Transcript Law Offices of Donald R. Whitney, Chartered

e-Discovery Compliance for
Businesses or Organizations:
Getting Ahead of the Game Before
Litigation Arises
Law Offices of
Donald R. Whitney,
Chartered
6800 College Boulevard
Suite 630
Overland Park, Kansas 66211
913.323.3100
913.323.3178 (direct)
913.663.2006 (fax)
[email protected]
Licensed in Kansas
And Missouri
What is “e-discovery” in litigation?
Discovery (in general) = process of parties gathering factual information (from another) that will either
be evidence at trial, or may lead to discovery of evidence
 Interrogatories to opposing party
 Request for production of documents to opposing party
 Subpoenas issued to a non-parties to produce business records
“E-Discovery” = production of information that is electronically stored (as opposed to tangible
documents)
 e-mail
 text messages (or mobile email)
 instant messages
 attachments to e-mail
 correspondence
 contracts/agreements
 photos/graphic image files
 audio files
 video image files
 web-pages
 other electronic document formats
 drafts or successive versions of documents
“Electronically Stored Information” (ESI”)
How significant is ESI in causing, or
defending litigation?
According to the American Management Association and its ePolicy
Institute:
 21% of companies have had their employee e-mail subpoenaed by
courts & regulators.
 13% of companies have battled lawsuits triggered by employee email.
 65% of companies lack e-mail retention policies.
 94% of companies fail to retain & archive IM.
 46% of companies offer employees NO e-mail policy training.
• 50% of workplace IM users send/receive in risky content including
attachments, jokes, gossip, confidential info, porn.
What we will cover:
• Procedural issues (how the e-discovery process works)
• Substantive issues (what content and form needs to be preserved)
• What happens if an organization cannot produce requested ESI
• How to prepare your organization ahead of time for e-discovery
Other concerns that are beyond the scope of this presentation: data archiving regulations
under other laws or regulatory agencies:
 Gramm-Leach-Bliley Act
 Sarbanes-Oxley Act
 SEC
 NASD
 Health Insurance Portability and Accountability Act (HIPAA);
 PCI Data Security Standard;
 Federal Information Security Management Act (FISMA);
 EU Data Protection Directive 95/46/EC;
 Basel II Accord
What are the litigation contexts in
which my organization might be
subjected to e-discovery?
 Organization is a party to a lawsuit (plaintiff or defendant)
and must comply with court discovery rules
 Organization is not a party to a lawsuit, but is served with
a subpoena for documents it has that might be evidence
in a lawsuit between other parties
Procedural requirements when the
organization is a party to a lawsuit
2 types of procedural events:
 Initial disclosures in Federal Court lawsuits
 Requests for Production of Documents in
Federal Court and state court lawsuits
Procedural requirements when the organization is a party to a lawsuit
Stages of a lawsuit
 Complaint (Federal Court) or Petition (Kansas or Missouri state court)
 Answer
 Initial Rule 26 conference between parties
 Initial Rule 26 disclosures (Federal Court)
 Discovery conference
 Discovery process
o Interrogatories
o Requests for Production of Documents
o Depositions
o Subpoenas for business records of non-parties
 Pretrial Conference
• Trial
Procedural requirements when the organization is a party to a lawsuit
Initial disclosure requirements in Federal Court lawsuits
Rule 26(a). Duty to Disclose
Initial Disclosure.
A party must, without awaiting a discovery request, provide to the other parties:
(i) the name and, if known, the address and telephone number of each individual likely to
have discoverable information—along with the subjects of that information— that the
disclosing party may use to support its claims or defenses;
(ii) a copy—or a description by category and location— of all documents, electronically
stored information, and tangible things that the disclosing party has in its possession,
custody, or control and may use to support its claims or defenses, unless the use would be
solely for impeachment;
Basis for Initial Disclosure; Unacceptable Excuses. A party must make its initial disclosures
based on the information then reasonably available to it. A party is not excused from
making its disclosures because it has not fully investigated the case or because it challenges
the sufficiency of another party’s disclosures or because another party has not made its
disclosures.
Procedural requirements when the organization is a party to a lawsuit
Safe Harbor for ESI
A party need not provide discovery of electronically stored information
from sources that the party identifies as not reasonably accessible
because of undue burden or cost.
But burden of proof is on the party from whom discovery is sought to
show that the information is not reasonably accessible because of undue
burden or cost.
Even if that showing is made, the court may still order discovery from
such sources if the requesting party shows good cause. The court may
specify conditions for the discovery.
Procedural requirements when the organization is a party to a lawsuit
Requirements with respect to Requests for Production of Documents
Rule 34. Producing Documents, Electronically Stored Information, and Tangible Things, or
Entering onto Land, for Inspection and Other Purposes
A party may serve a request on any other party to produce and permit the requesting party
to inspect, copy, test, or sample the following items in the responding party’s possession,
custody, or control:
• any designated documents or ESI—including writings, drawings, graphs, charts,
photographs, sound recordings, images, and other data or data compilations—stored
in any medium from which information can be obtained either directly or, if
necessary, after translation by the responding party into a reasonably usable form;
Responding to a Request for Production of Electronically Stored Information. The
responding party may object to a requested form for producing ESI. If the responding
party objects to a requested form—or if no form was specified in the request—the party
must state the form or forms it intends to use.
Procedural requirements when the organization is a party to a lawsuit
Form in Which ESI Information must be produced
Unless otherwise stipulated or ordered by the court:
A party must produce documents
as they are kept in the usual course of business or
organize and label them to correspond to the categories in the request;
If a request does not specify a form for producing electronically stored
information, a party must
produce it in a form or forms in which it is ordinarily maintained or
in a reasonably usable form or forms;
A party need not produce the same electronically stored information in more
than one form.
Procedural requirements when the organization is a party to a lawsuit
Timeliness of Production
Time for Initial Disclosures.
14 days after the parties’ Rule 26(f) conference
Time for Responding to Requests For Production
30 days from request
Procedural requirements when the
organization is not a party but is served
with a document subpoena
Rule 45. Subpoena
A party to a lawsuit can ask the Court to issue a subpoena to a non-party.
A subpoena can command a non-party to:
• produce documents, ESI, or tangible things
• to permit the inspection of premises
The subpoena can be for purposes a deposition, hearing, or trial
A subpoena may specify the form or forms in which ESI is to be produced.
A subpoena to produce documents, ESI, or tangible things requires the
responding party to permit inspection, copying, testing, or sampling of the
materials.
Procedural requirements when the organization is not a party but is
served with a document subpoena
DUTIES IN RESPONDING TO A SUBPOENA.
A person responding to a subpoena to produce documents must
produce them as they are kept in the ordinary course of business or
organize and label them to correspond to the categories in the demand.
If a subpoena does not specify a form for producing electronically stored
information, the person responding must produce it
in a form or forms in which it is ordinarily maintained or
in a reasonably usable form.
The electronically stored information need not be produced in more than
one form.
Procedural requirements when the organization is not a party but is
served with a document subpoena
Safe Harbor for ESI
The person responding need not provide discovery of electronically stored
information from sources that the person identifies as not reasonably accessible
because of undue burden or cost.
Burden of proof is on the person responding to the subpoena to show that the
information is not reasonably accessible because of undue burden or cost.
Even if that showing is made, the court may still order discovery from such
sources if the requesting party shows good cause.
The court may specify conditions for the discovery.
Failure to produce ESI
What happens if the organization is unable to produce the
information sought?
Overview:
Motion to compel –> Order to compel –> Sanctions
Failure to produce ESI
Rule 37. Failure to Make Disclosures or to Cooperate in
Discovery; Sanctions
A party may move for an order:
To Compel Disclosure. If a party fails to make a disclosure required by
Rule 26(a), any other party may move to compel disclosure and for
appropriate sanctions.
To Compel a Discovery Response. A party seeking discovery may move for
an order compelling a discovery response, production, or inspection.
Failure to produce ESI
Payment of Expenses
If a Motion to Compel Is Granted — or if the discovery is provided after the
motion was filed—the court must require payment of expenses and attorneys
fees incurred in making the motion to be paid by:
 the party or deponent whose conduct necessitated the motion, or
 the party or attorney advising that conduct, or
 both.
The court must not order this payment, however, if:
 the movant filed the motion before attempting in good faith to obtain the
disclosure or discovery without court action;
 the opposing party’s nondisclosure, response, or objection was substantially
justified; or
 other circumstances make an award of expenses unjust.
Failure to produce ESI
Sanctions for Not Obeying an Order to Compel Failure to produce or permit discovery
If a party or a party’s officer, director, managing agent or the organization’s
designated witness fails to obey an order to provide or permit discovery, the
court may:
 stay further proceedings until the order is obeyed;
 treat the failure to obey the order as contempt of court
 prohibit the disobedient party from introducing certain facts in evidence;
 prohibit the disobedient party from supporting or opposing certain claims or
defenses;
 order that certain facts be deemed to be established for purposes of the
action in favor of the prevailing party;
 strike the party’s pleadings in whole or in part;
 dismiss the action or proceeding in whole or in part;
 enter a default judgment against the disobedient party.
Failure to produce ESI
Sanctions for Not Obeying an Order to Compel Failure to Provide Initial Disclosures
If a party fails to provide information as required by Rule 26(a),
 the party is not allowed to use that information to supply evidence (unless the failure
was substantially justified or is harmless)
and, in addition to or instead of this sanction, the court, may:
 order payment of the reasonable expenses, including attorney’s fees, caused by the
failure;
 inform the jury of the party’s failure;
 stay further proceedings until the order is obeyed;
 treat the failure to obey the order as contempt of court
 prohibit the disobedient party from introducing certain facts in evidence;
 prohibit the disobedient party from supporting or opposing designated claims or
defenses;
 order that certain facts be deemed to be established for purposes of the action in
favor of the prevailing party;
 strike the party’s pleadings in whole or in part;
 dismiss the action or proceeding in whole or in part;
•
enter a default judgment against the disobedient party.
Failure to produce ESI
Safe Harbor for ESI
Absent exceptional circumstances, a court may not impose sanctions
under these rules on a party for failing to provide ESI lost as a result of
the routine, good-faith operation of an electronic information system.
(i.e, this arguably requires that the party have a valid document
retention policy, and that the retention policy was applied in good faith)
Failure to produce ESI
Spoliation – Presumptions & Jury Instructions
Missouri
A party who intentionally destroys or significantly alters evidence is subject to an adverse evidentiary
inference under the spoliation of evidence doctrine. Baldridge v. Director of Revenue, 82 S.W.3d 212,
222 (Mo. App. 2002).
”[T]he destruction of written evidence without satisfactory explanation gives rise to an inference
unfavorable to the spoliator.” Garrett v. Terminal R. Ass’n of St. Louis, 259 S.W.2d 807, 812 (Mo. 1953).
“Similarly, where one party has obtained possession of physical evidence which [the party] fails to
produce or account for at the trial, an inference is warranted against that party.” State ex rel. St. Louis
County Transit Co. v. Walsh, 327 S.W.2d 713, 717 (Mo. App. 1959).
When an adverse inference is urged, it is necessary that there be evidence showing intentional
destruction of the item, and also such destruction must occur under circumstances which give rise to an
inference of fraud and a desire to suppress the truth. In such cases, it may be shown by the proponent
that the alleged spoliator had a duty, or should have recognized a duty, to preserve the evidence. Morris
v. J.C. Penney Life Ins. Co., 895 S.W.2d 73, 77-78 (Mo. App. 1995).
“Since the doctrine of spoliation is a harsh rule of evidence, prior to applying it in any given case, it
should be the burden of the party seeking its benefit to make a prima facie showing the opponent
destroyed the missing [evidence] under circumstances manifesting fraud, deceit or bad faith.” Baldridge,
supra.
Simple negligence is not sufficient to apply the adverse inference rule. Brissette v. Milner Chevrolet Co.,
479 S.W.2d 176, 182 (Mo. App. 1972).
Failure to produce ESI
Spoliation – Presumptions & Jury Instructions
Kansas
Kansas law generally provides that “failure to throw light upon an issue peculiar with any
parties’ own knowledge or reach raises a presumption open to explanation, of course, that
the concealed information was unfavorable to him.”
Pattern Jury Instruction
If a party to [the] case has failed to offer evidence within his power to produce, you may
infer that the evidence would have been adverse to that party, if you believe each of the
following elements:
(1) The evidence was under the control of the party and could have been produced by the
exercise of reasonable diligence.
(2) The evidence was not equally available to an adverse party.
(3) A reasonably prudent person under the same or similar circumstances would have
offered if (he) (she) believed it to be favorable to him.
(4) No reasonable excuse for the failure has been shown.
Failure to produce ESI
If organization is not a party, to a lawsuit, but is
subpoenaed to produce documents FRCP 45(e) provides:
CONTEMPT. The issuing court may hold in contempt a person who, having been served,
fails without adequate excuse to obey the subpoena. A nonparty’s failure to obey must be
excused if the subpoena purports to require the nonparty to attend or produce at a place
outside the limits of Rule 45(c)(3)(A)(ii).
Failure to produce ESI
How Serious Are the Federal Courts About ESI Disclosure
and Production?
Case Studies and Examples
•
Morgan Stanley - $1.45 billion verdict for failure to timely produce email from back-up tapes.
•
UBS Warburg - $29 million verdict for failure to retain relevant
information, including e-mails from back-up tapes.
•
Morgan Stanley $15 million in SEC and NASD sanctions for inability to
produce e-mails.
•
Banc of America Securities LLC - $10 million for delayed recovering
and reviewing of e-mail.
•
Arthur Andersen – convicted of obstruction of justice in 2002 for
instructing staff to comply with company document
retention/destruction policy, without telling them, in midst of SEC’s
Enron investigation, to retain all documents related to the
investigation
Failure to produce ESI
Example of Extreme Case:
Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497 (D.Md. 2010) –
Court entered default judgment in plaintiff’s favor on copyright
infringement, against both corporate defendant and its president. Court
recited numerous failure to preserve ESI, and failure to produce ESI after
numerous Court orders to do so. Court also ruled that the corporate
president be imprisoned for a period not to exceed two years, unless and
until he paid to Plaintiff the attorney's fees and costs to be awarded to
Plaintiff as the prevailing party. Incredibly, the ESI misconduct was so
well-established that the defendant actually conceded that this was a fair
sanction.
Failure to produce ESI
Compare :
 organization that destroys data in the regular course of business,
when there is no anticipation of litigation
vs.
 the mere scent of spoliation.
Always err on the side of caution. Once you know there is a potential for
litigation or a lawsuit has been filed:
 Make sure the document retention policy is suspended as to subject
matter of the litigation or investigation.
 Make sure all involved parties know what documents, back-up tapes,
etc. to preserve until the threatened or actual litigation is resolved.
 Clearly put these instructions in writings, dated.
What ESI must be preserved, located
and produced
Understanding evidentiary requirements and discoverable
evidence
What is the scope of permissible discovery?
 Relevant
 Material
 Reasonably calculated to lead to the discovery of admissible evidence
 Not privileged
 Not otherwise protected from discovery
What ESI must be preserved, located and produced
‘‘Relevant evidence’’ means evidence having any tendency to make the
existence of any fact that is of consequence to the determination of the
action more probable or less probable than it would be without the
evidence.
All relevant evidence is admissible, except as otherwise provided by the
Constitution of the United States, by Act of Congress, by these rules, or
by other rules prescribed by the Supreme Court pursuant to statutory
authority.
Evidence which is not relevant is not admissible.
What ESI must be preserved, located and produced
Foundation Required for Evidence Admissibility
A witness may not testify to a matter unless evidence is introduced sufficient to support a
finding that the witness has personal knowledge of the matter. Evidence to prove personal
knowledge may, but need not, consist of the witness’ own testimony.
Authentication or identification is a condition precedent to admissibility of evidence.
This is satisfied by evidence sufficient to show that the matter in question is what its
proponent claims.
Examples of authentication or identification:
 Testimony of witness with knowledge that something is what it is claimed to be.
 Comparison with specimens which have been authenticated.
 Distinctive characteristics - appearance, contents, substance, internal patterns, or
other distinctive characteristics.
 Process or system.—Evidence describing a process or system used to produce a result
and showing that the process or system produces an accurate result.
What ESI must be preserved, located and produced
Understanding rules of evidence governing documents
Hearsay Rules
Hearsay is not admissible except as provided by the rules of evidence.
‘‘Hearsay’’ is a statement, other than one made by the declarant while
testifying at the trial or hearing, offered in evidence to prove the truth of
the matter asserted.
Documents (including ESI) brought into court as exhibits are “hearsay” if
they are offered to prove the truth of things stated in the document
What ESI must be preserved, located and produced
Hearsay Exceptions for Business records
Business records can be admitted (even though they are hearsay) if
testimony of the custodian or other qualified witness shows that the
record (in any form) is:
 a memorandum, report, record, or data compilation,
 of acts, events, conditions, opinions, or diagnoses,
 made at or near the time
 by, or from information transmitted by, a person with knowledge,
 is kept in the course of a regularly conducted business activity, and
 it was the regular practice of that business activity to make the
memorandum, report, record or data compilation
This is important for understanding what data is needed to be kept as
part of ESI
What ESI must be preserved, located and produced
KEY REQUIREMENTS FOR ESI EVIDENCE
Your organization needs to preserve, and be able to locate and produce its ESI records, and someone
must be able to testify about the following things to establish foundation for the records (including email):
 Who authored the document
 How, when, to who the document was transmitted
 Authenticity and integrity of the record, i.e., it is exactly what it purports to be, and has not been
altered since it was created, or showing who, when and how it was changed after it was created
 The record is complete (including any metadata), and the body, header, attachments, and log files
relating to transmission and receipt have remained intact as complete records.
The document is accurate about the facts originally recorded (which includes being able to identify
who wrote it, in order for additional evidence to be offered that they had the knowledge of the
facts they recorded, and that the content of the record correctly reflects what the recorded, and
that the facts recorded are as the author actually witnessed them)
 Information that can be used to refute any denial of authorship or denial of receipt (“I didn’t write
that” or I didn’t receive that” or “that’s not what the attachment stated”)
How To Prepare Your Organization
Ahead Of Time For E-Discovery
KEY OPERATIONAL MANAGEMENT STRATGEY AND SURVIVAL GAME PLAN
Your organization’s your ability to search, locate, and produce email and other
ESI is vital in the event of any litigation.
A successful e-discovery outcome in litigation (and even survival of your
organization) begins LONG BEFORE any litigation is threatened. It requires design
and implementation of a sound e-mail and electronic document management
protocol and system
 If preservation policy and practice is not in place years before litigation arises,
vital records may no longer exist
 Even if the records still exist, the short time frames in litigation (especially
Federal Court) may not permit you to successfully and timely identify, locate,
retrieve, organize and produce required documents
How To Prepare Your Organization Ahead Of Time For E-Discovery
Three key components are recommended for
coordinated preparation for e-discovery strategy:
 e-mail and document retention policy,
 e-mail and document archiving protocol and
system
 litigation or dispute response protocol
How To Prepare Your Organization Ahead Of Time For E-Discovery
KEY MANAGEMENT ELEMENT: E-Mail and Document Retention Policy
Establish a sound e-mail and document retention policy (“e-mail lifecycle management”)
E-mail and Document Retention Policy should consider these issues:

Which e-mails or documents are relevant enough to be retained

Consider all forms of electronic data (in all devices and media, including digital printers/copiers and voicemail)

How those will be categorized, identified/ labeled for retention

Who is responsible for retention functions (enforcing, monitoring and updating the policy, performing system
functions)

How long they should be retained –specify specific retention periods for specific categories of records – depends
upon
o Duration that customer projects or files are open
o Length of statutes of limitations that keep open the possibility of litigation after the work is complete

Method for archiving

Method for disposing/deleting (automated or are users responsible?)

How the policy will be communicated to employees, and how employees will be trained

What sanctions will be imposed for employees failing to comply with the policy

Detail procedure “legal hold” exception for when policy should be suspended, such as when a lawsuit is anticipated
or in progress, a subpoena has been served, or an investigation is known to be underway;

Inclusion of document retention policy as part of employee handbook, to be acknowledged by employees signing
the policy

Regular review of the policy

Documenting pass phrases and product version used at the time of encryption, if the documents are encrypted;
How To Prepare Your Organization Ahead Of Time For E-Discovery
Resources to consider in developing an e-mail and
document retention policy:
• American Management Association / ePolicy
Institute
• American Bar Association
• ArchMail
• Symantec
How To Prepare Your Organization Ahead Of Time For E-Discovery
KEY OPERATIONAL ELEMENT: Archiving, cataloging and preserving ESI
(long before any litigation arises)
Key criteria for selecting or designing archive system:
 Ability to capture inbound and outbound messages, and attachments.
 Sophisticated search capabilities and/or indexing to make sure that
emails are easily retrievable.
 Features that comply with evidentiary standards for foundation,
authenticity, integrity
 Ability to tag or identify certain records as privileged
 Establishing an exception process to place “legal hold” on records
once legal investigation, dispute or litigation arises
 Provides secure storage (encryption)
 Prevents alteration or tampering with contents of records
How To Prepare Your Organization Ahead Of Time For E-Discovery
Example of Dedicated and/or third-party e-mail archive systems

Defender from ArchMail
LK Communications
DJ Good
(816) 694-1280
[email protected]
www.LKConline.com



Enterprise Vault from Symantec Corp
Message Archiver from Barracuda Networks
LaserFiche
Advantages:
 Reliable preservation, in compliance with essential evidentiary standards
 Employees are prevented from deleting
 Preservation parameters can be coordinated with organization’s retention policy
 Ease of searching and retrieval – both for litigation and for business use
 Employees don’t have to spend time/effort saving
 User in-boxes can be kept uncluttered, and running faster with fewer demands on
system
How To Prepare Your Organization Ahead Of Time For E-Discovery
KEY MANAGEMENT & LEGAL ELEMENT: Specific protocol for
preservation of evidence and records upon notice or knowledge of
dispute, claim, threatened or actual litigation
If the organization becomes aware of
 the initiation of, or need for, any legal investigation
 a dispute or claim with another party
 threatened litigation with another party
 actual filing of litigation
organization should immediately take all reasonable steps to
 identify and preserve relevant potential records (including e-mails, underlying documents and
drafts of documents)
 prevent employees for altering or deleting documents (including e-mails)
 implement (with careful consultation with legal counsel) appropriate protocols and limitations
regarding creation of new documents, e-mail and communication relating to the claim or litigation
o all internal inquiries, communication about the claim/litigation should be with or at the
direction of counsel
o work product doctrine
How To Prepare Your Organization Ahead Of Time For E-Discovery
Specific protocol for preservation of evidence and records upon notice
or knowledge of dispute, claim, threatened or actual litigation
This protocol should be designed ahead of time, in consultation with
legal counsel
The use of the protocol procedures in the event of a claim or litigation,
should be coordinated with legal counsel
Multi-player team approach:
e-Discovery Compliance for
Businesses or Organizations:
Getting Ahead of the Game Before
Litigation Arises
Questions & Answers
Providing excellence and value in
legal services
Law Offices of
Donald R. Whitney,
Chartered
6800 College Boulevard
Suite 630
Overland Park, Kansas 66211
913.323.3100
913.323.3178 (direct)
913.663.2006 (fax)
[email protected]
Licensed in Kansas
And Missouri