E-Discovery: What You Need To Know

Transcription

1 E-Discovery: What You Need To Know Madeleine B. Johnson, Principal, Dallas Geoffrey S. Harper, Principal, Dallas Nancy L. Stagg, Principal, San Diego Sky Club at The Mayfair On Turtle Creek May 22, 2007

2 Objectives Learn what you need to know to manage litigation effectively in the wake of the e-discovery-related amendments to the Federal Rules of Civil Procedure & Federal Rules of Evidence Learn what to expect and when and how to budget for it. Learn best practices for disclosing and requesting electronically-stored information and how to avoid expensive & momentum-killing sanctions. Learn how to work with outside counsel, e-discovery vendors, and your own employees to create a successful e- discovery strategy both offensively & defensively.

3 Why is digital different? An estimated 93% to 95% of all information is born digitally; the majority is never printed Beyond your workplace PC and servers, there are also: Thumb drives, memory cards, external drives PDAs, BlackBerries, cell phones Digital cameras, MP3 players (capable of carrying away e-documents as well as music & audio files) Web pages and ISPs Fax machines and copiers that have their own hard drives Voic In the Enron litigation, 250 terabytes (or 78 billion pages) of information were collected 2.5 times more data than contained in the Library of Congress

4 Microsoft Comments on E-Discovery & Civil Rules, at (last visited Aug. 21, 2006)

5 Who cares about e-discovery, anyway? The U.S. Supreme Court. It has approved e-discovery amendments to Rules 16, 26, 33, 34, 37, 45 & Form 35 of the Federal Rules of Civil Procedure, effective December 1, Amendments to Rule 16 establish a process for parties & the court to address issues relating to the disclosure & discovery of electronically-stored information ( ESI ) early. Amendments to Rule 26 require parties to discuss, during discovery-planning conferences, issues relating to the disclosure & discovery of ESI. Amendments to Rule 33 provide that an answer to an interrogatory involving the review of business requests should involve a search of ESI. Amendments to Rule 34 make the distinction between ESI and documents. Amendments to Rule 37 create a safe harbor that protects a party from sanctions for failing to provide ESI information lost because of the routine operation of the party s computer system. Amendments to Rule 45 conform provisions for subpoenas to changes in other discovery rules as they relate to ESI discovery.

6 Who cares about e-discovery, anyway? As of May 2007, at least 28 U.S. District Courts have enacted special local rules addressing e-discovery. E.D. Texas: Magistrate Love requires that the parties provide to one another within 45 days after the scheduling conference and without awaiting a discovery request a copy of all documents, data compilations, and tangible things in the possession, custody, or control of the party that are relevant to the pleaded claims or defenses involved in this action. By written agreement of all parties, alternative forms of disclosure may be provided in lieu of paper copies. For example, the parties may agree to exchange images of documents electronically or by means of computer disk; or the parties may agree to review and copy disclosure materials at the offices of the attorneys representing the parties instead of requiring each side to furnish paper copies of the disclosure materials. N.D. Texas (Dallas Division, Patent Cases) : Parties to patent litigation must include, in their FRCP 26(f) case-management statements, an electronic discovery plan.

7 The Amendments Should Change Your Approach to Your First 100 Days of Litigation Rule 26(f): Extended Meet and Confer Parties must meet and confer at least 21 days before a Rule 16(b) scheduling conference to discuss any issues relating to preserving discoverable information Counsel must be familiar with the parties information systems before the meet and confer The scheduling order may include provisions for disclosure or discovery of ESI and agreements the parties reach for asserting claims of privilege or of protection [of] trial-preparation material after production The real changes will be in new levels of cooperation & transparency about your systems and technology that courts are going to demand. If you don t disclose upfront, you risk getting & giving out confusing information that will be costly to straighten out.

8 The New Trinity in Discovery The Preservation Letter The Meet & Confer The Sanctions Hearing

9 Duty to Preserve No bright-line test Generally triggered by the anticipation of a claim Person or company who sees lawsuit on the horizon must act to stop destroying electronic & tangible evidence and must take affirmative steps to preserve such evidence before a preservation letter from the other side or a lawsuit has materialized. Need to sensitize your people to be on the lookout for internal / external complaints that could mushroom into full-blown litigation. Get affirmative acknowledgement of your request and an agreement from your people to comply ( I will do that ) to help protect yourself from sanctions

10 Duty to Preserve: Breach It at Your Peril Zubulake v. U.S.B. Warburg (S.D.N.Y ) Employment discrimination / retaliation case Comprises multiple distinct opinions by SDNY Magistrate Judge Shira Scheindlin Plaintiff demonstrated that Defendant s backup tapes were likely sources of relevant evidence and should be restored for use in the case But several backup tapes inexplicably missing And several s had been deleted

11 Duty to Preserve: Breach It at Your Peril Zubulake v. U.S.B. Warburg (S.D.N.Y ) Court noted that the defendant was obligated to preserve what it knows or reasonably should have known would be relevant in an action. Once a party reasonably anticipates litigation, it should suspend its routine document destruction policy & implement a litigation hold to ensure preservation of relevant information. The defendant breached its duty to preserve. Court issued an adverse inference instruction to the jury. Jury permitted to infer that, had the lost s been produced, they would have been favorable to the plaintiff. Jury awarded the plaintiff $29.1 million ($20 in punitive damages).

12 Duty to Preserve: Breach It at Your Peril SANCTIONS BECAUSE DEFENDANT DID NOT SUSPEND ITS DOCUMENT DESTRUCTION PARTY FOR LITIGATION. Defendant s employees routinely deleted s in compliance with the defendant s document destruction policy without regard to whether the s were relevant to the litigation. The court determined that sanctions (evidence preclusion, adverse inference, and monetary sanctions which include attorneys fees) were appropriate although: the defendant s conduct did not constitute a pattern of deliberately deceptive litigation practices and the number of s lost was small. In re Napster, Inc. Copyright Litig. (N.D. Cal. 2006) 462 F.Supp.2d 1060, 1067 [ A party s destruction of evidence need not be in bad faith to warrant a court s imposition of sanctions. District courts may impose sanctions against a party that merely had notice that the destroyed evidence was potentially relevant to litigation. However, a party s motive or degree of fault in destroying evidence is relevant to what sanction, if any, is imposed ]. ADVERSE INFERENCE INSTRUCTION AND ATTORNEYS FEES AWARD BECAUSE OF INADEQUATE ENFORCEMENT OF LITIGATION HOLD NOTICES. Southern District of New York granted Plaintiff s motion for sanctions and gave an adverse inference instruction and attorneys fees when Defendant produced s for only 13 of 57 current and former key employees. Although D sent out litigation hold notices early in the case, D failed to issue reminder notices after a corporate re-organization. (D s initial litigation hold memos were also ignored.) In re NTL, Inc. Sec. Litig. (S.D.N.Y. Jan. 30, 2007) 2007 WL

13 The New Burden on Counsel: Takeaway Lesson of Zubulake and progeny Duty To Preserve Level of Culpability Prejudice to Other Party

14 Your Duty to Preserve: Challenges, Generally Touching e-data changes it. Digital evidence is increasingly ill-suited to printing (e.g., spreadsheets display values derived from embedded formulas, but you may not be able to embed those formulas on paper; information in large databases occupies expansive grids). Successfully preserving data entails preserving applications capable of interpreting the data, as well as computing environments (hardware, software). Storage media are fragile and ever-changing. Digital storage media are dynamic and recyclable (hard drive is constantly changing and recycling its contents; later version of a document may overwrite and destroy an earlier draft).

15 Your Duty to Preserve: Is All This Really about s? So far, preservation opinions really about s under the ESI label. Challenges in preserving s Individual users generally have control over folder structures Individual users commingle personal & business communications Individual users control the deletion / retention of messages An effective preservation effort should Give users clear, practical, and specific retention directions (remind users of places where may reside) Notify new hires & collect s from departing employees Suspend retention policies that actually call for purging Suspend re-use ( rotation ) of backup media containing Suspend hardware and software changes which make inaccessible (e.g., replacing backup systems without keeping the means to read older media; re-tasking or re-imaging systems for new users; selling, giving away, or otherwise disposing of systems and media) Prevent users from deleting / altering / corrupting Immediate & periodic snapshots of relevant user accounts Modify user privileges settings on local systems & networks Archiving (by auto-forwarding) select traffic to protect storage Restricting activity (moving, copying files) tending to alter irreparably file metadata Packet capture of Instant Messaging (IM) traffic or effective enforcement of IM prohibition Preserving potential for forensic recovery Image key hard drives or sequestering systems Suspend de-fragmentation Bar use of wiping software and encryption with audit & enforcement

16 Your Duty to Preserve: Getting Back to the Business of Doing Business Is there a duty of preservation going forward (i.e., with regard to information created while the action is pending)? If not, timely harvest of data, imaging of key hard drives, and culling of relevant backups from rotation may sufficiently satisfy the preservation duty so as to allow machines to be re-tasked, systems to be upgraded, and backup-tape rotation to be re-initiated. Seek guidance from the Court and work with opposing counsel to craft a preservation order to help insulate your company s good-faith conduct from subsequent claims of spoliation.

17 Your Preservation Letter to Adversaries: The Linchpin of a Successful Spoliation Claim Helps to establish bad faith and conscious disregard of the duty to preserve relevant evidence. Purpose: Educate your adversary about the importance of electronic evidence and the importance of taking prompt, affirmative steps to see that evidence remains accessible. Your chance to slam the door on their It was an oversight excuse. Insisting that communications about preserving data reach every custodian of discoverable data & stressing the importance of the duty to preserve is no more than what developing case law suggests is warranted. (Zubulake v. USB Warburg LLC, No. 02CIV1243 (S.D.N.Y. 2004).)

18 Your Preservation Letter to Adversaries: Seek to Stop Routine Destruction of Potential Evidence As appropriate, call for an end to Server backup-tape rotation E-data shredding Scheduled destruction of backup media Re-imaging drives Exchanges of drive hardware Sales, gifting, or destruction of computer systems Disk de-fragmentation and maintenance routines

19 Your Preservation Letter to Adversaries: Troubleshooting Common Omissions Most digital evidence disappears due to lack of enterprise communication ( Legal forgot to tell IT ) or individual initiative ( This is my , and I can delete it if I want to ). Highlight your adversary s duty to communicate retention duties to those with hands-on access to systems. Don t forget old-fashioned paper documents.

20 The Preservation Order Courts may consider entering interim preservation order if there is some minimal preliminary showing that relevant & discoverable information may be destroyed, modified, or mitigated if a preservation order is not entered. If there are multiple parties on the other side, ask the Court to use its inherent authority to designate a liaison counsel with whom you can reach a binding agreement.

21 Harvesting Data for Review & Production: Consequences of Overlooking E-Data Phoenix Four, Inc. v. Strategic Resources Corp., 2006 WL (S.D.N.Y. May 23, 2006) Investment company falls out with corporate advisor. Corporate advisor closes doors after investment company stops paying fees, but delivers (pre-litigation) to investment company all the paper & electronic accounting records that it has on investment company. Corporate advisor is evicted. Individual officers of now-defunct corporation move to another office; leave investment company s marketing documents, old prospectuses, trade publications, and at least 10 computer workstations. Landlord disposes of these. Individual officers take 50 boxes of pertinent documents + 2 servers + 2 computer stations and keep these in new office; 1 server is used in new business. Investment company files suit against corporate advisor and individual officers in May Claims are: breach of fiduciary duty, fraud & negligent misrepresentation. Before & immediately after receiving Plaintiff s first RFPs, Defense counsel advises of need to locate, gather pertinent paper & e-documents. Individual defendants search computer system (now in new office); tell counsel that they have not located pertinent ESI. They say, Because SRC [the corporate investment adviser defendant] was no longer in operation, there were no computers or electronic document collections to look through or search. Did not search the servers because they are unaware that servers contain responsive information.

22 Harvesting Data for Review & Production: Budgeting for the Nuts & Bolts What s this going to cost me? In a case involving a mere 8,930 gigabytes (or 8.72 terabytes) of data, one vendor estimated that it would cost a client $7.1 million to process that data even before any attorneys could begin review We ve seen the following vendor estimates (prenegotiations): Forensic preservation / harvesting: $500 per hard drive Restoration: $300 to $700 per LT1 backup tape De-duplication, filtering: $475 to $500 per GB $750 per GB to host data for review

23 Harvesting Data for Review & Production: Budgeting for the Nuts & Bolts What s this going to cost me? Sit down with a reputable outside EDD vendor who understands cost & volume and get an estimate (making sure to flush out the vendor s underlying assumptions). Prepare a budget that focuses on the hourly charges for EDD collection & review. (Brunt of cost will be in review.) Negotiate. Negotiate. Negotiate. Start small (e.g., sample quarterly backup tapes before launching into the restoration & processing steps). Don t get attached to particular software. Ask your outside litigation support manager about cutting-edge tech & the reputable vendors.

24 Harvesting Data for Review & Production: Budgeting for the Nuts & Bolts Recognize the difference between a comprehensive review set & a preliminary production set and the financial advantages and disadvantages of each

25 Harvesting Data for Review & Production: The Nuts & Bolts Comprehensive sets are compiled without regard to what information will be selected for production; scope constrained only by business units, facilities, machines, media selected for examination. Larger initial cost But, as new requests and issues arise, the collection can be culled again and again at little incremental cost Broadly preserving hedges against spoliation claims And, if your company is subject to on-going litigation & compliance production, comprehensive collection may be more cost-efficient across multiple matters

26 Harvesting Data for Review & Production: The Nuts & Bolts Preliminary production sets comprise only s & attachments the collector deems responsive to production requests. When a corporate defendant relies upon employees to locate & segregate responsive e- mails or when a legal assistant goes from office-to-office selecting e- mails, the resulting collection is a preliminary production set. Less expensive in the short term Cuts the number of messages & attachments subject to attorney review, reducing short-run costs But may need to return to every machine if initial harvest turns out to be insufficient Greater potential for loss / corruption of overlooked evidence and inconsistencies between reviewer judgments

27 Harvesting Data for Review & Production: The Nuts & Bolts Meet at the beginning of the case, in person, with outside counsel to deal with preservation issues Educate your IT department to the new litigation mode Seek proactive suggestions about how to preserve data Arrange for the following people to be present GC CEO Lead outside lawyer and e-discovery manager Senior managers Middle managers & back-office operations personnel who can tell you what the applications are for and how they can be adjusted Key players / document custodians and the people who manage their data Outside e-discovery expert / e-discovery vendor Records department personnel; administrative managers

28 Harvesting Data for Review & Production: The Nuts & Bolts Identify your key people ( document custodians ) Consider sending out a questionnaire at the beginning to potential custodians. Ask How do they download files? Where do they store their s? Their working electronic files? What passwords do they use to protect their work computer? To protect individual files?

29 Harvesting Data for Review & Production: The Nuts & Bolts Essential to maintain a chain of custody for harvested data Be able to establish the origin of the (system, user account, folder & file from which collected) as well as the custodian of the Be able to establish that no one tampered with data between harvest & use in court (need custodian s testimony re handling & storage) Select harvest method that preserves all of the data in the When authenticity is challenged, you ll need unseen header info or encoded attachment data Metadata (data about data) Application data (e.g., author, edit time, last print, changes) System data (e.g., file name & size, file location, MAC dates) Forensic data (drafts,.bak files,.tmp files, registry MRUs) Transmitted data ( circulation & transmittal info) Make sure your selected harvest method does not alter the evidence or its metadata. If it does, archive metadata before it changes. A spreadsheet reflecting the original metadata is preferable to spoliation.

30 Harvesting Data for Review & Production: Follow the Chain How thorough was your effort to identify ? Factors that determine the extent to which must be examined Issues in the case Key players ( document custodians ) Relevant time periods Agreements between the parties / court order Better to invest more at the beginning to know exactly what your company has than to concede (perhaps at a sanctions hearing) that you have failed to preserve and produce evidence you did not know that you had because no one bothered to look for it

31 Harvesting Data for Review & Production: Follow the Chain Easily accessible Online residing in active files on company/enterprise servers (MS Exchange; Lotus Notes; Novell GroupWise) stored in active files on local or external hard drives and network shares (user workstations / laptop hard drives; local e- mail data files stored on networked file servers [ network shares ]; mobile devices like PDAs, smart phones & Blackberries; home systems, esp. those with remote access to office networks) Near-line (optical juke box devices; backups of individual user folders [ brick-level backups])

32 Harvesting Data for Review & Production: Follow the Chain Accessible (but often overlooked) on remote servers (ISPs [IMAP, POP, HTTP servers], GMail, Yahoo Mail, Hotmail, etc.) forwarded and CC-ed to third party systems (e.g., employee forwards to self at personal account) threaded behind subsequent exchanges Offline local stored on removable media (external hard drives; thumb drives; memory cards; optical media [CD-R/RW, DVD R-RW]; floppy drives; zip drives) Archived (archived to.pst files by Outlook or saved under user-selected filenames whether intentionally or by users who experiment w/ export features and unwittingly create archives) Legacy (users migrate from clients abandon former stores) saved to other formats (e.g.,.pdf,.tiff,.txt,.eml) contained in review sets assembled for other litigation / compliance purposes retained by vendors or third-parties (e.g., former service provider) Printouts

33 Harvesting Data for Review & Production: Follow the Chain that s more difficult to access Offline on server backup media (e.g., backup tapes like DLT, AIT) on forensically-accessible areas of local hard drives (e.g., deleted , Internet caches, unallocated clusters)

34 Harvesting Data for Review & Production: Do Work cooperatively with the other side. It will save you money. Work with experts who know the risks of spoliation, chain-of-custody requirements, etc. Get to know the costliest components of EDD vendor service to help minimize costs. One vendor may restore tapes more cheaply, another may process more cheaply. Implement data taxonomy and standardize storage. Minimize customization computer-bycomputer. Build cross-enterprise search capability to allow data to be searched where it resides (on hard drives, on desktops). Get mobile & local business data onto the servers. Much more expensive to get that for discovery. Work with IT to design the system so that every time a laptop connects to the system, it syncs to the server. Then, your data will be in one place. Segregate data needing no attorney review. (And get Legal its own server to prevent commingling.) Bar new gadgets unless you have an EDD plan / budget for managing the new data stream created by those devices. Get tough on . Keep your focus on more than on technological solutions to e- mail. Advise your employees that there is accountability: Loose lips sink ships. Get rid of it if you don t need and aren t otherwise required to keep it.

35 Questions? Madeleine Johnson Principal, Business Litigation FISH & RICHARDSON P.C Main Street, Suite 5000 Dallas, Texas Telephone: (214) Facsimile: (214) Nancy L. Stagg Principal, Business Litigation FISH & RICHARDSON P.C El Camino Real San Diego, California Telephone: (858) Facsimile: (858) Geoffrey S. Harper Principal, Business Litigation FISH & RICHARDSON P.C Main Street, Suite 5000 Dallas, Texas Telephone: (214) Facsimile: (214)

36 Appendix SAMPLE DOCUMENT RETENTION NOTICE CONFIDENTIAL/ATTORNEY-CLIENT PRIVILEGED COMMUNICATION XYZ Corp. has been named in a lawsuit relating to the advertising of its widgets. You may have records or information relating to this lawsuit. This memo contains important directions about preserving relevant records and information. Make sure you understand these directions. These directions supersede all other record retention policies even records that would ordinarily be destroyed as part of XYZ s routine records management program must be preserved. Please contact me if you have any questions regarding these directions. Retain all records that contain any information relating to this matter. These records must be retained and maintained until you are informed that the matter has been concluded and the records no longer need to be retained. Records means anything that stores information In any medium: paper, electronic, video and audiotape, including s and any other electronic files; In any form: handwritten or typed, draft or final, desk or electronic calendars; Created at any time, including documents you created in the past, as well as any documents you may create from this date forward; Wherever maintained: whether on your computer, in your office, in departmental files, in a home office, on a home computer, in your car or elsewhere. [Cont. on next slide]

37 Appendix SAMPLE DOCUMENT RETENTION NOTICE [cont.] CONFIDENTIAL-ATTORNEY-CLIENT PRIVILEGED COMMUNICATION You must retain any and all records that contain any information that has any connection whatsoever to this matter or to any of the issues summarized in the paragraph below. Even if the relevant information is only a small portion of a particular record for example, a single bullet point in a comprehensive business or strategic plan you must retain the entire record. If you are uncertain whether a document related to this matter, retain it, and then check with me to determine whether to continue to retain it. _ This matter involves claims that XYZ s print advertising is false and misleading to consumers. Based on these claims, you must retain records that relate to these issues, including, but not limited to, the following records: records regarding product purchasing, distribution, shipping, sales, advertising (including radio, television, online and print), marketing, press releases, promotional literature, website pages, competitive research, and communications with consumers (for example, surveys and customer service scripts).

38 Appendix SAMPLE DOCUMENT RETENTION NOTICE [cont.] CONFIDENTIAL-ATTORNEY-CLIENT PRIVILEGED COMMUNICATION If the specified records exist in paper form, you must keep them, without alteration, organized in the way you normally keep them for business purposes (for example, if you normally keep them in file folders, continue to do so). Unless your home office is your principal office, records should be kept at a company location within the control of you or your department. Electronic records should generally be kept in electronic form. To the extent that any such records involve data that continually changes, you may satisfy the retention requirements by printing and retaining a monthly summary. If electronic files were created but not retained, please contact me and we will determine how best to recover these documents, including s sent and received. Please notify me promptly in the event you are leaving XYZ s employment or changing positions within XYZ I will make arrangements to appropriately preserve the documents you are maintaining pursuant to this notice. Thank you for your cooperation in this important matter. If you have any questions, please contact me.