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Posts Tagged ‘ediscovery software’

Music piracy the least of your audio worries; Dodd–Frank forces a closer listen

Wednesday, December 11th, 2013

We’re quickly approaching another milestone in the epic implementation of the Commodity Futures Trading Commission (CFTC) rules associated with the Dodd Frank Wall Street Reform and Consumer Protection Act (DFA); the expiration of a very contentious exemptive order that provided relief to cross border swap dealers (SD) and major swap participants (MSP) and foreign groups of US SDs and MSPs. If you follow the heated debate between Wall Street and the CFTC it is quite fitting that the order happens to expire on the winter solstice, December 21st 2013. Let’s hope the day at which the sun comes to a standstill in the sky before reversing direction doesn’t forebode a similar experience in the cross border free markets.

The 848 pages of Dodd-Frank legislation has resulted in (at current count) 67 new rules, exemptive orders, guidance and five ‘other’ actions from the CFTC – the regulatory body tasked with enforcing Title VII of the DFA. Prior to the DFA, the CFTC averaged about four rules per year. eDiscovery nerds will appreciate the fact that the complexity and length of the rules issued by the CFTC requires a website that offers Proximity and Boolean search options to navigate. Within these 67 rules are critical adjustments to the way that organizations, subject to the CFTC’s scope, need to capture, store, manage, search and produce information related to the many flavors of swaps – basically derivatives by which counterparties exchange cash flows of one financial instrument for another. That information includes all data concerning the swap, and communications leading up to the execution of the swap, including any voicemail or phone conversations with relevant information.

While audio discovery is nothing new, especially in regards to criminal investigations, these new regulations, rules and guidance have anointed audio data into the critical content sources category for many enterprises. Let’s discuss what that means for the eDiscovery technology world.

1. Audio search is now must-have eDiscovery functionality

If your organization is categorized as a swap data repository, derivatives clearing organization, designated contract market, swap execution facility, swap dealer, major swap participant and non-MSP counterparty (where most organizations outside financial services will be categorized) you are now subject to new rules for swap record keeping.

First, covered organizations must retain the following:

“…all oral and written communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading, and prices, that lead to the conclusion of a related cash or forward transaction, whether communicated by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device, or other digital or electronic media.” 77 Fed. Reg. 17 CFR Part 45 (December 8 2010)

Secondly, this data has specific retention and retrieval requirements. At Symantec, we’re keeping track by categorizing them into the 5 & 5, 5 & 3 and 1 & 5 rules:

  • All the data above, except audio files, must be retained for a period of 5 years post termination of the underlying swap.
  • For SDs and MSPs it must be retrievable and producible within 3 days
  • For non-MSP counterparties it must be retrievable and producible within 5 days
  • Audio files, they must be kept for a period of 1-year post termination of the swap and also retrievable and producible within 5 days.

2. A turnkey ‘Dodd – Frank’ solution is unlikely, so a repeatable eDiscovery process is critical

As the CFTC rules were being finalized over the past two years, Symantec invited our customers to discuss the impact of the DFA on their eDiscovery workflows. A primary concern was the belief that the rules required organizations to have a system in place to store and eventually reproduce a trade and associated communications in their entirety. The many lobbyists and organizations that submitted grievances and clarification requests to the CFTC shared this concern. In response, the CFTC adjusted its rules to state that an organization’s swap data need not be categorized and retained in what amounts to a single-swap file, provided that all related information could be retrieved and produced from wherever it resides within the required timeframe.

Although the CFTC isn’t forcing organizations into the implementation of a magical swap data captor, data growth, diversification and dispersion across the organization could still present major challenges to collecting, searching and producing requested swap information on an ad hoc basis. For example, sales and marketing data, research information on commodity markets, email and instant message communications and voice data, would very often be found in multiple systems.

In order to comply, organizations should evaluate whether they have the ability to collect audio files and other information in a timely manner from multiple data repositories. If not retained in a per-swap manner, organizations will need to be able to consolidate all relevant communications and data into a single system so that the review is complete and audit-able for requesting regulatory bodies. But pulling from these various sources is likely to collect a large amount of non-swap data. The ability to confidently exclude the large amount of non-swap related information will help organizations curtail the potential time and costs associated with identifying the proper swap data. Finally, this process should be duplicable for each search, retrieval and production to the CFTC or Swap Data Repositories.

Side note; I’m writing with an eDiscovery-only lens, but the retention and management angle of this particular challenge lends itself to a proactive information governance discussion, one that our friends at eDiscovery Journal have touched upon already.

3. eDiscovery search capabilities must satisfy the unique nature of swap data

The DFA record keeping requirements as it pertains to swaps are unique in that they require the combination of both static, database-like structured data (trade value, time, etc.) and un-structured communications (email, Bloomberg messages, voice mail, etc.) These communications will often bridge multiple systems, for instance, multiple emails and Bloomberg IM’s prior to a phone call confirming the trade. Teams reviewing data prior to production to the CFTC or Swap Data Repositories will be challenged to make sense of the entire communication thread especially under a five-day deadline. This review process is not one to be taken lightly either. Teams need to be extra careful with the search and review of all audio content as they risk mistakenly producing spoken information, not as easily identified as written, that is not related to the trade.

Organizations should consider how quickly they could get the necessary information in a searchable form. Five days to retrieve and produce is slim at best, so even audio processing advantages, like phonetic based audio indexing as opposed to speech to text to transcription could be critical. They should also consider how they can organize swap communications into a coherent form – functionality like discussion threading and topic clustering can help teams quickly understand and identify communication related to a specific swap.

The Symantec eDiscovery team considered the Dodd Frank Act and CFTC rules as we developed our latest release of the Clearwell eDiscovery Platform, from Symantec, now enabling advanced audio processing, search, and review capabilities to drastically accelerate audio discovery efforts. In addition to supporting over 400 file types for electronic discovery, these new capabilities leverage a powerful phonetic engine that can index up to 20,000 hours of recorded audio per day. Whether you are investigating voicemails, call-center recordings, or financial transactions, Symantec makes it easy to find what you are looking for.

 

Judge Scheindlin Blasts Proposed FRCP Amendments in Unconventional Style

Thursday, August 29th, 2013

A prominent federal judge wasted little time to air her dissatisfaction with the proposed amendments to the Federal Rules of Civil Procedure (Rules) the exact day the period for public comment on the Rules opened. In lieu of following the formal process of submitting written comments to the proposed amendments the Honorable Shira Scheindlin, Federal District Court Judge for the Southern District of New York, provided her feedback in more dramatic fashion. She went out of her way to blast newly proposed Federal Rule 37(e) in a footnote to a recent court order in a case where she sanctioned a party for spoliation of evidence. The order, dated August 15, 2013, conspicuously coincides with the opening day for public comment to the newly proposed amendments to the Rules and likely riled some attorneys who have lobbied hard for this particular Rule change for years.

The facts relayed in Sekisui American Corporation v. Hart are not uncommon. In fact, most have likely heard this story repeat itself for a decade despite the passage of amendments to the Rules in 2006 and myriad case law guiding against such conduct. The short version of the story is that a group of employees leave their company, the company sues the former employees, discovery ensues, and emails are missing. Why? Because emails were deleted long after the duty to preserve electronically stored information (ESI) was triggered and now those emails are lost. The question then turns to whether and how the judge should rectify the missing email problem. Those familiar with some of Judge Scheindlin’s prior decisions know the answer to that question – sanctions.

Judge Scheindlin is not a renegade who issues sanctions regardless of the facts of the case. However, some believe her attempts to provide clarity for litigants in her courtroom sometimes go too far which stirs debate. Whether you agree with her decisions or not, Judge Scheindlin takes special care to meticulously articulate the facts of the case, identify the relevant legal authority, present the legal analysis, and then nail the offending party with sanctions when they screw up discovery.

That is exactly what happened in Sekisui and the order is worth a read. People new to eDiscovery will learn the basics of when to apply a legal hold, while more seasoned eDiscovery veterans will be treated to a stroll down “case law memory lane” that includes stories of eDiscovery train wrecks past like the Zubulake and Pension Committee decisions. If you don’t have the stomach to read the entire thirty-two page opinion, then read the nice article written by Law Technology News aptly titled: Scheindlin Not Charmed When Visiting Spoliation a Third Time for further background on the case.

What is striking about the case is that Scheindlin used the case and issues at hand as an opportunity to articulate her displeasure with the proposed amendments to the Rules. In particular, she calls out proposed Rule 37(e) in footnote 51 of the opinion where she explains:

“the proposed rule would permit sanctions only if the destruction of evidence (1) caused substantial prejudice and was willful or in bad faith or (2) irreparably deprived a party of any meaningful opportunity to present or defend its claims…. The Advisory Committee Note to the proposed rule would require the innocent party to prove that ‘it has been substantially prejudiced by the loss’ of relevant information, even where the spoliating party destroyed information willfully or in bad faith. 5/8/2013 Report of the Advisory Committee on Civil Rules at 47. I do not agree that the burden to prove prejudice from missing evidence lost as a result of willful or intentional misconduct should fall on the innocent party. Furthermore, imposing sanctions only where evidence is destroyed willfully or in bad faith creates perverse incentives and encourages sloppy behavior. Under the proposed rule, parties who destroy evidence cannot be sanctioned (although they can be subject to “remedial curative measures”) even if they were negligent, grossly negligent, or reckless in doing so.”

Judge Scheindlin’s “Footnote 51” is almost certain to become a focal point of debate as the dialogue about the Rules continue. Not only did Judge Scheindlin ignite much of the early eDiscovery debate with her Zubulake line of decisions, she has also served on the  Federal Rules of Civil Procedure Advisory Committee from 1998 to 2005. The fact that she is known as the Godmother of eDiscovery in some circles illustrates that her influence over the rule making process is undeniable.  The time for public comment on the Rules closes on February 15, 2014 and the Godmother of eDiscovery has thrown down the gauntlet once again. Let the games begin.

The Top 3 Forensic Data Collection Myths in eDiscovery

Wednesday, August 7th, 2013

Confusion about establishing a legally defensible approach for collecting data from computer hard drives during eDiscovery has existed for years. The confusion stems largely from the fact that traditional methodologies die hard and legal requirements are often misunderstood. The most traditional approach to data collection entails making forensic copies or mirror images of every custodian hard drive that may be relevant to a particular matter. This practice is still commonly followed because many believe collecting every shred of potentially relevant data from a custodian’s computer is the most efficient approach to data collection and the best way to avoid spoliation sanctions.

 

In reality, courts typically do not require parties to collect every shred of electronically stored information (ESI) as part of a defensible eDiscovery process and organizations wedded to this process are likely wasting significant amounts of time and money. If collecting everything is not required, then why would organizations waste time and money following an outdated and unnecessary approach? The answer is simple – many organizations fall victim to 3 forensic data collection myths that perpetuate inefficient data collection practices. This article debunks these 3 myths and provides insight into more efficient data collection methodologies that can save organizations time and money without increasing risk.

 

Myth #1: “Forensic Copy” and “Forensically Sound” are Synonymous

 

For many, the confusion begins with a misunderstanding of the terms “forensic copy” and “forensically sound.” The Sedona Conference, a leading nonprofit research and educational institute dedicated to the advanced study of law, defines a forensic copy as follows:

 

An exact copy of an entire physical storage media (hard drive, CD-ROM, DVD-ROM, tape, etc.), including all active and residual data and unallocated or slack space on the media. Forensic copies are often called “images” or “imaged copies.” (See: The Sedona Conference Glossary: E-Discovery & Digital Information Management, 3rd Edition, Sept. 2010).

 

Forensically sound, on the other hand, refers to the integrity of the data collection process and relates to the defensibility of how ESI is collected. Among other things, electronic files should not be modified or deleted during collection and a proper chain of custody should be established in order for the data collection to be deemed forensically sound. If data is not collected in a forensically sound manner, then the integrity of the ESI that is collected may be suspect and could be excluded as evidence.

 

Somehow over time, many have interpreted the need for a forensically sound collection to require forensic copies of hard drives to be made. In other words, they believe an entire computer hard drive must be collected for a collection to be legally defensible (forensically sound). In reality, entire hard drives (forensic copies) or even all active user files need not be copied as part of a defensible data collection process. What is required, however, is the collection of ESI in a forensically sound manner regardless of whether an entire drive is copied or only a few files.

 

Myth # 2: Courts Require Forensic Copies for Most Cases

 

Making forensic copies of custodian hard drives is often important as part of criminal investigations, trade secret theft cases, and other matters where the recovery and analysis of deleted files, internet browsing history, and other non-user generated information is important to a case. However, most large civil matters only require the production of user-generated files like emails, Microsoft Word documents, and other active files (as opposed to deleted files).

 

Unnecessarily making forensic copies results in more downstream costs in the form of increased document processing, attorney review, and vendor hosting fees because more ESI is collected than necessary. The simple rule of thumb is that the more ESI collected at the beginning of a matter, the higher the downstream eDiscovery costs. That means casting a narrow collection net at the beginning of a case rather than “over-collecting” more ESI than legally required can save significant time and money.

 

Federal Rule of Civil Procedure 34 and case law help dispel the myth that forensic copies are required for most civil cases. The notes to Rule 34(a)(1) state that,

 

Rule 34(a)…is not meant to create a routine right of direct access to a party’s electronic information system, although such access might be justified in some circumstances. Courts should guard against undue intrusiveness resulting from inspecting or testing such systems.

More than a decade ago, the Tenth Circuit validated the notion that opposing parties should not be routinely entitled to forensic copies of hard drives. In McCurdy Group v. Am. Biomedical Group, Inc., 9 Fed. Appx. 822 (10th Cir. 2001) the court held that skepticism concerning whether a party has produced all responsive, non-privileged documents from certain hard drives is an insufficient reason standing alone to warrant production of the hard drives: “a mere desire to check that the opposition has been forthright in its discovery responses is not a good enough reason.” Id. at 831.

On the other hand, Ameriwood Indus. v. Liberman, 2006 U.S. Dist. LEXIS 93380 (E.D. Mo. Dec. 27, 2006), is a good example of a limited situation where making a forensic copy of a hard drive might be appropriate. In Ameriwood, the court referenced Rule 34(a)(1) to support its decision to order a forensic copy of the defendant’s hard drive in a trade secret misappropriation case because the defendant “allegedly used the computer itself to commit the wrong….” In short, courts expect parties to take a reasonable approach to data collection. A reasonable approach to collection only requires making forensic copies of computer hard drives in limited situations.

 

Myth #3: Courts Have “Validated” Some Proprietary Collection Tools

 

Confusion about computer forensics, data collection, and legal defensibility has also been stoked as the result of overzealous claims by technology vendors that courts have “validated” some data collection tools and not others. This has led many attorneys to believe they should play it safe by only using tools that have ostensibly been “validated” by courts. Unfortunately, this myth exacerbates the over-collection of ESI problem that frequently costs organizations time and money.

 

The notion that courts are in the business of validating particular vendors or proprietary technology solutions is a hot topic that has been summarily dismissed by one of the leading eDiscovery attorneys and computer forensic examiners on the planet. In his article titled, We’re Both Part of the Same Hypocrisy, Senator, Craig Ball explains that courts generally are not in the business of “validating” specific companies and products. To make his point, Mr. Ball poignantly states that:

 

just because a product is named in passing in a court opinion and the court doesn’t expressly label the product a steaming pile of crap does not render the product ‘court validated.’ 

 

In a nod to the fact that the defensibility of the data collection process is dependent on the methodology as much as the tools used, Mr. Ball goes on to explain that, “the integrity of the process hinges on the carpenter, not the hammer.”

 

Conclusion

 

In the past decade, ESI collection tools have evolved dramatically to enable the targeted collection of ESI from multiple data sources in an automated fashion through an organization’s computer network. Rather than manually connecting a collection device to every custodian hard drive or server to identify and collect ESI for every new matter, new tools enable data to be collected from multiple custodians and data sources within an organization using a single collection tool. This streamlined approach saves organizations time and money without sacrificing legal defensibility or forensic soundness.

 

Choosing the correct collection approach is important for any organization facing regulatory scrutiny or routine litigation because data collection represents an early and important step in the eDiscovery process. If data is overlooked, destroyed, altered, or collected too slowly, the organization could face embarrassment and sanctions. On the other hand, needlessly over-collecting data could result in unnecessary downstream processing and review expenses. Properly assessing the data collection requirements of each new matter and understanding modern collection technologies will help you avoid the top 3 forensic data collection myths and save your organization time and money.

The Need for a More Active Judiciary in eDiscovery

Wednesday, July 24th, 2013

Various theories have been advanced over the years to determine why the digital age has caused the discovery process to spiral out of control. Many believe that the sheer volume of ESI has led to the increased costs and delays that now characterize eDiscovery. Others place the blame on the quixotic advocacy of certain lawyers who seek “any and all documents” in their quest for the proverbial smoking gun. While these factors have undoubtedly contributed to the current eDiscovery frenzy, there is still another key reason that many cognoscenti believe has impacted discovery: a lack of judicial involvement. Indeed, in a recent article published by the University of Kansas Law Review, Professor Steven Gensler and Judge Lee Rosenthal argue that many of the eDiscovery challenges facing lawyers and litigants could be addressed in a more efficient and cost-effective manner through “active case management” by judges. According to Professor Gensler and Judge Rosenthal, a meaningful Rule 16 conference with counsel can enable “the court to ensure that the lawyers and parties have paid appropriate attention to planning for electronic discovery.”

To facilitate this vision of a more active judiciary in the discovery process, the Advisory Committee has proposed a series of changes to the Federal Rules of Civil Procedure. Most of these changes are designed to improve the effectiveness of the Rule 26(f) discovery conference and to encourage courts to provide input on key discovery issues at the outset of a case.

Rules 26 and 34 – Improving the Effectiveness of the Rule 26(f) Discovery Conference

One way the Committee felt that it could enable greater judicial involvement in case management was to have the parties conduct a more meaningful Rule 26(f) discovery conference. Such a step is significant since courts generally believe that a successful conference is the lynchpin for conducting discovery in a proportional manner.

To enhance the usefulness of the conference, the Committee recommended that Rule 26(f) be amended to specifically require the parties to discuss any pertinent issues surrounding the preservation of ESI. This provision is calculated to get the parties thinking proactively about preservation problems that could arise later in discovery. It is also designed to work in conjunction with the proposed amendments to Rule 16(b)(3) and Rule 37(e). Changes to the former would expressly empower the court to issue a scheduling order addressing ESI preservation issues. Under the latter, the extent to which preservation issues were addressed at a discovery conference or in a scheduling order could very well affect any subsequent motion for sanctions relating to a failure to preserve relevant ESI.

Another amendment to Rule 26(f) would require the parties to discuss the need for a “clawback” order under Federal Rule of Evidence 502. Though underused, Rule 502(d) orders generally reduce the expense and hassle of litigating issues surrounding the inadvertent disclosure of ESI protected by the lawyer-client privilege. To ensure this overlooked provision receives attention from litigants, the Committee has drafted a corresponding amendment to Rule 16(b)(3) that would enable the court to weigh in on Rule 502 related issues in a scheduling order.

The final step the Committee has proposed for increasing the effectiveness of the Rule 26(f) conference is to amend Rule 26(d) and Rule 34(b)(2) to enable parties to serve Rule 34 document requests prior to that conference. These “early” requests, which are not deemed served until the conference, are “designed to facilitate focused discussion during the Rule 26(f) conference.” This, the Committee hopes, will enable the parties to subsequently prepare document requests that are more targeted and proportional to the issues in play.

Rule 16 – Greater Judicial Input on Key Discovery Issues

As mentioned above, the Committee has suggested adding provisions to Rule 16(b)(3) that track those in Rule 26(f) so as to provide the opportunity for greater judicial input on certain eDiscovery issues at the outset of a case. In addition to these changes, Rule 16(b)(3) would also allow a court to require that the parties caucus with the court before filing a discovery-related motion. The purpose of this provision is to encourage judges to informally resolve discovery disputes before the parties incur the expense of fully engaging in motion practice. According to the Committee, various courts have used similar arrangements under their local rules that have “proven highly effective in reducing cost and delay.”

Conclusion

Whether or not these changes are successful depends on how committed the courts are to using the proposed case management tools. Without more active involvement from the courts, the newly proposed initiatives regarding cooperation and proportionality may very well fall by the wayside and remain noble, but unmet expectations. Compliance with the draft rules is likely the only method to ensure that these amendments (if enacted) are to be successful.

The Proportionality Amendments to the Federal Rules Spotlight the Importance of Efficient, Cost-Effective eDiscovery

Tuesday, July 16th, 2013

One of the most compelling objectives for amending the Federal Rules of Civil Procedure is to make civil discovery more efficient and cost effective. The proposed amendment to Federal Rule 1 – featured in our introductory post on this series that provides a comprehensive overview of the proposed amendments – is only one of several measures found in the amendment package that are designed to decrease the costs and delays associated with eDiscovery. Perhaps the most important of those measures are those that emphasize proportionality standards.

Proportionality standards, which require that the benefits of discovery be commensurate with its burdens, have been extant in the Federal Rules since 1983. Nevertheless, they have been invoked too infrequently over the past 30 years to address the problems of over-discovery and gamesmanship that permeate the discovery process. In an effort to spotlight this “highly valued” yet “missing in action” doctrine, the Civil Rules Advisory Committee has proposed numerous changes to the current Rules regime. Judicial Conference of the United States, Report of the Advisory Committee on Civil Rules 4 (May 8, 2013) (Report). The most significant of these changes are found in Rules 26(b)(1) and 34(b).

Rule 26(b)(1) – Tightening the Scope of Permissible Discovery

The Committee has proposed that the permissible scope of discovery under Rule 26(b)(1) be modified to spotlight the limitations that proportionality imposes on discovery. Those limitations are presently found in Rule 26(b)(2)(C) and are not readily apparent to many lawyers or judges. The proposed modification (in italics) would address this problem by making clear that discovery must satisfy proportionality standards:

Parties may obtain discovery regarding any non privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case considering the amount in controversy, the importance of the issues at stake in the action, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.

Report, at 19-20. By moving the proportionality rule directly into the scope of discovery, counsel and the courts should gain a better understanding of the restraints that this concept places on discovery.

Rule 26(b)(1) has additionally been modified to enforce the notion that discovery is confined to those matters that are relevant to the claims or defenses at issue in a particular case. Even though discovery has been limited in this regard for many years, the Committee felt that this limitation was being “swallowed” by the “reasonably calculated” provision in Rule 26(b)(1). That provision currently provides for the discovery of relevant evidence that is inadmissible so long as it is “reasonably calculated to lead to the discovery of admissible evidence.” Despite the narrow purpose of this provision, the Committee found that many judges and lawyers unwittingly extrapolated the “reasonably calculated” wording to broaden discovery beyond the benchmark of relevance. To disabuse courts and counsel of this practice, the “reasonably calculated” phrase has been removed and replaced with the following sentence: “Information within this scope of discovery need not be admissible in evidence to be discoverable.” Report, at 11.

Similarly, the Committee has recommended eliminating the provision in Rule 26(b)(1) that presently allows the court – on a showing of good cause – to order “discovery of any matter relevant to the subject matter.” In its proposed “Committee Note,” the Committee justified this suggested change by reiterating its mantra about the proper scope of discovery: “Proportional discovery relevant to any party’s claim or defense suffices.” Report, at 10-11.

Rule 34(b) – Eliminating Gamesmanship with Document Productions

The three key modifications the Committee has proposed for Rule 34 are designed to eliminate some of the gamesmanship associated with written discovery responses. The first such change is a requirement in Rule 34(b)(2)(B) that any objection made in response to a document request must be stated with specificity. This recommended change is supposed to do away with the assertion of general objections. While such objections have almost universally been rejected in federal discovery practice, they still appear in Rule 34 responses. By including an explicit requirement for specific objections and coupling it with the threat of sanctions for non-compliance under Rule 26(g), the Committee may finally eradicate this practice from discovery.

The second change is calculated to address another longstanding discovery dodge: making a party’s response “subject to” a particular set of objections. Whether such objections are specific or general, the Committee concluded that such a conditional response leaves the party who requested the materials unsure as to whether anything was withheld and if so, on what grounds. To remedy this practice, the Committee added the following provision to Rule 34(b)(2)(C): “An objection must state whether any responsive materials are being withheld on the basis of that objection.” Report, at 15-16. If enforced, such a requirement could make Rule 34 responses more straightforward and less evasive.

The third change is intended to clarify the uncertainty surrounding the responding party’s timeframe for producing documents. As it now stands, Rule 34 does not expressly mandate when the responding party must complete its production of documents. That omission has led to open-ended productions, which can unreasonably lengthen the discovery process and increase litigation expenses. To correct this oversight, the Committee proposed that the responding party complete its production “no later than the time for inspection stated in the request or [at] a later reasonable time stated in the response.” Report, at 26. For so-called “rolling productions,” the responding party “should specify the beginning and end dates of the production.” Id. Such a provision should ultimately provide greater clarity and increased understanding surrounding productions of ESI.

Other Changes – Cost Shifting in Rule 26(c), Reductions in Discovery under Rules 30, 31, 33, 36

There were several additional changes the Committee recommended that are grounded in the concept of proportionality. While space does not allow for a detailed review of all of these changes, practitioners should take note of the new cost shifting provision in Rule 26(c). That change would expressly enable courts to allocate the expenses of discovery among the parties. See Report, at 12, 20-21, 23.

The Committee has also suggested reductions in the number of depositions, interrogatories, and requests for admission. Under the draft amendments, the number of depositions is reduced from 10 to 5. Oral deposition time has also been cut from seven hours to six. As for written discovery, the number of interrogatories would decrease from 25 to 15 and a numerical limit of 25 has been introduced for requests for admission. That limit of 25, however, does not apply to requests that seek to ascertain the genuineness of a particular document. See Report, at 12-15.

The effect of these proportionality amendments on the eDiscovery process could be far-reaching, but their impact remains to be seen. If lawyers continue to ignore proportionality standards and should courts fail to counter such non-compliance with sanctions under Federal Rule 26(g), the depressing duo of unreasonable eDiscovery costs and delays will continue unabated. For those who truly wish to reverse this trend, strict enforcement of these proportionality standards must be the rule of the day.

A Comprehensive Look at the Newly Proposed eDiscovery Amendments to the Federal Rules of Civil Procedure

Tuesday, July 9th, 2013

You have probably heard the news. Changes are in the works for the Federal Rules of Civil Procedure that govern the discovery process. Approved for public comment last month by the Standing Committee on Rules of Practice and Procedure, the proposed amendments are generally designed to streamline discovery, encourage cooperative advocacy among litigants and eliminate gamesmanship. The amendments also try to tackle the continuing problems associated with the preservation of electronically stored information (ESI). As a result, a package of amendments has been developed that affects most aspects of federal discovery practice.

We will provide a comprehensive overview of the newly proposed amendments in a series of posts over the next few weeks. The posts will cover the changes that are designed to usher in a new era of cooperation, proportionality, and active judicial case management in discovery. We will also review the draft amendment to Federal Rule 37(e), which would create a uniform national standard for discovery sanctions stemming from failures to preserve evidence. This amendment has by far attracted the most interest, which is understandable given the far-reaching impact that such a change could have on organizations’ defensible deletion efforts. A final post will describe the timeline for moving the amendment package forward.

Cooperation

Drafted by the Civil Rules Advisory Committee, the proposed amendments are generally designed to facilitate the tripartite aims of Federal Rule 1 in the discovery process. To carry out Rule 1’s lofty yet important mandate of securing “the just, speedy, and inexpensive determination” of litigation, the Committee has proposed several modifications to advance the notions of cooperation and proportionality. Other changes focus on improving “early and effective judicial case management.” Judicial Conference of the United States, Report of the Advisory Committee on Civil Rules 4 (May 8, 2013) (Report). Today’s post will provide an overview of the draft amendment to Rule 1, which is designed to spotlight the importance of cooperation. Posts covering the proportionality and judicial case management amendments will follow shortly.

The Proposed Amendment to Rule 1

To better emphasize the need for cooperative advocacy in discovery, the Committee has recommended that Rule 1 be amended to specify that clients share the responsibility with the court for achieving the rule’s objectives. The proposed revisions to the rule (in italics with deletions in strikethrough) read in pertinent part as follows:

[These rules] should be construed, and administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.

Report, at 17.

Even though this concept was already set forth in the Advisory Committee Notes to Rule 1, the Committee felt that an express reference in the rule itself would prompt litigants and their lawyers to engage in more cooperative conduct. Indeed, while acknowledging that such a rule change would not “cure all adversary excesses,” the Committee still felt the amended wording “will do some good.” Report, at 16-17.

Perhaps more importantly, this mandate is also designed to enable judges “to elicit better cooperation when the lawyers and parties fall short.” Report, at 16. Indeed, such a reference, when coupled with the “stop and think” certification requirement from Federal Rule 26(g), should give jurists more than enough procedural basis to remind counsel and clients of their duty to conduct discovery in a cooperative and cost effective manner.

Though difficult to gauge the actual impact that such an amendment might have, the decision to spotlight cooperation could be beneficial if litigants and lawyers ultimately decide to conduct discovery with laser-like precision instead of the sledgehammer approach of the current regime. If implemented and followed as contemplated by the Committee, the proposed amendment to Rule 1 could help decrease the costs and delays associated with discovery.

 

Push or Pull? Deciding How Much Oversight is Required of In-house Counsel in eDiscovery

Tuesday, June 18th, 2013

When Kolon Industries recently found itself on the wrong side of a $919 million verdict, the legal department for the South Korean-based manufacturer probably started to take inventory on what it might have done differently to have avoided such a fate. While that list could have included any number of entries, somewhere near the top had to be an action item to revamp its process for supervising the preservation and collection of electronically stored information (ESI) from company executives and employees. Breakdowns in that process led to the destruction of nearly 18,000 pages of ESI. This resulted in an instruction to the jury in E.I. du Pont de Nemours and Co. v. Kolon Industries, Inc. that Kolon had engaged in wholesale destruction of key evidence. All of which culminated in the devastating verdict against the manufacturer.

Most enterprises will likely never have to deal with the fallout from a nearly $1 billion verdict. Nevertheless, many companies still struggle with the same issues associated with document collection that ultimately tripped up Kolon Industries. Indeed, one of the most troubling issues facing in-house counsel is determining the degree of oversight that must be exercised in connection with document preservation and collection in eDiscovery. While this is an issue counsel has always grappled with, the degree of difficulty has substantially increased in the digital age. With the explosion of information, courts have raised their expectations for how organizations and their counsel address ESI in discovery. Now that the stakes have been raised, should counsel allow executives and employees to decide what is relevant and have them “push” the data for production? Or, should the team collect  (i.e., “pull”) the data and then cull and review for relevancy?

These issues were recently considered in an article published in May 2013 by the ACC Docket. Authored by Shawn Cheadle, General Counsel, Military Space, Lockheed Martin Space Systems Company, and me, the article describes how counsel can balance these countervailing factors to appropriately supervise the inextricably intertwined eDiscovery phases of ESI preservation and collection. In this article, we detail the elements in play, and discuss the leading court cases and their respective factual scenarios, with an eye toward helping in-house counsel understand the dynamics that are driving this trend. We also provide some suggestions for how counsel can meet the required degree of eDiscovery oversight without neglecting its other duties.

A copy of this article is available here for your reading pleasure.

The Gartner 2013 Magic Quadrant for eDiscovery Software is Out!

Wednesday, June 12th, 2013

This week marks the release of the 3rd annual Gartner Magic Quadrant for e-Discovery Software report.  In the early days of eDiscovery, most companies outsourced almost every sizeable project to vendors and law firms so eDiscovery software was barely a blip on the radar screen for technology analysts. Fast forward a few years to an era of explosive information growth and rising eDiscovery costs and the landscape has changed significantly. Today, much of the outsourced eDiscovery “services” business has been replaced by eDiscovery software solutions that organizations bring in house to reduce risk and cost. As a result, the enterprise eDiscovery software market is forecast to grow from $1.4 billion in total software revenue worldwide in 2012 to $2.9 billion by 2017. (See Forecast:  Enterprise E-Discovery Software, Worldwide, 2012 – 2017, Tom Eid, December, 2012).

Not surprisingly, today’s rapidly growing eDiscovery software market has become significant enough to catch the attention of mainstream analysts like Gartner. This is good news for company lawyers who are used to delegating enterprise software decisions to IT departments and outside law firms. Because today those same company lawyers are involved in eDiscovery and other information management software purchasing decisions for their organizations. While these lawyers understand the company’s legal requirements, they do not necessarily understand how to choose the best technology to address those requirements. Conversely, IT representatives understand enterprise software, but they do not necessarily understand the law. Gartner bridges this information gap by providing in depth and independent analysis of the top eDiscovery software solutions in the form of the Gartner Magic Quadrant for e-Discovery Software.

Gartner’s methodology for preparing the annual Magic Quadrant report is rigorous. Providers must meet quantitative requirements such as revenue and significant market penetration to be included in the report. If these threshold requirements are met then Gartner probes deeper by meeting with company representatives, interviewing customers, and soliciting feedback to written questions. Providers that make the cut are evaluated across four Magic Quadrant categories as either “leaders, challengers, niche players, or visionaries.” Where each provider ends up on the quadrant is guided by an independent evaluation of each provider’s “ability to execute” and “completeness of vision.” Landing in the “leaders” quadrant is considered a top recognition.

The nine Leaders in this year’s Magic Quadrant have four primary characteristics (See figure 1 above).

The first is whether the provider has functionality that spans both sides of the electronic discovery reference model (EDRM) (left side – identification, preservation, litigation hold, collection, early case assessment (ECA) and processing and right-side – processing, review, analysis and production). “While Gartner recognizes that not all enterprises — or even the majority — will want to perform legal-review work in-house, more and more are dictating what review tools will be used by their outside counsel or legal-service providers. As practitioners become more sophisticated, they are demanding that data change hands as little as possible, to reduce cost and risk. This is a continuation of a trend we saw developing last year, and it has grown again in importance, as evidenced both by inquiries from Gartner clients and reports from vendors about the priorities of current and prospective customers.”

We see this as consistent with the theme that providers with archiving solutions designed to automate data retention and destruction policies generally fared better than those without archiving technology. The rationale is that part of a good end-to-end eDiscovery strategy includes proactively deleting data organizations do not have a legal or business need to keep. This approach decreases the amount of downstream electronically stored information (ESI) organizations must review on a case-by-case basis so the cost savings can be significant.

Not surprisingly, whether or not a provider offers technology assisted review or predictive coding capabilities was another factor in evaluating each provider’s end-to-end functionality. The industry has witnessed a surge in predictive coding case law since 2012 and judicial interest has helped drive this momentum. However, a key driver for implementing predictive coding technology is the ability to reduce the amount of ESI attorneys need to review on a case-by-case basis. Given the fact that attorney review is the most expensive phase of the eDiscovery process, many organizations are complementing their proactive information reduction (archiving) strategy with a case-by-case information reduction plan that also includes predictive coding.

The second characteristic Gartner considered was that Leaders’ business models clearly demonstrate that their focus is software development and sales, as opposed to the provision of services. Gartner acknowledged that the eDiscovery services market is strong, but explains that the purpose of the Magic Quadrant is to evaluate software, not services. The justification is that “[c]orporate buyers and even law firms are trending towards taking as much e-Discovery process in house as they can, for risk management and cost control reasons. In addition, the vendor landscape for services in this area is consolidating. A strong software offering, which can be exploited for growth and especially profitability, is what Gartner looked for and evaluated.”

Third, Gartner believes the solution provider market is shrinking and that corporations are becoming more involved in buying decisions instead of deferring technology decisions to their outside law firms. Therefore, those in the Leaders category were expected to illustrate a good mix of corporate and law firm buying centers. The rationale behind this category is that law firms often help influence corporate buying decisions so both are important players in the buying cycle. However, Gartner also highlighted that vendors who get the majority of their revenues from the “legal solution provider channel” or directly from “law firms” may soon face problems.

The final characteristic Gartner considered for the Leaders quadrant is related to financial performance and growth. In measuring this component, Gartner explained that a number of factors were considered. Primary among them is whether the Leaders are keeping pace with or even exceeding overall market growth. (See “Forecast:  Enterprise E-Discovery Software, Worldwide, 2012 – 2017,” Tom Eid, December, 2012).

Companies landing in Gartner’s Magic Quadrant for eDiscovery Software have reason to celebrate their position in an increasingly competitive market. To review Gartner’s full report yourself, click here. In the meantime, please feel free to share your own comments below as the industry anxiously awaits next year’s Magic Quadrant Report.

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Yet Another Victory: Court Rejects Sanctions for eDiscovery “Shortcomings”

Wednesday, May 29th, 2013

The news surrounding the eDiscovery industry is trending positive for organizations. Instances where companies have been sanctioned for alleged failures to preserve or produce electronically stored information (ESI) seem to be dropping. This is confirmed by various court opinions from 2012, together with reports from key industry players. In addition, the Civil Rules Advisory Committee is close to releasing for public comment draft amendments to Federal Rule of Civil Procedure 37(e) that might impact the sanctions equation. If enacted, the proposed changes could reduce the threat of sanctions relating to pre-litigation destruction of ESI.

Against this backdrop, organizations scored another sanctions victory this month as an Albany, New York-based federal court refused to impose sanctions on an enterprise for its so-called eDiscovery “shortcomings.” In Research Foundation of State University of New York v. Nektar Therapeutics, the defendant had sought an adverse inference instruction and monetary sanctions against the research foundation arm of the State University of New York for its alleged “grossly negligent” failure to preserve documents. The defendant argued that such punishment was justified given the foundation’s alleged failures to implement a timely litigation hold, to maintain “relevant backup-tape data” and to “suspend its auto-delete practices.”

The court, however, did not accept the defendant’s sweeping allegations of discovery misconduct. Instead, the court found that the foundation’s preservation efforts passed legal muster. Among other things, the foundation had issued timely hold instructions, preserved relevant backup tapes and acted to prevent the deletion of custodial data. Significantly, the court then explained that it would not get wrapped around the proverbial axel due to some isolated “shortcomings” with the foundation’s preservation efforts:

While there may have been some shortcomings in [the foundation’s] document retention protocol, it was, at most, negligent in its effort to preserve evidence related to this litigation.

Moreover, sanctions were not appropriate since the defendant had not established that relevant evidence had been destroyed. In what ultimately amounted to a “no-harm, no-foul” approach, the court observed that the “spoliation motion fails, then, on the ‘inability [of the defendant] to adduce evidence suggesting the existence, let alone destruction, of relevant documents.’”

The Research Foundation case is important for at least three reasons. First, the court’s reluctance to issue sanctions for mere preservation “shortcomings” is consistent with the general discovery principle that a party’s efforts need not be perfect. Instead of trying to reach a mythical benchmark of infallibility, Research Foundation confirms that a party’s preservation efforts need only satisfy the standards of reasonableness and proportionality.

The second lesson from Research Foundation flows naturally from the first: the misperception that courts acquiesce to knee-jerk sanctions motions. With the judiciary gaining a better understanding of the digital age nuances associated with the preservation and production of ESI, courts are less likely to go along with gotcha sanctions requests. This is particularly the case where sanctions are sought against companies that have an effective information governance plan in place.

This, in turn, gives rise to the third and final take-home from Research Foundation. Given the cooling judicial climate toward sanctions and the efforts being taken by the advisory committee to alleviate preservation burdens, the time is ripe for organizations to implement a defensible deletion strategy. Such a comprehensive approach, which aims to reduce the storage costs and legal risks associated with the retention of ESI, stands to benefit companies that can justify deletion decisions based on reasonable information retention practices. Like the foundation in Research Foundation, organizations that have done so have been successful in avoiding court sanctions while at the same time eliminating ESI that has little or no business value.

 

The eDiscovery Trinity: Spoliation Sanctions, Keywords and Predictive Coding

Monday, May 20th, 2013

The world of eDiscovery appears to be revolving around a trifecta of issues that are important to both clients and counsel. A discovery-focused conversation with litigants and lawyers in 2013 will almost invariably turn to some combination of this eDiscovery trinity: Spoliation sanctions, keyword searches and predictive coding. This should not come as a surprise since all three of these issues can have a strong impact on the cost, duration and disposition of a lawsuit. Indeed, the near universal desire among parties to minimize discovery costs and thereby further the resolution of cases on the merits has driven the Civil Rules Advisory Committee to explore ways to address the eDiscovery trinity in draft amendments to the Federal Rules.

While the proposed amendments may or may not succeed in reducing discovery expenses, the examples of how the eDiscovery trinity is playing out in litigation are instructive. These cases – bereft of the additional guidance being developed by the Advisory Committee – provide valuable insight on how courts, counsel and clients are handling the convergence of these issues. One such example is a recent decision from the DuPont v. Kolon Industries case.

Spoliation, Keywords and a $4.5 Million Sanction

In DuPont, the court awarded the plaintiff manufacturer $4.5 million in fees and costs that it incurred as part of its effort to address Kolon’s spoliation of ESI. In an attempt to stave off the award, Kolon argued that DuPont’s fees were not justified due to “inefficiencies” associated with DuPont’s review of Kolon’s document productions. In particular, Kolon complained about the extensive list of search terms that DuPont developed to comb through the ESI Kolon produced. According to Kolon, DuPont’s search methodology was “recklessly inefficient”:

DuPont’s forensic experts ran a list of almost 350 “keywords,” which yielded thousands of “false positives” that nevertheless had to be translated, analyzed, and briefed. Of the nearly 18,000 “hits,” only 1,955 (roughly 10 percent) were determined to be even “potentially relevant.” Thus, to state the obvious, 90 percent of the results were wholly irrelevant to the issue, but DuPont still seeks to tax Kolon for having the bulk of those documents translated and analyzed.

Kolon then asserted that the “reckless inefficiency” of the search methodology was “fairly attributable to the fact that DuPont ran insipid keywords like ‘other,’ ‘news,’ and ‘mail.’” Had DuPont been more precise with its keywords searches, argued Kolon, it “would have saved vast amounts of time and money.”

Before addressing the merits of Kolon’s arguments, the court observed how important search terms had become in discovery:

Of course, in the current world of litigation, where so many documents are stored and, hence, produced, electronically, the selection of search terms is an important decision because it, in turn, drives the subsequent document discovery, production and review.

After doing so, the court rejected Kolon’s arguments, finding instead that DuPont’s search methodology was reasonable under the circumstances. The court based its decision on the source of those search terms (derived from Kolon documents suggesting that ESI had been deleted), the “considerable volume” of Kolon’s productions and the nature of DuPont’s search (an investigation for deleted evidence).

The Impact of Predictive Coding on DuPont’s Search Efficiency

While DuPont considered the issues of spoliation and keywords in connection with the imposition of attorney fees and costs, it was silent on the impact that predictive coding might have had on the fee award. Indeed, neither the court’s order, nor the parties’ briefing considered whether the proper application of machine learning technology could have raised the success rate of DuPont’s searches for documents relevant to Kolon’s spoliation above the ten percent (10%) figure cited by Kolon.

On the one hand, many eDiscovery cognoscenti would likely assert that a properly applied predictive coding solution could have produced the same corpus of relevant documents at a fraction of the cost and effort. Others, however, might argue that predictive coding perhaps would not yield the results that DuPont obtained through keyword searches given that DuPont was looking for evidence of deleted ESI. Still others would contend that the issue is moot since DuPont was fully within its right to determine how it should conduct the search of Kolon’s document productions.

Whether predictive coding could have made a difference in DuPont is entirely speculative. Regardless, the debate over keyword searches versus machine learning technology will likely continue unabated. As it stands, the DuPont case, together with the recent decision from Apple v. Samsung, confirm that keywords may be an acceptable method for conducting searches for relevant ESI. The issue, as the DuPont court observed, turns on “the selection of the search terms.”

Nevertheless, the promise of predictive coding cannot be ignored, particularly if the technology that is used could ultimately reduce the costs and duration of discovery. Given that this debate is far from settled, these issues, along with spoliation sanctions, will likely continue to dominate the eDiscovery airwaves for the foreseeable future.