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Preservation Order in Pippins v. KPMG is Issued – What are the Practical Implications

Thousands of computer hard drives and their fate have been at the heart of an ongoing dispute in Pippins v. KPMG.  For months, the two sides have argued about the preservation responsibility surrounding a large number of computer hard drives during an EDiscovery process.  The Pippins court just overruled KPMG’s objections to the preservation order that had been issued by the magistrate who was overseeing the case and additionally, denied its motion for a protective order. Judge Colleen McMahon wrote: 

 “I deny KPMG’s motion for a protective order.  KPMG must preserve the hard drives – all of them, without exception, for all departed Audit Associates nationwide (since I certified a nationwide FLSA class) – until it either: (1) comes to some agreement with Plaintiff’s over a sampling methodology, which both sides agree is the appropriate thing to do; or (2) formally abandons its litigation position that, even if Audit Associates generally are found to be no-exempt employees (an issue yet to be resolved), individual Audit Associates perform work that renders them exempt from the FLSA”

KPMG is now required to preserve the hard drives of identified former and departing employees unless it can reach an agreement with the plaintiffs developing a methodology to sample data from a subset of the hard drives.

Why is this Important?
This ruling reconfirms the importance of both cooperation and proportionality in EDiscovery.  Cooperation is now a required and expected element in litigation.  I believe this case should finally put to rest the old school litigation technique of delay, deny and avoid, that was prevalent for so many years The Court emphasized that parties should take reasonable positions during the discovery process that will result in a mutually agreeable result.  The Court expects the parties to develop a mutually agreeable plan during the discovery process that will then allow a case to be decided on the facts. 

Additionally, the order stressed the importance of communicating with the court to clarify discovery obligations and expectations of orders that have already been issued by the court in order to avoid wasting time and resources.  In this case, the court faulted both the parties and the magistrate for not requesting the court’s clarification with respect to its prior order staying discovery. The court explained that the discovery stay (which KPMG had believed prevented any sampling methodology be applied to the hard drives) could have been partially lifted to allow for sampling. Had the parties requested this type of clarification, the costs and delays associated with the lengthy motion practice would have been negated.

The Court also confirmed the doctrine of proportionality as it applies to preservation and why it must be a factor in considering action in EDiscovery.  The court stated that proportionality is “typically determinative” when examining a motion for a protective order.  However, in this case, the court did not reach a rationality consideration because the defendant had not yet produced a single piece of evidence from the hard drives in questions which would allow an evaluation of the evidence.  Only after a sampling production could a determination be made about the proportionality issue which would weigh the benefits of preserving the drives vs the burden to do so.

The Takeaway
This case reaffirms that courts have raised their expectations for how parties should engage during the EDiscovery process.  There is a clear trend that discovery should take place which comply with the cost cutting mandates of the Federal Rules of Civil Procedure.  Promoting unreasonable positions while hiding behind the construct of zealous advocacy will not longer be viewed by the court as proper advocacy. 

In addition, by addressing the issue of using sampling to help make a determination on what and how to preserve, the court is showing a willingness to employ technology in its pursuit of efficiency.  The use of statistics, sampling and advanced algorithmic analysis should be used by all litigants involved in EDiscovery.  For those unfamiliar with these tools, the best decision that can be make is to hire a company to become your partner in the EDiscovery process.  It may be the best decision you make on behalf of your client.  Studeo Legal is available to help guide you through this process.
 

ESI Rules Apply to All: There is No “Small Company” Exception

There is no defense for sticking your head in the sand, hoping that because you are a small business, that complex rules of litigation will not be applied to your organization.  Whether you consider it to be fair or not, the same complex rules that surround electronically stored information (ESI) for large companies with thousands of employees involved in complex litigation involving hundreds of millions in damages also apply to small companies.  It is up to counsel to inform clients of the responsibility to preserve ESI before the need arises.

Perez v. Vezer Industrial Professionals, Inc. 2011 WL 5975854 (E.D. Cal. 2011) was at its core, a relatively straight forward truck accident liability case.  However, pointing to productions made by third parties, the plaintiffs sought a default judgment against the defendants for failure to preserve electronically stored information.  In depositions, one key employee admitted that he no longer had relevant electronic data due to computer crashes, upgrades, or handover of computers to employees who subsequently left the company.  A second employee acknowledged that he had never searched for electronic data before leaving the company and failed to back up his electronic data.  This fact was particularly damaging, as the employee left seven months after the company was served with the Complaint.  The defendant’s position was that the company was small and most of the communication about the key events occurred by telephone.

The court found that the defendant had breached EDiscovery obligations.  The court addressed several issues which define conditions that clearly could be applied to more than the defendant in this litigation.

1.  Two defendant executives, including the owner, admitted that they had made no effort to retrieve potentially relevant ESI from company computers.  (They did not even attempt to “self–collect” data, which is also fraught with problems).
2.  The defendant argued the following conditions regarding their company: 
• that it was a “small company”
• that the case was not document intensive
• and that the most relevant communications took place by phone or in person, and not with generally accepted forms of ESI.
The court rejected each of this arguments and further said that these facts were not valid explanations for the “minimal to no effort” made by the company or its representatives to preserve relevant ESI, including documents sent, received, or created by key players.
3.   The court further stated that the fact that one of the key players’ computer crashed was “no excuse” given that the witness admitted he did not backup any of his ESI.  The court then reiterated the following warning to all practicing attorneys:  “Defense counsel's apparent failure, in this electronic age, to verify with appropriate representatives of their client whether there was an e-mail backup system, cannot be countenanced.”
4.  The court determined that the company had “proceeded with business as usual, without making any special effort to retain ESI relevant to this litigation.”

The Takeaway
In this case, the court did conclude that the death penalty (a default judgment) was inappropriate in this case.  However the court did award monetary sanctions based on the behavior of the defendants.  The court’s ruling regarding ESI is a warning shot to all practicing attorneys on behalf of their clients, regardless of their size.  Even small companies are required to pay attention to their ESI preservation obligations once they are triggered, or pay the penalty.  If this type of expertise is not part of your legal background, you should contact a consultant to help you put together an education program that can be distributed to all your clients.  They will thank you in the long run for your forsight.  Studeo Legal can assist in this endeavor.

 

There is no “EASY” Button in EDiscovery – A Comment on Legal Tech 2012

There have been many excellent articles written about what was presented at this year’s Legal Tech: what was hot, what was new and what was “cool”.   I am not going to try to add my two cents to this already well documented discussion.  Rather, I want to focus on the overall marketing message that I was receiving as I walked around the show, speaking with vendors and reading the marketing headlines displayed in many booths while trying to absorb the trends and tidbits that would help me better serve my clients over the next year.

The consensus before the show began was that predictive coding (Technology Assisted Review) and Information Governance would be the hot topics that everyone would be talking about.  In fact, the show fulfilled that prediction, in spades!  These two topics are proving to be the major buzzwords for 2012.  They are complex and intimidating, yet they offer the most likely solution to the ever increasing volume of EDiscovery that is encountered in almost every litigation matter.  New software algorithms are being deployed at an ever increasing pace in an attempt to cull through large document populations and shine the light on the most relevant documents that need to be reviewed by attorneys before production or in preparation for trial.  So what is the problem?

As I wrote in last week’s blog:

We are all looking for the magic technology button (EASY) that will solve the problems we encounter on a daily basis with the ever expanding volume of EDiscovery data.  What we have to remember is: 1) technology is just another tool to help attorneys do their job and 2) that we have to be able to describe what the technology is and how it operates in order to defend our decisions regarding document productions and 3) there is no EASY button (more on that in my next blog).  We need to understand and document what goes on behind the scene when the technology performs its “magic”.

The first impression that is put forth by a company is often the one that is marked permanently in ones conscious.  It certainly begins to get embedded in your mind as the message is repeated.  I was bombarded with the graphic messages that each company had “the solution” to the EDiscovery problem.  Most often it was a new software solution that would eliminate the EDiscovery problem merely by installing it, “pointing” it towards the unknown document population and pressing a button.  EDiscovery made EASY.  But is the right message to be creating?  There was only limited messaging on the need for strong consultative services to deploy and implement these new technology tools properly and to develop and refine search methodology.

I believe that marketing EDiscovery services, no matter how technologically enhanced, as EASY does a disservice on several levels.  It is a disservice to clients who begin to think that it is not as complicated as vendors have been describing, and it should be faster and require very little interaction between the attorney and technologist to deploy effectively.  It is a disservice to vendors in the long run because if it is so EASY to implement and get good results, clients want to know why it costs so much. 

While this type of marketing message might be effective in garnering some quick attention and drawing somebody in for a discussion, it creates a virtually insurmountable problem as we then attempt to explain that we didn’t really mean that it would be that EASY and that it requires a collaboration between several different legal related disciplines to make it work.  And while the overall costs of EDiscovery can be reduced by including technology as part of the solution, the technology does not eliminate the need for humans.

Takeway

First impressions matter: we are often misleading our clients and then setting their expectation level to high with some of our marketing promises. There is no EASYbutton in EDiscovery.  It is a complex mix of technology and legal analysis which must be employed be experts in the fields of law, statistics, linguistics and database management. It is not a matter of "man vs. machine"   The argument in reality should involve machines providing human decision-makers with accurate, responsive information, rather than replacing those humans altogether.  Defensibility is a methodology that must be understood and described by an attorney in the courtroom, not a machine in the backroom.

The law (and more specifically the courts) are not satisfied with a black box solution; they have to understand how searches work and why certain results are produced.  Lawyers must be part of the team that implements technology, but it needs to include technologist, linguists etc to perform the work in a defensible manner and on a proportional scale. The process and methodology needs to be easier to understand and explain. In the legal context, lawyers need to know how a search works. They need to show all the things that were done that make the search results reasonable.  Sounds Easy doesn’t it?

 

When Using New Technology “Solutions” in EDiscovery Production and Review, Don’t Forget the Need to Focus on Methodology

As 2011 wrapped up, and 2012 begins, there appears to be a heavy focus on a technology application often called “predictive coding” or “technology-assisted review”.  We are all looking for the magic technology button (EASY) that will solve the problems we encounter on a daily basis with the ever expanding volume of EDiscovery data.  What we have to remember is: 1) technology is just another tool to help attorneys do their job and 2) that we have to be able to describe what the technology is and how it operates in order to defend our decisions regarding document productions and 3) there is no EASY button (more on that in my next blog).  We need to understand and document what goes on behind the scene when the technology performs its “magic”

On some level, lawyers have not yet embraced the technology advances because the courts have not yet given their ultimate stamp of approval on the technology approach.  However, courts are beginning to show signs that technology is an important part of the answer and should be integrated into the litigation process.  The ultimate question is what will this “new” multi-layered approach look like in the final analysis?

U.S. Magistrate Judge Andrew Peck of the Southern District of New York wrote an article in October, Search, Forward, in Legal Technology News.  He acknowledged that the nature of more advanced technology assisted review presents a new paradigm for the courts.  He wrote,

Until there is a judicial opinion approving (or even critiquing) the use of predictive coding, counsel will just have to rely on this article as a sign of judicial approval. In my opinion, computer-assisted coding should be used in those cases where it will help “secure the just, speedy, and inexpensive” determination of cases in our e-discovery world.

While this article immediately caused a great volume of commentary and analysis on the merits of technology-assisted review and put forth the arguments that it was in fact the “magic bullet”, there is much more to Judge Peck’s article upon a closer reading.  In his article, he revisited some of the seminal cases in this area of the law written by Judge Grimm and Judge Facciola in which there was discussion about the limits of keyword searches and then described how these issues were analogous to predictive coding solutions.

He pointed lawyers to the Sedona Principles as a basis for developing a methodology that can be defended by the parties.  His two major points are that 1) the practice of EDiscovery should be focused on methodology, versus technology and 2) that legal arguments need to be grounded in the reasonableness of technology-assisted review.  One of the fundamental features when defining “reasonable” behavior in litigation is the ability of counsel to provide detailed information about how and why certain steps were taken during the document production process.  Explaining a methodology and providing detailed back up documentation is important when convincing a judge that you have done the best possible job to comply with the FRCP.

It is very likely that for the next several years, predictive coding/technology-assisted review will increase its role in EDiscovery until the next new technology (artificial intelligence?) come along to replace it.  It is clear that technology is here to stay and that we all benefit from its integration into the document review process.   Traditional review approaches are no longer defensible.  As a tool, technology can help us achieve the goal of taming the increasing volume of EDiscovery.  But in the end, it is only a tool.

Technology is only a tool
Tools need to be deployed properly, described completely and integrated into an overall litigation strategy. Technology can not do this, only humans can.  Lawyers and technologists need to apply their legal insights and understanding to implement the technology.  Solving complex problems and providing a methodology that is accurate and defensible remain under the control of humans.
Therefore, the methodology employed by a legal team is what will provide the judiciary with the context for the decisions that are made during the document review and will ultimate Lely determine whether you have taken reasonable, defensible steps.  You will have to not only be able to describe what the technology does and how it works, but be able to provide the judges with the experts used to execute the technology.  This will include lawyers, linguists, statisticians and technologists who will be required to demonstrate that the proper balance between technology and methodology.

Statisticians and Linguists – Why are they Important?
Let’s face it.  Most lawyers became lawyers because math was not their strong suit.  Legal training focuses words: making judgments and interpreting language, formulating defensible arguments and clearly articulating that argument.  In fact, only attorneys can make the subjective determinations needed throughout the litigation, particularly when determining proportionality and reasonableness in EDiscovery.  Lawyers are, and will continue to remain at the center of the legal process based on legal and subject matter knowledge.  Lawyers should focus on case strategy and allow the substantive experts provide the expertise necessary to obtain results and document their methodology.  As the field of EDiscovery becomes more complex and specialized, legal teams need to integrate the services of other experts to achieve their goals.

Predictive coding and technology-assisted review are based on statistical algorithms and linguistic word patterns, which are clearly specialty fields unto themselves.  Only linguists and statisticians who devise the software used in advanced can properly understand how best to integrate what they have created with the specific circumstances of your litigation.  It is imperative that the legal staff work with these experts to obtain the best results when using this sophisticated technology.  They should become part of the litigation team to insure that the results obtained are correct and defensible.  Their role is to develop protocols for the review, make sure that the correct searches are employed to find the documents, study the results of the searches and fine tune the search strategy, and make sure that the results represent a statistical sampling of the documents that can be defended in the courts.  This methodology is ultimately what is used to show that the steps you have taken are reasonable under the law and given the circumstances of your litigation.

What is the Takeaway?

Technology is here to stay.  Lawyers need it to perform their jobs effectively and represent their clients in a world of ever increasing complexity.  But technology is only a tool, and it is not the magic button that some hope it to be.  Successful litigation in 2012 requires that an integrated team of experts, including software experts, statisticians and linguists who can deploy the latest technology in the most effective manner.  While lawyers can and should continue to design the litigation strategy; the use of experts will improve the search techniques and ultimately result in cost savings as the volume of documents that needs to have eyes placed on them is reduced.  Technology is a tool, but it must be deployed intelligently by humans to produce any tangible results.  The mythology employed by these teams of experts is ultimately what the courts can understand and will rely on.
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