Are Changes to the FRCP Increasing the Cost of Litigation?

Over the past year, in pursuit of everyone trying to figure out the best way to address all of the issues created by the changes to the Federal Rules of Civil Procedure and all of the resulting changes to state and local rules, I have worked with litigators from over 75 different law firm, litigation services professionals from 50 different service providers, technologies from 50 different litigation technology vendors and the General Counsels, Associate General Counsels and related IT professionals for over 25 Fortune 1000 companies. In addition to an incredible education of the current state of the litigation market and all of the associated technologies and new service practices, what I have taken away from this journey is a sense that we are still in the middle of a paradigm shift that is rocking the industry to its very core.

As such, I believe that the answer to the question about whether or not the changes to the Federal Rules of Civil Procedure and all of the resulting changes to state and local rules, is going to be different depending upon who you are asking.

Following are the results of the answers that I have gotten from the various groups that I meet with:

Litigators
Litigators are reporting that the changes to the FRCP and all of the resulting changes to state and local rules have required them to "go back to school" and learn a more about the technology and science of litigation and Electronically Stored Information (ESI) then many of them ever cared to know. I can tell you that the CLE classes on the effects of the changes to the FRCP that I teach have been full with a lot of very attentive attorneys.

In addition, litigators are now learning that litigation has gotten much more complicated and much more expensive. And, they are realizing that they are now required to solicit the assistance of technology and process experts are the very beginning of case to participate in pre meet and confer strategy sessions.

Further, whether they have been caught off guard or not, many litigators are finding that it is making more financial sense to settle their cases out of court due to the extreme cost of just getting prepared for trial.

Finally, although I am not a liberty to discuss the details of any of the cases that I have been involved in, I believe that there are an alarming number of new suits being filed against corporations by savvy litigators in which the "end game" is to force a settlement out of court due to the high cost of preparation and initial response.

Litigation Service Providers
As with Litigators, Ligitation Service Providers are reporting that the changes to the FRCP and all of the resulting changes to state and local rules have required them to "go back to school" and learn a more about the technology and science of litigation and Electronically Stored Information (ESI) then many of them ever cared to know. Having started in the legal services business providing copying services, the current surviving providers had to successfully make the transition to the world of imaging, coding, translatoin and hosting over the past several years. They are now faced with the even more daunting task of making the next leap to the world of Electronic Data Discovery and Computer Forensics. For a variety of reason, many of them will not be successful unless they embrace the eDiscovery Paradigm Shift, form new partnerships with technology vendors and consultants that can help them with the new paradigm and change their clients perceptions of what they can bring to the new ESI table. It is my opinion that based upon this classic paradgim shift, there is a tremendous opportunity for the Litigation Service Providers that successfully make the transition and a blunt reality of failure waiting for those that do not.

Litigation Technology Providers
As alluded to in my overview of how the changes to the FRCP have effected the Litigation Services Providers, we are in the midst of a classic market paradigm shift which casuse fear, uncertainty and doubt on the buyer side. As such, and is the case in any market where this occurs, it is an open season for technology providers to step in and fill the requirements gaps with new solutions. Since many of the posts on my Blog deal with my my opinions of all of the wonderful new technologies, I am not going to go into any detail in this post. However, I would like to mention that I believe that the biggest technology winner that will emerge from this opportunity will be the Software-as-as-Service (SaaS) deliver model. Its lesss expensive to develop and deliver, less expensive to use and enables very rapid and incremental updates.

The Fortune 1000
The changes to the FRCP and all of the resulting changes to state and local rules have had the most profound effect on the way in which the Fortune 1000 now have to manage with all things related to litigation. Frist and foremost, they can no longer ignore the whole area of what I am going to refer to as ESI Management including the development and implementaiton of a proper rentention policy and the asssociated infrastructure without taking on the liability of severe financial consequences for no compliance.

In addition, ESI no longer includes just information on servers, desktops and lapstops. It now includes information stored on corporate issued thumb drives and other external storage devices, Blackberries and other PDA, cell phones and even information stored with third party email providers and a list of information that may be stored with applications delivered via a Software-as-as-Service (SaaS) model. And, since collection is no longer an option, IT departments may no longer have the expertise or experience to keep up.

Further, courts are becomming less and less tolerant of ignorance and/or inaction and therefore management of preservation notices and actual preservation have also become an area riddeled with the rick of sanction and servere financial consequences.

In summary, with the changes to the FRCP and all of the resulting changes to state and local rules, the Fortune 1000 can longer afford its IT departments to like its fathers corporate IT departments. The externally mandated compliance and litigation preparedness requirements are much greater and the consequences of non-compliance are server.

So, my conclusion is that the changes to the FRCP and all of the resulting changes to state and local rules probably seems like it has had a net result of making litigation more complex and much more expensive for everyone involved. And, with our country heading into a ression or a least a downturn, conducting successful litigation under the new requirements being impossed by the changes to the FRCP may seem like it has become out of reach financially for many. And, it may be for some time.

However, in the long these changes will enable our legal system as a whole and the individual participants more accurate and equal access to justice. Only time will tell.

Labels: Compliance, Discovery, Document Rentention Policy, eDiscovery, ESI, FRCP, Litigation, Litigation Service Providers, Paradigm Shifts, Preservation, Records Rentention, Saas, Software-as-a-Service

posted by Charles Skamser @ 10:17 AM 0 Comments

Document Retention Policies and Practices

I recently found a checklist for Document Retention Policies and Practices written by Cecil A. Lynn III, Director of Industry Relations at LexisNexis Applied Discovery. And although this list is not comprehensive, it provides an extremely strong foundation up which to build your organizations list. Following is his list:

1. Maintain Document Retention Policies And Practices.
Every company should have a comprehensive, regularly audited document retention policy. The policy not only sets forth the procedures for the uniform and timely destruction of documents - both electronic and paper - but also establishes a consistent plan that is applied company-wide. A good document retention policy coupled with vigilant enforcement may be a company's best defense against claims of spoliation of evidence. The Federal Rules offer safe harbor for companies that lose data during the routine, good-faith operation of their electronic information systems. See FRCP 37(f). The "routine" requirement may be evidenced, in part, by a document retention policy. Counsel should review the company's retention program to ensure that it is current, applies to all employees in all locations, and is regularly monitored and enforced.

2. Understand The Corporation's Electronic Information Systems.
Case law underscores the need for outside counsel to become familiar with their client's electronic information and data retention architecture. See Phoenix Four Inc. v. Strategic Resources Corp., 2006 U.S. Dist. LEXIS 32211 at * 16-17 (S.D.N.Y. 2006) and Zubulake v. UBS Warburg, LLC, 229 F.R.D. 422, 432 (S.D.N.Y. 2004). The responsibility is even greater for in-house counsel who often provide a necessary link between the company's information technology (IT) department and outside counsel. Thus, corporate legal departments should develop a solid working relationship with the company's IT department and an understanding of the company's IT systems. Such an understanding is vital to the successful implementation of a document retention policy and will prove invaluable in evaluating preservation efforts in litigation.

3. Implement And Monitor Litigation Hold Procedures, When Appropriate.
The notion of document and information preservation is not something new to corporations. Several regulations impose preservation requirements on certain companies for the retention of documents and, in some cases, impose criminal penalties for their unlawful destruction. At common law, a company has a duty to preserve documents and electronic data when it "knows or reasonably should know" that information may be relevant to pending or anticipated litigation. Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003). Once litigation is anticipated, a party must suspend its routine document retention/ destruction policy and put in place a litigation hold to preserve what it knows, or reasonably should know, is relevant to the action. See Hynix Semiconductor, Inc. v. Rambus, 2006 U.S. Dist. LEXIS 30690, *66-67 (N.D. Cal. 2006) and Samsung Elecs. Co. v. Rambus, 2006 U.S. Dist. LEXIS 50007, *96-99 (E.D. Va. 2006).

Corporate counsel must determine appropriate trigger points for "anticipation of litigation" and develop litigation hold procedures to implement upon such triggers. See Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 2007 U.S. Dist. LEXIS 15277 at *23-24 (D. Co. March 2, 2007); see also Heng Chan v. Triple 8 Palace Inc., 2005 U.S. Dist. LEXIS 16520 at *16 (S.D.N.Y. 2005) (counsel has an obligation to monitor compliance with the company's preservation obligations). Counsel should be proactive and ensure that litigation hold procedures are being complied with.

4. Communicate With Key Custodians And Key Data Stewards.
When practical, counsel should communicate face-to-face with key players to make sure that they understand the seriousness of the preservation obligation and the consequences of destruction of potentially relevant evidence. Counsel should inquire about the potential witnesses's personal practices for document management and retention and determine whether it is consistent with company policy and determine whether the individual keeps potentially discoverable material on sources that are not online with the company's computer systems (e.g., home computer, PDA, pocket drive, etc.) Most importantly, counsel must explain the custodian's ongoing preservation obligation. A written litigation hold notice should be sent to these individuals that reminds them of their responsibilities under the company's document retention policy and specifically cautions them to refrain from altering, modifying or deleting potentially relevant information.

Counsel should also communicate with the "data stewards" - the IT staff who manage the resources on which key players create/store corporate data. Discuss whether it is appropriate or necessary to take a mirror image of the relevant storage devices and make sure that any auto-delete functionality is disabled. Counsel and IT should make sure that relevant active files are not deleted, converted to backup tape, or otherwise downgraded. Metadata should be preserved, even if the determination has not yet been made to produce it.

5. Establish An E-Discovery Committee.
In-house counsel should consider putting together a team with representatives from the IT department, records management, corporate compliance and the legal department to develop and implement an action plan for litigation involving electronic discovery. This team will be responsible for keeping the legal department apprised of procedural or staff changes that impact document retention policies, including any litigation holds in place. The IT representatives would advise of the latest technologies acquired by the company that impact data storage or relate to the company's document retention program.

Counsel may also want to interview and train potential Rule 30(b)(6) witnesses, ideally members of the committee who have knowledge and can effectively articulate their expertise with all aspects of the company's computer processing and storage capabilities.

6. Implement A Plan To Maintain Data Formats And Map Data Sources.
Electronic information can be maintained in a variety of formats and on multiple types of media. Corporate counsel should work closely with the IT department to determine how information is preserved and whether data is converted or degraded for storage or archival purposes. Counsel should also be aware of the range of potential sources for relevant information and collaborate with IT to develop a "data map" which profiles the company's sources and locations of electronically stored information. A data map can set out in detail the company's different active data creation and storage systems and give valuable insight into the potential cost - in terms of time and money - of preserving and collecting the information. Data mapping profiles may include details about:

• the applications and file types in use at the company, including details on proprietary or unique applications and integrated databases - particularly business-critical applications or those which are likely targets of discovery;
• the range of electronic communications, such as: email, instant messaging, voicemail, and Voice Over Internet Protocol applications, and including details about server organization, physical locations, and backup protocols for each;
• network storage and file servers, including information about server organization, physical location, and backup protocols;
• workstation distributions and configurations;
• remote user set-up (i.e., are employees able to VPN in from their home computers?);
• distribution and use of mobile devices, including laptops and PDAs, with specific attention to whether data on such devices is captured or "synched" in any formal fashion.

7. Establish A Collection Methodology So That Responsive Data Can Be Securely Stored Prior To Processing, Review And Production.
There are several collection methodologies and technologies that can realize significant cost savings for corporations. In-house counsel should explore these techniques to determine if they are right for the company. For example, corporations can establish a "black box" service on which duplicate copies of relevant emails are automatically stored. The black box reduces the risk of deletion. If the company is involved in multiple pieces of litigation where the same documents are at issue, counsel may want to consider building a central data repository. Document repositories can save the corporation time and money as the company may need to review the documents only once and information about the documents such as relevance, privilege, Bates stamps and redactions can all be retained and reused in subsequent litigation.

8. Determine What Information Is Not Reasonably Accessible Due To Undue Burden Or Cost.
While the general rule is that parties may obtain discovery on any matter relevant to the claims or defenses involved in the case, see FRCP 26(b)(1), the rules offer limitations where data sources are not reasonably accessible due to undue cost or burden. See FRCP 26(b)(2)(B). However, even if the data sources are deemed not reasonably accessible, the court may still order production and set conditions on the requested production, including cost shifting. See FRCP 26(b)(2).

A data map will assist counsel in the determination of whether data sources are arguably not reasonably accessible. Counsel should also discuss the potential cost and burden with their IT department and a data collection specialist to determine whether selective restoration or sampling of inaccessible data is appropriate. For some data, restoration may still be cost prohibitive given the amount at stake in the litigation.

9. Take Proactive Steps To Prevent The Potential Inadvertent Production Of Privileged Documents.
The sheer volume of electronically stored information that may be produced in litigation increases the risk of inadvertent production of privileged or protected documents. However, there are steps that corporate departments can take prior to litigation to reduce the risk of inadvertent production. If practical, privileged documents can be segregated, coded, or tagged in the ordinary course of business thereby reducing the risk that they will be commingled with non-privileged data. Boilerplate tags and footers that read "attorney-client privilege" may be insufficient to identify a protected document, particularly if the tag is automatically and indiscriminately applied to every email generated from a particular user.

10. Communicate Regularly With Outside Counsel.
In-house counsel must fully understand the company's preservation, collection and production procedures relating to electronically stored information and be able to discuss them with their outside counsel. This is particularly important in the beginning stages of litigation when the parties meet and confer under Rule 26(f). In-house counsel may want to be present during this conference to assist outside counsel. Of course, the extent of counsel's involvement may vary depending upon the size and complexity of the case, the amount of the controversy, the location of the litigation and the volume of potentially relevant data.

As corporate counsel get more involved in the corporation's litigation matters and document retention policies and practices, they will feel more confident and comfortable with the electronic discovery-related changes to the Federal Rules of Civil Procedure. Education and communication are two keys to litigation preparedness. Both will make certain that the legal department can make reasonable and defensible choices regarding the collection, preservation and production of documents in litigation.

Labels: Data Map, Discovery, Distruction of Evidence, Document Rentention Policy, eDiscovery, eDiscovery Consultants, EDRM, email, ESI, FRCP, Metadata, Preservation, Zubulake

posted by Charles Skamser @ 3:23 PM 1 Comments

The Art and Science of Legal Holds

Preservation of potentially relevant ESI in 2008 is no longer an option. However, how to preserve that ESI has become an interesting debate from both an art and science perspective. It wasn't that many years ago the this entire field was reactive in nature and therefore enabled important information to slip through the cracks.

Then, in the wake of Zubulake and the revisions to the FRCP, the Fortune 5000 began to get serious about managing preservation. Hold notices and confirmations of compliance have historically been the lowest-cost method of preserving information and demonstrating good faith. But, after spending many hours inside Fortune 5000 organizations discussing document management, data retention policy strategies and the practical application of leading edge preservation and collection technology, I can help but wonder how effective hold notices have been.

In fact, I would suspect that despite the best intentions of outside counsel, corporate counsel and IT, hold notices have actually alerted potential custodians to take steps to avert the collection process. As such, and with the current crop of more financially palatable proactive collection and storage technology such as Kazion and WorkProducts, preserving data under a well thought out data retention plan is becoming more attractive.

Add in sophisticated hold management and legal holds become much more of a science and less of an art.

Labels: Discovery, eDiscovery, ESI, FRCP, Inside the Tornado, Legal Holds, Preservation

posted by Charles Skamser @ 8:37 PM 0 Comments

Proactive Enterprise eDiscovery Should be a Standard Business Practice

With the changes in the Federal Rules of Civil Procedure at the end of 2006 along with the subsequent and associated sanctions and law suites, corporations that face litigation on a fairly regular basis should consider treating proactive ediscovery as a standard operating processes vs. a series of discrete events.

For example, many organizations are now taking steps toward automating the litigation hold process. As part of this process, witnesses (e.g. employees, vendors, etc.) will automatically receive instructions to suspend the destruction of documents that might be potentially pertinent to an anticipated litigation/investigation matter. However, even in the face of the well know federal and state actions and sanctions that have been broughg against those organizations that do not comply, there is strong evidence that preservation orders, when emailed or even handed out, will not be followed.

As such, these organizations are being forced to turn to more automated and integrated ESI detection and collection to accompany the hold order. As a results, we are quickly seeing explosive growth in what has been tagged Evidence Lifecycle Management (ELM).

Although a somewhat disjointed market that still requires a fair amount of consulting, we are starting to see some very good semi-integrated solutions from vendors such as Kazeon (http://www.kazeon.com/), Clearwell (http://www.clearwellsystems.com/) and WorProducts (http://www.workproducts.com/) that include features such proactive identification of employees (i.e. potential custodians), mapping of their data, preservation and hold lifecycle management, automated collection, culling and de-duping, preservation management, Electronic Data Discovery and Computer Forensics, Online Review, Hosting and long term Storage.

As anyone that reads this Blog on a regular basis knows, I am a big proponent of SaaS and onDemand delivery and therefore will be looking for the first vendor or consortium of vendors that develops and releases a true onDemand SaaS ELM solution.

Stay tunned for the results of my investigation.

Labels: Chain of Custody, eDiscovery, ELM, ESI, Evidence Lifecycle Management, FRCP, Litigation, Litigation Service Providers, Litigation Support Software, Preservation, Software-as-a-Service

posted by Charles Skamser @ 8:31 AM 0 Comments

eDiscovery Challenge: Instant Messaging and Voice Mail

The eDiscovery Paradigm Shift continues to provde us all with new eDiscovery challenges. In its Fourth Annual Litigation Trends Survey of corporate counsel at U.S. companies (http://www.fulbright.com/index.cfm?fuseaction=correspondence.LitTrends07), law firm Fulbright & Jaworski LLP surveyed respondents on their policies on the retention of employee voice messages and instant messages. These technologies are playing an ever-growing role in discovery and disclosure during so-called litigation hold periods, the law firm noted.

Fifty-three percent of in-house counsel said employees use instant messaging (IM), while the rate among billion-dollar firms was 70 percent. As instant messaging gains widespread use at many companies, businesses have the added burden of capturing and retaining those running online conversations in the event they are needed in a litigation hold instruction.

The portion of companies logging employee IMs is considerable—28 percent said they retain the messages as routine policy or in certain cases; for billion-dollar firms, the segment was 40 percent. While many companies may archive IMs for only several weeks or a month, 43 percent keep them for two months or longer, including 15 percent holding on for at least a year; among large companies, 25 percent maintain IMs for one year. One-third of all companies permit employees to attach documents to instant messaging, which can take on added significance in light of the extended holding periods in place at some businesses.

Besides IMs, companies these days have to consider holding on to another ephemeral slice of office life: voicemail. Forty percent of in-house counsel said they have a retention policy for employee voice messages. As with IM, much of the phone chatter is saved for a month or less, but 31 percent of companies store their voicemail for at least two months, including nine percent with a one-year or longer hold policy. The retention protocols become even more complex considering that 37 percent of companies said their phone systems allow voice messages to be forwarded to others via e-mail, creating a potentially huge web of vocal documentation.

Further complicating e-discovery and document retention practices is the line that employees regularly cross between their business and personal discourse. Thirty-seven percent of the Fulbright survey respondents said they allow employees to access outside e-mail accounts using company-issued computers; for billion-dollar companies, the allowance rate was 44 percent; and for tech shops, it rose to 61 percent. Meanwhile, 74 percent of companies let employees access the corporate network from their home computers. The high degree of co-mingled communication could lead to unexpected challenges in a litigation context.

With data breaches and electronic security lapses becoming all too common, many companies have beefed up their privacy policies, yet only 39 percent of in-house counsel said their firms have in place a full-time privacy officer; 60 perce nt said they have no current plans to hire one.

Health care providers have the highest level of privacy officers at 71 percent, followed by retailers (61 percent) and financial services firms (59 percent). Technology firms are quick to tout their robust privacy tools and practices, but only 35 percent have an in-place privacy officer.

Labels: Discovery, eDiscovery, FRCP, Instant Messaging, Preservation, Voice Mail

posted by Charles Skamser @ 8:37 AM 0 Comments

Preservation

Preservation for eDiscovery has become a complicated, multi-faceted, evolving concept. Starting with the nebulous determination of when the duty to preserve arises, then continuing into the litigation hold process and the staggering volumes of material which may need to be preserved (ESI and hard copy) in multiple global locations, platforms and formats, the task of preservation is an enormous challenge for the modern litigator.

Seeking a foundation in reasonableness, wrestling with the scope of preservation is often an exercise in finding an acceptable balance between offsetting the risks of spoliation and sanctions related to destruction of evidence, against allowing the business client to continue to operate its business in a somewhat normal fashion.

I am curious if anyone has developed a standard approach and/or best practices within your organziations, whether on the legal side or the business / IT side to address the mutlitude of issues and constantly changing expectations surrounding Preservation?

Further, I am interested in hearing from any vendors that have developed Software-as-a-Service (SaaS) offering to support and/or automate the preservation process.

In the weeks to come, I will be posting my research and own ideas on this subject along with all of your resopnses.

Labels: eDiscovery, ESI, FRCP, Litigation, Meet and Confer, Preservation

posted by Charles Skamser @ 2:45 PM 4 Comments