e-discovery 2.0

It is axiomatic that the law helps those who help themselves.  Perhaps nowhere is that truism more applicable than in the context of electronic discovery.  The organization that implements an effective information governance strategy – including developing reasonable data retention policies – will likely avoid court sanctions and reduce its legal costs.  This was confirmed in a recent industry survey, which found that organizations “help themselves” when they develop information retention policies.  According to the survey, better retention practices drive dramatically better outcomes in litigation, particularly in the context of retention and preservation.

Such a finding is echoed by a recent case issued from the District of Indiana.  In Haraburda v. Arcelor Mittal U.S.A., Inc. (D. Ind. June 28, 2011), the court tied a litigant’s preservation duty to its document retention efforts.  In order to discharge its duty to reactively preserve evidence, the court reasoned that enterprises must proactively create “a ‘comprehensive’ document retention policy that will ensure that relevant documents are retained.”  Failing to implement a retention policy often results in a loss of key information.  And this, opined the court, may result in sanctions.

Such a finding is not limited to an isolated case.  Court decisions from across the United States in 2011 have found the same connection; better data retention practices yield more successful document preservation results.  For example, in the E.I. du Pont de Nemours v. Kolon Industries (E.D. Va. April 27, 2011), the plaintiff manufacturer defeated a sanctions motion due to its effective information retention procedures.   The manufacturer implemented a document retention policy that typically kept emails from former employee accounts for 60 days, after which the emails were overwritten and deleted.   Among the emails deleted pursuant to that policy were several that the defendant argued were relevant to its counter-claims.  The DuPont court declined to impose sanctions, however, since the emails in question were overwritten before the duty to preserve was triggered.  Instead, the court lauded the manufacturer’s preservation efforts, finding that it “took positive steps reasonably calculated to ensure that information . . . was preserved for litigation.”  Because the manufacturer faithfully observed its established retention policy, it reduced a stockpile of email, made relevant documents unavailable for discovery and was still protected from court sanctions.

Similarly, in Viramontes v. U.S. Bancorp (N.D.Ill. Jan. 27, 2011), the defendant bank relied on its data retention protocols to stave off a sanctions motion after deleting several years of email.  Because those emails were destroyed pursuant to a neutral retention policy before a preservation duty attached, the bank was protected from sanctions under the Federal Rule of Civil Procedure 37(e) safe harbor for the destruction of electronic information.

The converse, of course, is also true.  Those organizations that failed to implement effective retention policies have fared poorly in discovery because they have not preserved relevant ESI.  Take the defendant, for instance, in Northington v. H & M International (N.D.Ill. Jan. 12, 2011).  The court issued an adverse inference jury instruction against that company because it spoliated significant emails and other data.  The genesis of this spoliation was the company’s failure to establish a formal document retention policy.  Instead of having a thoughtful, top-down approach, “data retention . . . was evidently handled on an ad hoc, case-by-case basis.”  The company’s failure to develop a pre-litigation information retention policy eventually led to the loss of key information and the court’s sanctions award.

These recent cases and others confirm the correlation between retention and preservation.  Simply put, proactive retention leads to better preservation in eDiscovery.  Anything less could be disastrous in litigation.

We’ve all heard the phrase that “everything is bigger in Texas” and the little “mini-conference” held in Dallas, TX last Friday was no exception.  The Discovery Subcommittee held a small, one-day conference to tackle some big issues related to preservation and sanctions that could ultimately lead to amendments to the Federal Rules of Civil Procedure (Rules).

The Subcommittee’s primary purpose was to discuss “preservation and sanctions issues” by using the following topics as guidelines:

• The nature and scope of the current “problem”
• The role of technology
• Possible solutions to the problem

Counsel from large companies like Google, General Electric, and Exxon Mobil participated side by side with outside counsel from both plaintiffs’ and defense bar to discuss what some characterized as a lack of clear direction in the current Rules.  Government lawyers, academics, and federal judges including Judges David Campbell (D. Az.), Shira Scheindlin (S.D.N.Y.), Paul Grimm (D. Md.), John Facciola (D.D.C.), Lee Rosenthal (S.D. Tx.), Michael Mosman (D. Ore.), and Nan Nolan (N. D. Ill.) helped round out the field to make for a lively discussion with multiple perspectives represented.  The following summary highlights some of the key viewpoints and areas of contention debated throughout the day.[1]

The nature and scope of the problem

An underlying theme throughout the day was whether or not preservation and sanctions challenges warrant amending the Rules.  Not surprisingly, counsel for large organizations that commonly bear the brunt of large and frequent document requests lobbied for rule amendments that provide more certainty around when the duty to preserve evidence is triggered, the scope of that duty, and how sanctions are applied.

In support of this position, some corporate attorneys argued that the lack of certainty in the current Rules unfairly requires organizations to err on the side of preserving evidence early and broadly to avoid the risk of sanctions.  Since preserving evidence can be extremely expensive and the duty may be triggered before litigation even begins, they argue that changes to the Rules are necessary.  One corporate attorney framed the issue by providing specific details about costs associated with preserving data for different cases.  He explained that in one situation, his organization has spent more than $5 million to locate, collect, preserve, and maintain data for an ongoing matter even though a complaint has never been filed.  He went on to explain the dilemma by stating: “not preserving asks us to take a chance with our reputation.”

In response, a few attendees questioned how preservation related expenses could spiral so high even before attorney review.  Others pointed out that if the current Rules were better utilized, specifically the meet-and-confer provisions of Rule 26(f), then many preservation challenges could be minimized.  Supporters of better Rule 26(f) engagement complained that counsel for large organizations often refuse to discuss preservation related issues and thereby fuel problems related to the scope of preservation themselves.   Others suggested that if organizations enforced better information management policies instead of keeping “everything forever”, then the magnitude of the problem could be reduced.

Technology

The Subcommittee members generally agreed that the evolution of technology has led to massive data growth which creates new electronic data challenges.  Electronically stored information (ESI) is often duplicative, typically resides in many different technology systems, and can be difficult to locate on a case by case basis.  There was some thoughtful discussion about how data archiving and cloud computing technology are important tools for helping organizations manage these information problems more effectively.  Another commentator acknowledged that although “predictive coding” may be helpful for “reviewing” data, it requires significant human involvement and simply does not solve the problem at hand.

Surprisingly, aside from the comments above, the technology discussion focused mainly on the issue of what constitutes “possession, custody or control” under Rule 34 in today’s environment of social media, cloud computing, and mobile devices.  Unfortunately, there was no discussion of either the role legal technology solutions play in minimizing risk and cost or of the impact the current Rules have on public policy.  For example, the Subcommittee did not address whether organizations that invest in technology in order to automate their internal data management and electronic discovery process should be afforded more protection under Rule 26(b)(2)(B) (“not reasonably accessible because of undue burden or cost”) than organizations that choose not to invest in technology.  If an organization’s technology investment (or lack thereof) is not a factor, does Rule 26(b)(2)(B) have the unintended effect of stifling meaningful legal technology investment by some organizations?  Similarly, do advancements in legal technology diminish the need for a Rule amendment that, at its core, is geared toward reducing costs?  In my opinion, the manner in which organizations are using technology today is an important factor that warrants deeper discussion and a subject I intend to address in a future publication soon.  Stay tuned.

Possible solutions

Discussion about possible solutions to the problem revealed more about the contrasting viewpoints in the room.  Notably, the Department of Justice representatives and those typically aligned with the plaintiffs’ bar tended to lobby for better adherence to the framework contained in the existing Rules in lieu of drafting new Rules.  These folks generally appeared to fall into the “No New Rule” or “Not Yet” camp, and cited the relative newness of the 2006 Rule Amendments and the fact that only about one percent of federal cases involve sanctions in support of their position that Rule amendments are premature or not needed.  Along the same lines, many called for further study and evaluation of the issues through organizations such as The Sedona Conference and the 7th Circuit Electronic Discovery Pilot Program.  Others referenced the importance of looking to evolving case law for more guidance before moving forward with Rule amendments.

In stark contrast, those on the other side of the aisle that typically represent large organizations, lobbied for bright line rules or at least “guideposts” to provide more certainty regarding preservation.  For example, one participant suggested that the duty to preserve evidence should begin when a complaint is served.  Another suggested that the duty should be triggered when a potential litigant is “reasonably certain to be a party to litigation” – a standard that is arguably narrower than the commonly applied “reasonably anticipates litigation” standard articulated in Judge Scheindlin’s frequently cited Zubulake v. UBS Warburg line of decisions.

Those calling for more certainty regarding triggering events also provided recommendations for addressing the scope of the preservation duty and the application of sanctions.  A suggestion to incorporate language that presumptively limits the number of custodians (10) and documents (by age) met resistance on the grounds that trying to apply a one-size-fits-all rule fails to acknowledge that the facts and circumstances of every case are different and so too are the litigants.  Similarly, recommendations to limit sanctions for evidence spoliation to situations where a litigant’s conduct is “intentional” or “willful” were met with a chilly reception by those favoring better adherence to the current Rules.

Conclusion

Time did not permit comprehensive discussion and analysis of every perspective, but the mini-conference highlighted the complexity surrounding preservation and sanctions issues and revealed some polarized viewpoints about how to solve those issues.  Perhaps one glimmer of consensus was the acknowledgement that “pre-litigation” obligations to preserve evidence before service of a complaint is often challenging for large organizations.  However, whether this and other issues should be addressed through better education, more stringent enforcement of existing rules, or by modifying the existing rules to include more “guideposts” remains unsettled.

What do you think?  Please respond to the poll, above right, to let us know whether you think amending the Federal Rules of Civil Procedure (FRCP) is necessary to address some of the preservation and sanctions issues discussed above.

To join the conversation and receive automatic updates when new information is posted to this blog, please subscribe to e-discovery 2.0.

---

[1] A more exhaustive list of participants and sample questions was incorporated into the Federal Rules Advisory Committee’s June 29, 2011 memorandum announcing the mini-conference.  Similarly, the events leading up to the mini-conference are described in more detail as part of my previous postings on the same subject.

In my last post I announced that discussions are taking place that could change the way preservation and sanctions issues are handled within the federal court system.  The next round of discussions about possible amendments to the Federal Rules of Civil Procedure (FRCP) is scheduled to take place on September 9th in Dallas, Texas as part of a “mini-conference” led by the Discovery Subcommittee – a committee appointed by the Advisory Committee on Civil Rules.  This post discusses three different rule amendment approaches that attendees have been asked to consider in order to help them prepare for the mini-conference.  A complete list of attendees, preparation materials, and questions the group will consider are included in the Advisory Committee’s June 29, 2011 memorandum to the participants.

The debate about whether or not rule amendments are even required is far from over.  A 452-page document located on the U.S. Courts’ website chronicles many of the meetings, notes, and submissions driving the current discussion.  Page 265 of the document contains a memorandum prepared by the Civil Rules Advisory Committee earlier this year, stating that:

“the Subcommittee has reached no conclusion on whether rule amendments would be a productive way of dealing with preservation/sanctions concerns, much less what amendment proposals would be useful.”

Despite concerns that amending the current rules now would amount to jumping the gun, there is an undeniable desire for more clarity around when the duty to preserve electronically stored information (ESI) is triggered, what must be preserved, and when the duty expires.  This momentum has resulted in the crafting of draft proposals that are likely to help frame the discussion on September 9th. The “proposals” are really draft approaches that have been broken down into three general categories described in the Civil Rules Advisory Committee’s memorandum, titled: “PRESERVATION/SANCTIONS ISSUES” (see page 263).  The Category 1 approach can best be described as providing a higher degree of specificity than the other approaches.  For example, the Category 1 approach provides a fairly detailed explanation of the duty to preserve evidence (Rule 26.1(a)) and details possible triggers (26.1(b)), the scope of the duty to preserve (26.1(c)), and sanctions (Rule 37).  Category 2 proposes a more general preservation rule, while Category 3 only addresses sanctions as a tool for influencing behavior.  The three categories are discussed in more detail below.

Category 1: Specific Rule

This draft includes many different exemplary lists, alternative approaches, and footnotes that highlight the fact that one of the key challenges with drafting a specific rule is trying to foresee all of the challenges that might lie in the road ahead.  For example, the draft rule provides a long list of events that could trigger the duty to preserve evidence, including everything from serving a pleading to taking “any other action” in anticipation of litigation.   The rule also provides a list of information types that are “presumptively excluded” from the preservation duty, such as deleted data on hard drives, temporary internet files, and physically damaged media.

The lists are helpful in that they provide guidance.  However, each list also includes a “catch-all” provision to address scenarios that might not be foreseeable.  The inclusion of catch-all provisions highlights the inherent challenge of providing more clarity and certainty without creating rules that are so inflexible that they are difficult to apply to unforeseen factual scenarios or technological developments.  Some might argue that trying to provide a laundry list of examples will make passage of new rules difficult because each item on the list will stir debate.  Others contend that the lists add little value because the catch-all provisions will still require litigators to pass the sniff test of “reasonableness.”

Despite the inherent challenges related to drafting rules with specificity, most practitioners would likely support the inclusion of lists or examples that provide at least some direction.  What is likely to be far more controversial with respect to Category 1 is the use of alternative language proposing fixed limits around custodians and litigation holds.  For example, one alternative would limit data preservation requirements to a fixed number of custodians and the duty to preserve evidence would similarly expire after a fixed number of years.  Bright line rules like these may be easier to understand, but they also tend to be controversial since they lack the flexibility necessary to fairly address every conceivable situation.

Category 2: General Rule

Like the Category 1 proposal, the Category 2 proposal uses lists and outlines several alternative approaches throughout the rule.  However, the Category 2 proposal fundamentally differs from Category 1 by outlining a more general approach.  For example, one of the alternatives essentially states that the duty to preserve evidence is triggered whenever a “reasonable person” would expect to be a party to an action.  Similarly, the ongoing duty to preserve information after the duty has been triggered would be evaluated based on what is described as a “reasonable period” under the circumstances.

The beauty of this more general approach lies in its simplicity and flexibility.  The idea is that evaluating conduct based on the “reasonableness” of a person’s actions is much easier than attempting to draft bright line legal guidelines that account for every possible factual scenario.  The flip side is that reasonable minds could differ and results could be inconsistent if there are no bright line rules.  What this means in the context of the federal rule discussion is that one judge might find a party’s conduct with respect to data preservation efforts reasonable, while another judge might issue sanctions based on the same set of facts.  In large part, it is this lack of certainty and guidance in the current rules that sparked the current debate in the first place.

Category 3: Sanctions-Based Rule

Unlike the first two categories, the Category 3 approach focuses only on sanctions and would act like more of a “back-end” rule.  In other words, the rule would not contain any specific directives about preservation, but it would provide direction in the areas of when and how sanctions might be applied.

Despite the draconian image a “sanctions” based rule might conjure up, the Category 3 rule may seem surprisingly lenient to some.  For example, absent extraordinary circumstances, the court would be prohibited from imposing any of the sanctions listed in Rule 37(b)(2) or from giving an adverse-inference instruction unless:

“the party’s failure to preserve discoverable information was willful or in bad faith and caused [substantial] prejudice in the litigation.”

The sanctions based approach would almost certainly have an impact on how parties handle upstream preservation related issues.  However, the key ingredients that will impact what kind of behavior this rule drives are the severity of the threatened sanction as well as the applicable standard.  For example, a party facing severe sanctions for conduct that is either negligent, willful or in bad faith is likely to take their preservation obligations seriously.  On the other hand, if the realm of possible sanctions is trivial, parties are less likely to take their preservation related obligations seriously.

Conclusion

The three rule approaches represent very early attempts at framing possible approaches to amending the FRCP.  If the Discovery Subcommittee chooses to recommend rule amendments following the September 9th mini-conference in Dallas, the proposed language is likely to be closer to final form and easier to assess than the current proposals.  I will continue to monitor the rule making discussion and provide commentary in future posts.  Stay tuned for my next post where former US Magistrate Judge Ron Hedges explains why he thinks the rule changes are unnecessary and why the current proposals might run afoul of the Rules Enabling Act.

(Editor’s note: This special guest post was written by Chitrang Shah, Clearwell Principal Product Manager. He is an RIT alum and avid hiker who works with our engineering team and lead customers to optimize the product for large-scale review. – Kurt)

As we’ve previously shared, our product strategy throughout 2009 and 2010 was to expand the product footprint across the EDRM as customers were demanding a single, end-to-end eDiscovery product. During this period we successfully expanded from our roots in processing, search and analysis to review and production (August 2009), identification and collection (September 2010) and legal hold workflow (March 2011). Over the last several months, our focus has been to go deep in each of these modules and provide features that deliver even greater return on investment to our customers.

Today, I am excited to announce significant new features and feature enhancements to the Clearwell Review and Production Module and say a few words about what motivated us to build these features and how they enable our customers to further streamline their legal review workflow.

There are several exciting features in this release, but I would to like to highlight three in particular:

1. Ability to seamlessly import production load files

Most matters require reviewing relevant documents alongside the documents received from third parties, opposing parties, and even previous litigations. With the new load file import feature, users can now streamline the process of importing load files with three simple steps.

In Step 1, a step-by-step wizard-like interface guides users though the selection of formatting information such as field delimiters and nested value delimiters, metadata information such as bates numbers, family relationships, tags, folders and any number of custom attributes, and content information such as images, extracted text and native files. When the load file has both extracted texts and native files, the wizard gives users an option to specify which content should be used for searching.

In Step 2, the system performs a deep validation of the load file and generates a report documenting any inconsistencies such as missing bates numbers or missing values for required fields found in the load file. As a result, customers have the ability to quickly find and fix any issues with the load file before the import begins.

In Step 3, the system imports the documents and builds analytics. Once this step completes, the imported documents, including all metadata and content, are available for viewing and searching.

All the analytics capabilities customers are familiar with, such as discussion threads and concept search, are also available for documents imported from load files. This allows users to quickly discover documents in the load file that are conceptually similar to natively processed documents, for example.

2. Support for large scale reviews and productions

As the volume of electronically stored information (ESI) continues to grow, our customers find themselves reviewing and exporting more and more documents, and they need a solution that can cope with the massive growth in data. At the same time, they don’t want to spend large sums of money building a server farm in anticipation of the growth. They want the flexibility to add capacity when needed and remove it when not needed.

Clearwell’s scale-out architecture enables administrators to easily add appliances and allocate them to a particular matter and to a specific task using a point-and-click interface.

For example, if an administrator needs to increase the number of reviewers from 200 to 400 in order to meet a tight deadline, he or she can easily add 2 appliances to the cluster and assign them for review. Once the review completes, the administrator can now easily re-assign these appliances for production, allowing users to easily meet deadlines while reducing their overall hardware costs.

This flexibility allows our customers to maximize the use of their hardware resources while providing infinite review, export and production scalability.

3. Streamlined management of exports and productions

Clearwell provides powerful export options, and while our customers use them extensively for creating a variety of different production formats, they typically standardize on a few. Clearwell’s new case export and production templates provide a quick and easy way for case administrators to define the export format once and use it across multiple cases. When exporting documents, users can simply select a template from the list of visible templates in that case. This capability significantly reduces the overhead associated with managing export formats and allows our customers to produce documents in a consistent format across multiple matters.

Additionally, new production pre-mediation reports automatically identify problem documents and group them by issue type for quick resolution. This enables users to preemptively identify and resolve document production issues without delaying entire productions.

Says Wendy Butler Curtis, chair of Orrick, Herrington & Sutcliffe’s eDiscovery Working Group, “Legal review is one of the most challenging phases of the eDiscovery process. As electronic data volumes continue to grow, it is increasingly important to leverage technologies that can streamline and improve legal review, ensure defensibility and reduce costs. Solutions like the Clearwell eDiscovery Platform enable legal teams to create an iterative eDiscovery workflow that allows for more efficient and effective large-scale review.”

We will be showcasing the new features at ILTA (Booth 816) this week in Nashville, so come see us and let us know what you think.

(Chitrang Shah is a Principal Product Manager at Clearwell Systems, now a part of Symantec, and the lead Product Manager for Clearwell’s Processing & Analysis and Review & Production Modules)

In past years we’ve covered Gibson Dunn’s Mid-Year E-Discovery Report which is always a good read, chock full of take-aways about the eDiscovery market.  In my mind, they do an excellent job of synthesizing the ever-expanding volume of case law and comparing those trends with historical averages.  This year’s report is no exception, and for those who don’t get to read all the cases, this is a stellar way to keep up on eDiscovery trends.  Without trying to summarize the entire 23 page document, there were a number of findings that stood out and should be perused by anyone with even a passing interest in the space.

Legal Holds/Preservation. As we all know, eDiscovery sanctions (at least here in the US) are critical business/legal drivers, particularly with regard to the legal hold area (which is the riskiest part of the EDRM).  As the Gibson report points out, the actual award of sanctions has remained relatively flat (56% in the first half of 2011 versus 55% for the full year in 2010) –  but, more important than this relatively stable metric, it’s very clear that the plaintiff’s bar has caught on to the ability to win cases by revealing shoddy (or just undocumented) legal hold procedures, even in some instances where data isn’t lost.  This is why the report notes a dramatic increase in the seeking of eDiscovery sanctions – 68 at mid-year 2011 versus 31 at mid-year 2010.  This doubling of attempts to pierce an entity’s legal hold regime should be a wake-up call to in-house practitioners and chief legal officers, since the attempt and success rates will likely only increase over time.

While there is still some considerable debate, at least for those following Judge Scheindlin’s Pension Committee logic, anything less than a formal, written legal hold policy is per se negligent.  Although it’s conceivable that  a reviewing court won’t use this rigorous standard, anything less formal will strike most organizations as simply too risky.  Ongoing compliance with the legal hold process is also another difficult task for many organizations, one which is considerably easier with an automated solution that is able to track acknowledgements and send reminders over time.  It’s all too easy for companies to think that once they’ve discharged their initial legal hold duty they’re in the clear – but as these obligations morph (with more custodians/data types) and elongate (from months to years) over time, keeping on top of the legal hold processes becomes that much more important.

Sanctions. The Gibson report also importantly points out that there’s currently a split in jurisdictions where some courts can levy sanctions for bad faith, while others can merely require proof of negligence.  Here, the important take-away is that a defendant entity doesn’t typically get to forum shop and therefore they can’t really tell which type of jurisdiction they’ll end up in as a litigant.  So, they need to build their eDiscovery processes to meet the high water (i.e., most rigorous) standard.  In most cases, it’s therefore prudent to be prepared to be sanctioned for merely negligent conduct – anything less can potentially be safe but that risk calculation needs to be considered carefully.

The other perilous part of the equation is that once sanctions are deemed warranted, the court has almost unlimited discretion to levy whatever blend of sanctions it thinks is appropriate.  In Green v. Blitz, for example, the court ordered a laundry list of sanctions, some of which were pretty unfathomable:

1. Defendant had to pay plaintiff $250,000

2. Defendant had to provide a copy of the court’s order to plaintiffs “in every lawsuit proceeding against it” for the past two years

3. Defendant had to file the court’s order in every case that it is involved in for the next 5 years

The bottom line is that sanctions, despite the fear factor, can be used to drive positive proactive conduct – namely in the shape of eDiscovery best practices.

Outside Counsel Duties. Here, the Gibson report notes that outside counsel’s Zubulake duties continue to increase over time, with a number of cases continuing the trend of holding attorneys responsible for ensuring that their clients properly implement legal holds, institute sound sampling protocols and conduct sufficient quality control steps.  This line of discussion can be useful when talking to outside counsel where we’re starting to see how their increasing responsibilities can lead to malpractice exposure, as seen in the recent McDermott case.

Search/Analysis. Lately there’s been a ton of buzz about predictive coding, but (despite the hype) it still doesn’t appear ready for prime time yet.  The Gibson report noted that there were no reported cases that addressed the use of predictive coding or other advanced search technologies.  My sense is that without some semblance of judicial approval or strong client backing, outside counsel (who are concerned about their malpractice exposure, per above) aren’t quickly going to be the first ones into the pool.  Unless an enterprise client demands that they use this type of technology, most will wait for judicial approval and that’s probably still a way off.  While next generation search technologies are more promise than reality right now, there is still a mandate to implement a defensible search methodology.  These are needed initially to demonstrate transparency in the eDiscovery process and to then withstand the challenges levied by counsel in the case of an inadvertent production.

In sum, the Gibson report shows the ongoing maturation of the eDiscovery space.  But, any niche market led by case law and/or attorneys deciding to adopt new technologies won’t be quick to change.  In many instances, therefore, the best practices will be decided a combination of standards bodies and vendors who are being pushed by their more forward thinking clients to get and stay on the cutting edge.

According to a complaint filed by the U.S. government, the FBI secretly recorded an employee at one of Apple’s suppliers passing confidential information about the soon to be released Apple iPad in an October, 2009 telephone conversation.  The recording, along with other evidence, led to the arrest of the employee and others on charges on of wire fraud and conspiracy to commit securities fraud on December 16, 2010 as part of a major insider-trading investigation.  In the conversation, a director for Flextronics named Walter Shimoon is heard saying:

“they [Apple] have a code name for something new … It’s … It’s totally … It’s a new category altogether… It doesn’t have a camera, what I figured out. So I speculated that it’s probably a reader. … Something like that. Um, let me tell you, it’s a very secretive program … It’s called K, K48. That’s the internal name. So, you can get, at Apple you can get fired for saying K48.”

Four months later, the first Apple iPad, code named K48, was unveiled to the public.    To read more about the case background, read the press release issued by the U.S. Attorneys’ Office on December 16, 2010.

The case is interesting from an eDiscovery standpoint because it highlights challenges related to finding critical evidence as part of an investigation or lawsuit when people are intentionally using code words to hide information.  Finding or overlooking important documents that have been disguised can make or break your case, so determining whether or not key players are using code words is an important part of a thorough investigation.  Equally important to the investigation is segregating relevant and irrelevant documents quickly before key evidence is lost or destroyed without being required to conduct a painstaking page by page review of each document.

How Does Technology Help?

The good news is that even though technology innovation has resulted in massive data growth requiring the review and analysis of more documentary evidence during lawsuits and investigations, advances in eDiscovery technology have also made sifting through this information faster and easier.  In other words, technology can help solve the data growth problem technology created.

One of the newest advances is the use of “transparent concept search” technology to find important electronic files in lieu of basic “keyword” or “traditional” concept searching technology.  In many situations investigators or lawyers simply aren’t aware code words are being used to hide activity, so critical evidence is often overlooked.  For example, in the present case assume the investigator is unaware that “K48” is the internal code name used for the first iPad.  A simple keyword search for the term “iPad” may not retrieve critical documents about the “iPad” because the code name K48 is being used to disguise the product name.  If this is the only search methodology used, information could easily be overlooked during the investigation due to the limitations of simple keyword search technology.

On the other hand, running the same search using a traditional concept searching tool is likely to retrieve documents containing the word “iPad” as well as other conceptually related documents.  The problem is that the user has no ability to control the breadth of the search using traditional concept searching technology.  That means even though a traditional concept search for the term “iPad” is likely to include documents containing the term “K48” and “iPad,” it is also likely to retrieve a large number of irrelevant documents containing terms like “iPod, iTouch and iTunes that may appear to be conceptually related to the search term “iPad.”  The problem may seem trivial initially, but when investigators are required to read hundreds or thousands of irrelevant documents about the iPod, iTouch or iTunes in an effort to find relevant documents about the iPad, the time and cost of the investigation can skyrocket.

Next Generation Transparent Concept Search Technology

To solve this problem, next generation transparent concept search technology takes traditional concept searching a step further by empowering investigators to reap the advantages of traditional concept searching while actually reducing instead of increasing e-discovery expenses.  The secret is that transparent concept searching technology significantly reduces the time and expense resulting from over-inclusive document retrieval by allowing users to eliminate documents containing concepts that are not relevant to the intended search.  This is accomplished by providing a transparent view of concepts related to a search so that users can actually visualize and select (or deselect) the range of concepts to be included in a search before the search is executed.

For example, using transparent concept search technology to search for the term “iPad” would reveal conceptually related terms like “K48” just like traditional concept searching.  However, a transparent concept search would also provide a list of all concepts related to the keyword “iPad” prior to the search such as “K48, iPod, iTouch, Shimoon, iTunes, etc.  Prior to executing the search, the user could de-select irrelevant concepts and limit the search to “iPad”, “Shimoon”, “internal” and “K48” to make sure only the most relevant documents are retrieved. (See Figure 1).  In addition to decreasing the cost associated with segregating relevant and irrelevant documents, the transparent approach to concept searching results in strategic advantages for investigators and legal teams because the most relevant evidence is found quickly so cases can be assessed faster, with more accuracy, and before evidence disappears.

Conclusion

Not knowing what to search for as part of eDiscovery or investigations is often the biggest organizational challenge that basic keyword and traditional concept search technology has not been able to solve.  Next generation transparent concept search technology overcomes the inherent limitations of basic keyword and traditional concept searching technology by empowering users to uncover, assess, and review evidence faster and with more accuracy, thereby giving litigators or investigators new strategic advantages on every case.

In the world of technology we live in, a huge amount of benefit is created when people apply certain well-known techniques to solve problems and create value to the broader community. Such techniques are often the result of painstakingly long and laborious research, driven primarily by academic institutions with private industry either funding such research directly or by co-opting them in their own work. When the industry as a whole recognizes a certain methodology, it gains popular usage.

In information retrieval, searching and retrieving relevant content from unstructured text has been a vexing problem, and we’ve had decades of the brightest minds applying their collective intelligence and the rigors of peer review to validate and establish the most effective way to solve a retrieval problem. And, research forums such as TREC, SIGIR and other information retrieval conferences establish a venue for advancing the state of the art. So, when Recommind announced that they have been issued a patent on Predictive Coding, I took notice, especially since it touches a nerve with those who believe research should be openly shared.

The patent lists six claims that describe a workflow whereby humans review and code a document and the coding decisions applied to the document sample are projected or applied to the larger collection of documents. Anyone who has even the slightest exposure to information retrieval research will recognize this as a very common interactive relevance feedback mechanism. Relevance feedback as a way to perform information retrieval has been studied for well over forty years, with a paper as early as 1968 by Rocchio J.J., titled Relevance Feedback in Information Retrieval. It falls under a category of methods broadly known as machine learning.

Any supervised machine learning system involves creating a training sample and using that sample to project into a larger population. The fact that one could claim patentable ideas on something that is so widely known and used is puzzling.  Any workflow that employs machine learning would include the steps of creating an initial control set, coding that by human review, and applying the learned tags to a larger population.  In fact, the Wiki article Learning to rank describes precisely the workflow that is claimed in the patent and as part of our participation in the TREC Legal Track 2009, Clearwell submitted a paper with iterative sampling based evaluation and automatic expansion of initial query.  In that paper, we describe exactly the workflow postulated by the six claims of the patent.

In terms of other prior art that would potentially invalidate the patent, the list is long. Let’s start with Text Classification. Text Classification using Support Vector Machines (SVM) was first published by Thorsten Joachims in 1998, in the Proceedings of Sixteenth International Conference on Machine Learning, as well as his book Learning to Classify Text Using Support Vector Machines: Methods, Theory and Algorithms, published by The Springer International Series in Engineering and Computer Science.  Now a well-recognized Professor of Computer Science at Cornell University, that work is widely cited as a seminal work on the area of machine learning and text classification. Interestingly, this work was cited by the Patent Examiner as prior art, but the inventors missed listing it. Nevertheless, that work and further work by several academics such as Leopold and Kindermann has already established the use of Support Vector Machines as a useful technique for machine learning. To claim the novelty of its use in automatically coding documents is, in my opinion, a hollow claim.

Another technology mentioned in passing is Latent Semantic Indexing (LSI). This is proposed as a retrieval technique by Deerwester, S., Dumais, S.T., Furnas, G.W.,Landauer, T.K., Harshman R. in their paper, Indexing by Latent Semantic Analysis, in Journal of the ASIS, 41(6):391-407, 1990. The use of LSI for semantic analysis, concept searching and text classification is also very widespread, and once again, it seems ridiculous to claim that it is something novel or innovative.

Next, let’s examine the use of sampling to validate the initial control set. Use of sampling for validation of a control set of documents is in fact such a widely known technique that most e-discovery productions employ sampling. In fact, the Sedona Commentary on Achieving Quality and the EDRM Search Guide recommend use of sampling to validate automated searches. Furthermore, several E-discovery opinions such as Judge Grimm’s opinion in Victor Stanley [Victor Stanley, Inc. v. Creative Pipe, Inc. , 2008 WL 2221841 (D. Md., May 29, 2008)]  suggests that any technique that reduces the universe of documents produced must employ sampling to validate automated searches.

In short, we think the claims issued in the patent and the associated workflow are so commonly used that the workflow is neither novel nor non-obvious to a trained practitioner, and there is enough prior art on each of the individual technologies to warrant a re-examination and eventual invalidation of the patent. In any event, it is fairly easy for anyone to pick up existing prior art and devise a similar workflow that achieves the same or better outcome, and attempt to enforce the patent will likely be challenged.

But there is an even bigger issue at stake here beyond the status of Recommind’s patent: namely, shouldn’t the e-discovery vendor community continue to work, as it has for years, toward what is in the best interest of the legal community and, more broadly, the justice system? Recommind’s thinly veiled threats about requiring industry participants to license their technology are an affront to those who have invested years developing the technology and practicing the approach in real-world e-discovery cases. Spend a few minutes trolling (no pun intended) around on archive.org and you’ll see that early predictive coding companies like H5 were practicing machine learning and predictive workflows in e-discovery over two years before Recommind announced their first version of Axcelerate.

Wouldn’t a better outcome be for corporations and law firms to benefit from the innovation that comes from free competition in the marketplace, while still honoring the sort of novel, non-obvious innovation that warrants patent protection? Legitimate patents that actually encourage and protect investments by an organization are fine, but process patents that attempt to patent a workflow are bad for business. With such an approach, the full promise of automated document review (which, as any truly honest vendor should admit, still has much more room to grow and develop) can be fully realized in a way that both provides vendors with the fair and just economic rewards they deserve while helping the legal system become radically more efficient.

I was at Sedona midyear meeting last week and during Ken Withers’ excellent discussion of recent e-discovery case law, a few thoughts occurred to me. First, there are so many cases coming out now each week it’s hard to stay above the fray and mine for useful nuggets. The task is a bit Sisyphean, so folks like Ken (who keep a rolling index of cases) are particularly helpful. Next, I was struck by how hot Pension Committee still is, even after almost a year and a half. Certainly, this ongoing spotlight wasn’t an accident, and it’s almost certain that Judge Scheindlin is pleased by the ongoing debate.

I frequently get questions from enterprise clients regarding which cases they should know about, and so I put together an EDRM oriented (left to right) list for folks who just can’t get to all the latest cases. While it’s not an annual roundup per se, I do think it’s a bit more functional for busy electronic discovery professionals who need to stay current. So, here’s the buzz index of cases arranged by topic:

Preservation: The Legal Hold Gold Standard

Case: Pension Committee of the Univ. of Montreal Pension Plan, et al., v. Banc of America Securities, LLC, et al. (S.D.N.Y. 2010).

Summary: The dispute focused on claims by a group of investors who brought an action to recover losses of $550 million dollars stemming from the liquidation of two British Virgin Islands based hedge funds. Unlike many typical e-discovery disputes, this instant action focused on the conduct of the plaintiffs as they attempted to deal with the often murky landscape of electronically stored information (ESI) preservation, collection and production. Judge Scheindlin goes out of her way to crystallize duties and identify the type of conduct that can cause an e-discovery breach. “After a discovery duty is well established, the failure to adhere to contemporary standards can be considered gross negligence. Thus, after the final relevant Zubulake opinion in July, 2004, the following failures support a finding of gross negligence, when the duty to preserve has attached:

• to issue a written litigation hold;
• to identify all of the key players and to ensure that their electronic and paper records are preserved;
• to cease the deletion of email or to preserve the records of former employees that are in a party’s possession, custody, or control;
• and to preserve backup tapes when they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those players is not obtainable from readily accessible sources.”

Why it’s (still) important: First of all, Pension Committee is written by Judge Scheindlin, who is the most famous electronic discovery jurist on the planet. Next, since she’s in the Southern District of New York, it means that folks even in other jurisdiction that aren’t bound by her opinions still must take heed given the fact that New York is home to so many multinational organizations. Finally, her opinion is the clearest (even if disputed) articulation regarding the standard of care for the issuance of legal holds and the duty to preserve ESI. She attempts to categorically define conduct that is grossly negligent and therefore susceptible to extreme sanctions, including spoliation inferences and terminating sanctions. Fortunately, she recognizes the numerous challenges associated with electronic discovery. And, so as to blend in a healthy dose of reality Judge Scheindlin also said: “In an era where vast amounts of electronic information is available for review, discovery in certain cases has become increasingly complex and expensive. Courts cannot and do not expect that any party can meet a standard of perfection.”

In the end, Pension Committee, was the case of the year in 2010 and even in 2011 it’s generating an unprecedented level of retrospectives (here and here). It may be because Judge Scheindlin’s relatively bright line standard has created so much debate, but in the end the Pension Committee discussion will likely continue for the foreseeable future (perhaps only ending when/if the culpability rules are amended to create a unified national standard).

Preservation: Why Preserve in Place is Risky?

Case: Wilson v. Thorn Energy, LLC, (S.D.N.Y. 2010).

Summary: In Wilson, the defendant corporation identified a flash drive that contained relevant ESI, but rather than copying that data safely to a centralized evidence repository, the defendant’s employee chose to hold on to the drive, putting it instead into a desk drawer. When the files were requested for review and production, the files could not be read from the drive. The defendant’s employee attempted to recover the ESI contained on it, but those efforts failed. Granting plaintiffs’ motion for sanctions, the court ordered that defendants would be precluded from offering evidence at trial concerning the data contained on the discarded drive.

Why it’s important: In today’s e-discovery world, many organizations are instituting hold processes via manual solutions and then waiting weeks or months to ultimately collect the ESI. Wilson shows the danger of simply preserving data and makes the argument that you should either “collect to preserve” or collect very shortly after the litigation hold notice goes out. While focusing on a certain media type (flash drive), this analysis can be extended to any digital system containing ESI that inherently has some set failure rates or can be imagined to fail without express, conscious action (due to loss, theft, recycling, etc.).

Identification & Collection: “Manual” Collections Come Under Fire

Case: Green v. Blitz U.S.A. (E.D. Tex. Mar. 1, 2011)

Summary: In this case, Plaintiff sought to re-open her lawsuit despite prior settlement upon learning that defendant had failed to produce relevant documents. Finding that defendant had committed discovery abuses, including failing to disclose relevant evidence and failing to issue a litigation hold, the court ordered defendant to pay plaintiff $250,000, to provide a copy of the court’s order to plaintiffs “in every lawsuit proceeding against it” for the past two years and to file the court’s order in every case that defendant is involved in for the next 5 years. It was revealed that the employee “solely responsible for searching for and collecting documents relevant to litigation” issued no litigation hold, conducted no electronic word searches for emails, and made no effort to speak with defendant’s IT department regarding how to search for electronic documents.

Why it’s important: Green is the latest in a line of cases [See also Ford Motor Co. v. Edgewood Properties Inc., 257 F.R.D. 418 (D.N.J. 2009) and Phillip M. Adams & Assoc., LLC v. Dell, Inc., 621 F. Supp. 2d 1173 (D. Utah 2009) ] that have been highly critical of manual (or self) collection efforts by the individual custodians. Historically, if the custodians were monitored/supervised enough by counsel, this manual collection process was largely deemed defensible, but it looks like this behavior is simply too risky for any conservative enterprise. The better practice is to leverage the custodians to point out where relevant ESI might exist and utilize software tools to conduct broad collections from key players. While it’s not necessary to use IT tools to collect data immediately for all custodians who have received a litigation hold notice, it’s probably unreasonable to not quickly collect ESI (via formal, IT based methods) from at least some subset of key players. The main point is that this isn’t an all or nothing calculation. Costs, risks and benefits should all be carefully evaluated and documented, in case there’s a downstream challenge.

Analysis & Review: Failure to Test Keywords and Sample

Case: Mt. Hawley Ins. Co. v. Felman Prod., Inc., (S.D. W. Va., 2010).

Summary: In this case the court examined the reasonableness of plaintiff’s precautions to prevent disclosure of email, which was inadvertently produced by the plaintiff amidst “a massive disclosure of e-discovery.” The Mt. Hawley court applied the five-factor test established in Victor Stanley, Inc. v. Creative Pipe, Inc. (D. Md. 2008) and found that the producing party had not taken reasonable steps during discovery. In particular, the court was unwilling to find that the inadvertent production of 377 privileged documents was “solely attributable” to a technological glitch and instead found that plaintiff and counsel “failed to perform critical quality control sampling to determine whether their production was appropriate and neither over inclusive nor under-inclusive.” This finding meant that their attorney client privilege was waived as to the subject documents.

Why it’s important: Mt. Hawley demonstrates why sampling and keyword search term formulation is critically important to any defensible discovery effort. In many instances where “blind” keyword strategies are used, the producing party is taking on an undue risk, in essence flirting with the “3^rd rail” of electronic discovery (inadvertent production). Blind keyword searching (followed by brute force review and production) is sadly still a very common practice today. My hope is that cases like Mt. Hawley will force the blissfully ignorant practicioners to take stock of their risky practices and get with contemporary best practices like ECA, sampling, iterative search and the like.

Conclusion

Simply by creating such a list, I’m sure to leave off cases other folks think are more buzz worthy. But, for me, having a few good legal chestnuts is better than trying to boil the ocean and synthesize all the available case law. If you have any comments I’d be eager to hear (good, bad or indifferent).

The amazing thing about the litigation hold process is that everyone is doing it, but the vast majority of people are still doing it manually.

Every company in every case has a duty to preserve, and the only way to meet that obligation is to send out litigation hold notices, track responses, and monitor compliance. To help companies do this, software vendors like PSS (now part of IBM) and Exterro have had products on the market for years. But, despite being good applications with several happy customers, they have only been adopted by about 100-200 customers in aggregate, which is a tiny fraction of the thousands of companies struggling to manage the litigation hold process. Why the low penetration rate?

Well, it turns out there are several good reasons. First and foremost, these applications are expensive, and usually cost over $250K in software licenses, hardware, and implementation services. Second, they take a long time to deploy, often requiring services engagements lasting more than 6 months. Finally, they are pure workflow solutions which are disconnected from the data. That makes it hard to keep them up to date, and means you cannot use them for later stages of the e-discovery process such as collecting data or then processing it. So the audit trail, which is important for defensibility, is often incomplete, and there’s the real risk of “disconnects” between different phases of the e-discovery process.

At Clearwell, we find this type of situation – where there’s a clear market need that’s unaddressed by existing solutions – absolutely fascinating. It led us to ask: what if there was an inexpensive litigation hold solution that’s easy to deploy AND is tightly integrated with identification, collection, processing, ECA, and review? For the past few months, we’ve been working closely with a large number of our customers to answer that question. Our goal was to design a product that will meet the needs of the mass market, which today is still using spreadsheets to track its litigation holds.

The result is Clearwell’s new Litigation Hold Module, which we announced on Monday and is available this month. It brings Clearwell’s trademark ease-of-use and quick time-to-value to the preservation stage of EDRM, and enables customers to manage all their cases from cradle (preservation) to grave (production) within a single product. From the initial conversations with customers, the response has been incredibly positive. Prior to the product shipping, it has been purchased by CA Technologies, Exterran, Flowserve Corporation, and several others, with many more evaluating it for purchase this month. As with all our products, we offer free evaluations and I encourage anyone responsible for managing the litigation hold process to give it a try.

For those who are keeping count, this is Clearwell’s fourth module, all built as a single integrated product. We first came to market in 2006 with processing and ECA. In 2009, we expanded to the right of the EDRM model by adding a module for review and production. The following year, in 2010, we moved left (in EDRM terms) by releasing a module for identification and collection. Now in 2011, this new module for preservation and managing the litigation hold process completes the picture. It makes Clearwell the only fully integrated, end-to-end e-discovery product suite, since other vendors either offer a narrower product footprint or have cobbled together disparate products via acquisition.

Coming on the heels of Transparent Concept Search, this is our second major product announcement of the year – and there will be more to come. The product development team is bursting with new ideas, and we have a rich pipeline of new technologies and products slated for release in the coming months.

(Editor’s note: This special guest post was written by Teddy Cha, Clearwell Senior Product Manager, MIT alum, and coffee connoisseur. Teddy was a key member of the team that developed our Legal Hold Module and has worked tirelessly with our engineering team and lead customers to bring the product to market. – Kurt)

Legal hold is a critical first step to any e-discovery process, but as recent experience has shown, enterprises are still struggling to perform them in a defensible and repeatable way. A judicial warning was heard as early as 2003 with Judge Sheindlin’s ruling in Zubulake v. UBS (and most recently in Pension Committee).  The need for change is not coming from only a single judge, however.  In 2010, the Duke Law Journal studied the level of sanctions compared to previous years and found that:

1. Sanctions are at an all-time high (up 271% since 2005)
2. Damages were as high as almost $9 million
3. The most common misconduct was the failure to preserve data

Sending legal hold notices can start out simple, but it can quickly become unwieldy if not managed correctly. It’s like taxes. Everybody has to do them, and it typically starts out as a “simple” process. But as your assets grow, you may want to invest in more complex software or an online service to maintain efficiency. And once you start a family (or a small business), you’ll need to graduate to a much more robust process.

As companies grow their legal hold process evolves in the same way. Their progression can be described in the following distinct three stages:

Stage 1: Manual Legal Hold Process

Sending a litigation hold notification is as easy as…well, sending an email. But tracking these litigation matters and their responses in spreadsheets quickly grows out of hand once a poor paralegal has to manage a 10th, 20th and 50th simultaneous legal matter (or even multiple holds in a single case).  This manual process is difficult to repeat, error-prone, and likely doesn’t reflect the real-time status of compliance the second the spreadsheet is saved. Typical corporations are concurrently managing hundreds active legal holds, involving thousands of custodians, across multiple business units and groups. It becomes quickly apparent that a better solution is required.

Stage 2: Stand-Alone Legal Hold Software

Legal Hold solutions have been in the marketplace for a number of years. Typically they fall into two categories:

1. Matter Management or Information Governance systems that help enterprises construct workflows and integrate record management policies and controls. Legal Hold notification capabilities are an appended component to these ambitious and holistic solutions. These systems are typically expensive and have long implementation cycles.
2. Narrowly focused offerings aimed at managing just legal hold notification and survey tracking. These solutions typically cost less than the above and are delivered as a hosted service (SaaS).

Stand-alone legal hold software products are certainly an improvement on the Stage 1 manual process. But despite virtually all major enterprises needing some sort of legal hold process, they have not yet raced to embrace these Stage 2 solutions yet. Why not?

Following a typical e-discovery case quickly uncovers the problem. Sending and tracking legal holds is a necessary part of the e-discovery process, but it is only the first step. Soon after custodians are notified of their obligation, e-discovery teams must separately collect, process, analyze, review, and produce that data using other solutions. Stage 2 legal hold solutions are stuck just managing the holds.

This is where purchasing a stand-alone legal hold solution is a bit like buying an iPhone without the network plan: You can’t really do much with it (well, you could play Angry Birds, but only if you download it over a WiFi connection). You can’t obtain your goal of mobile communication without a phone and a network plan.

Stage 3: Integrated Legal Hold Software

To address to drawbacks of Stage 2, many companies today are looking for a more integrated approach – one that marries legal hold with the rest of the e-discovery process. This is where Clearwell’s new solution can help. Once custodians have acknowledged the legal hold notice, Clearwell can immediately reach across the enterprise network and collect those custodians’ data. Once the data is collected, a few clicks of the mouse prepare it for early case assessment (ECA), analysis, and review.

As any experienced corporate IT and legal executive will tell you, such a comprehensive solution has long been promised, but has not come with fast implementation (i.e., up and running in a day), ease of use (i.e., no training required), or in a single platform  (i.e., one login for users and no exporting or importing of data between e-discovery phases). With this in mind, we are delighted to announce the Clearwell Legal Hold Module, now available as part of the Clearwell E-Discovery Platform. Combined with Clearwell’s Identification & Collection, Processing & Analysis, and Review & Production modules, companies can now leverage a truly integrated e-discovery solution to lower the cost and risks of e-discovery. Key features of the new Module include:

• Hold Notices: Hold notices can be quickly created and sent to relevant custodians and system administrators via email. Different notices can be sent to custodians and system administrators, streamlining the notification process. Notices can be sent immediately or scheduled for delivery.
• Auto-Reminders and Auto-Escalations:  Reminders and escalation notices can be scheduled for delivery to non-responsive custodians, eliminating the need for manual follow-up.
• Custodian Surveys: Surveys containing single-choice, multiple-choice, or free form text questions can be created and issued to key custodians so administrators can easily capture information critical to a case, thereby expediting the interview process. Surveys can also be saved as templates to the Notice Library and reused.
• Automated Tracking and Reporting: Administrators have immediate visibility into the status of all legal hold notices across all cases through a single pane of glass. Administrators can drill-down by case to view the status across all custodians, including those who have received and responded to their hold notices, and those who haven’t.

Until today, corporations have been making do with manual or stand-alone legal hold solutions that are neither scalable nor integrated with the rest of the e-discovery process, assuming more and more risk and incurring greater costs – never an ideal combination. Fortunately, it no longer needs to be that way.

(Teddy Cha is a Senior Product Manager at Clearwell Systems and the lead Product Manager for Clearwell’s Legal Hold and Identification & Collection Modules.)