E-discovery: Federal Rules of Civil Procedure and their Implications for Public Sector Corrections Departments

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1 E-discovery: Federal Rules of Civil Procedure and their Implications for Public Sector Corrections Departments Andres De Aguero, Senior Lead, Deloitte Consulting LLP David F. Axelrod, Director, Deloitte Financial Advisory Services LLP May 5, 2008

2 Agenda Introductions A Universal Problem Agency Duties Why should you care? Types and Forms of Records; Who Pays? An Approach to Consider Summary Questions?

3 Colorado DOC Experience with e-discovery Paul Lewin-Colorado DOC CIO will describe his experience with e-discovery and the Colorado Attorney General s office

4 A Universal Problem Colorado DOC Example Case Law Example National Union Electric Corp. v. Matsushita Electric (1980)» We now live in an era when much of the data our society desires to retain is stored in computer disks.» We suspect that by the year 2000 virtually all data will be stored in some form of computer memory.

5 A Universal Problem (continued) Electronically Stored Information (ESI) Trends Costs Sanctions Courts are Losing Patience ESI Obligations Identify Preserve Retrieve Review Produce

6 3 Most Common e-discovery Issues The adequacy of records management policies and procedures The form in which information must be produced Who should bear the cost of producing electronically stored information

7 Agency Duties Retention the preservation of records in connection with threatened or pending litigation Compliance with discovery orders Discovery the process of exchanging records and information in litigation What you must provide to satisfy case management orders and e-discovery requests

8 Records v Documents All records are documents, but not all documents are records Evidence (function, content) Records are created for specific business purposes and are kept to memorialize business activity Information (business or non-business) Documents contains information that may or may not be of business value

9 Record Retention Duty Regular retention duties Imposed by statute and regulation Many such duties are industry specific Litigation-related retention duties Imposed by common law Refined by judicial rules of civil procedure Pending enactments and revisions

10 Scope of preservation duty Varies with the type of claim All key custodians Duty to preserve covers all kinds of evidence, including paper, physical and ESI Zubulake v. UBS Warburg Litigation hold Notice to preserve relevant records Communicated to all employees At reasonable intervals With follow-up and periodic reminders

11 Duties of Counsel Duty to locate Familiarity with records retention policies and procedures Familiarity with ESI architecture Communication with IT personnel Communication with key players in litigation Duty to preserve Responsible for ensuring: Issuance of litigation holds Suspension of routine destruction of backup and other media Duty to monitor compliance

12 Common Law Retention Duty Attaches when litigation is reasonably anticipated An objective test All relevant records Relevance in a very broad sense Often difficult to determine the universe of relevant records Example In an employment discrimination case with a class action allegation, must all personnel files be preserved?

13 When may records be destroyed? In the ordinary course of business, pursuant to a reasonable records management policy Except when a litigation hold applies [A] corporation cannot blindly destroy documents and expect to be shielded by a seemingly innocuous document retention policy. Lewy v. Remington Arms Co., 836 F.2d 1104 (8 th Circuit 1988)

14 Allocating e-discovery expense: who pays? General rule: producing party pays Key distinction: Accessible information Inaccessible information Cost shifting for inaccessible information Certain costs rarely shifted Costs associated with reviewing data before production Technological costs Legal fees

15 Recognizing the discovery landscape Where do electronic records reside? Where can they hide? Sometimes like finding needles in a haystack Most electronic systems are designed to process information not for records management Data can be copied and stored anywhere Data conversions often unaddressed

16 Places to look Internet Internet Traffic Local Area Network Main Frame Mail Server File Server Hard Disk Offsite Storage Tape Backup Mobile and Other Devices Cell Phones Palm Pilots Blackberries USB Drives (a/k/a thumb or flash drives) Onboard Systems Digital Cameras Voice mail Disks (Floppy, Zip, etc.) CD-ROMs, DVDs Finc Actg Mktg Laptop Hard Disk Operations Desktop External Sources Former Employees Clients Experts Consultants Licensees Suppliers Industry Data

17 An approach to consider Phase I Define scope of discovery Goal Develop strategy to identify, locate and retrieve discoverable data Benefits Challenges Limit document collection More accurately project the costs of downstream processes Guidelines established to address potential e- discovery issues So much data, and so many sources of data: difficult to compile an inventory Interactive exercise Documenting the process by which data is created, secured, stored, retained, deleted, transferred, modified and archived

18 Phase I - Typical Scope Limiters Custodians Key Secondary Media purpose Work use Personal use Disaster recovery Media Type Hard drives Company servers Backup tapes Data Type s and user files System files Unallocated file space Financial / ops databases Other (web, proprietary) Data Ownership Individual Shared servers Time Frames Period in time Ongoing ( evergreen )

19 Phase II Data Preservation Goal To ensure data integrity so that it can be used as evidence Benefits Challenges Save money Avoid sanctions At this point, have not necessarily incurred collection costs Supports admissibility in evidence Data is available for other purposes (double edged sword) Spoliation and inadvertent destruction Business disruption Lack of forensic / legal training for custodians Legal guidance Non-compliance can result your opponent obtaining access to your information systems

20 Phase III - Methods to Implement Preservation Restraining orders Instructions to preserve evidence, a\k\a litigation hold Securing physical media Computers Peripheral media Backup tapes Discontinuing automated data deletions / modifications where required Tape rotations Automated archives and deletions Copying and collecting the data (such as forensically imaging)

21 Phase IV - Collect and Cull Data Goal Gather data potentially responsive to discovery requests Benefits Challenges Have the responsive data in one (or a few) places Can begin elimination of obviously non-responsive and redundant documents from the population ( initial cull ) System files and other nonprintables De-duplication Other filters (date, etc.) Data over-collection Preserving chain of custody and evidence handling Data management Non-standard data Structured data versus unstructured data Wide variety of file formats

22 Phase V - Processing Goal Create a data set that supports the review process Benefits Challenges Create a consistent file format Create a fully searchable data set Apply searches to the data File formats (Moving to a hybrid approach - TIFFs & natives) Maintaining parent-child relationships (i.e., s and attachments) Exploding archives (.pst,.zip, etc.) Cost Often review s and user files only

23 Phase VI - Review and Analyze Goal Perform legal and investigative analysis of the data to identify privileged matter and further understand the facts and circumstances of the matter. Benefits Challenges Review efficiency Leverage tools that exploit electronic data Simple, complex, and ad hoc searching Simple and complex analytical and operational reporting Ability to review and analyze thoroughly Document / page level management and control Ability to administer batch operations Current practice is still keyword, Boolean, and fuzzy searches Tremendous variety in review tools Practical challenges integrating unstructured data review with structured data review

24 Phase VII - Production Goal Data typically delivered in a useable format to the courts and/or opposing side (typically load files) Benefits Challenges Traditionally, a memorialized / static production set Usually images, but may still be paper Bates numbers, endorsed, and/or branded (e.g., confidentiality) In principal, data exchange between parties is fluid Production reporting and control Multiple productions to single or multiple parties Document history features in review platforms Native format productions Focus still on unstructured data ( , user files) Structured data is still treated as an exception Review platform alternatives

25 Reasons to move from reactive to proactive Agency reaction Most are not ready to comply with new e-discovery rules Companies that are most prepared have often dealt with significant investigations and/or litigation before Business drivers Economics - significant expense item Workload - significant strain on resources Poorly understood risk area Volume of active discovery requests - 10s, 100s, and 1000s of active current discovery requests for many agencies Business process and technology solutions Electronic discovery management Records management

26 Records Management / Electronic Disocvery Management Records and Information Management Identification, classification, and treatment of agency data Hot topic traditionally anchored in regulatory requirements Difficult to implement comprehensively Current the envisioned ultimate solution, but not an overnight solution Electronic Discovery Management: One piece of agency record management Concerned with: Discovery request receipt and legal hold implementation Collecting and managing case-specific data Managing the portfolio of legal holds and data maintained for litigation purposes Addressing legacy data maintained for non-litigation purposes

27 Summary Questions?

28 About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of approximately 135,000 people worldwide, Deloitte delivers services in four professional areas, audit, tax, consulting and financial advisory services, and serves more than one-half of the world s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names Deloitte, Deloitte & Touche, Deloitte Touche Tohmatsu or other related names. In the United States, Deloitte & Touche USA LLP is the U.S. member firm of Deloitte Touche Tohmatsu and services are provided by the subsidiaries of Deloitte & Touche USA LLP (Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Financial Advisory Services LLP, Deloitte Tax LLP, and their subsidiaries), and not by Deloitte & Touche USA LLP. The subsidiaries of the U.S. member firm are among the nation s leading professional services firms, providing audit, tax, consulting, and financial advisory services through nearly 40,000 people in more than 90 cities. Known as employers of choice for innovative human resources programs, they are dedicated to helping their clients and their people excel. For more information, please visit the U.S. member firm s Web site at Copyright 2006 Deloitte Development LLC. All rights reserved.

29 APPENDIX

30 An approach to consider Phase I- Define scope of discovery Goal: Develop strategy for identifying, locating, and retrieving discoverable data Benefits: Limit document collection More accurately project the costs of downstream processes Guidelines established to address potential ED issues Amended FRCP will establish a forum for parties to confer on electronic discovery (Rule 26(b)) Parties are only required to preserve information that is potentially discoverable Challenges: So much data, and so many sources of data: Difficult to compile an inventory Interactive exercise IT, Business process owners, In house and Outside Counsel, vendor Documenting the process by which data is created, secured, stored, retained, deleted, transferred, modified and archived

31 Phase II - Preserve Data Goal: To ensure that data is valid and that original data is not changed so that it can be used as evidence in a court of law Benefits: Save money Avoid sanctions At this point, have not necessarily incurred collection costs Maintains data integrity Data is available for other purposes (double edged sword) Challenges: Spoliation and inadvertent destruction Interference with daily business operations Lack of forensic / legal training for client personnel Legal guidance Increases responsibility of the organization Non-compliance can give your opponent access to information systems of the producing party

32 Phase III - Methods to Implement Preservation [Temporary] Restraining order Instructions to preserve evidence, a\k\a litigation hold Securing physical media Computers Peripheral media Backup tapes Discontinuing automated data deletions / modifications, if necessary or appropriate Tape rotations Automated archives and deletes Copying and collecting the data (such as forensically imaging)

33 Phase IV - Collect and Cull Data Goal: Gather data potentially responsive to the discovery request Benefits: Have the responsive data in one (or a few) places Can begin to eliminate obviously non-responsive and redundant documents from the population ( initial cull ) System files and other non-printables De-duplication Other filters (date, etc.) Challenges: Data over-collection Preserving chain of custody and evidence handling Data management Non-standard data Structured data versus unstructured data Wide variety of file formats

34 Phase V - Processing Goal: Create a data set that supports the review process Benefits: Create a consistent file format Create a fully searchable data set Apply searches to the data File formats (Moving to a hybrid approach--tiffs & natives) Challenges: Maintaining parent-child relationships (i.e., s and attachments) Exploding archives (.pst,.zip, etc.) Cost Often review s and user files only

35 Phase VI - Review and Analyze Goal: Perform legal and investigative analysis on the data: including providing classification of data (i.e., privilege) and understanding facts and circumstances of the matter. Benefits: Review efficiency Leverage tools that exploit electronic data Simple, complex, and ad hoc searching Simple and complex analytical and operational reporting Ability to review and analyze thoroughly Document / page level management and control Ability to administer batch operations Challenges: Current practice is still keyword, Boolean, and fuzzy searches Tremendous variety in review tools Practical challenges integrating unstructured data review with structured data review

36 Phase VII - Production Goal: In most cases we are talking about delivering data in a useable format to the courts and/or opposing side (typically load files) Benefits: Traditionally, a memorialized / static production set Usually images, but may still be paper Bates numbers, endorsed, and/or branded (e.g., confidentiality) In principal, data exchange between parties is fluid Production reporting and control Multiple productions to single or multiple parties Document history features in review platforms Challenges: Native format productions Focus still on unstructured data ( , user files) Structured data is still treated as an exception Review platform alternatives

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