Transcript Document

Best Practices in Preserving, Managing
and Producing Electronic Documents –
The Practical Problems and Solutions
Douglas S. Grandstaff – Litigation Counsel – Caterpillar Inc.
FDCC Corporate Counsel Symposium
September 29-30, 2005
Electronic Discovery:
The identification, location, retrieval, preservation,
review and production of electronic documents and
information in regulatory and civil discovery
. . . And the policies and procedures for records
management, information technology and
corporate compliance to support the process and
minimize its risks.
A Week in Electronic Discovery Hell (Day One)
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Receive service of Complaint
– filed in Judicial Hell Hole Jurisdiction
– alleges generic toxic tort injuries to class
– Involves product Company X does NOT manufacture – Company X is a
consumer of the product
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Receive Ex Parte Order, filed and signed day after Complaint was
filed, requiring all defendants to:
“. . . suspend all routine destruction of documents including, but not limited to,
recycling backup tapes, automated deletion of e-mail, and reformatting hard drives
. . .”
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Order broader than preserving documents related to issues in
Complaint – applies to all electronic data bases regardless of
relevance
Day Two in Electronic Discovery Hell
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Issue One: Literal Compliance
– Can we comply with this order?
– Suspension of “recycling backup tapes, automated deletion of
e-mail, and reformatting hard drives”
– And if so, at what cost?
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Issue Two: Reasonable Compliance
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Do we have to comply literally?
What are the rules?
Is “reasonable” compliance sufficient?
At what cost literal “non-compliance”?
Types and Residences of Electronic
Data/Documents
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Word Processing Files
Electronic Mail
Electronic Calendars
CAD/CAM
Spreadsheets
Financial/Accounting
Personnel Records
Voice Mail
Video Mail
Internet
Chat Rooms
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Mainframes
LANs
Servers
Desktop Computers
Home Computers
Laptops
Palm Pilots
Printers
Telecom Equipment
Intranet
Blackberries
30%-70% Never Printed
Thousands of Systems
Caterpillar Systems
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45,000 + desktop computers
55,000 + individual e-mail accounts
Group e-mail accounts
LAN shares
2,500 + servers
Numerous additional database store houses
Sender
Recipient 1
Disk Storage
Disk Storage
Backup
Backup
INTERNET
Mail Server
Mail Server
Backup
Backup
Mail Server
Backup
Backup
Backup
Recipient 2
Disk Storage
Laptop
Caterpillar’s Document Retention Policy
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Applies to both paper and electronic documents
Documents retained for continuing legal, regulatory and
business purposes
– Set retention periods for classes of documents
– If no continuing legal or business purpose, documents are not
retained.
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When implemented in early 1990s, saved millions $$ in
storage alone
Implemented by individual employees
(1) Suspending Backup Tape Recycling
 Multiple systems/servers
 Backups for disaster recovery only
– Not Searchable
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Backups performed nightly
Backup tapes rotated for reuse every two
weeks
Suspending recycling possible, but not
practical
– Significant costs – tapes, storage, etc.
– Significant business disruption
(2) Suspending E-mail Auto-deletion
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2,500 + Servers
App. 55,000 + employees with e-mail access
– Assume each employee stores 20 e-mails/day, 22 business
days/month: 55,000 x 20 x 22 = 24,200,000 monthly – very low
estimate
– Plus attachments
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Documents automatically deleted in 30 days
Suspension of automatic deletion would exceed system
capacity in days, potentially crippling company
Enormous expense, little value
– Only a handful employees involved in area related to litigation
(3) Suspending Hard Drive Reformatting
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PCs replaced on a three year rotation
Thousands of other computer data bases
– Constant upgrading
– Many legacy systems
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In practice, may be impossible to implement
suspension
High cost – little value
– only a handful of systems could conceivably have
relevant documents
Day 3 – Literal Compliance
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Can we comply with this order?
– Doubtful
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Costs:
– Potential crash of e-mail system, potentially crippling to a
multinational company
– Enormous costs, for little value
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Not a CAT product at issue
Scope of order is general, rather than specific to issue
CAT a consumer of product (should be a plaintiff?)
Few employees involved in issue
Electronic Documents are Different
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Massive volume – created at much greater rate
– Backup tapes, archives
– Not indexed, not searchable
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Incompatible, widely dispersed systems
Old software, hardware
Easy, profligate, replication
‘Hidden’ information – metadata
Delete  delete
COSTS
E-Discovery Costs
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Locating responsive information
Reconstructing ‘legacy’ data
Reconstructing deleted files
Reconstructing ‘metadata’
Restoring, searching backup tapes
Reviewing for privilege, relevance
Business disruption
Production anomalies
Day 4 – Reasonable Compliance
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Do we have to comply literally?
– Oppose Ex Parte Order as a Temporary Injunction
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Dodge Warren & Peters Ins. Serv. Inc. v. Riley, 105 Cal.App.4th
1414. 2003 WL 2455586 (Cal. 4th App. Dist. Feb. 5, 2003)
(applying standards for injunctive relief to “freeze” electronic
data)
– Oppose with affidavits, evidence related to:
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Unreasonable cost of compliance
Minimal value
Reasonable compliance efforts
Outcome dependent on:
– the Rules, and
– the Judge
Electronic Discovery -- What Rules?
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Generally – Discovery rules of the applicable Federal or
State Rules of Civil Procedure
– Adopted before electronic data became an issue
– FRCP 34 include “data compilations” as documents
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A few state and local federal rules address electronic
discovery
– Texas R. Civ. P. 196.4
– Several local federal rules requiring discussion of issues during Rule
26 conference
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Case law guidance on issues unique to electronic discovery
Is “Reasonable” Compliance Sufficient?
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Institution of Legal Hold
Identification and interviews of key personnel
E-mail:
– Timely key word searches and sequestration of responsive documents,
and/or
– Timely sequestration of e-mail files of employees identified as
potentially having relevant information
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Hard drives, data bases:
– Timely searches and/or sequestration of hard drives and data bases
that may contain relevant information or responsive documents
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Answer: depends on the judge
Day 5 – Key Issues addressed by Courts
Preservation:
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To avoid spoliation claim, a party must effectively preserve
tangible and potentially discoverable information once notified
of potential or actual litigation
– Triggered by notice of claim, lawsuit – service of complaint, discovery?
– What is the scope of the obligation? Hard drives, backup tapes, deleted
data
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Types of Failures:
– Sunbeam (did not identify and recover e-mail in timely fashion)
– Mosaid (did not institute litigation hold on e-mail of key actors)
– Phillip Morris (did not adequately enforce broad preservation order or
internal records retention policy)
– Metro. Opera Ass’n (finding willfulness and bad faith in destruction of
computer hard-drives)
Safe Harbors
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Preservation obligations apply only to information which has
some “semi-permanent” existence. Convolve (SD NY 2004)
– Such as E-mail
 (“transmitted to others, stored in files, and are recoverable as active data until
deleted, either deliberately or as a consequence of automatic purging”)
– But not:
 “wave forms” (which are “ephemeral” and no business purpose requires even
brief retention),
 “Instant Messenger functions” ( “may be a close [question]” since some
programs can store messages)
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Backup Tapes, recycling and restoration
– McPeek v. Ashcroft, 212 F.R.D. 33 (D.D.C. 2003) (restoring all backup
tapes not necessary in every case)
– Linnen v. A.H. Robbins Co., (Mass Super Ct. June 15, 1999) (obligation
imposed to cease recycling of backup tapes).
Litigation Holds
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Key process to (1) execute preservation obligations and (2) defend
against sanctions for loss of information
– Often involves “freezing of information” as of time of notice
– Zubulake IV (S.D. N.Y. 2003) ( “a mirror-image of the computer system
taken at the time the duty to preserve attaches”)
– Distinguish between past and forward looking obligations (protected drop
boxes for future documents)
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Timely Implementation
– Mosaid (requiring suspension of otherwise routine deletion and destruction)
– Residential Funding Corp. (2d Cir. 2002) (imposing sanctions for negligent
failure to take adequate steps to preserve and produce documents in a timely
manner)
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Complete Not Incremental Implementation
– Morgan Stanley (FL Cir. Crt. 2005) (granting partial default judgment and
shifting burden of proof due to grudgingly incremental discovery responses)
Who Pays?
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Zubulake IV (S.D.N.Y. 2003) (adopting multiple
factor test to address cost allocation of electronic
discovery burden)
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In Re Brand Name Prescription Drugs
(N.D. IL 1995) (“The mere fact that the production of
computerized data will result in substantial expense is
not a sufficient justification for imposing the costs on
the requesting party.”)
Sanctions
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Sunbeam, 2005 WL 674885 (2005) (Florida state court
jury ordered to treat allegations of complaint as proven as
penalty for willful discovery abuse)
Mosaid, 348 F. Supp.2d 332 (D.NJ 2005) (jury permitted
to infer that e-mails not produced because of failure to
institute litigation hold would have been unfavorable)
Phillip Morris (2004) ($2.7M fine based on failure of 11
executives to save e-mail)
Morgan Stanley (2005) (burden of proof shifted and
partial default judgment entered; resulting in $1.44B
fraud verdict for plaintiff)
Day 6 – Proposed Amendments to FRCP
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The Federal Civil Rules Advisory Committee has
proposed:
1. Defining electronic documents in Rule 26
2. Requiring early discussion of key issues in e-discovery
during Rule 16 and Rule 26 Conferences
3. Including electronic documents in Rule 34 definition of
“documents”
4. Defining a default form of production for electronic
documents Rule 34(b)
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In a “reasonably useable form” or as ordinarily maintained
Proposed Amendments to FRCP
5. Clarifying burden re retrieving, reviewing and producing
inaccessible date under Rule 26
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Two-Tier production of inaccessible information (Rule 26(b)(2))
“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.”
6. Protecting against inadvertent waiver of privilege (Rule
26(b)(5))
7. Creating a preservation “safe harbor” under a new Rule 37(f)
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Absent exceptional circumstances, a court may not impose sanctions
under these rules on a party for failing to provide electronically stored
information lost as a result of the routine, good faith operation of an
electronic information systems.
Timeline
www.uscourts.gov/rules/index.html
June 2004
Court Standing Committee
authorized the Advisory
Committee to circulate
proposal
June 2005
By May 2006
Standing Committee Action
Supreme Court adopts
the amendment
I
1993-2003
Advisory Committee
Mini-conferences
FJC Correspondence
Research
Sedona Principles
ABA Standards
Local Rules
IV
2004
VI
2005
V
Feb. 2004 Fordham
conference
08/04 – 02/15/05
Six month
comment period
II
III
April 2005 Advisory
Committee considers
comments, sends final
amendment to the
Standing Committee
Sept. 2005
Judicial Conference
approves and transmits
to Supreme Court
2006
VII
Dec. 2006 Deadline for
Congressional action
(can reject, change, or
defer). If no action, the
amendment becomes
law
The 7th Day – Implementing Best Practices
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Document Retention Policy – Verify that your company’s document retention policy is in writing, applies
to electronic data and that there are procedures to ensure it is followed and
enforced.
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Information Technology Knowledge
– Know where your electronic documents reside. Have a checklist!
– Meet with your IT personnel and learn your company’s IT infrastructure
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Document and understand: Number and Type of Systems; Current electronic
retention policies; Search capabilities and limitations. Update Frequently!
Review retention period for backup tapes – should only be retained as long as
necessary to ensure access for disaster recovery.
Understand Costs and Burdens
MONITOR AND UPDATE FREQUENTLY
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Legal Hold Policy
– Verify that your company’s legal hold policy is in writing, applies to
electronic data and that there are procedures to ensure it is followed and
enforced.
– Verify that attorneys are periodically updating and/or re-issuing holds as cases
develop.
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E-Discovery Protocol
– Written protocol to be followed at notice by every attorney on every case to
ensure preservation of responsive documents
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Set out roles of discovery personnel: Outside counsel, inside counsel, paralegals,
information technology personnel
Set out steps for identification of and interviews of key personnel
Set out instructions for searching and/or sequestrating responsive documents from
all relevant data systems, including email, hard drives, and data bases
Develop protected electronic drop-buckets for key personnel for relevant future
documents
Provide for compliance monitoring, quality control and documentation
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Communication:
– Internal: Have written communication plan to ensure that all team members
are informed. Particularly important that in-house attorneys and outside
counsel are communicating on every step.
– External:
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Be prepared to share/communicate your e-discovery protocol to opposing counsel
and to judge (Remember proposed amendments to Rule 16 for early discussion of
e-discovery issues).
Shows candor and willing to do the right thing
– Ensure that positions taken with the Court are consistent with plan and
implementation
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Protocol Implementation
– Designated team implements protocol upon receiving notice. Important that
in-house counsel is engaged and active (Zubulake V)
– Status and progress is tracked, compliance with the plan is monitored, and
quality is controlled.
– All steps are documented
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Responding to Unduly Burdensome E-Discovery Requests
– Have “draft” affidavits and proposed 30(b)(6) witnesses ready to go
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Costs/burdens of literal compliance
Reasonable compliance already completed by company
See “The Sedona Principles for Electronic Document Production” (2003)
– Educate Judge on early on burden of E-Discovery requests, but come with
your reasonable and sufficient plan (protocol)
– Be prepared to educate judge on your IT systems
– Use protective order motions to protect inaccessible information
– Request reallocation of costs of electronic discovery to the requesting party
(Rowe and Zubulake) where feasible
– Use proposed amendments to FRCP to support positions
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Learn from Experience
– Develop “lessons learned” from each case, update protocol, etc. for common
and consistent approach to key issues as they develop across litigation
Artificial Intelligence Solutions
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Attenex, Cataphora, Eugenium
Not the comprehensive solutions promised
– Use to stage and trend data
– Use to help manage review/workflow
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Useful, but not the silver bullet
– Must still implement and follow best practices