Heidi Maher, Esq., eDiscovery Expert

Just when you thought the idea of a government investigation couldn’t get any worse, here comes the new Supreme Court ruling in FCC v. AT&T, Inc., 562 U.S. ____(2011).

The case began in 2004, when AT&T realized that it may have been collecting too much government cash as part of the E-rate program that provides broadband access to schools around the country. The Federal Communications Commission (FCC) opened an investigation, and in response to its request for documents, AT&T turned over massive amounts of data.  The matter appeared to be resolved when AT&T paid a fine of $500,000 and agreed to fix its oversight of the program with no acknowledgment of wrongdoing.   However, the settlement was not good enough for CompTel, a trade association representing long-distance providers which included some AT&T competitors.  In 2005, CompTel’s assistant general counsel, made a Freedom of Information Act (FOIA) request seeking all the documents AT&T submitted to the FCC. When the FCC agreed to allow them access to this information, AT&T challenged that decision, citing an exemption in FOIA that bars the public release of government records when such action could “constitute an unwarranted invasion of personal privacy.”

AT&T maintained that the personal privacy exemption applied to corporations as well as people since corporations are considered legal “persons” in the United States.  This was the winning argument at a federal appeals court, convincing judges there to block the release of the information.  However, the Supreme Court disagreed and unanimously ruled against AT&T.  After lengthy discussions about grammar, the court concluded that though corporations are described as “persons” in the law, that doesn’t mean that “personal” in “personal privacy” applies to them.

This ruling should be a clear wakeup call to those corporate attorneys who operate under the assumption that it doesn’t really matter if they do not have good eDiscovery practices because the threat of serious sanctions is remote.  After this opinion, it will be easier for ordinary citizens and competitors to gain access to most records turned over during government investigations. Therefore, any damaging information that is turned over, whether relevant to the investigation or not, can potentially serve as fodder for the media and competitors. Since not turning over documents to government investigators is rarely an option, this means when the government comes knocking at the door, corporations who have their informational house in order, will have an easier time finding and turning over only the requested material and nothing else.  Corporate lawyers, who dump massive amounts of data over to investigators because they lack the knowledge or means to sort through them in time, can now be potentially held responsible for affecting their company’s bottom line.

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It takes a Village…A cross-functional approach to eDiscovery (CLE Credit )

Time 10:30 – 11:30 am ET

Room: Concourse Level Room F

With eDiscovery, there isn’t an “Easy Button”.  The practical realities of eDiscovery deployment, management, and litigation have had a significant impact on corporations, as well as expanded the general counsel’s role.  This session will focus on the realities of Discovery behind the firewall.  Industry experts and Practitioners discuss the legal trends and IT realities affecting the cost and risks of managing a mobile work force & dispersed ESI sources in a global world.

Speakers:

William O’Neil, Esq., Solutions Consultant—eDiscovery & Compliance
EMC Corporation

Michael Spencer – Records/eDiscovery Manager, Dish Networks

Rich Simon – eDiscovery, Deloitte

George Socha, Esq. – Socha Consulting

R.S.V.P. today, as space is limited.

Heidi Maher, Esq., eDiscovery Expert

To those of us in the eDiscovery field, the EDRM diagram appears straightforward.  However, to the legal practitioners who are getting acquainted with it for the first time, the “Information Management” node seems so overwhelming that they go no further.  The explanation of that node on EDRM.net[1] is good but gives no functional pointers on how to actually put together a plan.  I typically tell organizations that the best way to get started is to divide up the types of data you have into the following four categories:

1. Managed Unstructured Content – collaboration and content management platforms (Documentum, SharePoint, FileNet, etc) and custom platforms
2. Structured Content – databases
3. Fixed Content – physical and paper records, legacy systems and email archives
4. Unstructured Content – laptops and desktops and network fileshares

For each of the categories, think of how you will classify and (if necessary) archive the data, enforce polices against it and dispose of it when it no longer meets any business or legal value.

The easiest data to manage, not surprisingly, is the data that sits in collaboration and content management platforms.  They have built in management tools that facilitate classification of documents according to value, have internal indexing and searching mechanisms, and can fully dispose of data when it has reached the end of its lifecycle.  If organizations were able to put all their data into these types of platforms, the information management step would be a simple one.  However, most organizations likely have the three other types of data to deal with also.

Structured content is typically data that is shared among many people and is stored in critical database systems, such as financial accounting, human resources and manufacturing.  These systems maintain the data in a very formal, structured manner like an electronic filing system.  Since everything is already catalogued, there is no further need to do so.  To access and search from a database, you will most likely need a report writer or report generation program, the most popular of which is Crystal Reports.  This type of program allows you to enter, organize and select data to be put into a usable format.   However, the critical issue with databases is that most of the time, organizations are loath to delete anything out of them as they house important business critical data, so data is often kept in perpetuity or until the database is retired.

Fixed content like legacy email systems, boxes of paper documents, and orphaned SharePoint sites will need to be cataloged for their contents in order to determine value, age and availability for final disposition. Email archives allow for disposition according to age of data and most have good search tools to allow access for eDiscovery.  Emails not in an archive that are simply on an email server should not be treated like fixed content.  Since email is the most requested type of data in eDiscovery, un-archived email should be handled as described in the category below.

Unstructured content is the most difficult to manage.  Today’s knowledge workers are constantly creating information on their own hard drives, putting new documents on shared drives or in an organization without an email archive, creating emails on an email server. There is no natural classification of this type of content; and without an archive for the email or an enterprise indexing tool, there is no automated way to enforce any policies against it or find relevant material for eDiscovery.  In order to get your information house in order, unstructured content is where you should put most of your time and focus.  The key to managing unstructured information is to develop a classification methodology based on one or more informational attributes (e.g. based on age, custodian, location, file types) that superimpose order based on subject(s) relevant to a legal matter. With unstructured content’s volume and growth, organizations often turn to eDiscovery software suites to index, automate and codify the classification methodology for large litigation matters. If you choose not to classify, you at least need to have a plan for intelligent discovery against unstructured content before a litigating event occurs to avoid potential sanctions.  Most importantly, determine when and how you will expunge any unstructured content that has met the end of its lifecycle. Without a plan, you will always be on the reactive versus the proactive side of the EDRM model, which is the most risky, as well as the most expensive path.

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Heidi Maher, Esq., eDiscovery Expert

the main reasons for the high cost of eDiscovery.  Vendors and outside counsel make good money helping corporations sift through massive amounts of data to separate out privileged information.  When Federal Rule of Evidence 502 was amended with the intent to mitigate this cost, litigators all over the nation rejoiced.  However, since the establishment of the rule, it has quickly become evident that the celebration may have been a little premature.

There are eight primary provisions to the rule.  The most relevant of which is 502(b) which clarifies that inadvertent disclosure does not result in waiver when the holder of the privilege “took reasonable steps to prevent disclosure” and “promptly took reasonable steps to rectify the error.” So how do courts define “reasonableness” within the context of eDiscovery cases?

One of the premier cases addressing this standard is the Mt. Hawley Ins. Co. v. Felman Prod., Inc. 2010 WL 1990555 (S.D. W. Va. May 18, 2010).  In this case, plaintiff Felman sued defendant Mt. Hawley Insurance for an insurance claim related to property damage and business interruption. During production, plaintiff inadvertently turned over an email that was listed on the privilege log but that the defendant believed was the “smoking gun”.  Plaintiff was unaware of the disclosure until the defendant included it as an exhibit in a motion, thereby making it a public record.  Defendant claimed waiver of privilege due to plaintiff’s negligent review before production.

The court applied the following five factor test established by Magistrate Judge Grimm in Victory Stanley, Inc. v. Creative Pipe, Inc. 250 F.R.D. 251 250 F.R.D. 251, 70 Fed.R.Serv.3d 1052 (D. Md. 2008) to determine if privilege was waived:

1. The reasonableness of the precautions taken to prevent inadvertent disclosure;
2. The number of inadvertent disclosures;
3. The extent of the disclosures;
4. Any delay in measures taken to rectify the disclosure; and
5. overriding interests in justice

At first glance it appeared as though the plaintiff had taken on a massive effort to prevent disclosure of privileged documents.  It used analytic tools at numerous stages to search for carefully crafted privilege search terms, conducted a thorough document by document review of potentially privileged documents, did a second electronic search of remaining documents, and compiled an extensive privilege log. The court considered the plaintiffs review and production methods in light of all of these factors and found that their efforts were in vain, partly because: “As warned in Victor Stanley, 250 F.R.D. at 257, the failure to test the reliability of keyword searches by appropriate sampling is imprudent.”

Great latitude has been given to courts to apply the reasonableness standard on a case-by- case basis to promote fairness and efficiency. Besides the lack of sampling, other factors such as: overproduction of documents of which 30% were irrelevant, the large number of inadvertent disclosures constituting more than double the amount from the Victor Stanley case, and the failure to identify the inadvertent disclosures until the defendants included it in their motion, for the court indicated a significant lapse in plaintiff’s quality control over the eDiscovery process.  As a result, the court determined that plaintiff did not take reasonable steps to prevent the disclosure and determined that privilege was waived.

The takeaway lesson is that Rule 502 has a lot of maneuvering room.  It may give litigators a false sense of security that should they inadvertently produce privilege information, that they can easily claw it back.  However, this case has shown that even with herculean efforts it is not so easy to put the cat back in the bag.  That’s why it would be prudent to document an agreement with opposing counsel at the beginning of the case.  This agreement would state that neither side will raise the reasonability argument, or that the procedure around production has been agreed to as reasonable.  It would be even better to memorialize this agreement in a court order to prohibit any future posturing by opposing counsel.

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

In customer meetings and speaking engagements, I sometimes relate eDiscovery sanctions to Dante’s “Inferno” and its nine circles of hell.  The idea is that those who have poor eDiscovery processes and cannot meet their obligations to preserve relevant ESI have a good chance of facing sanctions.  At that point, the only question becomes the level of sanction – in Dante-speak, the circle of hell – on which to land.  Fortunately for most, the determination of the sanction is based in large part on the level of culpability — but as we will see in a few recent cases, the road to, uh, sanctions can be paved with good intentions.

Judges have a wide variety of sanctions available to remedy eDiscovery violations, which typically revolved under the failure to retain relevant ESI.  From least to most harsh sanction, they are:

• Further discovery
• Cost-shifting
• Fines
• Special jury instructions
• Preclusion; and
• Default judgment or dismissal (terminating sanctions)

(Pension Committee v. Banc of America Securities, 2010 WL 18431 (S.D.N.Y. Jan. 15, 2010) at 19-20).  The court has broad discretion in such matters, with the severity of the sanction normally based upon a combination of (1) the prejudice caused to the innocent party and (2) the degree of culpability of the bad actor.  (Victor Stanley v. Creative Pipe (“Victor Stanley II”), No. MJG-06-2662 at 71-72 (D. Md. Sept. 12, 2010); Pension Committee at 19-20).  As Judge Grimm notes in Victor Stanley II, harsh sanctions can result from a low level of culpability where there has been considerable prejudice to the injured party (to remedy the innocent party); and can also be awarded where prejudice is minimal but the culpability is great (to punish the wrongdoer and discourage future bad actors).  (Victor Stanley II at 72).

The Punishment Fits the Crime

In Victor Stanley II, Judge Grimm deals with a party – Mark Pappas, the president of defendant Creative Pipe – who repeatedly deleted ESI in deliberate attempts to frustrate the discovery process.  If you read the incredibly detailed opinion, you will see that this is not your run-of-the mill case where typical mistakes are made because IT did not talk to legal, or the lawyers did not know about much about IT concerns such as backup tapes or destruction policies.  Pappas intentionally and knowingly deleted thousands of files, deleted email while claiming that he was actually preserving the email in the “Delete” folder, and even used programs in an effort to eliminate more ESI (and his trails).  All along, he intentionally misleads the court and the opposing party about the state of discovery in the case and the defendant’s efforts to preserve and collect data.

Ultimately, Judge Grimm has seen enough, and he fashions one of the most interesting — and severe — sanctions that we have seen in eDiscovery caselaw.  Not only is judgment entered against the Defendant on one of the main claims in the case –the default judgment seems to be a fair response to all of the spoliation activities –- but Judge Grimm finds it important to go a step further:

I order that Pappas’s acts of spoliation be treated as contempt of this court, and that as a sanction, he be imprisoned for a period not to exceed two years, unless and until he pays to Plaintiff the attorney’s fees and costs that will be awarded.  [Emphasis added].

Prison – could it be a secret 10^th circle?  This punishment is not even on our original list of possible sanctions!  (Technically, this part of the sanction is for contempt of court and not merely a remedy for violating eDiscovery requirements).   Truly, a sanction like this will apply only in the very rarest of circumstances.  However, before you discount the case as just another “shark bite” case, take a look at the next one.

Little Bad Acts Add Up

In interesting contrast to the totally indefensible acts of Victor Stanley II is Harkabi v. Sandisk Corp., 08 Civ 820 (S.D.N.Y. Aug 23, 2010).  In Harkabi, the defendant (ironically a high-tech, electronic data storage company) never intentionally deleted ESI, but it did make several important mistakes:

-                    After segregating and then imaging the plaintiffs’ laptops (former employees), employees ultimately lost all of the data before it could be produced;

-                    The company deleted relevant email messages during its transition to a new email archive platform (which also occurred after litigation hold began but before production);

-                    The company failed to quickly realize these mistakes and – either as a function of that failure or as a separate mistake – failed to promptly inform the plaintiffs and the courts of these issues.  In fact, the plaintiffs were the first to discover that there were problems with defendant’s production, despite defendant’s assertions that it had not reason to believe that there were any problems.

Unlike Victor Stanley II, these problems seem to arise from a lack of attention to detail and possibly a lack of legal and/or IT knowledge.  While the court takes those circumstances into account, it also notes that in-house counsel was noticeably absent at critical junctures of the case, such as:

(1) when the plaintiffs’ original hard drives, which had been physically set aside, were copied onto a retention server;

(2) when those hard drives were later wiped so that the laptops could be re-issued to other employees; and

(3) during the transfer of email into the new archive system – which was particularly troubling because many of those emails should have been on litigation hold – there is no record that legal was involved at all.

Because much of the data was ultimately recoverable, one could argue that these are mostly minor to or moderate-level transgressions (and they certainly are minor in comparison to Victor Stanley II).  But to the court, taken together they show some serious problems and in response, the court leveled appropriately serious sanctions:

-                    to address plaintiffs’ costs and the delays in the eDiscovery process, defendants were ordered to pay money sanctions of $150,000; and

-                    Perhaps even more important, the court authorized an adverse inference instruction to be issued to the jury when the case is tried, permitting or requiring the jury to assume that Sandisk destroyed evidence that would have helped the plaintiffs to prove their case.

These are serious sanctions.  While the court stopped short of a terminating sanction (the 9^th circle), there are few cases that can reasonably survive a strong adverse inference instruction that seems likely to be given here.  Thus, while the sanctions are vastly different on their face from those in Victor Stanley II (particularly in the issue of incarceration), the practical difference on the actual cases may be very similar.

Conclusions

The language of Pension Committee, Victor Stanley II and other important rulings in 2010 are sounding a common theme: that the bench has less tolerance for eDiscovery violations, and is more willing to order appropriate sanctions for violations.  While you may not always be able to avoid procedural issues with your eDiscovery processes, taking a diligent approach and documenting your processes will help you to avoid serious sanctions.

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Presentation One

Title: eDiscovery: Why the IT and Legal Departments Are Strategic Partners In Managing eDiscovery

When: 2:00 PM, Wednesday, May 12th

Abstract: Gaps exist between IT and Legal in most corporations today. This hinders the efficiency and accuracy with which legal processes such as eDiscovery may be performed. Learn how EMC can bridge this gap and ensure a successful eDiscovery strategy across your enterprise using the SourceOne eDiscovery – Kazeon product.

Presentation Two

Title: File Management: Managing your Enterprise-wide Files Content in an Efficient and Systematic Manner

When: 8:30 AM, Thursday, May 13th

Abstract: This session will discuss how to better manage your enterprise data, especially files (unstructured data), for the purposes of better IT management, adherence to compliance or other internal policies/procedures and ultimately reducing costs in your environment. All of this and more can be achieved with EMC SourceOne Kazeon file management and reporting solution.

“Join us for the ultimate EMC educational forum and gain unparalleled access to our entire portfolio of software, platforms, solutions, and services.  This year we add eDiscovery to EMC’s product portfolio. Deploying the right technology is critical to help reduce eDiscovery cost and increase productivity,” says Karthik Kannan. “We will discuss why eDiscovery is not only a legal matter since it impacts attorneys, it professionals and business stakeholders and outline eDiscovery best practices. Since eDiscovery is a specific use case of a larger Information Management, Compliance and Governance initiative, we will also discuss how to manage file content across the enterprise with Kazeon’s File Manager to meet eDiscovery and Information Management challenges.”

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By James Shook, Esq., EMC SourceOne eDiscovery Expert

James D. Shook, Esq., CIPP

Having an Early Case Assessment (ECA) capability is absolutely imperative for corporations to deliver rapid insight into a potential or pending litigation, so that the corporation can determine risk and exposure quickly and accurately.   What are the top five considerations corporate counsel should investigate prior to making an ECA investment?

1. Ability To Immediately View Data In-Place – Some systems touting “ECA” cannot actually view data until it has been collected.  When looking at ECA capabilities, you need to determine whether such delays really meet your needs.  With recent cases like Pension Committee, which discuss how critical it is to quickly identify key players, the capability to immediately start reviewing email, desktop files, SharePoint data, etc. in the production environment can be extremely important.
2. Scope of Data Available — Determine what the system can actually access for early case assessment purposes.  For example, systems that can view only “archived” data can be of extremely limited value when a case first starts and you are trying to determine key custodians and where they are storing relevant data, etc.  For example, in a straightforward trade secrets case — is it more likely that relevant data would reside in or outside an official archive?
3. Search, Culling and Reporting Capabilities — A good ECA system will enable access to a lot of data, so the ability to rapidly cull the important from the mundane is critical.  Capabilities such as email threading, proximity searching and rapid searches — where a search is run against an index and returns results in seconds instead of hours — are all critical.  Similarly, visual maps of data — how much data, how old is it, who are the custodians, what types of files are present — can be critical to fast case evaluation.
4. Concept and “Smart” Search Technologies – Having the system do some of the work for you can also be critical, so solutions that employ concept searching, fuzzy search and other “smart” technologies can identify data and people that might not ordinarily be found.  For example, concept search can make code words jump right out, and also group common concept together (location, people, etc.) making evaluation faster.
5. Ease of Use — None of the technologies are very useful, if they cannot be used by the actual investigators who may not have strong IT backgrounds (lawyers, paralegals, etc.). Easy-to-use web-based interfaces, allowing click-throughs instead of requiring users to memorize lists of arcane commands make solutions much more accessible to the investigators.

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Andrew M. Cohen, Esq., VP & GM of EMC SourceOne eDiscovery - Kazeon

by Lora Bentley, IT Business Edge

Lora Bentley spoke with Andrew Cohen, Vice President and General Manager of EMC SourceOne eDiscovery in the  Content Management and Archiving Division of EMC Corporation, on why companies should care about e-discovery requirements and how to best approach improving their e-discovery system and efforts.

Bentley: How much do businesses focus on e-discovery requirements now?

Cohen: Historically, corporations have not focused on e-discovery requirements, but that has changed since the changes to the Federal Rules of Civil Procedure, and some famous legal cases, including Zublake v. USB Warburg.  Numerous corporations have recently been sanctioned and fined because of their failure to identify, collect and produce electronically stored information (ESI) as required by the rules and the case law.

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Excerpt from Law.com’s Legal Technology Blog

Matthew Nelson, Esq., EMC eDiscovery Expert

By Matthew Nelson, Esq.

Fresh off the heels of yet another LegalTech New York event in early February, it remains clear that the promise to make a fortune from e-discovery continues to lure more and more companies to the table to claim their fair share of the feast. Working in the legal technology space for a decade as a lawyer and e-discovery consultant, I like to think I know most of the e-discovery players, but the emergence of countless new companies, partnerships, and technologies would probably leave the head of even the most seasoned e-discovery veteran spinning when trying to figure out who’s who in the e-discovery zoo.

After slogging through the LTNY vendor exhibition hall, past hundreds of e-discovery vendors, I felt dazed by a roller coaster of emotions. I asked myself if it was normal to feel enlightened, confused, annoyed, and sometimes downright scared, by aggressive marketing after only a brief waltz through e-discovery land. Should I be worried about feeling a bit overwhelmed or was everyone else just as confused by all the hype? Then it hit me like a ton of bricks: “What the heck is ECA?”

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“This session is one of the jewels of LegalTech.  The Judges frankness on the subject, I believe, signals that there are no more “free passes” when it comes to eDiscovery in the State of New York, much less elsewhere, ” says J. David Morris EMC SourceOne eDiscovery – Kazeon.


Seating is limited so register to reserve your seat with the Judges.

The super session “The Ten eDiscovery Commandments: The Judges Speak” with noted guest speakers The Honorable Andrew J. Peck and The Honorable Frank Maas at LegalTech New York on Feb 2nd, 2010 at 9:00 a.m. in room SS1 on Concourse C.  CLE credit is available for this session; however, session attendance is limited.  Send an email to reserve your seat, email or register online at http://www.kazeon.com/newsroom2/legaltech.php.

Click Here for the LegalTech Super Session Flyer