William E. O'Neil, Jr., Esq., eDiscovery expert

by William E. O’Neil, Jr, Esq.

It has been an interesting first half of the year for e-Discovery cases. The “Pension Committee” case “revisited” the Zubalake decisions and re-affirmed the duties for legal counsel when managing the Discovery & legal hold processes.  But, it still seems some are willing to take the risks of possible spoliation of evidence…I speak with clients across the country and have been asked the question more than once…”why should I care about Pension Committee…I am not in the 2^nd Circuit…”

Because…the standards established in in Zubalake, codified in the Federal Rule changes and “revisited” in “Pension Committee” are the standard for legal counsel. They are just explained in detail in “Pension Committee”.  Counsel needs to understand who the “key players” are, what ESI exists, where it resides and ensure the risk of spoliation is reasonably mitigated.  The lack of an e-Discovery strategy and a defensible process for legal hold management and preservation & collection is not a viable defense anymore…whether spoliation is negligent or intentional.

There was an interesting spoliation case decided in the 10^th Circuit.  In “ Medcorp”, the plaintiff allegedly destroyed ESI on 43 hard drives .  The fact that it was done was not in dispute, whether it was intentional, willful or negligent and what should be the consequences of the destruction was at issue.   The defendants requested the action be dismissed and the Plaintiffs argued minimal impact by having provided “some” of the ESI from another source.

The court applied the standards for determining sanctions for spoliation outlined in the “Pension Committee” decision…“[a]ppropriate sanctions should ‘(1) deter the parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore “the prejudiced party to the same position [it] would have been in absent the wrongful destruction of evidence by the opposing party.”

Here, the Court found the Plaintiff’s conduct was negligent rather than intentional. As such, the Court awarded the defendant’s attorney fees, expert witness fees and expenses related to litigating the spoliation issue…AND ordered a “negative inference” jury instruction…allowing the jury to infer the ESI on the 43 hard drives would be detrimental to the Plaintiff’s case.

This is a steep price for counsel to pay for not exercising proper oversight over discovery!

SEE: Medcorp., Inc. v. Pinpoint Technologies, Inc., et al 2010 WL 2500301 (D. Colo.).

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Does the Pension Committee Amended Opinion and Order Go Far Enough?

Matthew Nelson, Esq., EMC eDiscovery Expert

The Pension Committee Blog Series – Part Two – Backup Tapes

In my previous post, I discussed whether Footnote 99 of Judge Scheindlin’s Pension Committee Amended Opinion and Order went far enough in clarifying challenges related to backup tape preservation and search.  Footnote 99 is tricky because it both adds clarity and creates challenges at the same time.  The footnote states that there is not a duty to preserve backup tapes unless the tapes are the sole source of relevant information. Pension Committee of the Univ. of Montreal Pension Plan, et al., v. Banc of America Securities, LLC, et al. at 42.

Unfortunately, this apparent bright line rule has some practical limitations because parties often do not know what information is contained on backup tapes since tapes are often outdated, voluminous, or otherwise not reasonably accessible due to undue burden or cost.  Therefore, destroying or overwriting backup tapes in the midst of litigation often results in the possibility of destroying the “sole source of relevant information” which could lead to spoliation sanctions.

To avoid the risk of sanctions, parties should strongly consider preserving the tapes in question if it is not clear whether the tapes are the sole source of relevant information.  Ideally, parties can stipulate during the Rule 26(f) meet and confer conference that at least some backup tapes with unknown content need not be preserved or searched and that agreement can be incorporated into the Rule 16(b) scheduling order.  If the parties are unwilling to stipulate regarding tape production, then a responding party could seek a protective order under Rule 26(b)(2)(B) by showing that their backup tapes are not reasonably accessible because of undue burden or cost.  However, does a successful showing of “undue burden or cost” alone mean a protective order will be granted to the responding party and that tape data will not need to be produced?

Join our discussion and make your opinion(s) known, as we probe the case’s lingering questions and foreboding implications in The Pension Committee Blog Series.

Randolph A. Kahn, Esq., Kahn Consulting	James D. Shook, Esq., EMC eDiscovery expert and Attorney

Date: Wednesday, July 14, 2010
Time: 10:00 AM Pacific

EMC is proud to bring you this special webinar focused on how you should think about handling eDiscovery in 2011. Our esteemed guest speaker, Randolph A. Kahn, Esq., is well known in the legal/compliance circles and brings a wealth of knowledge on eDiscovery.

He will be discussing current trends in eDiscovery that will dictate how you perform eDiscovery in 2011, risks associated with current practices/tools/processes and best practices to consider adopting in order to get ahead of your eDiscovery woes. Joining him in this discussion will be our in-house attorney, James D. Shook, Esq., who too brings tremendous eDiscovery knowledge to the event.

Register Today, as seating is limited for this premium webinar.

All attendees will be entered into our drawing for a new iPad.

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Gain autonomy and receive improved eDiscovery guidance

By Chuck Hollis, Global Marketing CTO EMC Corporation

VP -- Global Marketing CTO EMC Corporation

Sorry for falling behind the pace here, but there was a recent EMC product announcement that I found worthy of a deeper discussion.

EMC’s SourceOne group just announced their new File Intelligence product.  And, as organizations struggle to get their arms around unfettered information growth, we may just have a new and important tool in the arsenal.

You be the judge …

The Back Story

It’s obvious — information in corporate environments is growing like crazy.  Whether it lives in file systems, email boxes, repositories like SharePoint or Documentum — the forecast is rampant growth followed by more of the same.

And that’s where I think the discussion around information governance is so interesting.

A Familiar Theme

If you’re a long time follower of this blog, you probably remember a time when I was discussing this topic frequently.

My case went something like this:

• more and more of our business models are being built on information — in some ways, it’s the new “money” of our digital age.

• whereas many organizations know how to effectively manage money, far fewer are proficient at managing information in all of its forms.

• over time, more and more organizations will be forced to consider the topic of “information governance”, a cross-functional approach to balancing costs, risks and value of the organizational information portfolio.

• information governance teams — over time — will arguably be at least as important as, say, financial governance or other forms of organizational governance.

If you want to read more, I’ve dug out a few of the older posts here, here and here.

So, Where’s The Real Problem?

Most people when they think of information governance tend to think of transactional data: customer records, structured databases and the like.

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James D. Shook, Esq., CIPP EMC eDiscovery Expert

In today’s economic environment, companies deploying new technology have to show not just that they will be better and faster, but also just how much faster and better so that they can justify the expense.  Part of the buying process frequently involves gathering data on how much it costs to handle a business process in the current environment, how much can be saved with improvements, and establishing that the savings will justify the cost of the improvement (and frequently, how long it will take to do so).  Most companies refer to this process with the shorthand acronym of “ROI” or “return on investment”.  (In financial circles, ROI is actually a more complex analysis, but it’s still a good acronym for our purposes).

For companies that are looking to bring more of their eDiscovery process in-house, the ROI process can be difficult.  While we intuitively know that we can save money and cut risk with a leading eDiscovery solution, it can be tough to show that quantitatively because financial information is usually not readily available.  Even within the legal department, the cost of eDiscovery is frequently not well-known.  Often, time and money spent on eDiscovery issues is buried with other tasks in time entries from outside counsel; internal costs are generally not tracked at all; and payments to third-party processes are passed through (or marked up) by outside counsel and difficult to locate.

The benefits can also be difficult to calculate.  For example, many companies have poor eDiscovery processes (what we term “Faux eDiscovery“), where they wrongly or negligently ignore data sources and/or sound eDiscovery processes.  Faux eDiscovery can actually be very inexpensive — the real “cost” is in the risk with being caught and sanctioned.  But risk is difficult to quantify.  The result is that some companies trying to improve their eDiscovery processes may actually find a negative ROI (i.e. we only spend $10,000 per litigation now but it will cost us $50,000 to do it right) because they fail to identify or quantify the real ROI — their reduction in risk by handling eDiscovery properly.

If you are putting together an ROI analysis for bringing eDiscovery in-house, here are a few things to consider:

The general statistics available about eDiscovery costs are startling.  It’s well-established that having legal professionals review data – one of the later steps in the eDiscovery process — is expensive, with $18,750 per gigabyte a well-accepted number.  (Gartner, Reducing the Cost and Risk of EDiscovery in 2009, 1/9/2009 at 6).  Over the last several years, the average cost of discovery per case ranged from $621,880 to $2,993,567 (Litigation Cost Survey at 3).  And as noted earlier, Gartner advised an IT eDiscovery budget of $500,000 for a modestly sized case.    (Gartner, Reducing the Cost and Risk of EDiscovery, at 5).

Cutting through the noise, Gartner notes that many companies report a full return on their investment in an eDiscovery solution within 3 to 6 months — or within a single large case.  (Gartner, Marketscope for E-Discovery Software Product Vendors, 12/21/2009 at 2).  While these high-level facts alone may not be enough to convince anyone who requires a detailed ROI, they can help to set the stage for acceptance and also tend to strike a nerve with many C-level executives.

Undertake basic investigation on costs.  Talk to the legal department about how many “cases” they handle in each month (or year), being sure to include internal investigations and employment claims, regulatory inquiries and other matters where data is being preserved, collected and/or processed — not just “lawsuits”.  Ask them if they have information about amounts paid to outside service providers (perhaps through their law firm) for eDiscovery services.  Also check with the people who handle backups and email within the IT department — since different groups within legal may be asking them for help, they may actually have the best view of this work, and could even have hired an outside vendor to handle some eDiscovery-related work.  IT wil generally know whether the company has had to purchase tape processing equipment, additional storage or other non-standard equipment to help the lawyers with eDiscovery.

Check on soft-costs, too.  Most IT departments are only too ready and able to tell someone (anyone!) how much time they have devoted to eDiscovery tasks.  Frequently groups of 2-3 staffers can be assigned full-time or better for weeks or months on a medium or large case.  Without a chargeback model, legal might not even be aware of the massive undertaking to help them.

You may only be able to gather information on a few cases.  In that scenario, try to figure out whether it’s legitimate to extend the information out across the full volume of cases:  were these cases representative of what’s happening?  Do our cases tend to be similar or repeatable?  Do I have a good sampel?  When detailed information is not available — and usually it’s not — your goal is to get an understanding of the magnitude of the spend, and not necessarily the exact dollar amount.

There are a variety of ways in which you can begin to assess the savings that an eDiscovery solution will bring to the company.  In many cases, after purchasing a solution the incremental costs fo reach case will be almost nothing.  The better systems will enable custodian notification, search, preservation, collection and processing within the platform, so that investigators can efficiently handle these tasks.  This is really the purpose of the ROI analysis — case-by-case handling costs should be very small, because the expense is up-front in the purchase and deployment of the solution.

One area where the savings can be significant, but still substantial, is with “eyes-on” legal review.  An efficiently deployed system will help to minimize the amount of data collected, processed and eventually reviewed; but the review volumes can still be large.  And the hourly costs of review will be the same (although you can get some savings from de-duplication, clustering, email threading, etc.).  Still, we routinely see 50%+ savings in review based on the reduction in volume for efficient collection and culling.

You may decide that risk is too difficult or political to calculate as part of the ROI.  Or you may decide that it’s a necessary component that you must include.  Both approaches can be effective.

If you decide not to calculate a specific value for risk, you should still consider some risk analysis as part of your process, even as merely a “plus” factor to your overall analysis.  In doing this, take note of recent cases where companies have paid sanctions, had their case compromised and/or faced a backlash in the press (and potentially from shareholders).  You may not have a value for that risk, but the message will resonate with management.

If you do calculate risk, consider a conservative approach and factor in the probability of a sanction.  For example, you might decide that a severe sanction would compromise your ability to effectively defend (or prosecute) a case, and a larger case can be worth $5,000,000.  If you estimate a 10% chance of being sanctioned, you could take the resulting product ($5,000,000 x 10% = $500,000) as a basis for your risk value.  Remember that this risk amount would apply to each such case; so while the risk amount for a sanction on a smaller case might seem low (let’s say $20,000), it would be applied over a far larger number of cases.  It adds up!

Also remember that sanctions costs can exceed the entire estimated value of a case.  There have been many cases where shoddy eDiscovery processes have resulted in expensive remediation efforts — legal fees in determining what went wrong and how to fix it (and fending off motions for sanctions), repeating earlier work or being forced to use extraordinary efforts such as tape restoration.  So even a $500,000 case with eDiscovery problems could easily require more than the case value to try to “fix”.  (And don’t let anyone argue that you could always just write a check to settle the case.  Opposing counsel may have valued the case at a higher value than you, and once they realize that you are in trouble, it could be tough to negotiate a fair settlement).

Sometimes a simple model is better.  We have used extremely complex ROI models that were spot-on, but difficult to explain, and ultimately were ignored. We have also seen very simple models — “an eDiscovery solution will save us 50% in review costs, and last year review costs were $5M” — that have carried the day.  Hopefully, as you work on your ROI project, you’ll uncover the method that will best establish your case.  Until then, consider using a scenario-based approach (small case, medium case, large case), develop your facts for each one, and extrapolate the costs across the volumes that you expect to see each year.

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Matthew Nelson, Esq., EMC eDiscovery Expert

Does the Pension Committee Amended Opinion and Order Go Far Enough?

The Pension Committee Blog Series

On January 1, 2010, Judge Scheindlin re-established her ability to captivate legal audiences by authoring an opinion that struck fear into the hearts of many litigators and the parties they represent.

Dubbed “Zubulake Revisited: Six Years Later”, the Pension Committee decision serves as the “snooze button” for those practitioners who may have slept through the original eDiscovery “wake up call” sounded by Judge Scheindlin in her oft quoted Zubulake line of decisions.

Not surprisingly, opinions designed to offer clarity regarding a controversial subject such as electronic discovery, are destined to have both supporters and critics.  What is surprising, is that Judge Scheindlin responded to many critics quickly by issuing an amended Pension Committee Order and Opinion on January 15, 2010, to clear up language that could be characterized as confusing at best and inconsistent with previous case law at worst.

The Amended Order primarily clarifies language that could lead one to believe that a duty to preserve and possibly search backup tapes that relate to “key players” always exists.  The Amended Order clarifies the issue in a number of areas, but cautionary footnote number 99 arguably frames the issue best:

“I am not requiring that all backup tapes must be preserved.  Rather, if such tapes are the sole source of relevant information (e.g., the active files of key players are no longer available), then such backup tapes should be segregated and preserved.  When accessible data satisfies the requirement to search for and produce relevant information, there is no need to save or search backup tapes.” Pension Committee of the Univ. of Montreal Pension Plan, et al., v. Banc of America Securities, LLC, et al. at 42.

Footnote 99 is a potential trap for the unwary because its apparent simplicity could lead some practitioners to take backup tape preservation less seriously.  Does Footnote 99 and the rest of the Amended Pension Committee Opinion and Order go far enough in clarifying the tricky backup tape issue that gives so many organizations headaches?

Join our discussion and make your opinion(s) known, as we probe the case’s lingering questions and foreboding implications in The Pension Committee Blog Series.

Gabriela Garner, EMC Information Intelligence Group

The latest news about Autonomy’s acquisition of certain CA Information Governance business group products (CA Message Manager and CA Records Manager) got me to thinking about the strategic differences among companies in the Information Governance space. On the one hand, you have companies that build or acquire products and technologies to further strengthen their existing offerings, fill product gaps, or break into new markets. They have a clear strategy and their acquisitions reflect a decision to purchase and incorporate a technology or company because it fits well within that strategy. On the other hand, you have companies that acquire products and technologies that do not appear to have a strategic fit. It seems more likely they made a tactical decision to milk the maintenance revenue stream or pirate the installed base for a short-term advantage. This tactical rather than strategic approach can be dangerous not only to the purchasing company, but more importantly it can pose a threat to customers in the installed base of both the existing and purchased companies.

Autonomy has a long history of acquiring technologies and products, largely to propagate their IDOL (Intelligent Data Operating Layer) technology, which was my experience when I was a ZANTAZ employee. That’s all well and good for Autonomy, but I doubt that many ZANTAZ customers were originally shopping for an enterprise-wide search platform. I am sure most were looking for an email management solution, but they are now being force-fed a very complex and expensive solution to a problem that they may not have. Several analysts have noted the complexity involved in an IDOL integration, both during the install and after, in the form of increased maintenance for the product. Gartner had this to say in their December 2009 market scope for eDiscovery: “Depending on the components a company chooses, implementation can take between one and six months or longer.”

Autonomy has a long history of acquiring technologies and products, largely to propagate their IDOL (Intelligent Data Operating Layer) technology, which was my experience when I was a ZANTAZ employee. That’s all well and good for Autonomy, but I doubt that many ZANTAZ customers…….

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Document Retention and Employee Terminations: Increased Risk of ESI Loss in Today’s Economic Uncertainty

Alitia Faccone, Esq., and Gina Trimarco, Esq., of McCarter & English, LLP with James D. Shook, Esq., of EMC discuss the impact of employee terminations and the increased risk loss of and/or misappropriation of Electronically Stored Information (ESI).

Learn Best Practices from the legal experts.

Attendees are automatically registered for iPad drawing.

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Register today, as space is limited for these once only premium webinars.

By Heidi Maher, Esq.

Heidi Maher, Esq., eDiscovery Expert

In 2009, prosecutors delivered on their promise to vigorously pursue individuals and corporations who violated the Foreign Corrupt Practices Act (FCPA). Thirty-three individuals and eleven organizations were named in enforcement actions brought by the DOJ or SEC.  This year promises more of the same. The current number of indictments has quadrupled compared to 2008 and fines and settlements since 2009 have exceeded $2 Billion.  Not only do these enforcement activities frequently result in substantial fines and penalties but prison time for some individuals is becoming more common.   Additionally, investigations sometimes trigger follow-on civil lawsuits.  Indeed, many of the most prominent recent FCPA investigations have been followed by shareholders’ derivative lawsuits. Most recent example can be found here: http://www.courthousenews.com/2010/06/07/27856.htm

Any company that engages in international business should pay careful attention to minefield that FCPA can create.  By having protocols for compliance and rapid collection of both physical and electronic evidence, a corporation can vastly decrease its costs of responding as well as its risk of multimillion dollar fines and a public relations nightmare.

So what is the FCPA?  Essentially it is a federal law prohibiting bribes to of foreign government officials.  To ensure compliance, it requires public companies (and subsidiaries) to:

-maintain accurate books and records in reasonable detail, accurately and fairly reflect the transactions and disposition of its assets, and

-devise and maintain a system of internal accounting controls sufficient to provide assurances that assets and transactions are accounted for.

When the SEC or DOJ begins an investigation or criminal conduct is suspected, the company should immediately take the following steps to conduct its own internal investigation.  This is not optional!

1. Determine the scope of the investigation – the SEC and DOJ will take consider this in determining whether the investigation was effective
2. Secure evidence: physical, paper and electronic
3. Collect evidence
4. Conduct on-site employee interviews
5. Review evidence
6. Determine whether to do a voluntary disclosure if a violation is detected

Electronic evidence is critical in FCPA investigations as most evidence of bribery is found in email and other electronic documents.  Given its international nature, electronic evidence will likely be widespread, spanning multiple custodians, repositories, and countries.  Email servers, laptops, mobile phones, thumb drives and other types of data could all contain evidence and will all have to be secured and collected no matter the format or language.  This can be a herculean effort as most companies facing an investigation ultimately end up securing terabytes of information.  As another hurdle to the process, if any of this data is located in a country with data privacy laws, those laws will also have to be navigated when conducting a search and collection.  Additionally, if any wrongdoing is suspected, live data search alone may not be enough and a forensic search for deleted data is required.

So what is a company to do to reduce its risk of violations? There are several guidelines that have come forth from past cases:

1. Develop clear FCPA policies and programs and communicate those policies through regular training and acknowledgement by employees and agents

2. Enforce those policies through reporting and discipline

3. Develop FCPA procedures to help prevent violations:

-       through due diligence and oversight of relationships and anti-bribery provisions in contracts with third parties

-       have controls in place for accurate maintenance of books and records

4. Bring in an independent compliance monitor

5. Conduct regular audits to monitor effective implementation of the policies and programs

6. When in doubt, request a statement of the Justice Department’s present enforcement intention under the anti-bribery provisions of the FCPA regarding any proposed business conduct

No action can completely shield a company that does business oversees from an SEC or DOJ FCPA investigation but by taking a proactive approach to compliance and discovery, it can greatly lessen the sting when it inevitably happens.

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EVENT Venue: Four Seasons Palo Alto 2050 University Avenue East Palo Alto, California 94303 650.566.1200

Date: Thursday, June 17th, 2010 11:30 am PDT.

Agenda: 11:30 – 12:00 Registration & Lunch – 12:00 – 1:30 Panel Discussion

Panelists: Browning Marean, Esq., Senior Counsel, Angela Padilla, Esq., VP litigation VMWare, Emily V. Pastorius, Esq., DISH Network, L.L.C., Matthew Nelson, Esq., eDiscovery and Compliance Expert, EMC SourceOne eDiscovery – Kazeon.

Register to DISCOVER Reserve your seat for Lunch today, as attendance is limited.

Outside counsel recommends preserving everything, the IT department thinks the attorneys are out of their minds and in house counsel knows there must be a better approach to eDiscovery. How should the company litigation hold strategy relate to the company record retention policy? Can technology help solve any of these problems?

If these are the kind of issues keeping you awake at night, then join our panel of attorneys as they debate modern eDiscovery and Compliance best practices from their unique points of view as corporate counsel, outside counsel and technolawyer.

Topics Include:

	Is my litigation/eDiscovery strategy legally defensible?
	How do we update our records retention policy?
	Can today’s legal technology solutions minimize corporate risk and expense?

For additional information, contact April Lombardo at lombardo_april@emc.com or 925.600.5852.

“This is an excellent opportunity to gain firsthand eDiscovery knowledge and learn best practices from Corporate Counsel who have been in the eDiscovery trenches,” J. David Morris, EMC SourceOne eDiscovery – Kazeon.

CLE Details ——

California: This activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1.5 hours in the General category. DLA Piper certifies that this activity conforms to the standards for approved education activities prescribed in the rules and regulations of the State Bar of California governing minimum continuing legal education.

New Jersey: This program has been approved by the Board on Continuing Legal Education of the Supreme Court of New Jersey for 1.8 hours of total CLE credit. Of these, 1.8 qualify as hours of credit toward the General category.

New York: This transitional and nontransitional continuing legal education program has been approved in accordance with the requirements of the Continuing Legal Education Board for a maximum of 1.5 credit hours which can be applied toward the General requirement.

CLE credit will be applied for in other states where DLA Piper has an office with the exception of Minnesota, North Carolina and Pennsylvania.

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