Posts Tagged ‘spoliation’

Q&A with Allison Walton of Symantec and Laura Zubulake, Author of Zubulake’s e-Discovery: The Untold Story of my Quest for Justice

Monday, February 4th, 2013

The following is my Q&A with Laura Zubulake, Author of Zubulake’s e-Discovery: The Untold Story of my Quest for Justice.

Q: Given your case began in 2003, and the state of information governance today, do you believe that adoption to has been too slow? Do you think organizations in 2013, ten years later, have come far enough in managing their information?

A: From a technology standpoint, the advancements have been significant. The IT industry has come a long way with regard to the tools available to conduct eDiscovery. Alternatively, surveys indicate a significant percentage of organizations do not prioritize information management and have not established eDiscovery policies and procedures. This is disappointing. The fact that organizations apparently do not understand the value of proactively managing information only puts them at a competitive disadvantage and at increased risk.

 Q: Gartner predicts that the market will be $2.9 billion by 2017. Given this prediction, don’t you think eDiscovery is basically going to be absorbed as a business process and not something so distinct as to require outside 3rd party help? 

A: First, as a former financial executive those predictions, if realized, are reasonably attractive. Any business that can generate double-digit revenue growth until 2017, in this economy and interest rate environment, is worthy of note (assuming costs are controlled). Second, here I would like to distinguish between information governance and eDiscovery. I view eDiscovery as a subset of a broader information governance effort. My case while renowned for eDiscovery, at its essence, was about information. I insisted on searching for electronic documents because I understood the value and purpose of information. I could not make strategic decisions without, what I refer to as, “full” information. The Zubulake opinions were a result of my desire for information, not the other way around. I believe corporations will increasingly recognize the need to proactively manage information for business, cost, legal, and risk purposes. As such, I think information governance will become more of a business process, just like any management, operational, product, and finance process.

With regard to eDiscovery, I think there will continue to be a market for outside third-party assistance. eDiscovery requires specific skills and technologies. Companies lacking financial resources and expertise, and requiring assistance to address the volume of data will likely deem it economical to outsource eDiscovery efforts. As with any industry, eDiscovery will evolve.  The sector has grown quickly. There will be consolidation. Eventually, the fittest will survive.

Q: What do you think about the proposed changes to the FRCP regarding preservation? 

A: As a former plaintiff (non-attorney), eDiscovery was (to me) about preservation. Very simply, documents could not be collected, reviewed, and produced if they had not been preserved. Any effort to clarify preservation rules would benefit all parties—uncertainty created challenges. Of course, there needs to be a balance between overwhelming corporations with legal requirements and costs versus protecting a party’s rights to evidence. Apparently, the current proposals do not specifically pertain to preservation. They concern the scope of discovery and proportionality and thus indirectly address the issue of preservation. While this would be helpful, it is not ideal. Scope is, in part, a function of relevance – a frequently debated concept. What was relevant to me might not have been relevant to others. Regarding proportionality, my concern is perspective.  Too often I find discussions about proportionality, stem from the defendant’s perspective. Rarely, do I hear the viewpoint of the plaintiff represented. Although not all plaintiffs are individuals, often the plaintiff is the relatively under-resourced party. Deciding whether the burden of proposed discovery outweighs its likely benefits is not a science. As I wrote in my book:

Imagine if the Court were to have agreed with [the Defendant’s] argument and determined the burden of expense of the proposed discovery in my case outweighed its likely benefit. Not only would the Zubulake opinions not have come to fruition, but also I would have been denied my opportunity to prove my claims. 

Q: Lastly, what other trends are you see in in the area of eDiscovery and what predictions do you have for the market in 2013? 

A: eDiscovery Morphs. Organizations will realize that eDiscovery should be part of a broader information governance effort. Information governance will become a division within a corporation with separate accountable management from which operations, legal, IT, and HR professionals can source and utilize information to achieve goals. Financial markets will increasingly reward companies (with higher multiples) who proactively manage information.

Reorganization. Organizations will recognize while information is their most valuable asset it is fearless— crossing functions, divisions, borders and not caring if it overwhelms an entity with volume, costs, and risks. Organizational structures will need to adapt and accommodate the ubiquitous nature of information. A systems thinking framework (understanding how processes influence one another within a whole) will increasingly replace a business silo structure. Information and communication managed proactively and globally, will improve efficiency, enhance profitability, reduces costs, increase compliance, and mitigate risks.

Search. Algorithms become an accepted search tool. Although keyword, concept, cluster, etc. searches will still play a role. For years, law enforcement, government, and Wall Street have used algorithms—the concept is not new and not without peril (significant market corrections were the result of algorithms gone wrong). Parties confronted with volumes of data and limited resources will have no choice but to agree to computer assistance. However, negative perceptions and concerns about algorithms will only change when there is a case where the parties initiate and voluntarily agree to their use.

Education. Within information governance efforts, organizations will increasingly establish training for employees. Employees need to be educated about the origination, maintenance, use, disposal, risks, rules, and regulations associated with ESI. A goal should be to lessen the growth of data and encourage smart and efficient communications. Education is a cost-control and risk-mitigating effort.

BYOD Reconsidered. Thinking a BYOD to work policy is cost-effective will be questioned and should be evaluated on a risk-adjusted basis. When companies analyze the costs (cash outlay) of providing employees with devices versus the unquantifiable costs associated with the lack of control, disorganization, and increased risks – it will become clear BYOD has the potential to be very expensive.

Government Focus. I had the privilege of addressing the Dept. of Justice’s Civil E-Discovery training program. It was evident to me that eDiscovery is one of the department’s focuses. With recent headlines concerning emails uncovering evidence (e.g. Fast and Furious), government entities (state and federal) will increasingly adopt rules, procedures, and training to address ESI. This brings me back to your first question—have organizations come far enough in managing their information? Government efforts to focus on eDiscovery will incentivize more corporations to (finally) address eDiscovery and information governance challenges.

Stay tuned for more breaking news coverage with industry luminaries.

Breaking News: Bad Faith Retention Policy Leads to Terminating Sanctions

Friday, January 4th, 2013

The patent infringement litigation involving chipmaker Rambus took another twist this week as the court in Micron Technology v. Rambus declared several Rambus patents to be unenforceable as an eDiscovery sanction for its destruction of evidence. In a crushing blow to Rambus’ dynamic random access memory (DRAM) chips litigation strategy, the court reasoned that such a “dispositive sanction” was the only remedy that could address the chipmaker’s “bad faith” spoliation of email backup tapes, paper documents and other ESI.

At the heart of the Micron court’s sanctions order was its finding that Rambus implemented its information retention policy in bad faith. While acknowledging that retention policies may be “employed for legitimate business reasons such as general house-keeping,” the court found that the policies at issue were designed to deprive the chipmaker’s litigation adversaries of evidence that could impugn its patents. Furthermore, Rambus deviated from its policies to ensure that evidence favorable to its claims would be preserved. For example, after ordering the destruction of 1,270 email back-up tapes pursuant to its retention schedule, the chipmaker intervened to save a lone back-up tape after determining that “it contained data that could be used … to establish a conception date for an invention.” Such selective use of its retention policies belied Rambus’ contention that the policies were neutral and conclusively showed that the policies were tactically deployed to “seek an advantage in litigation.”

While the Micron court’s sanctions order will likely set up another round of appeals before the Federal Circuit, the lesson to be learned by organizations is the importance of developing a reasonable information retention policy. Indeed, had Rambus followed good faith business procedures within the parameters recently delineated by the Federal Circuit, it is unlikely that the destruction would have been seen as spoliation. The Micron ruling should not affect the current judicial trend that absent a preservation duty or other exceptional circumstances, organizations may use document retention protocols to destroy stockpiles of data that have no meaningful business value.

Breaking News: Court Issues 20-Year Product Injunction in Trade Secret Theft/eDiscovery Sanctions Case

Friday, August 31st, 2012

The court in E.I. du Pont de Nemours v. Kolon Industries returned a stunning, 20-year worldwide product injunction yesterday in a trade secret theft case involving Kevlar®. Almost a year after a jury returned a $919 million verdict for DuPont, the court found that defendant Kolon Industries’ actions merited a permanent injunction. Not only is Kolon barred from competing with DuPont’s Kevlar® product for the next 20 years, it must also give a court-appointed expert access to its computer files to confirm that it has swept out and returned all of the stolen trade secrets.

Remarkably enough, Kolon’s troubles are still not over. While Kolon has moved to stay the injunction pending its appeal, it must still wait for the court’s attorney fee order that will likely result in a substantial award for DuPont. It is worth noting that a significant portion of that award will encompass the fees and costs that DuPont incurred to address Kolon’s eDiscovery spoliation, which culminated in the game-changing adverse inference instruction the court read to the jury.

Given that the DuPont trial proceedings are essentially over, it is worth analyzing whether the results for the parties might have been different absent the eDiscovery sanctions. Had Kolon been able to prevent the key evidence from being destroyed, perhaps it could have mitigated the disastrous results with a smaller jury verdict or perhaps even a settlement. While perhaps nothing more than speculation, it is clear that an information governance strategy would have helped Kolon with its preservation duties and efforts to obtain an early assessment of the likely outcome. Such results would certainly have been an improvement over the game-ending jury instruction stemming from Kolon’s eDiscovery and information retention deficiencies.

Following the Yellow Brick Road: Archiving and eDiscovery for the Government in OZ

Friday, August 31st, 2012

Our Australian colleagues refer to their country as OZ, and there is no doubt that the employees of the government agency CenITex wish they could click their heels like Dorothy and not be front-page news anymore. The recent Freedom of Information request dispute with The Age newspaper suggests that the Victorian government is in dire need of archiving and eDiscovery technologies. On August 20, ITPro reported that CenITex (the government’s Centre for Information Technology Excellence) would need to spend over $1 million AUSD to comply with recent FOI requests made by The Age. To add insult to injury, the process is projected to take a whopping 24 years!

Matters regarding FOI requests are adjudicated by the Victorian Civil and Administrative Tribunal, and so far, the tribunal has been less than impressed with the testimony of FOI Officer Ross Gilmour. He claimed that there was no separate archive for emails and other relevant documents that relate to The Age’s requests.  These FOI scenarios are a universal problem; typically, the government will always argue the request is “overly broad and burdensome” and the civilian will argue their “statutory right” and for the responsive documents to be produced.

Ironically, this dispute involves the CenITex and their inability to comply with FOI requests. It seems impossible that an agency dedicated to government IT advancement could be the furthest behind on the eDiscovery continuum, particularly because FOI requests are not uncommon in Australia. An article written by ITPro indicates that the government agencies in Victoria typically do have readily searchable archives for email and that this is an exceptional circumstance.

The yellow brick road (successfully deployed archiving and eDiscovery tools) has been paved in the US by the private sector’s example and the government is slowly but surely following, although there is much work left to do. This road was also built in the litigious environment of the US where there are ever-present fears of spoliation claims and sanctions. However, in Australia, because the environment is less litigious, the catalyst for change will likely be driven by FOI requests and Royal Commissions, more than traditional litigation. Global companies, especially those doing business in the US, are the exception to this reality. It has been predicted that government transparency would be a primary driver for archiving and eDiscovery in Australia, and the evidence is mounting to support this hypothesis with FOI conflicts like the present one with CenITex.

In previous blogs focusing on the eDiscovery climates of other common law countries, the rules governing electronically stored information (ESI) have been addressed for Australia and the United Kingdom. We have also had extensive coverage on the Freedom of Information Act (FOIA) in the United States, as well as the equivalents in Australia and New Zealand. While governments in general are behind the private sector on the eDiscovery maturity curve, many have come up to speed in recent years. Australia is presently in the midst of this change – and will need to stay on the yellow brick road.

It is true there have been some landmark eDiscovery events in Australia that put fear into organisations about their information governance plans, but they are initiated in a quasi-governmental or entirely governmental manner. For example, the 2009 Royal Commission on the Bushfires expended a tremendous amount of time and money to complete their investigation. No expense was spared, including massive eDiscovery costs. Typically, when there is a national tragedy that needs to be investigated, these commissions are formed and they are extensive. An analogy in the US could be responding to a HSR Act request, but in the reverse. In Australia the government has to produce to the commissions, whereas private litigants are responding to the US government in a second request.

The public sector in Australia is forging ahead in all areas on the eDiscovery front with conferences like the Public Sector Litigation and Dispute Management Forum in Canberra on September 11 and 12, 2012. All areas of the government will be represented. Nigel Carson (from KordaMentha) and I will tackle this CenITex example in our presentation. We will use this exisiting example as a way to frame how organisations can avoid the lengthy collection, review and production periods that make compliance with FOI untimely. Our presentation will cover information governance, eDiscovery and best practices.

In The Wizard of Oz, the yellow brick road symbolizes the “the gold standard.” There is an established gold standard for archiving and eDiscovery that is scalable and cost effective. The proactive information management components that archiving enables are undeniable.  In-house eDiscovery capabilities are ideal as well, but secondary to an archive for an organization in the beginning stages of information governance implementation. Unless others in OZ wish to be vulnerable to FOI requests without a searchable archive, they must start their journey on the yellow brick road.

Conducting eDiscovery in Glass Houses: Are You Prepared for the Next Stone?

Monday, August 27th, 2012

Electronic discovery has been called many names over the years. “Expensive,” “burdensome” and “endless” are just a few of the adjectives that, rightly or wrongly, characterize this relatively new process. Yet a more fitting description may be that of a glass house since the rights and responsibilities of eDiscovery inure to all parties involved in litigation. Indeed, like those who live in glass houses, organizations must be prepared for eDiscovery stones that will undoubtedly be thrown their way during litigation. This potential reciprocity is especially looming for those parties who “cast the first stone” with accusations of spoliation and sanctions motions. If their own eDiscovery house is not in order, organizations may find their home loaded with the glass shards of increased litigation costs and negative publicity.

Such was the case in the blockbuster patent dispute involving technology titans Apple and Samsung Electronics. In Apple, the court first issued an adverse inference instruction against Samsung to address spoliation charges brought by Apple. In particular, the court faulted Samsung for failing to circulate a comprehensive litigation hold instruction when it first anticipated litigation. This eventually culminated in the loss of emails from several key Samsung custodians, inviting the court’s adverse inference sanction.

However, while Apple was raising the specter of spoliation, it had failed to prepare its own eDiscovery glass house from the inevitable stones that Samsung would throw. Indeed, Samsung raised the very same issues that Apple had leveled against Samsung, i.e., that Apple had neglected to implement a timely and comprehensive litigation hold to prevent wholesale destruction of relevant email. Just like Samsung, Apple failed to distribute a hold instruction until several months after litigation was reasonably foreseeable:

As this Court has already determined, this litigation was reasonably foreseeable as of August 2010, and thus Apple’s duty to preserve, like Samsung’s, arose in August 2010. . . . Notwithstanding this duty, Apple did not issue any litigation hold notices until after filing its complaint in April 2011.

Moreover, Apple additionally failed to issue hold notices to several designers and inventors on the patents at issue until many months after the critical August date. These shortcomings, coupled with evidence suggesting that Apple employees were “encouraged to keep the size of their email accounts below certain limits,” ultimately led the court to conclude that Apple destroyed documents after its preservation duty ripened. To address Apple’s spoliation, the court issued an adverse inference identical to the instruction it levied on Samsung.[1]

While there are many lessons learned from the Apple case, perhaps none stands out more than the “glass house” rule: an organization that calls the other side’s preservation and production efforts into doubt must have its own house prepared for reciprocal allegations. Such preparations include following the golden rules of eDiscovery and integrating upstream information retention protocols into downstream eDiscovery processes. By making such preparations, organizations can reinforce their glass eDiscovery house with the structural steel of information governance, lessening the risk of sanctions and other negative consequences.

[1] The district court modified and softened the magistrate’s original instruction issued against Samsung given the minor prejudice that Apple suffered as a result of Samsung’s spoliation. The revised instruction against Samsung, along with the matching instruction against Apple, were ultimately never read to the jury given their offsetting nature.

The Data Vampire Diaries: Data Value

Monday, August 6th, 2012

There are many barometers for value: the Kelly Blue Book for cars, the discounted cash flow method for stocks, and the currency exchange for money. For data however, conducting a valuation can be much more complex and there is no one method. For example, a single smoking gun email in litigation could be incriminatory or exculpatory in “bet the company” litigation. Organizations, particularly in retrospect, would value this email as priceless. However, in periods where there is no litigation, organizations tend to ignore their ever-growing data volumes without any consideration for this seemingly innocuous data.

In any valuation exercise, the goal is to maximize the value and minimize the risks of data in a defensible manner. For organizations that have no in-house archiving or eDiscovery capabilities, is the irrelevant data worth the money it costs to review? The answer is usually no. Spam is spam.

Data that is junk in the first place should not be kept long enough to be reviewed at all. The term data vampires (DV) refers not only to spam and junk, but to the valueless information that lives forever and feeds on the resources of an organization. DVs are created when data is born and has no assigned home or predestined timeframe for expiry in the information management lifecycle. Data vampires live in the digital graveyard of organizations, which is becoming a very scary and overpopulated place.  And, they thrive in a disorganized IT environment that has not implemented intelligent information governance.

One way to measure how much data is worth has been dictated by eDiscovery vendors and the various line items they charge associated with data processing, conversion, hosting, etc. Another method of valuation are review costs, which are typically 70% of total eDiscovery costs. Moreover, as these DVs live forever, the same data could be collected, processed and reviewed multiple times – compounding the initial problem. These methods should be compelling enough to incentivize organizations to examine the value of their data, yet even these metrics are not true valuations that have long-term meaning to an organization. While they certainly project potential legal costs for eDiscovery, they do not take into account whether or not the data is valuable to the organization in the first place. This valuation cannot be dictated by outside sources, and must be owned by key stakeholders committed to information governance as a business process. Part of the valuation formula for data includes: an organization’s technology infrastructure, document retention policies and the applicable regulatory and legal requirements of each respective industry.

For example, an organization without automated legal hold capabilities is often forced into preserving everything and utilizing employee self-collection. These manual processes will not only expose an organization to possible spoliation claims, but they contribute to the “save everything mentality.” Because their technology is lacking, the data valuation is high (for reasons not related to true value), and their preservation efforts are all encompassing with indefinite timeframes. Alternatively, an organization that has the ability to deploy automatic legal hold notices and execute in-place preservation within an archive can assign a tiered valuation to the data. Valuation can start out high, but eventually decreases as the legal hold is lifted and/or the retention period has expired. When this process is automated it ensures DVs are not created, and that appropriate value is assigned to data.

Archiving and the auto-classification of records are proactive measures an organization should employ to ensure that when data is born, it has a home, and ultimately expires according to a document retention policy. Organizations that have not done this work up front from a policy and technology perspective fall into the reactive category. Electronic discovery is generally a reactive measure used to pull information from an organization relevant to a matter, and some of the tools used for analysis and review for litigation could be used to clean up digital graveyards. While conducting eDiscovery on an organization’s entire corpus of data for clean-up purposes is unlikely, as a best practice organizations can start to deploy this assessment of data modularly. By using an updated data map, organizations can begin to examine specific areas for valuable and non-valuable data with technology, expiring what they no longer need in accordance with a defensible protocol.

Lawyers focus on relevant and non-relevant data, but C-level executives are macro-focused on valuable and non-valuable data. In an ideal world, lawyers would never have to review non-valuable data. In today’s weakened global economic climate, organizations in financial crisis are being forced to revaluate all aspects of their businesses and make hard decisions about value – but they aren’t looking at their data through the intelligent valuation glasses. Presently, this evaluation of assets typically includes real estate, equipment leases, contracts, and headcount. What is many times forgotten is (understandably) what cannot be seen. Data is an asset when repurposed or utilized in the right way, but a massive liability when left homeless indefinitely.

The potential silver bullet to kill the data vampires is Transparent Predictive Coding. While we are at the inception of using predictive coding for litigation, there are many other uses for intelligent technology and cleaning up digital graveyards is one of them. The ability to use software on large data sets to classify and manage data for companies that are in a reactive state will allow them to hit the reset button and start anew with an eye toward a proactive information governance plan. Once legacy data has been evaluated, then the proactive archiving and auto-classification of data must be implemented in order to avoid the build-up of non-valuable data in the future. The data vampires will live in the digital graveyard forever if not addressed, causing painful blood baths in discovery and on the profit and loss statements of companies.

Twitter Chat: How to Speak Legalese

Friday, July 20th, 2012
EDITOR’S NOTE: Due to the July 26 Twitter outage, the #IGChat has been postponed to August 2. This post has been updated to reflect new chat details.

Do you know what “subpoena duces tecum” means? What about spoliation? Unless you’re on the legal side of a business, you probably haven’t had to work these terms into your daily conversations. However, if you’re managing an IT team, these are just a couple of the legal terms you’ll want to understand when, sooner or later, your team is tasked with an eDiscovery request.

Like any good relationship, communication is key. In business relationships, IT and legal must speak one another’s language in order to effectively work together. Though the two departments may come from two different worlds and knowledge backgrounds, they quickly become closely tied when an eDiscovery matter hits the fan. And, when it does, IT needs to know legal terms and vice versa to ensure, for example, that data is properly archived and efficiently collected as needed.

Next Thursday, join Symantec eDiscovery experts to discuss this topic – and break down a slew of jargon – on our upcoming Twitter Chat: “How to Speak Legalese.” The chat will take place on Thursday, July 26 at 10am PT.  Simply follow the hashtag #IGChat to join in the discussion. We look forward to hearing your feedback on communication challenges you’ve faced, questions you’ve encountered, and how IT and Legal can learn each other’s language to work together more effectively.

Twitter Chat: How to Speak Legalese (#IGChat)

Date: Thursday, August 2, 2012

Time: 10 a.m. PT / 1 p.m. ET

Length: 1 hour

Where: Twitter – follow the hashtag #IGChat

The Changing Landscape for National eDiscovery Standards as Pension Committee Erodes

Tuesday, July 17th, 2012

It is remarkable to observe the legal world chip away at the landmark opinion of Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, 685 F.Supp.2d 456 (S.D.N.Y. 2010). When it was first issued in 2010, Pension Committee was at once heralded as the electronic discovery gold standard for legal hold best practices. Following the Zubulake cases, Pension Committee established bright line rules on data retention, litigation response efforts and sanctions. Such rules, in turn, strengthened the call for corresponding national eDiscovery standards regarding document preservation and spoliation sanctions, which were not addressed by the 2006 amendments to the Federal Rules of Civil Procedure (FRCP).

Despite the impact of Pension Committee on eDiscovery practice and jurisprudence, subsequent case law reveals that the decision was far from universally embraced. Instead, many courts declined to follow the Pension Committee rubric, especially as it relates to litigation holds. In particular, courts have disagreed with Pension Committee’s unambiguous rule that a litigant’s failure to issue a written hold constitutes gross negligence. Some of these cases, detailed below – including the Chin v. Port Authority of New York & New Jersey decision issued this month by the U.S. Court of Appeals for the Second Circuit – likewise illustrate the difficulty in crafting national eDiscovery standards.

For example, in Steuben Foods v. Country Gourmet Foods, the court refused to sanction the plaintiff despite its failure to issue a written litigation hold. Relying on Pension Committee, defendants argued that plaintiff’s oral hold instruction was inadequate and grounds for terminating sanctions. The court rejected that argument, explaining that an oral hold instruction was sufficient given the limited number of players involved and that plaintiff was a small enterprise. Pension Committee was therefore found to be inapposite.

This same theme was emphasized in Surowiec v. Capital Title Agency when an Arizona district court declined to follow Pension Committee’s rigid written hold rule. The Surowiec court reasoned that “per se rules” were often too inflexible to address the factual complexities surrounding eDiscovery sanctions motions. Though it refused to follow the Pension Committee rule, the court nonetheless issued an adverse inference jury instruction to address what it characterized as a grossly negligent litigation response effort. Such a sanction was warranted since defendants failed to implement any hold until six months after the duty to preserve attached, causing the destruction of key emails.

Even in its court of origin, the Pension Committee hold rule has not been followed. In GenOn Mid-Atlantic v. Stone & Webster, the Manhattan based federal court declined to sanction plaintiffs whose consultant had not preserved certain electronically stored information (ESI). While the plaintiffs did not require the consultant to issue a written litigation hold to its employees, the ensuing destruction of ESI did not prejudice the defendant. Given that lack of prejudice and that “certain courts have questioned the bright-line culpability rules that Judge Scheindlin promulgated in Pension Committee,” the GenOn court declined to sanction the plaintiffs for failing to issue a written hold instruction.

Picking up on this same rationale, the Second Circuit delivered a crushing blow to the Pension Committee strict written hold rule in its Chin decision issued July 10, 2012. In Chin, the Second Circuit held that a lower court had properly declined to issue an adverse inference instruction despite the defendant’s failure to issue a litigation hold over certain documents. In doing so, the Chin court singled out its disapproval of the Pension Committee hold rule: “We reject the notion that a failure to institute a ‘litigation hold’ constitutes gross negligence per se.” In addition, the Chin court went on to discard the concept that an adverse inference sanction must necessarily follow a finding of gross negligence. Rather than apply rigid rules to factual intensive matters, the Second Circuit urged that courts adopt a “case-by-case approach to the failure to produce relevant evidence.”

These decisions represent a substantial number of cases that have criticized the Pension Committee rules as simply being too inflexible to address the factual nuances of eDiscovery. More than just diluting the effect of Pension Committee, this quartet of cases makes clear the difficulty of establishing national standards to address the factual complexities of many eDiscovery issues. Indeed, the Discovery Subcommittee of the Advisory Committee on Civil Rules, which continues to deliberate on various proposals to amend the FRCP, has yet to find a clear path toward national standards regarding preservation and sanctions. Given the strong differences of opinion that exist on the issues, it is questionable whether such a path will emerge any time soon. Until such a path emerges, organizations with significant preservation pains will need to develop an information governance strategy that fits within the existing legal framework. Such a strategy, anchored by effective, enabling technologies, may be the best bet for organizations groping for greater certainty surrounding eDiscovery.

Morton’s Fork, Oil Filters the Nexus with Information Governance

Thursday, May 10th, 2012

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

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

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

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

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

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

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

[i] Insert your own current political joke here…

Email Archive Saves the Day, Prevents eDiscovery Sanctions

Thursday, April 5th, 2012

The recent case of Danny Lynn Electrical v. Veolia Es Solid Waste (2012 WL 786843, March 9, 2012) showcases the value of an information archive from a compliance and eDiscovery perspective. In Danny Lynn Electrical the plaintiff sought sanctions against the defendant for the spoliation of electronic evidence, including the usual blend of monetary sanctions, adverse evidentiary inferences and the striking of affirmative defenses. Plaintiff argued that the defendant “blatantly disregarded their duty to preserve electronic information” by failing to implement an effective legal hold policy and deleting email after litigation began. In rejecting plaintiff’s claims, the court concluded that sanctions on the basis of spoliation of evidence were not warranted.

The court, in a harbinger of good things to come for the defendant, questioned “whether any spoliation of electronic evidence has actually occurred.” In finding that there wasn’t any spoliation, the court relied heavily on the fact that the defendant had recently deployed an email archive:

“[T]here is no evidence that any of the alleged emails, with the exception of the few that were accidentally deleted due to a computer virus or other unforseen [sic] circumstance, were permanently deleted from the defendants’ computer system. … VESNA began using a new software system which archives all emails on the VESNA network. Therefore, it is clear to the court that the defendant preserved email from its custodians in a backup or archive system.”

In combination with the deployed archive, the court also noted that plaintiff’s arguments were devoid of substantive evidence to support their spoliation claims:

“In order to impose sanctions against the defendants, this court ‘would have to substitute Plaintiffs’ speculation for actual proof that critical evidence was in fact lost or destroyed.”

The rejection of plaintiff’s spoliation claims in Danny Lynn Electrical reinforces the long held notion that information archives[i] have tremendous utility beyond the data management/minimization benefits that were the early drivers of archive adoption. This prophylactic, information governance benefit is particularly useful when the archive goes beyond email to additionally capture loose files, social media and other unstructured content.

As we said in 2011, organizations are already finding that other sources of electronically stored information (ESI) like documents/files and unstructured data are rivaling email in importance for eDiscovery requests, and this trend shows no signs of abating, particularly for regulated industries. This increasingly heterogeneous mix of ESI certainly results in challenges for many organizations, with some unlucky ones getting sanctioned (unlike the defendant Danny Lynn Electrical ) because they ignored these emerging data types.

The good news is that modern day archives have the ability to manage (preserve, categorize, defensibly delete, etc.) ESI from a wide range of sources beyond just email. Given cases like Danny Lynn Electrical it’s increasingly a layup to build the business case for an archive project (assuming your organization doesn’t have one deployed already). Further pushing the archiving play to the top of the stack is the ability to deploy in the cloud context, in addition to traditional on premise deployments.

The Danny Lynn Electrical case also shows how an upstream, proactive information governance program can have an impact in the downstream, reactive eDiscovery context. It is the linking of the yin and yang of the proactive and reactive concepts where an end to end paradigm starts to fulfill the long anticipated destiny of true information governance. As the explosion of data continues to mushroom unabated, it’s only this type of holistic information management regime that will keep eDiscovery chaos at bay.

[i] In the interests of full disclosure, Symantec offers both on-premise archiving and cloud archiving solutions. They are not the solutions referenced in the Danny Lynn Electrical case.