e-discovery 2.0

Every car dealer knows he should focus customers on the monthly payment, not the total cost of the car. Every credit card solicitation (or sub-prime mortgage, for that matter) starts with the offer of 0% interest, not the actual interest rate or fees the customer will pay after the first 6 months. The reason is simple: once you lease the car or put a balance on the credit card, it’s very hard to switch away when – as often happens – you find yourself paying much more than you should later on.

I was reminded of these examples when reading about Kroll Ontrack’s offer of “free ECA” and Stratify’s recent press release announcing “free early stage filtering” for electronic discovery. Taking each in turn:

Kroll Ontrack Advanceview

Based on feedback from several customers in Washington DC, New York, and the Mid-West, Kroll Ontrack often provides Advanceview at no charge. That means customers can get “custodian de-duplication” and “1 keyword and date filter pass” for free, although Kroll still charges $200-250/hour for doing the work. The resulting data set is then processed and loaded into its review platform for $1,500-$1,800 per gigabyte.

Is this a good deal? For the vast majority of customers, the answer is “no” for three reasons.

First, customers typically end up paying more than they would using alternative products. For example, in the chart below, we compare the cost of using Kroll Ontrack to that of Clearwell for a 100 gigabyte project. In both cases, we assume customers are doing de-duplication, filtering, keyword searching, first pass review, and load file creation. As with any comparison of this sort, you have to make some simplifying assumptions. For example, we excluded data hosting fees and professional services fees from the analysis.

Whether customers are better off with Kroll depends entirely on how much data is culled out for free before customers incur the high, back-end charges. Given that all Kroll is doing for free is custodian de-duplication and running one set of keywords and date filters, the typical cull rate is likely be anywhere from 20% to 50% — nowhere near the 80% cull rate required for Kroll to be more cost effective than Clearwell.

The second reason why this is not a good deal is that it gives customers no certainty about costs. Culling rates from de-duplication and blind keyword searches are unpredictable and vary widely, meaning that some projects will cost more than expected while others will cost less. But every project has budget that’s determined up front and, as any litigation support manager will tell you, you get much less credit for being under budget than you get pain for going over budget. That’s why cost certainty is one of the leading requests from anyone involved in electronic discovery.

Finally, excluding data based on a single round of keyword searches and date filters is not in line with The Sedona Conference best practices. Rather, Sedona recommends that customers iterate their keywords and culling strategies to hone them appropriately.

Iron Mountain Stratify OnPoint

It is not yet possible to do the same detailed analysis on Stratify’s OnPoint which offers “free early stage filtering”, because it’s impossible to tell exactly what that means. In its artfully-worded press release and data sheet, Stratify promises to provide “free processing and loading of unlimited data for early stage filtering”. Does that include de-duplication? Does that include any keyword searching? My guess is “no”, in which case all they are really doing for free is offering to load data into their review platform so that they can then charge you – not a very compelling offer. But if anyone does know the answer to these questions, or if Stratify would like to clarify exactly what’s being offered for free, then please let me know and I’ll post an update.

Once data is in Stratify’s system, it charges a “one-time fee starting at $500 per gigabyte” for “reviewable data”. But it does not say if that’s the only fee. What about monthly hosting charges? Fees for additional reviewers? Again, it’s not yet clear what the downstream cost of review really is using Stratify, so it’s impossible to know whether this is a good deal.

If there’s one lesson from all of this, it’s “buyer beware”. Just as when you buy a car, sign up for a credit card, or click on that offer to get more corn on Farmville, you need to look beyond the “free offer” and understand what it’s really going to cost you.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The New York state court looked in the mirror recently and they didn’t like what they saw.  While it’s hard to imagine the self-dubbed “center of the universe” finding flaws with anything… apparently e-discovery has caused the big apple to take serious stock of the situation.  In a report entitled ELECTRONIC DISCOVERY in the NEW YORK STATE COURTS, Chief Judge Jonathan Lippman and Chief Administrative Judge Ann Pfau do an excellent job laying out the nature of the problem in a 24 page report.  Their initial findings in many ways mirror those of the American College of Trial Lawyers Task Force on Discovery (”Task Force”) and their survey of the Fellows of the American College of Trial Lawyers (”ACTL”).

“Electronic discovery (“e-discovery”) has for some time been changing the face of modern litigation. It is a major, if not the predominant, factor behind rising litigation costs and delays and presents serious challenges to the court system’s ability to resolve disputes ranging from commercial matters to personal injury cases, in an efficient, cost-effective manner.”

Fortunately, the Report recognizes the ubiquity of the vexing e-discovery challenges.

“[T]he volume of electronically stored information (“ESI”) has increased exponentially over the last decade, along with the amount of ESI potentially relevant to legal disputes. But while it is inexpensive to store immense quantities of ESI, it can be extremely expensive in the context of litigation to identify, preserve, and collect potentially relevant ESI and to have it reviewed for responsiveness and privilege by attorneys and paralegals prior to production to another party.”

But surprisingly, they’ve taken their shortcomings personally, and the seriousness apparently threatens New York’s standing in the legal community.

“Interviews with leading judges, law clerks, and practicing lawyers from around the state strongly suggest that the New York court system’s standing as a leading forum of both national and international litigation is at stake. … Those same parties and lawyers appear to be turning away from New York State courts for the greater sense of certainty and ability to handle massive e-discovery disputes that the Federal courts, and to a lesser extent, other state courts with more developed e-discovery practices, can provide.”

The report founded upon “extensive research and interviews with experts in electronic discovery”, addresses the problems of electronic discovery, including cost and delay, and provides several recommendations on how “the courts can manage e-discovery in a more expert, efficient and cost-effective manner within the framework of existing law.”

1. Establish an E-Discovery Working Group

This proposed step is one of the more interesting since the goal is to create “a working group of e-discovery experts that would serve as a resource for the court system and support its efforts to improve the management of e-discovery.”  This Working Group would have a very expansive (perhaps too much so) roster:

• Judges, court attorneys, and court clerks drawn from both the Commercial Division and other courts around the state that handle electronic discovery issues (and perhaps one or more judges/court personnel with little or no e-discovery experience);
• Lawyers with extensive experience litigating cases involving large volumes of ESI;
• One or more CPLR Advisory Committee members with an electronic discovery background;
• Medical malpractice, matrimonial, criminal, mass tort, and employment law practitioners, because of the increasing frequency and importance of electronic discovery in these practice areas;
• General counsel familiar with the issues affecting corporate clients who are heavy-ESI producers, particularly in the financial services and health care industries;
• Forensic computer/e-discovery specialists who typically are hired for large electronic discovery productions, but can share their substantive technical knowledge and familiarity with the latest technological/forensic trends;
• A mix of newer and more experienced practitioners, including one or two more experienced practitioners with limited technical proficiency;
• Bar association representatives who have studied and issued reports on electronic discovery;
• Federal practitioners and/or federal magistrates to offer the federal courts’ perspective;
• An academic who has studied and written about electronic discovery;
• Representatives of the Advisory Group to the New York State and Federal Judicial Council, which works to promote awareness about differences and commonalities in law practice between the state and federal judiciaries;
• A member of The Sedona Conference®, a national group of jurists, lawyers, experts and academics considered to be at the cutting edge of electronic discovery issues;
• Representatives of the Attorney General’s and/or District Attorneys’ Offices who are familiar with how electronic discovery is affecting their caseloads.

Assuming they can put together this dream team, the next challenge (beyond finding times to meet) would be to harmonize all the differing perspective, which certainly won’t be easy.

2. Improve the Preliminary Conference

The Preliminary conference was roundly felt to have value, but there were both short term and long term recommendations for change.  In the near term, the Report concludes that new language should be added to Commercial Division Uniform Rule 1 and to Rule 202.12(c)(3) adding in a new language stating that:

“Counsel appearing at the PC should be sufficiently versed in matters relating to their client’s technological systems to competently discuss with the court and opposing counsel all issues relating to e-discovery. Counsel may, in appropriate cases, supplement their ability to address these issues at the PC by bringing a client representative or outside expert with such knowledge.”

Assuming the short term fixes don’t remediate things completely, the Report recommends two additional steps, each to be piloted.  First, one pilot project should require an Initial Disclosure (similar FRCP Procedure 26[a][1]) for all parties relating to electronic discovery issues, which would require the parties to detail the following, in advance of the PC:

• Who the party’s key IT people are;

• Whether, and to what extent, the party has implemented preservation measures to avoid spoliation of the information relevant to this case;

• Which substantive witnesses the party is likely to call who are likely to possess ESI, and the location of that ESI (e.g., laptops, wireless handheld devices);

• What types of computer systems (including e-mail, word processing and spreadsheet software) and other technologies the party uses that may have created documents relevant to the litigation; and

• Whether the party expects to claim that certain ESI relevant to the case is inaccessible due to the form in which it is maintained (e.g., disaster recovery backup tapes, legacy data).

The other pilot program would require an “Affirmation of E-Discovery Compliance” that would be jointly signed and certified by the lawyers for each party, and provide the court with three lists.

“The first list would contain those e-discovery matters, contained in Rule 8(b) or Rule 202.12(c)(3), which the parties were able to meet-and-confer about and resolve. The second list would contain similar matters that, despite meeting and conferring, the parties could not agree upon or resolve and that need the court’s involvement. The third list would be any additional issues that, because of the disagreements described in the second list, the parties could not yet reach and resolve. The document would also chronicle the parties’ attempts to meet-and-confer, and indicate whether, and to what extent, client personnel and IT specialists were involved.

While there are a few other minor suggestions, one of the most interesting is the shout out to the The Sedona Conference®.  The Report concludes that “judges and practitioners applauded the work of The Sedona Conference®, particularly its emphasis on changing the litigation culture and fostering dialogue, cooperation, and transparency in e-discovery.”  The Report recommends an appointment of a representative to The Sedona Conference® which despite the foregoing “should not be interpreted to mean that the court system necessarily endorses that organization’s work and proposals. Rather, the court system’s appointee would bring back materials for consideration here in New York, to be accepted, rejected, or modified, as appropriate.”

All in all, the New York state court appears to have taken a reasoned and measured approach to address their candid shortcomings.  This type of critical analysis should be taken by more jurisdictions to determine where process gaps still exist.  Only then can a better future state be divined.

Since I’ve finished off the last of the Halloween candy and tossed out the moldy, squirrel ravaged pumpkins, it occurred to me that now might be a good time to think about what 2010 will hold for the electronic discovery industry.  My 2009 list seems to have been fairly prescient and many of those notions still hold true since the legal industry (as we know) doesn’t move at the most blistering pace.

Again, doing my best Nostradamus impersonation, here are my top ten trends for 2010:

1. Early case assessment (ECA) moves from a “nice to have” to a “must have” requirement for any matter involving electronically stored information (ESI).  In 2009, we saw ECA move into the mainstream as a methodology to quickly understand case facts, assess risk and lower both review and data processing costs.  But, in 2010, with the advancement of the tools and the increased socialization within the bar and the litigation support community, ECA will graduate into a core methodology for savvy litigators regardless of matter type or size.
2. Appetites for broad information lifecycle management initiatives diminish as organizations realize these programs are far too complex to solve specific pain points, and they often take too much time (measured in years) to execute.  The economic reality is that these holistic, cross data, cross enterprise pipe dreams really can’t demonstrate the ROI that’s needed in today’s challenging economy.
3. Staffing roles continue to evolve with a newfound focus on project management. The role of an in-house e-discovery coordinator will emerge as more of a project management and analyst versus pure legal or IT. This shift will become increasingly necessary as e-discovery evolves from an ad-hoc fire drill to a standard business process that is repeatable, measurable, and defensible.
4. Data analytics and statistical methodologies gain traction to augment the type of subjective decision making approaches that have historically formed the backbone of the e-discovery search and review processes.  These objective methodologies have long been called on as best practices by the likes of the Sedona Working Group. In 2010, they now will start to move from theoretical to practical task as e-discovery tools increasingly move in-house and departments enhance defensibility and add elements such as sampling into the workflow.
5. Platform e-discovery solutions finally become a reality as customers finally graduate from painfully stitching point solutions together, thus requiring less physical document hand-offs (i.e., exports and imports) between applications, cutting costs and lowering the risk of data loss.
6. Associate-based review gradually goes extinct, as both clients and law firms tire of expensive, linear review processes.  More review work becomes either insourced or is managed with specialized contract attorneys, who are both cheaper and better trained for this type of work.
7. Similarly, FRE 502 and “clawback” agreements will be increasingly used to reduce the need for any manual, eyes-on review, although many litigators will resist this trend because of the fears of “un-ringing the bell” when privileged information is disclosed in any context.
8. While perhaps anathema, alternatives to the much lauded EDRM model will gain traction, as practitioners strive to find an even better, and perhaps more practical, project management framework, in many cases acknowledging the role that the EDRM has taken in forming *the* lingua franca of the e-discovery industry.
9. The push for cooperation in the e-discovery process, will make incremental progress despite reticence by old school litigators.  Increasingly, this type of cooperation, as strongly advocated by the Sedona Working Group, will be ironically forced by judges and local rules.
10. “Cloud” computing starts to really impact how e-discovery data preservation/collection is done, both in terms of social media and traditional ESI.  More and more companies block social media applications and file types in the workplace because of fears surrounding the inability to preserve and collect.

Recently, I attended the Sedona Conference’s annual meeting in Atlanta and, amongst other interesting topics, was the discussion of local rules developments and in particular the Seventh Circuit’s new Electronic Discovery Pilot Program (“Pilot Program”).  The Pilot Program was launched October 1, 2009 and seems to be a model for collaboration, since it was developed by eliciting input from a number of disparate groups:

“(a) continuing comments by business leaders and practicing attorneys, regarding the need for reform of the civil justice pretrial discovery process in the United States, (b) the release of the March 11, 2009 Final Report on the Joint Project of the American College of Trial Lawyers Task Force on Discovery (“Task Force”) and the Institute for the advancement of the American Legal System at the University of Denver (“IAALS”), and (c) The Sedona Conference® Cooperation Proclamation.”

The impetus of the Pilot Program was the “broken” nature of the electronic discovery process with the belief that better collaboration and cooperation would certain help remediate the situation.

“The goal of the Principles is to incentivize early and informal information exchange on commonly encountered issues relating to evidence preservation and discovery, paper and electronic, as required by Rule 26(f)(2). Too often these exchanges begin with unhelpful demands for the preservation of all data, which often are followed by exhaustive lists of types of storage devices. Such generic demands lead to generic objections that similarly fail to identify specific issues concerning evidence preservation and discovery that could productively be discussed and resolved early in the case by agreement or order of the court. As a result, the parties often fail to focus on identifying specific sources of evidence that are likely to be sought in discovery but that may be problematic or unduly burdensome or costly to preserve or produce.”

What I really like about the Pilot Program is that it strives to be both prescriptive and practical, which should hopefully avoid the type of ambiguity often exploited by obstreperous counsel.  For example, there is an entire section on early case assessment (ECA) principles, which require discussion of:

• Production issues
• Identification of electronically stored information (ESI)
• The scope of preservation
• The meet & confer process

There’s also the relatively novel requirement that counsel designate an e-discovery “liaison” to work with the parties to coordinate and flesh out germane e-discovery issues.  Regardless of whether the e-discovery liaison is an attorney, a third party consultant, or an employee of the party, the e-discovery liaison(s) must:

“(a) be prepared to participate in e-discovery dispute resolution;

(b) be knowledgeable about the party’s e-discovery efforts;

(c) be, or have reasonable access to those who are, familiar with the party’s electronic systems and capabilities in order to explain those systems and answer relevant questions; and

(d) be, or have reasonable access to those who are, knowledgeable about the technical aspects of e-discovery, including electronic document storage, organization, and format issues, and relevant information retrieval technology, including search methodology.”

Needless to say, this requirement alone should make marked improvements in the e-discovery dialogue, which unfortunately seems like it’s occurring (literally) among participants who both speak different languages and don’t realize it.

Finally, what makes the Pilot Program unique is that its Principles will be subjected to testing during the phases of the Pilot Program, which is scheduled to end on May 1, 2010 (for the first phase).

This project certainly seems like it’s on the right track and pending feedback from the bench and bar, it could serve as a model for local jurisdiction everywhere.

Maybe this will show my age, but I’ve been around the electronic discovery business since the days when pricing was both simple and very expensive. Terabytes were at the mythical high-end of the spectrum and gigabytes of “e-docs” (not “ESI”) cost $3,000 – $4,000 to process. Understandably (and fortunately for most), pricing models have evolved, thanks in part to more educated consumers and initiatives such as Sedona’s RFP + Vendor Panel.

Leaving the WABAC machine and moving into present times, we’ve starting to see some variance from traditional pricing models that primarily focus on data “into” the processing machine. More and more companies (such as Kroll Ontrack) are moving to models that price on data “out” of the process. Since that’s a bit nebulous, an example might illustrate:

Traditionally, in a somewhat simplified fashion, an electronic discovery project would be priced by the amount of data in the initial corpus (say 100 gigabytes) and processing would be priced at $500 a gigabyte (for round numbers purposes). Leaving out the sometimes significant caveat that the 100 gigabytes would likely increase due to expansion of compressed files, this would mean that the bulk of the project expenses would be $50,000 ($500 x 100), plus relatively nominal costs for monthly hosting and user access rights.

At the end of the day, after elimination of system files, deduplication and application of search terms (reducing the initial corpus by say 70% collectively) there would be 30 gigabytes remaining for hosting and possible production, both of which are most often priced separately.

Given rampant commoditization there’s an arms race underway among certain service providers where they’re now changing the above model to give away initial processing as a loss leader – pricing only on the data that comes out the end of the processing/search step. In this approach the above workflow would largely stay the same, but the vendor would charge a higher rate for what ultimately is hosted on the back-end. If this back-end fee was $2,000 per resulting gigabyte and the same 30 gigabytes was seen out the back end, then the customer would pay $60,000 for the project. But, if the deduplication, searching, culling, etc. was more effective (at say 80%) then the resulting 20 gigabytes would only cost $40,000.

The question then, as Clint Eastwood would put it, is: “Do you feel lucky?” This pricing model forces attorneys and litigation support managers to guesstimate what culling, search, and de-duplication rates they’ll likely get on the data corpus. Guess right and they save the end client money, guess wrong and they’re way over budget.

The dynamics of this purchasing decision are a bit atypical because the buyer (usually counsel) doesn’t pay the bills, so the decision can often be more vexing than most. When a direct consumer gambles on pricing things will ideally balance out over time, with money being saved in some instances and some being overspent in others. But, when the buyer doesn’t pay the bills the motivation is less clear.

Thoughts run to Maslow’s hierarchy of needs to determine which pricing model is ultimately more compelling: (a) price certainty/adherence to budget, or (b) cost variability and the opportunity to save money. While it’s never good to understate the upside of saving money (Esteem), I think ultimately there’s a more fundamental need (Safety) to stay within budget and avoid the painful (sometimes client imperiling) call to discuss how a given e-discovery project has gone way over budget.

This calculation is made further vexing because it not only pits the purchasing party against unknown data culling/searching rates, but it also puts the vendor in an ethical bind where they make less money if they’re supremely effective at data reduction, whereas if they’re either intentionally or accidentally beneficiaries of relatively little data reduction then they stand to make a ton of upside.

It’s like you went to Vegas to gamble your kid’s college fund and on top of the already questionable house odds you knew that the dealer stood to profit by your losses. So, as for myself, no, I don’t feel lucky.

I was at the Sedona Conference Working Group’s Mid Year meeting last week where 80 or so electronic discovery practitioners and judges met to discuss hot topics in bucolic Denver, Colorado.  Without getting into the particulars of any discussion, several themes continue to stay on the front burner, including the progress of the cooperation proclamation and the relatively newer issue of proportionality (as highlighted recently by The American College of Trial Lawyers Task Force on Discovery).

Aside from those overarching themes I was struck by how polarizing the discussion was around one recent case in particular.  While many notable commentators have already made this the most talked about cases of the year, Phillip M. Adams & Assoc., LLC v. Dell, Inc., 2009 WL 910801 (D. Utah Mar. 30, 2009) continues to stimulate discussion.   Adams v. Dell is a patent infringement case where the plaintiff, alleged that one of the defendants (ASUS) destroyed critical pieces of evidence and should be sanctioned accordingly.

The underlying facts and timelines are fairly complex, but in summary the dispute centered around the alleged infringement of several patents developed to resolve defects in floppy disks during in the late 80’s.  What makes this decision so vexing is that it starts out as a preservation case, but quickly confuses that concept with data retention and information management practices/policies.

So, starting with the preservation angle…  Both sides fortunately agreed about the definition for the duty to preserve evidence, which in the 10^th circuit begins when a party “knows or should know [it] is relevant to imminent or ongoing litigation.”  The triggering of the preservation duty was not surprisingly much more complicated and ASUS (the responding party) claimed that its duty to preserve wasn’t triggered until early 2005, when they received a letter warning it of potential litigation because of the alleged patent infringement.  But, the Magistrate held that “counsel’s letter is not the inviolable benchmark” and the duty to preserve was triggered much earlier (in the 1999-2000 time frame) because similar litigation was rampant in the industry, highlighted by a late 1999 suit where Toshiba paid billions of dollars in a class action settlement related to similar floppy disk issues.

Leaving the murky preservation issue by the wayside for a bit, the Magistrate then moved into ASUS’ claims that FRCP 37(e) provided a safe harbor for its alleged destruction.

“ASUS claims it can find a safe harbor against sanctions because of the recently adopted rule that sanctions may not be generally imposed for ‘failing to provide electronically stored information lost’ if a party can show the loss was ‘a result of the routine, good-faith operation of an electronic information system.’”

Nice try, but strike two for ASUS…

“ASUS provided an extensive declaration from an experienced consultant in e-discovery. While he stated the reasons for and history of ASUS’ ‘distributed information architecture,’ he did not state any opinion as to the reasonableness or good-faith in the system’s operation. And while he says ‘ASUSTeK’s data architecture relies predominantly on storage on individual user’s workstations,’ his 31-page declaration does not show he is familiar with the precise practices pointed out in the declarations of employees. Those employees’ declarations describe the practice of ASUS’ email system to overwrite old data regardless of its significance; ASUS’ reliance on employees for all email and data archiving; and the process of replacement of computers, which also relies on employees to transfer data from their old to their new computers. Neither the expert nor ASUS speak of archiving ‘policies;’ they speak of archiving ‘practices.’

The court’s distinction between “policies” and “practices” seems like a convenient (perhaps “Deus ex machina”) way to discount ASUS’ data retention activities and prevent the use of the FRCP 37(e) safe harbor.  Since in most instances, “bona fide, consistent and reasonable” document retention “policies” have been found to be presumptively valid by everyone ranging from Sedona (Guideline 3) to Carlucci v. Piper Aircraft Corp. and Arthur Andersen LLP v. United States, 125 S.Ct. 2129 (2005).  It’s not clear how he draws the important “practices” distinction and why said practices are exponentially different from presumptively valid “policies.”

It’s precisely this line of thinking that confuses the alleged failure of the duty to preserve (discussed at the outset of the opinion) with the duty to retain information.  The court seems to think it’s an “unreasonable” practice to have custodians responsible for compliance with data retention and this deficiency made the safe harbor unavailable.

“ASUS has explained that it has no centralized storage of electronic documents, email or otherwise, and relies on individual employees to archive email (which will be deleted if left on the server) and electronic documents (which reside only on individual workstations).”

Not only is this custodian-based retention practice, in and of itself, reasonable; it’s probably the most common form of data retention practices seen at corporations today.  While a number of vendors have promised intelligent retention systems that work without any significant human intervention, for the most part those solutions are still in their infancy.  Additionally, there are significant technical challenges to have an application manage *all* ESI (Electronically Stored Information) that exist for a given custodian (including desktop files, instant messaging, text messaging, social media, etc.) As such, most companies must inherently rely upon their custodians to both retain and preserve data pursuant to company policies.  The court not only seems to miss this point, but also attempts to impose an obligation that corporations must prevent the “loss of data” above and beyond specific preservation obligations.

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

Although the exact rationale was unclear, the court held that ASUS violated their duty to preserve and that the loss of evidence could not be excused as a “routine, good faith operation of electronic information systems.” While the court ruled that sanctions were appropriate, it reserved final sanctions pending the close of discovery.   Depending on what those ultimate sanctions look like, it seems pretty likely that this decision will be subject to appellate review.  Until then, it’s probably too soon to treat this questionable holding as gospel.  Wary corporations however should continue to bolster the “reasonableness” of their information management/retention/destruction policies and practices so that in hindsight a court won’t be able to take away the FRCP 37(e) safe harbor by casting those “practices” as being unreasonable.

Picking five out of the sea of electronic discovery cases isn’t as easy as it sounds.  Sure, a few, like our “Case of the Year” will be no-brainers, but others aren’t as clear cut.  And, they’re certainly open to debate.  But, in my humble opinion here’s THE list, counting down David Letterman style:

5) Mancia v. Mayflower Textile Servs. Co., 2008 WL 4595175 (D. Md. Oct. 15, 2008)

If there ever was an opinion written by a judge to make a larger societal point, Mancia was certainly it.  Judge Paul Grimm, who’ll appear on this list in another slot as well, has clearly taken the mantle from Judge Scheindlin as the leading electronic discovery jurist.  He’d heretofore authored a number of significant opinions in this area, including Hobson and Thompson. Now, in Mancia he used a garden variety discovery dispute, which was typically rife with boilerplate objections and other obstreperous tactics, to highlight the Sedona Conference’s Cooperation Proclamation.

The lasting takeaway from the opinion is the notion that “[c]ourts repeatedly have noted the need for attorneys to work cooperatively to conduct electronic discovery, and sanctioned lawyers and parties for failing to do so.” To support this notion he cites the Sedona Conference Proclamation and the little used FRCP 26(g).  This opinion is noteworthy because it gives precedent to bolster the Sedona initiative and should provide a ready citation for all those counsel who aren’t getting the level of cooperation they need from the opposition.  It remains to be seen if other judges will follow suit, but this could be the beachhead for a more cooperative electronic discovery process in 2009 and beyond.

4) Flagg v. City of Detroit, 252 F.R.D. 346 (E.D. Mich. 2008)

Flagg highlights the growing need to reconcile the electronic discovery landscape, which typically focuses somewhat myopically on email, with the larger informational trends which are now categorized by the use of blogs, social networking sites, instant messaging, and text messaging.  Flagg was one of the first to determine text messages (e.g., messages exchanged among certain officials and employees of the City of Detroit via city-issued text messaging devices) were discoverable under the standards of FRCP 26(b)(1).  The holding further demonstrated the challenges of conducting electronic discovery across information systems that mix personal information with business communications.  This type of information commingling will continue to escalate, causing significant long term electronic discovery challenges due to thorny privacy, privilege and policy implications.

3) Rhoads Indus., Inc. v. Bldg. Materials Corp. of Am., 2008 WL 4916026 (E.D. Pa. Nov. 14, 2008)

Rhoads is one of the first cases post Federal Rule of Evidence (FRE) 502, which recently created a national standard (versus the previous split in jurisdictions) and now states a “middle ground” for the determining of inadvertent disclosure during electronic discovery.  The key provision is (b)(2) which provides protection only if “the holder of the privilege or protection took reasonable steps to prevent disclosure.”  So, Rhoads took that “reasonableness” question head on in a scenario where the plaintiff Rhoads admittedly (yet inadvertently) produced over eight hundred privileged, electronic documents.  The decision is significant because it used the five-factor test stated in Fidelity, but put an undue weighting on the final test which was: “whether the overriding interests of justice would be served by relieving the party of its errors.”   This approach potentially threatens the development of sound case law that will be necessary to help the deployment of FRE 502 into practice because it casts too much uncertainty with its weighting of “fairness” (a problematically vague notion) in the analysis.  It will be interesting to see if/how this approach is subsequently adopted as we enter the New Year.

2) Qualcomm Inc. v. Broadcom Corp., 2008 WL 66932 (S.D. Cal. Jan. 7, 2008)

This for many was the case of the year given it’s far reaching implications for the legal community.  Some have argued that this isn’t an e-discovery abuse case per se, but more of an example of discovery abuses that just so happened to be centered around ESI.  In either case, the fraud, resulting cover-up, sanctions, ethical issues and privilege discussions made for insightful and thought provoking reading throughout 2008.  The lasting takeaway from Qualcomm appears to be the implications of not just committing discovery abuses, but the failure of having a well thought out e-discovery plan that is actively executed/monitored by outside counsel.  The resulting tension between outside counsel, inside counsel and the internal IT department may continue to escalate if more cases like this make the headlines in 2009.

1)  E-Discovery Case of the Year: Victor Stanley, Inc. v. Creative Pipe, Inc., 2008 WL 2221841 (D. Md. May 29, 2008)

Judge Grimm’s hallmark opinion has had the legal community buzzing over the past several months and the reason appears pretty straight forward.  In Victor Stanley Grimm builds on the holdings in Seroquel, O’Keefe and Equity Analytics, to boldly cast doubt on a practice so routine that it’s literally shocked the legal community into reevaluation:

(”[D]etermining whether a particular search methodology, such as keywords, will or will not be effective certainly requires knowledge beyond the ken of a lay person (and a lay lawyer) . . . .”

The notion that electronic discovery search is beyond the ability of most attorneys has caused tremors within the litigation support community who had a long history of blindly receiving keywords from counsel, running them and turning back over the results – often blissfully unaware of the extent to which those keyword searches actually located relevant information.  Victor Stanley’s analysis of the “reasonableness” of search protocols also has impact on the FRE 502 and therefore cements its place alongside other e-discovery “must reads” such as Zubulake and Morgan Stanley.

The cases above are my Top 5.  What additional cases do you think were important?  Please let me know by commenting on the cases you think shaped electronic discovery in 2008 and why.

Without getting in Dutch with the key Sedona Conference principle that “what happens at Sedona, stays at Sedona” I thought I’d nevertheless write a post that focuses on the core topic at this year’s annual meeting, namely the case for cooperation in e-discovery.

According to the “Cooperation Proclamation” e-discovery is facing an unprecedented crisis:

“The costs associated with adversarial conduct in pre-trial discovery have become a serious burden to the American judicial system. This burden rises significantly in discovery of electronically stored information (”ESI”). In addition to rising monetary costs, courts have seen escalating motion practice, overreaching, obstruction, and extensive, but unproductive discovery disputes – in some cases precluding adjudication on the merits altogether – when parties treat the discovery process in an adversarial manner. Neither law nor logic compels these outcomes. With this Proclamation, The Sedona Conference launches a national drive to promote open and forthright information sharing, dialogue (internal and external), training, and the development of practical tools to facilitate cooperative, collaborative, transparent discovery.”

These sentiments about the “broken” nature of the discovery process echo in many ways the draft findings from the Interim Report & 2008 Litigation Survey from the Fellows of the American College of Trial Lawyers which stated:

“The joint study grew out of a concern that discovery is increasingly expensive and that the expense and burden of discovery are having substantial adverse effects on the civil justice system. There is a serious concern that the costs and burdens of discovery are driving litigation away from the court system and forcing settlements based on the costs, as opposed to the merits, of cases.”

In both instances, the core notion is that “we’ve met the enemy and the enemy is us” because it’s the participants in the process have collectively perverted the discovery process to the point it’s at today.

Sedona’s focus on this front has received at least some traction from the bench, as echoed in Mancia v. Mayflower Textile Servs. Co., 2008 WL 4595175 (D. Md. Oct. 15, 2008).  Mancia, written by leading e-discovery jurist Judge Grimm, was a fairly pedestrian employment litigation case where the parties had come to loggerheads over the e-discovery process.  Judge Grimm held that “[c]ourts repeatedly have noted the need for attorneys to work cooperatively to conduct discovery, and sanctioned lawyers and parties for failing to do so” citing both the Sedona Cooperation Proclamation and the Survey.

Judge Grimm also observed that the these recent lamentations about the costs of civil litigation aren’t terribly dissimilar to those voiced eighteen years ago when the Civil Justice Reform Act of 1990, 28 U.S.C. §§ 471 et seq., was passed:

“Perhaps the greatest driving force in litigation today is discovery. Discovery abuse is a principal cause of high litigation transaction costs. Indeed, in far too many cases, economics-and not the merits-govern discovery decisions. Litigants of moderate means are often deterred through discovery from vindicating claims or defenses, and the litigation process all too often becomes a war of attrition for all parties.”

Given the fundamentally adversarial nature of litigation, the Sedona initiative is either dramatically ambitious or simply tilting at windmills.  While generally a skeptic by nature, I think that the bench’s early participation and downstream behavior modification is the linchpin to reforming the litigating masses.  Given the long term “sales” cycle involved here, I doubt if we’ll know whether this effort will gain real traction for at least several years.

Concept or content search continues to be a hot topic within the e-discovery community.  There’s a continuous stream of articles that discuss it.  Some that point out the positive.  Others that point out the limitations.  The courts have also gotten involved in the discussion.  Judge Grimm refers to concept search in e-discovery in Victor Stanley, Inc. v. Creative Pipe, Inc., 2008 WL 2221841 (D. Md. May 29, 2008).  Judge Facciola discusses concept search in Disability Rights Council of Greater Washington v. Washington Metropolitan Transit Authority, 242 F.R.D. 139 and other opinions.  Despite (or maybe because of) all the commentary on this topic, I find that while a lot of people think that concept search in e-discovery is good, many are not fully sure of exactly what concept search is, and how it is practically useful in e-discovery.   It’s pretty clear that after several years of commentary and hype, concept search has become something of a buzzword associated with many myths and misconceptions.  In an effort to better understand what concept search is and how it can help in e-discovery, I want to dispel two of the most common myths I have heard.

The “Concept Search is Concept Search” Myth

The first myth around concept search actually revolves around what it is.  In my experience, people tend to lump two different technologies together when talking about concept search: concept search and concept categorization.  It’s very common, for example, to see commentators say concept search even when what they are really talking about is concept categorization.  To make matters more confusing, people also use a plethora of other names including content search, content clustering or concept clustering when what they really mean is concept categorization.

So, what are the differences between concept search and concept categorization?  First, let’s start with concept search.  Concept search technologies find documents containing “concepts”.  I think that the Sedona Conference’s “Best Practices Commentary on the Use of Search & Information Retrieval Methods in E-Discovery“, provides a good definition of “concept” when used in a search context: “the combination of [a] query term and the additional terms identified by the thesaurus.”  In other words, concept search technologies find documents containing a specified term plus additional terms with similar meanings derived from a thesaurus.

Concept categorization, on the other hand, is actually not a search technology at all.  Concept categorization technologies do not “find” documents.  Rather, they categorize or group documents based on their similarity.   There are many different ways to group documents based on similarity.  Techniques include statistical (which assesses similarity based on word frequency), Bayesian classification (which weights words differently depending on factors in addition to statistical frequency, such as where the terms appear in a document), and semantic indexing (which takes into account the fact that many words used in a similar context may have a similar meaning).  It would take more time to describe these technologies in detail but the Sedona commentary has a good summary of these different technologies if you are interested in learning more.

As should now be apparent, these technologies are very different and using the same words to describe them is confusing.  It’s why it’s not surprising that a lot of the users of e-discovery services and software don’t have a strong understanding of what these technologies are or what benefits they can actually provide in practice.  Dispelling the myth that they can be lumped together is a critical first step in any conversation about concept search and how it can help in e-discovery.  This leads us to a second myth, that Concept Search is better than Keyword Search.  I’ll discuss this in my next blog post.