Studeo Legal

Third-party Ediscovery: How the FRCP can Help Limit the Subpoena

The amount and variety of information that businesses continue to maintain in digital form is growing exponentially.  Due to the structure and location of data, companies maintain more of these resources in third-party locations, beyond their immediate control.  The Federal Rules of Civil Procedure include rules that allow the discovery of ESI from nonparties to litigation. When a company is the recipient of a third-party subpoena seeking electronic ESI, there are several decisions that must be made due to the often high cost of complying with subpoenas.  In-house counsel should be proactive when responding to a subpoena and understand the rights they have to limit overbroad requests or shift costs to the requesting party.

The first step is to try and reach an agreement with the requesting party to limit the subpoena to reasonable time and scope to reduce the volume of data produced.  Cooperation during the discovery process is something that judges are beginning to expect from parties in litigation, and the lack of reasonable steps is a factor that may prove to have negative consequences.  Reasonable cooperation is unsuccessful, then a close review of FRCP Rule 45 may provide some direct protection since it provides that a “person responding to a subpoena need not provide discovery of electronically stored information from sources that the person identifies as not reasonably accessible because of undue burden or cost.”

If the subpoena requests multiple years of data and the older data is only available on backup tapes, an argument can be make that the older data is not readily available due to the high costs of retrieving the data.  Unless the request is extremely specific and can be shown to be for good cause by demonstrating its critical direct relevance or that the party has no alternative method to obtain the records, courts are often reluctant to impose such costs on third parties. 

In 2007, Guy Chemical Company, Inc. v. Romaco AG, the defendant sought electronic business records from the plaintiff’s customer, a third party to the litigation. The third party did had easy access to the records, but the request included language requiring the third party to search for and locate the records using an outside computer firm with an estimated cost of approximately $7,000. The court held that the cost to locate the records was indicative “that the information is not reasonably accessible absent undue burden," and that the "non-party status is a significant factor to be considered in determining whether the burden imposed by a subpoena is undue.” The court concluded that “it is not [the third party’s] lawsuit and they should not have to pay for the costs associated with someone else's dispute.”   In conclusion, the court ordered the third party to produce the requested records to the defendant, but that the defendant bear any and all associated costs.

Each case will need to show reasonableness and balance the burden of third-party compliance with the benefit of the material sought ultimately. Knowing and exercising the rights provided by the FRCP can help counsel limit the burdens associated with responding to third-party discovery. The mere suggestion of cost shifting alone may motivate the party seeking third-party discovery to take a more reasonable view as to what information they really need.

The Takeaway
When in-house counsel receive third-party subpoenas for ESI, the first step should be to speak with the requesting party to limit the requests to a reasonable time and scope in order to avoid undue burden.  If and when this does not work, then a close review of the FRCP and State procedural rules may provide you with the lever needed to force the requesting party modify the requests to a more reasonable and cost effective position.

Preservation of Relevant Documents –Discovery Rules Must Be Clearly Understood to Avoid Judgments and Sanctions

In Day v. LSI Corporation, Docket No. CIV-11-186-TUC-CKJ, the United States District Court for the District of Arizona granted, in part, the plaintiff-employee’s motion for entry of a default judgment and imposed additional sanctions against the defendant-employer.  The court concluded that the employer’s in-house attorney had a “culpable mind” and acted willfully in failing to carry out the company’s preservation obligations. The triple play of a default judgment, an adverse instruction and monetary damages were considered to be appropriate remedies for the in-house counsel’s failure to properly preserve potentially relevant evidence after receiving notice of potential litigation.

The Case
During his October 2010 exit interview from LSI Corporation, the employee complained about alleged job discrimination. In January 2011, three months after the interview, the company received a letter from an attorney representing the employee setting forth various contractual and other claims. The in-house counsel was aware of both the exit interview complaint and the attorney letter.  In January 2011, counsel issued a written document retention notice.  However, the notice was not sent to a critical witness with relevant knowledge of some of the claims.  The company claimed that the witness was not identified in the attorney letter and further, that it was not aware that the witness had potentially relevant knowledge until receiving the former employee’s initial disclosures seven months later. By then, the witness was no longer with the company and his emails had been purged from the company’s server.

The Decision
The Court’s decision contains a complete discussion of the parties’ spoliation-specific discovery dispute.  This included the depositions of the in-house attorney and members of the company’s IT department. There are three major points that should be understood by examining the errors made in this case:

1. A legal hold notice directing employees to preserve paper and electronically stored documents and information should be issued to all witnesses with potentially relevant knowledge or information.  Counsel should not rely solely on a list of specific employees identified by opposing counsel in a notification letter. The responsibility to identify potentially relevant witnesses lies with the company and the in-house counsel.  In this case, the Court determined that the witness’ involvement “should reasonably have been known” to the company and that had notice been issued as required, relevant documents would have been preserved.

2. When an in-house counsel assumes responsibility for engaging in litigation hold and preservation activities, s/he should investigate not only the identity of potential witnesses, but also work closely with the company’s IT professionals to identify the sources of or locations where relevant data may be stored. Here, the in-house attorney testified that he directed the preservation of data and electronic files, wherever they may have been located (a “universal hold”).  (Although the company disputed that a universal hold was required, relying on Fed.R.Civ.P. 26(b)(2(C) and Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212 (S.D.N.Y. 2003).

The company’s IT staff offered contradictory testimony,  saying that only specific locations had been identified by the in-house counsel and only those were searched and preserved. Regardless of whether the search was intentionally limited or the result of mere miscommunication, a default judgment as to the claim for which the employee was substantially prejudiced because of the missing documents, an adverse instruction as to the remaining claims, and an award of $10,000 in monetary damages was issued by the court.

3. It is becoming more common for courts to impose serious sanctions for spoliation. The District Court for the District of Arizona determined that a default judgment was appropriate as to one of the claims because:
- the company’s conduct led to the destruction of evidence that would have assisted the employee in the litigation,
- the public’s interest in expeditious litigation was hampered by the company’s failure to timely provide relevant discovery,
- and the employee was substantially prejudiced by the destruction of evidence, which “threatened to interfere with the rightful decision of the case.”

Additionally a number of lesser, though still severe, sanctions were imposed by the court concerning the employee’s other claims, determining that the risk of substantial prejudice existed by was not necessarily significant.

The Takeaway

 It is extremely important for all attorneys to understand that the litigation hold process is important enough to be discussed ahead of time and that written procedures should be created before they are needed.  All parties, attorneys, IT, and corporate department personnel should be part of the process and weigh in on the written plan being considered.  Then and only then, will the litigation hold be deemed defensible when it is questioned in the future.  Errors can be avoided if they are anticipated.

Two EDiscovery Wishes for 2013 and Beyond

I am ever hopeful that the legal landscape is changing for the better, and there are some indications that certain attitudes will be forever banished to the past.  I am old enough to remember that the first rule of litigation was to delay and obfuscate, while appearing to cooperate with discovery requests.   Much of a lawyer’s time was spent arguing about issues and documents that they knew that they would ultimately lose and be required to turn over, but the concept of discovery cooperation was never even discussed.   It was often years before the first documents began flowing to the opposition, and when they did flow, the requested documents were buried in mountains of useless material.  Additionally, no one ever prepared adequately for a Meet and Confer and instead used that time to further argue the need for more time since the necessary answers and experts had not yet been consulted, and the state of the documents was unknown.  

I think that judges have reached their limit of discovery abuses and have recently been more proactive in their rulings in an attempt to get the train back on the track.  Discovery should be about producing related and requested evidence “the facts”, the trial or settlement discussions is the place where the art of law should be practiced, allowing lawyers to argue what the “facts” and the evidence means.

Parties Cooperation
Historically, the mentality of “hiding the tree in the forest’ was the fundamental tenant that was the chosen course of action.  Zealous advocacy, which is the fundamental basis of our legal system, was extended to all phases of contact with the opposition, even arguing about where a meeting should take place in order to gain some type of psychological advantage.  Drowning the other side with dozens of motions is a classic away to delay the forward progress of any litigation.  The “problem” with cooperation during the discovery process is a two edged sword.  First, as mentioned above, cooperation goes against the grain of practicing law.  Secondly, and perhaps more importantly, discovery has become so complex with the advent of EDiscovery, that many lawyers are not prepared nor do they have the specific experience needed to adequately handle EDiscovery issues and trends.

Part of the problem may be generational; part of it is the recognition that EDiscovery is a specialty section of the law that requires someone’s full attention.  For older attorneys that have been practicing law for decades, there are many intricate technological issues that they may not have experience with or the desire to master.  As younger attorneys for whom computers have been an intricate part of growing up, the complexities of technology are not overwhelming. They speak the language of many of the information experts and are not afraid of using computers as a powerful tool to assist them practice law.

In addition, a number of law firms have recently hired or transformed firm members into EDiscovery experts. With a focus on understanding and implementing the Rules of Civil Procedure, combined with the application of the Sedona Principles and time to focus on technological solutions, these in-house EDiscovery specialists have become game changers for the proper implementation of EDiscovery principles.  They are beginning to transform the discovery process to one that is led by cooperation, which will ultimately shorten the discovery process and allow the lawyers to focus on the content of the claims.

Preparation for the 26(f) Meet & Confer
The goal of the Meet and Confer is to be a forum to resolve any outstanding issues that could not be resolved by the two parties without the intervention of a judge. It is supposed to be a session with meaningful discussion which leads to a detailed ESI agreement.  It is not supposed to be the first time that lawyers start to think about these issues, with no understanding of details such as number of custodians of interest, the type and location of data to collect, date ranges of interest, data processing decisions, etc.  While sometimes one party has come to the conference with a lot of the background information prepared, it is extremely rare that both parties arrive with data and experts to guide the discussions.

True progress in the Meet and Confer (and far fewer unnecessary motions) would occur if both parties:

1) came prepared
2) had looked at the data
3) had conferred with IT and Information Management staff and brought them to the meeting
4) had done a preliminary exploration and categorization of the data, and
5) most of all, come into the meeting with a cooperative attitude

The Takeaway

Judicial enforcement of the intent of the Meet and Confer (can you say sanctions??) will shortly lead lawyers to understand that it is more than a one time, required meeting.   It is a mechanism that should dictate what the parties need to discuss and that these discussions are likely to occur over a series of progressively more successful meetings, leading to a detailed ESI statement and the exchange of information.

I think that lawyers should read the writing on the wall and move to come to the Meet and Confer meetings in a prepared and cooperative manner.  It makes sense to be at the leading edge of the curve rather than to await the wrath of a judge who is pushed too far.

Legal Hold and Process are Effectively Inseparable, A Lesson for In-House Counsel

After many years, I believe that corporate legal teams are finally beginning to realize that addressing legal holds cannot be conducted either in a vacuum or in an ad hoc, unplanned manner.  In fact, the best policy is one that contains a complete process which creates accountability, transparency AND defensibility in court.  Clearly something this interrelated cannot be developed in a series of separate unrelated decision points; it must be created as a set of related policy decisions that is part of a unified plan.

The Problem
The problem has become compounded in the last 10 years with the growth of EDiscovery into terabytes and petabytes of potentially relevant ESI that exists across a wide variety of sources including; client servers, desktops, third party data centers, the Cloud, social media sites and personal devices.  Without a unified, written plan in place it is very easy for mistakes to occur when a variety of individuals attempts to issue, monitor, gather, comply with and release legal holds from this vast number of locations.

Since parties involved in civil litigation have a duty to preserve all potentially relevant ESI when litigation is reasonably anticipated, it is risky behavior to not act according to a well thought out plan that can be implemented on a moment’s notice. When this duty is violated, severe penalties and sanctions may be the result.   A recent case, Day v. LSI Corp. (D. Ariz. Dec. 20, 2012) is an example of how an ad hoc legal policy can lead to spoliation and subsequent court sanctions.

This case arose from a complaint filed by the plaintiff, Day, alleging multiple claims against the defendant, his former employer which included breach of contract, fraud and misrepresentation. When plaintiffs claim was noticed, the General Counsel sent out a written notice to several key custodians who might have information regarding the claim. The notice instructed them “not to delete or destroy any document, including emails, related to Day.” After the claim was filed, the plaintiff accused the defendant of failing to preserve all the relevant ESI, specifically information from a key employee who was involved in Day’s hiring and performance reviews.

The Finding
The court held that the defendant, LSI Corp., both failed to preserve relevant ESI and that spoliation had occurred.  The court noted that the Defendant failed to adequately preserve the key employee’s ESI; and that no hard drive and only three emails were produced.  Additionally, the court noted a series of preservation errors with included: a failure to follow its own document retention policies and the GC’s contradicted testimony concerning directions to search and preserve data.

According to the court, in-house counsel mistakes (for which they could be held culpable) could be categorized in three major ways: 

• by exercising an incorrect judgment as to which employees were to receive a litigation hold notice;
• by failing to maintain a reliable record of what instructions were given to the IT department about what documents were to be collected and from which sources, or to supervise and understand the collection process;
• by allowing the company’s document retention practice to be ignored or forgotten.

Based on this evidence, the court held that the GC acted with a “willful” culpable state of mind by not sending out a legal hold notice to the key employee because he “knew or should have known that Skelton (key employee) had contact with Day during the hiring and performances processes.” As a result of spoliation, the court awarded partial default judgment to one of the plaintiff’s claim while awarding an adverse instruction and $10,000 in monetary sanctions.

The Takeaway
This case should be studied carefully by corporate legal teams.  It is easy for anyone from a litigation support manager to the general counsel to make mistakes when it comes to defensibly preserving potentially relevant ESI. Without a pre-defined, transparent and enforced legal hold process it is very easy to go off the rails and make mistakes.  Without proper written guidelines in place, the following is a very short list of the potential errors that can be made:

1. It is very easy for IT staff to misinterpret what the requirements are for preserving all potentially relevant email or data sources.  Without written guidelines to follow, mistakes can and will be made.
2. Under the pressure of the moment legal teams may not properly identify potentially key employees to the legal hold list.  If employee interview are not carefully conducted it is easy to miss potentially relevant custodians.
3. Without a meaningful, reproducible record of all the instructions and steps that were implemented by Counsel, it is virtually impossible to prove that best efforts have been made to comply with a reasonable process.

The only defensible way to meet this duty is to create a process around legal holds that can be tracked, monitored, audited and automated. There are now a number of E-Discovery software solutions designed specifically for legal teams to easily meet this burden. The time is past for in-house legal teams to implement these procedures immediately.  Some major factors to consider when investigating a software solution include a product that will:

• Increase transparency by recording and tracking all efforts to preserve, collect, process and produce ESI regardless of location
• Enable users to identify gaps in the process and, subsequently, create a more efficient process
• Identify key employees and schedule follow-up interviews to ensure all potentially relevant custodians are put on legal hold
• Automate legal hold reminders and re-issuance notices so that custodians will not forget their obligation to preserve all potentially relevant ESI

What Expectation of Privacy can Employees Expect when Using Corporate Communication Devices?

On December 12, 2012, the U.S. Court of Appeals for the Fourth Circuit upheld the conviction of Phillip Hamilton, a former member of the Virginia House. In 2011, he had been sentenced to over 9 years in prison for using his political position for personal enrichment. The source of some of the evidence that was used in his conviction was an office email account used to communicate his criminal intentions to his wife. Employees should take notice of this ruling which reinforces that there is NO special privacy protection for the content of emails sent using your employer’s electronic devices.

The Appeal

One of the major assertions of the defendant during the appeal was that the use of the messages violated his right to privacy as well as his marital communication privilege. The court disagreed, finding that Hamilton had waived the privilege because he sent the email messages from his work computer and his work e-mail account. Further, he had taken no steps to protect the emails given his choice of communication devices. This conclusion was reached even though the workplace had not instituted and communicated its computer use policy until after most of the incriminating email had been sent.

Fourth Circuit Judge Diana Gribbon Motz wrote, "…(T)he district court found that Hamilton did not take any steps to protect the emails in question, even after he was on notice of his employer's policy permitting inspection of emails stored on the system at the employer's discretion."

Other Key Rulings

This decision is in line with a number of rulings where employee privacy rights related to communications emanating from office equipment have been severely restricted or denied by the courts. A quick review of some key rulings make it clear that there has been a consistent treatment of this issue. The right of employers to monitor information that passes through corporate equipment provided to employees seems to be settled.

In Quon v. the City of Ontario (California), a police officer sued over the review of what turned out to be embarrassing, sexually-explicit messages that he had sent to his wife and his mistress using a department-provided pager. In its ruling, the court found that, due to the nature of Quon’s position and the reason for providing him with the device, he had no reasonable expectation of privacy.

In Bohach v. the City of Reno, a 1996 opinion, the court dismissed a challenge to an employer’s stated intention to review the communications that passed between two employees as part of an internal investigation. The unique aspect about the Bohach case is that the communications system through which the messages were sent was a proprietary system purchased by the city around 1995 for delivering information to its employees. Because this system was installed by the municipality, the court determined that the city was the system administrator, giving the city special rights as to the data and was free to access the messages at will.

  In 2000, CIA agent Mark L. Simmons lost the appeal of his conviction for possessing pornography, which had been downloaded to his office computer. The court found that Simmons had no reasonable expectation of privacy. The court ruled that the viewing of personal email did not violate federal wiretapping laws since the email was not viewed while it was being transferred but rather was obtained from a storage device. Not only did the Foreign Bureau of Information Services have a well-communicated policy that prohibited the use of its computers for personal browsing, but it also gave its employees notice that the department might perform computer investigations to ensure compliance with this policy.

Is the Waiver of Privilege Automatic?

However, it should be noted that using the office computer for personal purposes does not automatically result in a waiver of privacy and privilege. Some cases have protected employee email from corporate review.

In Stengart v. Loving Care Agency, Inc., an employee filed suit against her former employer for discrimination. Before she quit, she used her company-provided computer to send information to her attorney that she felt would be useful to her case. During the course of the case, it became clear to Stengart that her former employer had gained access to the legal strategies and documents that had been communicated with her attorneys. The court decided that because Stengart had taken steps to protect her privacy by using a personal email account that was password-protected, she had a reasonable expectation of privacy that preserved her attorney/client privilege.

So What is the Best Policy?

As usual, it would appear that the best policy is to have an official corporate policy. In order to make it clear to all parties what can be expected of them regarding the use of corporate communication devices, having a policy that is communicated to all parties is recommended. According to a survey by Quicktake, 42% of employers monitor their employees’ emails. However, Michael Overly (author of E-policy1) found that only 60% of the employers who monitor emails actually have an adequate written policy in place. By monitoring emails without warning, employers are arguably infringing on an individual’s privacy and therefore might be susceptible to workplace privacy lawsuits. However, employees need to understand that privacy concerns are generally not upheld by the courts under these circumstances. However, the best policy for all parties is to have a policy in place that clearly outlines expectations.

The Takeaway

So, is email monitoring is legal? Generally, the answer is yes. If your company has implemented a written email policy in which employees are warned that their emails can be monitored and that they should have no expectation of privacy. Not only will the existence of an email policy help you in a court of law, it will also educate your employees in the usage of email and may prevent many of the issues you were trying to stop by monitoring email. Make sure that the email policy is properly communicated to all staff and that any updates are circulated amongst all employees. It is preferable to have employees sign the email policy, including any additions to it, to prove that the employee has agreed to abide by the rules. The policy should clearly indicate that employees should have no expectation of privacy as to communications to or from their office computer.

Social Media Primer Published by the Sedona Conference for Public Comment

The Sedona Conference® (TSC) is a nonprofit, 501(c)(3) research and educational institute dedicated to the advanced study of law and policy in the areas of antitrust law, complex litigation, and intellectual property rights. In early December of 2012, the Sedona Conference® published their public comment version of its latest offering, The Sedona Conference® Primer on Social Media. 

Why has it chosen to publish a Primer and not the usual Commentary or Principles that is their usual formal presentation?   In the Preface of the document, they describe their approach:

Unlike many of previous publications in this series, this is not entitled a “Commentary,” nor does it present any formal “Principles,” although it contains plenty of practical guidance for attorneys, judges, and parties. This is called a “Primer” because the goal is to provide primary instruction to the bar and bench in the basics of social media and the law, from definitions, to the use of social media in business, to the discovery of social media in litigation, to professional responsibilities lawyers have in relation to their own use of social media. This is a fast-developing and fast-changing area of technical, social, and legal development, and any consensus-based Commentary or set of Principles that claims to advance the law in this area may be doomed to obsolescence as soon as it is announced on Twitter. However, we hope that this Primer represents a positive first step in grounding the dialogue leading to consensus on moving the law forward in the reasoned and just way.

As they typically do with their papers, the Primer is first being published as a public comment version, allowing for time to receive comments and input from a wider audience involved in EDiscovery.  Once comments are received and reviewed, appropriate edits will be made in the text and then released for use by the legal market.  As always, their goal is to provide immediate and practical assistance to lawyers, judges, database management professionals, and others involved in the legal system.

Identifying how social media is used, and understanding how the typical rights and obligations are related to their content, are essential steps in shaping a sensible social media policy.  Given the rapid rise of social media in the business world, it is important for companies to develop social media policy that clearly outlines major areas such as:
 
 Privacy and User Expectations
 Regulatory Considerations
 EDiscovery Issues
 Preservation and Collection of Data
 Challenges to the Discovery and use of Social Media

Social Media is also directly influencing the volume of electronic discovery issues in litigation due to the increased costs of preservation, collection, review, and production.  It is now common practice for lawyers to counsel clients to take the same preservation steps for various social media data as for other electronically stored information. Since Social Media involves complex data management and ownership issues, preserving it presents an increase in the challenge of EDiscovery.  In order to address these challenges, organizations should develop a practical approach to meeting their legal obligations including: identification of overall objectives, setting clear policies, training employees, and monitoring the impact of social networking on their operations.  The Primer provides a detailed framework of the issues that need to be included to develop social media policy and should be required reading for all organization leaders.

The entire publication is available for free download from the Sedona Conference®, here.  It is well worth everyone’s time to read it, use it and provide comments to improve the content.

 

New E-Discovery Guidelines Adopted by the U.S. District Court for Northern District of California

Further proof that the business of law is being changed by judicial expectations was revealed on November 26, 2012.  The guidelines issued by the Federal Court mandate that the early phases of litigation need to switch from adversarial to cooperative regarding EDiscovery.  The Northern District is joining a growing list of jurisdictions that have implemented rules to improve the handling of the discovery of electronically stored information (ESI).  Those familiar with my blog will note that this is not the first time that I have written about the need to change to a cooperative approach to discovery in order to succeed in today’s litigation climate.

The local approach, which emphasizes cooperation between parties, combines flexible guidelines, a checklist for practitioners to use in discussions over e-discovery, and a three-page model order addressing the preservation and production of electronically stored information.  The Guidelines were developed by a bench-bar committee that was chaired by Magistrate Judge Elizabeth D. Laporte in partnership with the Court’s Rules Committee and then unanimously approved the Court. 

Laporte stated that the goal of the Guidelines was to provide practitioners with tools “to focus them on what's important and head off unnecessary disputes"   Looking to the future, the group created tools that would be flexible enough to address a wide range of cases and could be easily adapted as technology evolves.

To make it easy to employ the Guidelines, the court has provided access via their website, (see ESI Guidelines).  The package of new ESI-related documents includes:

• Guidelines for the Discovery of Electronically Stored Information;
• ESI checklist for use during the Rule 26(f) meet and confer process;
• Model Stipulated Order Re: the Discovery of Electronically Stored Information.
• Standing Order for All Judges of the Northern District of California

Effective November 27, 2102, Parties must comply with certain reporting requirements to the court as per the judges’ uniform Standing Order.   Paragraph 6 requires that all Joint Case Management Statements include a report that certifies that the parties have reviewed the ESI Guidelines and confirm that the parties have met and conferred pursuant to FRCP 26(f) regarding reasonable and proportionate steps taken to preserve evidence relevant to the issues reasonably evident in the action at issue. Parties are also encouraged to use the Model Stipulated Order as the foundation for the Rule 26(f) meet-and-confer process. The Court hopes that the Model Stipulated Order will be a widely-used tool for litigants just as the court-approved Stipulated Protective Orders have been in patent and other cases

Judge Laporte explains: “The Court requires counsel to be familiar with these tools and confirm in the initial case management statement that they have reviewed the Guidelines regarding preservation and decided whether to enter into a stipulated order governing e-discovery, in light of the Model Stipulated Order.”
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Perhaps most importantly, the guidelines require all parties to discuss the preservation of electronically stored information, or ESI, at the outset of litigation and to continue discussing EDiscovery topics at routine meet-and-confer sessions. In most cases, lawyers are advised to appoint a liaison who will become familiar with the technical aspects of e-discovery.  One notable guideline states that "The court expects cooperation on issues relating to the preservation, collection, search, review and production of ESI." The court further notes “ that an attorney's zealous representation of a client is not compromised by conducting discovery in a cooperative manner."

The guidelines attempt to balance the interests of plaintiff’s lawyers who want to obtain as much information as possible early in a case and the concerns that defense lawyers have over responding to overbroad and expensive discovery requests.  The guidelines encourage parties to prioritize and phase discovery requests and to balance the cost and burden of requests against factors like the amount in controversy, the parties' resources, the issues at stake in the litigation and the importance of the discovery to resolving the case.

I believe that more Court’s will adopt similar Guidelines in the future and hold parties responsible for their use and implementation.  By taking control of the Discovery process and forcing parties to work together in a cooperative fashion, the practice of law can return to its primary purpose, the determination of facts which prove or disprove a complaint.

 

Reducing risk is a key goal of legal professionals, and Federal Rule 37(e) provides the impetus

Determining the best methods for navigating the rising volume of information in litigation is becoming an increasing focus for corporations and law firms.  The costs and logistics of managing data storage have increased dramatically which in turn is responsible for the increased legal consequences of the information.  Many companies feel that there is no relief in sight for the growing and confusing area of EDiscovery.

What all participants (litigators, in-house counsel and EDiscovery professionals) have in common is their aversion to risk of all types.  Controlling the early phases of litigation, particularly during discovery, can help avoid the risk of spoliation and sanctions, two of the most prevalent forms of risk.  What tools are available to assist in this process?  The intent of Federal Rule 37(e), which is known as the “Safe Harbor” provision can used to show the court that your actions are defensible, but only when you undertake a planned approach to managing your data.

Rule 37(e) is designed to protect organizations from sanctions when their computer systems automatically destroy or delete email, archival data, and other electronically stored information (ESI). Specifically, this provision states that, “Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.”  This provision typically applies when companies, acting in good faith, allow the routine and normal operation of their automated systems to overwrite or delete such data.

Procedures that enable a defensible deletion strategy
However, in order to argue the conditions of the rule favorably and avoid sanctions, companies must implement and deploy viable information management policies and practices. By employing defensible policies, you can reduce the risk of spoliation claims.  Knowing exactly what you have, where it is located and invoking a legal hold, in a timely manner, provides the basis for a claim of safe harbor. In order to successfully argue that Rule 37(e) applies to your situation and protect your organization against spoliation and sanction rulings, there are several considerations that need to be identified:

1. In the digital age, a key aspect of defensible deletion strategy must by definition include technology such as archiving technology.   One of the many benefits of data archiving software is the ability to classify data, which analyzes and tags ESI content as it is placed in an archive solution pursuant to company retention protocols.  In addition to eliminating unnecessary data, organizations can search and retrieve data efficiently.  
2. Your organization must couple technology with a defensible information management strategy in order to defend against spoliation charges.  This requires a proactive approach which involves the participation of the key players in your organization to develop retention policies that fulfill the various stakeholders’ needs. A complete information system, along with regularly scheduled controls and data deletions should be in place and followed.
3. Any technology solution must be scalable and include options to help manage data, email and social media, the fastest growing type of data in most organizations. 
4. Note that the ability to invoke safe harbor provisions ends once litigation is reasonably anticipated. Make sure the solution you select can easily apply defensible legal holds, and ensure policies are in place to promptly notify custodians about preservation requirements. But more importantly, actually be able to apply a hold on the data.

Why isn’t Rule 37(e) used more frequently?
Despite the availability of Rule 37(e), few companies have actually invoked its protections. Primarily, this is because many organization organizations still have not implemented adequate information governance policies which must be in place in order to use the advantages of safe harbor. Collaboration between key players responsible for defensible deletion has not been implemented.  Without retention policies and cooperative teamwork, companies have effectively delegated the duty to manage, archive and discard data to line employees. Allowing employees to unilaterally and arbitrarily manage a company’s information is not a policy that can be successfully defended in court if the need arises.

With an effective defensible deletion strategy in place, there are two major advantages.  It will reduce the high cost of document storage and management and reduce the legal risks associated with the retention of ESI which must be reviewed and produced during discovery. Effective document retention strategy will retain information that is significant and must be kept for business, legal or regulatory reasons, and eliminate all the rest of the data that is produced on a daily basis. This is especially true regarding email volume. Currently, email issues are generating more discovery motions than any other source of ESI and causing a related increase in costs.  Creating an organization plan that determines a timeline for retaining email based on strong business principles will go a long way towards reducing data volume.

An example of proper implementation paying dividends
Viramontes vs. U.S. Bancorp et al (N.D. Ill. Jan. 27, 2011),  is an interesting example of a company that shows the benefits of proper implementation. U.S. Bancorp defeated a sanctions motion due to the effective procedures that defined its defensible deletion strategy.  Bank policy dictated that emails be kept for only 90 days, after which they were destroyed.  The policy further included procedures to suspend the policy once a litigation trigger was identified.  Based on these written policies, Judge Coleman ruled that the deletion of e-mail after 90 days, pursuant to the corporation’s archiving policy, but prior to the anticipation of litigation, did not constitute spoliation and sanctions were not warranted.  The safe harbor was upheld.

The Takeaway
The implementation of defensible policies and practices can reduce operational risk and curtail the overall costs of discovery.  While budgets for information management must be committed to this process, the end result is an overall cost saving when the litigation matter begins. By implementing a reasonable retention policy that includes the ability to be modified when required, an organization can safely eliminate extraneous data in a manner provided by law, reducing data stockpiles, storage costs and related search requirements.

Should Judicial Activism be Feared or Embraced?

There has been an outcry in recent years about “judicial activism” which is generally described when judicial rulings are based on personal or political considerations rather than on existing law.  It is most often related to constitutional interpretation, statutory construction and separation of powers.  Some are equating this form of judicial activism with those progressive judges who are pushing the envelope regarding EDiscovery rulings.  There have been a number of articles and blogs written by professionals expressing concern about judges who are imposing EDiscovery solutions on parties, even when they haven’t been requested by either side.  They believe that this form of activism is bad for the law.

I look at the same information and interpret the results in a more positive light.  I think that judges are sick and tired of parties “working” the system; not complying with the intent of the Federal Rules of Civil Procedure and other state rules which are written to provide a systematic approach to discovery.  Parties are spending countless hours of the court’s time fighting over issues which ultimately do not go to the fact pattern of a case.  Discovery rules are in place to assure an orderly exchange of relevant information to be used in evaluating the veracity of lawsuits. 

Judges are beginning to force parties to comply with the law and engage the use of technology whenever they feel that it will assist the discovery of facts and help ensure the speedy and inexpensive outcome which is at the heart of the rules.  As a technologist, I believe that this has been a long time coming and is a positive direction for the industry.  While recent rulings still indicate a state of flux, I believe that lawyers need to look at some recent court decisions and more carefully pick which battles they wish to fight regarding the production of data.  While judicial intervention may be raising some questions about the extent to which judges should direct third-party experts or force parties to embrace particular EDiscovery methods, the field of play is changing and litigators need to take notice.

Recent Cases
In a very recent case, Carrillo v. Schneider Logistics, Inc., No. CV 11-8557-CAS, 2012 U.S. Dist. LEXIS 146903 (C.D. Cal. Oct. 5, 2012),  Magistrate Judge David D. Bristow took the action of ordering the defendant to hire a third party EDiscovery services provider to collect e-mails and other ESI after the defendant failed to produce responsive documents in spite of the existence of a court order. The basis for this action came after Schnieider repeatedly claimed to have produced all responsive documents, but the plaintiffs continually proved to the court that this was not the case.  When deposed, Schneider's representative could not testify as to the specific steps the company took to search for responsive documents.  Based on these statements, the court held that it had lost confidence in the defendant’s good faith in conducting searches.

The court ruled that Schneider was "required to retain an outside vendor experienced in retrieving electronically stored information to collect responsive documents and determine whether responsive documents have been permanently destroyed.  In addition to awarding monetary sanctions to the plaintiffs, the court also ordered the following:

• The EDiscovery company should be given access to all servers where the e-mails were kept as well as individual hard drives from the custodians involved in the dispute in order to conduct keyword searches.
• A fairly short 45-day deadline for producing all documents responsive to the plaintiffs' discovery requests. 
• Schneider could only exclude documents that were protected by attorney client privilege, but not on the basis of relevance
• The EDiscovery company was also to perform some forensic analysis to determine whether any responsive documents had been deleted by defendants and if so, could they be recovered
• Finally, the court ruled that if the parties cannot agree on an EDiscovery provider, search protocol, or document custodians, the court would step in to resolve the disputes.will resolve the disputes. The court also awarded monetary sanctions to the plaintiffs.

Other Interesting Judicial Intervention Case Notes

EORHB, Inc. v. HOA Holdings LLC, C.A. No. 7409-VCL (Del. Ch. Oct. 15, 2012).
The judge ruled sua sponte that parties should utilize predictive coding to assist in the discovery process and further, that both parties should hire and split the services of a single EDiscovery vendor during the remainder of the litigation between the parties.

Kleen Products, LLC v. Packaging Corp. of America, No. 10 C 5711, 2012 U.S. Dist. LEXIS 139632 (N.D. Ill. Sept. 28, 2012).
A party’s interrogatory was quashed when the  judge found it violated the spirit of cooperation that she had previously ordered the parties to comply with throughout discovery (although she commended the parties on their overall commitment to cooperating throughout the pendency of their litigation).

Scentsy, Inc. v. B.R. Chase, LLC, No. 1:11-cv-00249-BLW, 2012 U.S. Dist. LEXIS 143633 (D. Idaho Oct. 2, 2012).
This case involves the importance of having a written vs. verbal litigation hold procedure.  The company had only employed an oral communication about litigation hold that resulted in staff deleting all emails that were over 6 months old.  Finding that the company's verbal litigation hold policy was insufficient, the court held that the company had spoliated evidence.
However, because a forensic examination of the company's computers would cost into the millions of dollars, such a remedy would be an undue burden.  The court determined that in this case, it would be appropriate that witnesses from the company be deposed about relevant e-mails that were deleted due to the inadequate retention policy and litigation hold.

The Takeway
The judiciary is beginning to understand that technology solutions can have a positive impact on controlling litigation, especially in the discovery process.  When parties don’t cooperate with one another, try to use the complexity of database management as a fence to hide behind or claim that information is too difficult to obtain without describing the steps that have been taken; judges are stepping up and forcing parties to use technology to solve problems.  It used to be acceptable for an attorney to just affirm that information was not accessible and the courts would move on.  But that is no longer the case.  Judges want to know, in detail, what technology and expertise have been employed in response to discovery issues.  And recently, they have not been shy in requiring or imposing a solution when a party does not provide adequate information.  Judges want to get through the discovery process and litigate the facts of the case, not the process of exchanging information.

Metadata is Important – Just ask David Petraeus

For a long time attorneys have been telling those of us in EDiscovery that Metadata is “just not worth the effort,  it complicates EDiscovery productions and no one ever uses it”.  I would like to report that Metadata is alive, well and kicking a certain CIA Director squarely in the teeth.  As a result of the FBI investigation into threatening emails sent to a friend of Petraeus by an unknown source, Director Petraeus resigned from his position as CIA Director when the investigation revealed an extra marital affair with his biographer, Paula Broadwell.  How did this all unfold?

The Investigation

Jill Kelley, a social planner with ties to organizing social events at MacDill Air Force Base in Tampa, Florida began receiving emails in May 2012 which she deemed to be harassing.  Ms. Kelley didn't know who sent the emails, some of which appeared to be accusing her of an inappropriate relationship but didn't name Mr. Petraeus.  Based on the nature of the emails, the FBI began their investigation with these five to 10 emails that Ms. Kelley turned over.

FBI agents were pursuing what they thought was a potential cybercrime, or a perhaps a breach of classified information.  They spent weeks piecing together who may have sent them, using sophisticated digital forensic techniques. They used metadata footprints left by the emails to determine what locations they were sent from. They matched the places, including hotels, where Ms. Broadwell was during the times the emails were sent.  Using that information, FBI agents and federal prosecutors had probable cause to seek a warrant to monitor Ms. Broadwell's email accounts.  This monitoring led them to determine that the emails were sent from an account shared by Ms. Broadwell and her husband, who live in North Carolina.

Based on an examination of Ms. Broadwell’s account, they uncovered emails between Broadwell and an unknown person that were sexual in nature.  But because Mr. Petraeus used a pseudonym, agents doing the monitoring didn't immediately uncover that he was the one communicating with Ms. Broadwell.  The agents determined that Ms. Broadwell and Mr. Petraeus had set up private Gmail accounts to use for their communications, which included explicit details of a sexual nature, according to U.S. officials. 

As an additional bonus, the FBI determined that Ms. Broadwell also had some classified documents illegally on her computer.  The source and nature of the classified information is still part of the ongoing investigation, although Mr. Petraeus denied that the documents came from him and he has been cleared by the FBI.

The Lesson

Deleting information from a laptop, desktop and even a server is not a guarantee that the information cannot be recovered.  Additionally, electronic data transfers leave a "hidden footprint"  that can be easily examined by a forensic expert.  Metadata can be examined and analyzed to provide lots of context for disparate pieces of electronic information.  While you will not always examine metadata during electronic discovery, you should always request that metadata be supplied as part of the discovery process.  Then it will be there when you need it.