brigham Young teaches that organizations will be protected from eDiscovery sanctions to the extent they destroy ESI in good faith pursuant to a reasonable records retention policy. This will likely bring a sigh of relief to enterprises struggling with the information explosion since it encourages confident deletion of data when the coast is clear of a discrete litigation event.

The buzz in the eDiscovery world has focused on predictive coding and the related order issued last month in the Da Silva Moore v. Publicis Groupe case. Yet in that order, the Moore court emphasized that predictive coding would not become the exclusive tool for eDiscovery. The strong inference from the Moore case was that organizations should be prepared to deploy any number of tools in addition to predictive coding technology to effectively and efficiently address discovery obligations. To ignore these other weapons in the litigator’s arsenal would be to put the client’s case at risk.

This point was emphasized last month in a Wasted Costs Order originating from the United Kingdom. In West African Gas Pipeline Company Limited (WAPCo) v. Willbros Global Holdings Inc., the High Court ordered the claimant to pay the defendant a minimum of £135,000 after finding the claimant “failed to provide proper disclosure” under the Civil Procedure Rules. A subsequent hearing was also held to determine the additional costs the claimant must pay to address its shortcomings in discovery (called “disclosure” in the UK).

The principal basis for the High Court’s Civil Procedure Rule 44.3 cost order was the claimant’s failure to properly deduplicate documents. As the court observed, “a significant proportion of duplicates had not been removed,” which was due to “a problem with the de-duplication process.” In rendering its order, the court concluded that: “Whilst I accept that de-duplication of electronic documents has a number of technically complex facets, if appropriate software is properly applied it can remove multiple copies of the same or similar documents.”

As renowned eDiscovery thought leader Chris Dale recently observed in a post regarding this issue, a deduplication failure in 2012 might rightfully be perceived as either old news or even small potatoes. Yet just like Judge Peck’s order in Moore v. Publicis Groupe, the WAPCo case emphasizes the significance of deploying the right tools to meet the challenges of eDiscovery on either side of the Atlantic Ocean. That UK “firms [are] scared witless by the West African Gas Pipeline judgment,” as Mr. Dale observes, gives additional credence to this point.

For law firms looking to better address these issues, there are any number of technologies and vendors that can help provide answers. For most firms, efficient search and analysis tools are probably the best bet for properly reducing the amount of potentially relevant information that must be reviewed prior to production. Others may be ready in the near future for the more advanced features of predictive coding technology.  Either way, having the right combination of eDiscovery technologies to support an intelligent litigation response effort will more likely yield successful results in litigation.

In an effort to envision information governance as a modular and digestible concept, a great place to start is by imagining two building blocks. Not only will this approach make the task of thinking about holistic information governance less daunting, but it will carve out a beginning and an end with two basic concepts, thereby enabling a realistic and modular implementation.

Classification, Intelligent Archiving and Storage

The first block, and one of the single biggest cost savers an organization can embrace, is the proactive classification of data. Data classification begins with policy creation. Organizations that form a committee(s) to define policies and invest the energy into the enforcement of those policies almost always reap significant benefits from the initiative.  The efficiencies are so compelling that it’s a wonder that data classification and archiving are ever considered separately. One major benefit includes the ability to intelligently leverage information since the classification places the data with similar material pursuant to the stated policy. Organizations that embrace archiving for storage footprint reduction, compliance, litigation, and retention will also see the value of preventing trash from entering the archive upfront.

The more useless data that can be disposed of at the initial point of classification, the more intelligently and nimbly the archive can run, thereby reducing costs when it comes time to collect and cull potentially non-relevant data for eDiscovery. At a minimum, policies should be created to prevent trash from entering the archive.  Optimally, policies should contain key identifiers that direct information into specific folders within the archive.

One common concern among record managers is that data classification needs to be perfect – but perfection is  neither the goal nor is it achievable. For most organizations, any improvement in data management would be a big step in the right direction. Proactive data classification and archiving are not meant to be granular records management systems.  Instead they serve as safeguards on what enters the archiving system, and where and for how long that data is subsequently maintained.

Data Loss Prevention, Asset Protection and Security

The other beneficial block of a holistic information governance plan is security-centric and focused on data loss prevention (DLP). With the proactive management of data, it is important to reduce costs as information is created and received.  Similarly, it is critical to monitor sensitive data on an outgoing basis to protect organizations from inadvertent disclosures of sensitive information and intellectual property assets. Much like the policy-driven classification, data loss prevention requires policy creation as well. The policy creation requirements for DLP can luckily leverage much of the hard work done with document retention and classification as they often mirror each other.

If an organization does not know which data is sensitive or constitutes an asset, how can it be protected? In order for organizations to address their valuable information they need to assess, at a minimum, the following four considerations:

1. What kind of information does the organization consider to be valuable/sensitive?
2. What happens if that information gets into the wrong hands?
3. Where does the sensitive information presently reside/where should it reside?
4. How to track such information if it is transmitted outside of the organization?

The primary events that keep information security officers concerned regarding data loss prevention are: the unauthorized disclosure of sensitive customer information, unauthorized downloads of intellectual property, lost/stolen laptops, the transfer of proprietary information onto flash drives, and finally, concern over outbound emails containing sensitive information. These events most frequently occur at the hands of malicious and/or careless workers. A way to monitor and control activities associated with breach is through data loss prevention policy and technology.

Next Steps

Examine the document retention/classification policies and data loss prevention policies of the organizations and compare them for similarities.  Next, consider getting the key stakeholders for Compliance, IT, Legal, RIM, and Security together to talk about these aforementioned scenarios and to construct a policy. Make the agenda for the meeting short and simple, focusing first on email. Initially focus on how to address the trash being kept so it does not enter the archived environment in the first place. If you do not have an archive, consider getting one.

Finally, tie in data loss prevention as a necessary means of protecting the assets of the organization, as well as providing consistency through classification and data protection. The parameters for defining valuable information will be the same whether looking at classification or data loss prevention. If nothing else, addressing these two critical building blocks will reduce storage and eDiscovery costs, facilitating better coordination of information through intelligent archiving, while simultaneously protecting the organization’s critical assets.  

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:

As 2011 comes quickly to a close we’ve attempted, as in years past, to do our best Carnac impersonation and divine the future of eDiscovery.  Some of these predictions may happen more quickly than others, but it’s our sense that all will come to pass in the near future – it’s just a matter of timing.

1. Technology Assisted Review (TAR) Gains Speed.  The area of Technology Assisted Review is very exciting since there are a host of emerging technologies that can help make the review process more efficient, ranging from email threading, concept search, clustering, predictive coding and the like.  There are two fundamental challenges however.  First, the technology doesn’t work in a vacuum, meaning that the workflows need to be properly designed and the users need to make accurate decisions because those judgment calls often are then magnified by the application.  Next, the defensibility of the given approach needs to be well vetted.  While it’s likely not necessary (or practical) to expect a judge to mandate the use of a specific technological approach, it is important for the applied technologies to be reasonable, transparent and auditable since the worst possible outcome would be to have a technology challenged and then find the producing party unable to adequately explain their methodology.
2. The Custodian-Based Collection Model Comes Under Stress. Ever since the days of Zubulake, litigants have focused on “key players” as a proxy for finding relevant information during the eDiscovery process.  Early on, this model worked particularly well in an email-centric environment.  But, as discovery from cloud sources, collaborative worksites (like SharePoint) and other unstructured data repositories continues to become increasingly mainstream, the custodian-oriented collection model will become rapidly outmoded because it will fail to take into account topically-oriented searches.  This trend will be further amplified by the bench’s increasing distrust of manual, custodian-based data collection practices and the presence of better automated search methods, which are particularly valuable for certain types of litigation (e.g., patent disputes, product liability cases).
3. The FRCP Amendment Debate Will Rage On – Unfortunately Without Much Near Term Progress. While it is clear that the eDiscovery preservation duty 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 increasing dramatically.  Yet, there isn’t a consensus viewpoint regarding which changes, if any, would help improve the murky problem.  In the near term this means that organizations with significant preservation pains will need to better utilize the rules that are on the books and deploy enabling technologies where possible.
4. Data Hoarding Increasingly Goes Out of Fashion. The war cry of many IT professionals that “storage is cheap” is starting to fall on deaf ears.  Organizations are realizing that the cost of storing information is just the tip of the iceberg when it comes to the litigation risk of having terabytes (and conceivably petabytes) of unstructured, uncategorized and unmanaged electronically stored information (ESI).  This tsunami of information will increasingly become an information liability for organizations that have never deleted a byte of information.  In 2012, more corporations will see the need to clean out their digital houses and will realize that such cleansing (where permitted) is a best practice moving forward.  This applies with equal force to the US government, which has recently mandated such an effort at President Obama’s behest.
5. Information Governance Becomes a Viable Reality.  For several years there’s been an effort to combine the reactive (far right) side of the EDRM with the logically connected proactive (far left) side of the EDRM.  But now, a number of surveys have linked good information governance hygiene with better response times to eDiscovery requests and governmental inquires, as well as a corresponding lower chance of being sanctioned and the ability to turn over less responsive information.  In 2012, enterprises will realize that the litigation use case is just one way to leverage archival and eDiscovery tools, further accelerating adoption.
6. Backup Tapes Will Be Increasingly Seen as a Liability.  Using backup tapes for disaster recovery/business continuity purposes remains a viable business strategy, although backing up to tape will become less prevalent as cloud backup increases.  However, if tapes are kept around longer than necessary (days versus months) then they become a ticking time bomb when a litigation or inquiry event crops up.
7. International eDiscovery/eDisclosure Processes Will Continue to Mature. It’s easy to think of the US as dominating the eDiscovery landscape. While this is gospel for us here in the States, international markets are developing quickly and in many ways are ahead of the US, particularly with regulatory compliance-driven use cases, like the UK Bribery Act 2010.  This fact, coupled with the menagerie of international privacy laws, means we’ll be less Balkanized in our eDiscovery efforts moving forward since we do really need to be thinking and practicing globally.
8. Email Becomes “So 2009” As Social Media Gains Traction. While email has been the eDiscovery darling for the past decade, it’s getting a little long in the tooth.  In the next year, new types of ESI (social media, structured data, loose files, cloud context, mobile device messages, etc.) will cause headaches for a number of enterprises that have been overly email-centric.  Already in 2011, organizations are finding that other sources of ESI like documents/files and structured data are rivaling email in importance for eDiscovery requests, and this trend shows no signs of abating, particularly for regulated industries. This heterogeneous mix of ESI will certainly result in challenges for many companies, with some unlucky ones getting sanctioned because they ignored these emerging data types.
9. Cost Shifting Will Become More Prevalent – Impacting the “American Rule.” For ages, the American Rule held that producing parties had to pay for their production costs, with a few narrow exceptions.  Next year we’ll see even more courts award winning parties their eDiscovery costs under 28 U.S.C. §1920(4) and Rule 54(d)(1) FRCP. Courts are now beginning to consider the services of an eDiscovery vendor as “the 21st Century equivalent of making copies.”
10. Risk Assessment Becomes a Critical Component of eDiscovery. Managing risk is a foundational underpinning for litigators generally, but its role in eDiscovery has been a bit obscure.  Now, with the tremendous statistical insights that are made possible by enabling software technologies, it will become increasingly important for counsel to manage risk by deciding what types of error/precision rates are possible.  This risk analysis is particularly critical for conducting any variety of technology assisted review process since precision, recall and f-measure statistics all require a delicate balance of risk and reward.

In their latest survey, entitled “E-Discovery Market Trends: A View from the Legal Department,” Enterprise Strategy Group (ESG) analysts Brian Babineau and Katey Wood analyze a number of interesting statistics and provide a range of insightful conclusions.  By surveying general counsel from large, mid-market (500-999 employees) and enterprise-class organizations in North America they were able to dive into a range of eDiscovery topics, including pain points, operational expenses and prioritizations on a go-forward basis.  Some are more intuitive than others, but in either case the results serve as good calibration metrics for those who endeavor to understand the corporate eDiscovery state of the nation.

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

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

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

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

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

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

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

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

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

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

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

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