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Major Recent Developments in Electronic Discovery and Thoughts on Information Management Jeffrey Klein Adam Cohen David Lender November 9, 2004 Agenda Spoliation Cost shifting Proposed Federal rules changes Benefits of an information management policy

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major recent developments in electronic discovery and thoughts on information management

Major Recent Developments inElectronic Discovery and Thoughts on Information Management

Jeffrey Klein

Adam Cohen

David Lender

November 9, 2004

  • Spoliation
  • Cost shifting
  • Proposed Federal rules changes
  • Benefits of an information management policy
  • Characteristics of a good IMP

Doc Retention Policy

Duty to Preserve

what is the duty to preserve
What is the Duty to Preserve?

“While a litigant is under no duty to keep or retain every document in its possession, even in advance of litigation it is under a duty to preserve what it knows, or reasonably should know, will likely be requested in reasonably foreseeable litigation.”

Scott v. IBM Corporation, 196 F.R.D. 233 (D.N.J. 2000)

the common law duty to preserve
The Common Law Duty to Preserve
  • Courts have not adopted a uniform common law standard as to when the duty to preserve attaches; nor have courts consistently delineated the scope of that duty.
  • Oftentimes, the scope of the duty is jurisdiction and judge specific.
duty to preserve did you reasonably know
Duty to Preserve: Did You Reasonably Know?
  • In many ways, the analysis of what constitutes reasonable notice is retrospective.
  • In essence, the ultimate issue is: will a court someday, looking back on the evidence with twenty-twenty hindsight, decide that you had sufficient information to believe litigation was reasonably likely or probable?
zubulake v ubs warburg llc 220 f r d 212 s d n y 2003 zubulake iv
Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) (“Zubulake IV”)
  • Zubulake filed an EEOC charge on 8/16/01.
  • Zubulake sued UBS for gender discrimination, failure to promote, and retaliation on 2/14/02.
  • Certain UBS backup tapes relevant to Zubulake’s claims were missing, and certain isolated e-mails were deleted.
what was trigger date for the duty to preserve
What Was Trigger Date for the Duty to Preserve?
  • Arose, at the latest, on the date of the EEOC filing.
  • Arose even earlier based on communications which supposedly showed that everyone associated with Zubulake “recognized the possibility that she might sue.”
what was the evidence
What was the Evidence?
  • Zubulake’s co-worker sent an e-mail in April 2001 to Zubulake’s supervisor calling for Zubulake’s termination. This e-mail was labeled “UBS Attorney Client Privilege,” but no attorney was copied on the e-mail.
  • Zubulake’s supervisor testified that, in April 2001, a suit by Zubulake “was something that was in the back of my head.”
  • “Thus, the relevant people at UBS anticipated litigation in April 2001.”
zubulake v 2004 wl 1620866 s d n y july 20 2004
Zubulake V2004 WL 1620866 (S.D.N.Y. July 20, 2004)
  • In Zubulake IV, court found fault in UBS’s document preservation strategy but lacked evidence that lost tapes and deleted e-mails were favorable to Zubulake.
  • Ordered re-deposition of witnesses at UBS’s expense to inquire about newly restored e-mails
  • During depositions learned of additional problems (more deleted e-mails, non-production of e-mails, late production of e-mails).
zubulake v
Zubulake V
  • Court set forth standard for seeking an adverse inference instruction.

(1) party having control over evidence had duty to preserve at time it was destroyed;

(2) that the records were destroyed with a culpable state of mind;

(3) that the destroyed evidence was relevant to party’s claim or defense so that trier of fact could find that it would support that claim or defense.

zubulake v13
Zubulake V
  • In Second Circuit culpable state of mind includes ordinary negligence.
  • When destruction is negligent, relevance mustbe proven.
  • When evidence is destroyed in bad faith (i.e., intentionally or willfully), that fact alone is sufficient to demonstrate relevance.
what is zubulake v all about
What is Zubulake V All About?
  • “This decision addresses counsel’s obligation to ensure that relevant information is preserved by giving clear instructions to the client to preserve such information and, perhaps more importantly, a client’s obligations to heed those instructions.”
counsel s duty to monitor
Counsel’s Duty To Monitor
  • A party’s obligations do not end with the implementation of a “litigation hold” – to the contrary, that’s only the beginning.
  • Counsel must oversee compliance with the litigation hold, monitoring the party’s efforts to retain and produce documents.
    • Party and counsel must identify all sources of relevant information and apply litigation hold. Involves speaking with IT personnel and key players about how information is stored.
  • Counsel must also make reasonable follow-ups.
how to comply with preservation obligations
How to comply with preservation obligations?
  • Counsel must issue a “litigation hold” when litigation is reasonably anticipated. The hold should be periodically reissued.
  • Counsel should communicate directly with key players and periodically remind them about the litigation hold.
  • Counsel should instruct all employees to produce electronic copies of their relevant active files and ensure that backup tapes required to be retained are identified and stored in a safe place.
what were the failings here
What were the failings here?
  • Counsel repeatedly advised UBS of its discovery obligations, including issuing a litigation hold and communicated with many of the key players.
  • However, counsel failed to:
    • adequately communicate with one employee about how she stored data, resulting in late production of certain e-mails.
    • communicate litigation hold to human resources employee involved in Zubulake’s termination.
    • ask one employee for her files.
    • protect relevant backup tapes.
  • UBS personnel continued to delete relevant e-mails, resulting in late production of certain e-mails, and non-production of other e-mails.
applying adverse inference standard
Applying adverse inference standard
  • Duty to preserve arose prior to litigation (Zubulake IV)
  • UBS acted willfully in destroying potentially relevant information.
      • timing of e-mails recovered from backup tapes showed that key employees deleted key e-mails after receiving litigation hold instructions.
      • certain key e-mails produced very late because counsel assumed “archive” files meant backup tape.
  • Therefore, relevance is presumed.
adverse inference instruction
Adverse inference instruction

“If you decide that UBS could have produced this evidence, and the evidence was within its control, and that the evidence would have been material in deciding facts in dispute in this case, you are permitted, but not required, to infer that the evidence would have been unfavorable to UBS.”

adverse inference instruction cont d
Adverse inference instruction (cont’d)

“In deciding whether to draw this inference, you should consider whether the evidence not produced would merely have duplicated other evidence already before you. You may also consider whether you are satisfied that UBS’s failure to produce this information was reasonable. Again, any inference you decide to draw should be based on all of the facts and circumstances in this case.”

adverse inference instruction21
Adverse inference instruction

“It’s like cow crap; the more you step in it; the more it stinks.” Morris v. Union Pacific Railroad, 2004 WL 1432288 (8th Cir. 2004).

summary practical guidance
Summary - Practical Guidance
  • Need familiarity with document retention policies and data retention architecture.
  • Speak to IT: need to ensure actual implementation of litigation hold.
  • Speak to key players: understand how they store information.
  • If company is too big, consider reasonable alternatives including system-wide keyword searching (to make initial broad cuts).
summary cont d
Summary (cont’d)

(5) Attorneys must monitor compliance including periodic follow-ups.

  • Instruct all employees to produce electronic copies of their relevant active files.
  • Make sure preserved backup tapes are identified and kept safely.
  • Paper everything.

“No. I’m not backing up our files – I’m just assuming that the F.B.I. is making copies.”

mastercard v moulton 2004 wl 1393992 s d n y june 22 2004
MasterCard v. Moulton, 2004 WL 1393992 (S.D.N.Y. June 22, 2004)
  • MasterCard sued over Defendant’s use of references to Priceless ad campaign on pornographic website.
  • MasterCard wrote to Defendant’s counsel, reminding him of obligation to maintain evidence, including original content of website.
  • Defendant’s counsel conveyed preservation instructions to client.
  • Defendant failed to suspend automatic deletion of e-mails.
mastercard v moulton 2004 wl 1393992 s d n y june 22 200426
MasterCard v. Moulton, 2004 WL 1393992 (S.D.N.Y. June 22, 2004)
  • Court held continued destruction of e-mail pursuant to normal document retention policies was not in bad faith, but negligent.
  • MasterCard demonstrated only that the e-mails were “potentially relevant,” and prejudice was unclear.
    • As for tarnishment and dilution, MasterCard already had “ample evidence” of content of website.
    • MasterCard has “not made a compelling case” that the missing e-mails would reflect confusion about whether MasterCard endorsed porn website.
mastercard v moulton 2004 wl 1393992 s d n y june 22 200427
MasterCard v. Moulton, 2004 WL 1393992 (S.D.N.Y. June 22, 2004)
  • Nonetheless, court permits MasterCard to prove the facts reflecting the non-retention of the e-mails and to argue to the jury that this destruction of e-mail, in addition to other proof at trial, warrants the inference that the public was confused and that the MasterCard marks were diluted and tarnished.
more and more spoliation decisions
More and More Spoliation Decisions
  • Philip Morris (D.D.C. July 21): $2.75 million sanction and witness preclusion for destroying e-mail and violating preservation order.
  • GE Harris (D. Del. Aug. 18): adverse inference where destroyed documents in anticipation of litigation.
  • Morris (8th Cir. June 28): reversing and ordering new trial where trial court gave adverse inference without finding that destruction was intentional.
cost shifting since zubulake
Cost-Shifting Since Zubulake
  • Hagemeyer (E.D. Wis. August 12)
      • motion for cost-shifting relating to request to search and restore back-up tapes.
      • after analyzing different cost shifting schools of thought, adopts Zubulake test.
      • orders sampling before analysis applied.
cost shifting since zubulake32
Cost-Shifting Since Zubulake
  • Wiginton (N.D. Ill. August 10)
      • adopts modified Zubulake test for cost-shifting by adding a factor that considers the importance of the requested discovery in resolving the issues in the litigation.
      • shifts 75% of the costs to plaintiffs.
cost shifting since zubulake33
Cost-Shifting Since Zubulake
  • Multitechnology Services (N.D. Tex. July 12)
      • Verizon moves to shift costs in responding to interrogatories seeking customer information from databases.
      • Verizon estimates costs at about $60,000.
      • “Zubulake is a district court opinion without binding authority.”
      • Order costs split 50/50 because it balances benefits of discovery for MTS and provides Verizon with incentive to manage its costs.
litigation databases
Litigation Databases
  • Portis (N.D. Ill. July 7): civil rights suit
    • City moves to compel production of litigation database compiled by plaintiffs from arrest reports produced by City.
    • Court finds:
      • database is mixed fact/opinion work product.
      • City has demonstrated substantial need.
      • database must be produced, but City must pay 50% of costs associated with compiling database.
proposed federal rules changes
Proposed Federal Rules Changes
  • Civil Rules Advisory Committee meetings at Fordham Law School and Administrative Office of U.S. Courts.
  • Civil Rules Committee recommends that the Standing Committee on Rules of Practice and Procedure publish proposed rule amendments for comment.
  • Draft rule changes published for comment in August 2004.
proposed federal rules changes early attention to e discovery
Proposed Federal Rules ChangesEarly Attention to E-discovery
  • At Rule 26(f) conference, parties must discuss:
    • preservation of discoverable information
    • whether to include in the discovery plan an agreement that the court should enter an order protecting the right to assert privilege after production.
    • form of production of electronic information
  • Court may adopt parties’ agreement as part of Rule 16(b) scheduling order.
proposed federal rules changes accessible v inaccessible rule 26 b 2
Proposed Federal Rules ChangesAccessible v. Inaccessible – Rule 26(b)(2)
  • Proposed two-tier structure to discovery.
  • A party need not produce discovery of electronically stored information that is “not reasonably accessible” without a court order.
  • Party seeking information not reasonably accessible must show good cause.
proposed federal rules changes asserting privilege after production rule 26 b 5
Proposed Federal Rules ChangesAsserting Privilege After Production – Rule 26(b)(5)
  • Party who inadvertently produced privileged information must notify receiving party within a “reasonable time.”
  • After notification, receiving party must return, sequester, or destroy the specified information and any copies.
  • Receiving party can subsequently file motion to compel based on lack of privilege or waiver.
proposed federal rules changes rules 33 34
Proposed Federal Rules ChangesRules 33, 34
  • Rule 33: answers to interrogatories should also include review of electronically stored information and producing party may answer by providing access to electronically stored information.
  • Rule 34:
    • specifically includes “electronically stored information”
    • sets default for production if parties don’t agree on form – either in a form in which it is ordinarily maintained or in an electronically searchable form.
proposed federal rules changes rule 37 sanctions narrow safe harbor
Proposed Federal Rules ChangesRule 37 Sanctions – narrow “safe harbor”
  • No sanctions for failure to provide electronically stored information lost because of routine operation of the party’s computer system.
  • Safe harbor does not apply if party violated preservation order, or the party failed to take reasonable steps to preserve the information after it knew or should have known the information was discoverable.
  • Additional issue for comment is whether standard for ineligibility for safe harbor should be negligence, or a greater level of culpability.
proposed federal rules changes rule 45 subpoena
Proposed Federal Rules ChangesRule 45 Subpoena
  • Expressly includes “electronically stored information.”
  • Adopts two-tier level for production - do not need to produce electronically stored information if it is not reasonably accessible. Compelling production requires showing of good cause.
  • Adopts default for form of production – if no agreement, person responding to subpoena must produce the information in a form in which it is ordinarily maintained or in electronically searchable form.
  • Also includes waiver of privilege protections requiring notice within a reasonable time and prompt return.
  • old phrase: “document retention policies”
  • what’s the problem: information is out of control, and getting further out of control every moment
    • storage technologies
    • communications technologies
    • illusory evanescence
  • no need to take this lying down – and significant reasons not to
general benefits of an imp
General Benefits of an IMP
  • business utility of having identified, catalogued, categorized, knowing lifespan of available information
    • e.g., assessing IT needs
    • why keep information that has no use
  • NOT eliminating “bad” information
    • can’t be identified out of context in any event
    • throwing out the baby with the bathwater
    • adverse inferences for spoliation even where destruction is pre-litigation and pursuant to a policy
litigation benefits of imp
Litigation Benefits of IMP
  • knowing what you have, where it is, how stored, etc. makes preservation and collection easier
  • keeping garbage means more lawyer time spent culling relevant information
  • systematic treatment of information enables explanation of why you have some and don’t have other
information out of control risks
Information Out of Control Risks
  • retaining
    • cost, cost and more cost – time, effort, technology, legal fees, etc.
    • bad evidence – but see supra
  • destroying
    • criminal penalties, e.g., obstruction of justice
    • civil sanctions, e.g.,
      • monetary
      • adverse inference
      • judgment
    • good evidence
stumbling blocks
Stumbling Blocks
  • “good people keep everything”
  • fear of spoliation
    • paralysis is the wrong reaction
    • IMP can be implemented even where litigation is pending – just do it the right way
  • proactive, forward looking (cure for this malady is one bad, expensive experience)
document reasons for establishment implementation
Document Reasons for Establishment/Implementation
  • thwart allegations that the policy was implemented to eliminate “bad documents” or destroy relevant evidence
  • note cases where destroyed information relates to area in which party frequently sued
define information covered and how treated
Define Information Covered and How Treated
  • methodical identification/categorization
  • consideration of associated business needs
  • assessment of regulatory and/or other legally mandated preservation requirements
  • note: samples are minimally helpful here at best – what treatment is appropriate for what information is in most cases an organization-specific matter.
consider regulatory requirements
Consider Regulatory Requirements
  • each industry may have unique requirements
    • what (subject matter, media)
    • how long (time period)
    • how (security, accessibility)
  • E.g.’s:
    • Gramm-Leach-Bliley
    • Sarbanes-Oxley
    • SEC – Books and Records Rule
    • PATRIOT Act
    • Investment Company Act
    • Bank Secrecy Act
    • NASD
    • and on and on and on and on
allocate individual implementation responsibilities
Allocate Individual Implementation Responsibilities
  • accountability is key to enforcement
  • on a more basic level the job of implementation must belong to someone because it won’t happen “automagically”
establish follow monitoring enforcement plan
Establish/FollowMonitoring/Enforcement Plan
  • if not, forget the whole idea
  • makes IMP worse than useless
    • Fluor Daniel
    • Arthur Anderson, Quattrone
  • Murphy Oil, USA, Inc. v. Fluor Daniel, Inc., 2002 U.S. Dist. LEXIS 3196 (E.D. La.)
  • essentially a breach of contract case
  • question of whether internal email should be produced and who should bear related production costs
  • “Fluor's e-mail retention policy provided that backup tapes were recycled after 45 days. If Fluor had followed this policy, the e-mail issue would be moot. Fluor does not explain why, but it maintained its backup tapes for the entire fourteen month period. As a consequence it has 93 e-mail backup tapes. Each tape includes not only the e-mail communications for the 37 persons involved in the Murphy turnaround, but also from the 650 other mail boxes.”
  • “Murphy followed its own document retention policy and so has no backup tapes for e-mail message for the fourteen month period. Fluor further contends that Murphy had an obligation to maintain its backup tapes of e-mail communications, because the tapes were destroyed at a time that Murphy planned to file the lawsuit. Fluor, however, does not seek any relief from Murphy on this issue, so it is not before the undersigned.”
litigation hold procedures
Litigation Hold Procedures
  • pre-established lines of communication: outside counsel to inside counsel to relevant business and IT technology personnel and even to outside IT service providers if necessary
  • miscommunications can result in spoliation, see Keir, Zubulake
identify personnel to answer questions
Identify Personnel to Answer Questions
  • don’t want non-legal personnel creating their own interpretations of the policy and making decisions about how it should be applied.
  • so make sure that there is a mechanism for obtaining guidance on what is a complex issue.
  • advancing information technology will continue make information management more difficult but may also provide ways to help
  • consequences of lacking sound information management policies and practices continue to show up in the form of punitive court orders – the carnage is likely to continue given the fuzzy legal tests (both as to timing and as to scope)
  • act now to implement a policy that works (“if you choose not to decide, you still have made a choice”)
questions and follow up
Questions and follow up

Jeffrey Klein

Weil, Gotshal & Manges

767 Fifth Avenue

New York, NY 10153