SURVIVING E-DISCOVERY

1. SURVIVING E-DISCOVERY HON. JAMES C. FRANCIS (S.D.N.Y.) HON. SIDNEY I. SCHENKIER (N.D. ILL.) NEW YORK WORKSHOP – 07/27/06

2. I. THE SCOPE OF E- DISCOVERY PROBLEMS • HOW OFTEN DO WE SEE THEM? • WHAT KINDS OF CASES DO WE SEE THEM IN? • HOW BIG ARE THE PROBLEMS WHEN THEY ARISE?

3. MAGISTRATE JUDGE SURVEY 2000 SURVEY RECIPIENTS 400 SURVEY RESPONDENTS 115 RESPONDENTS REPORTING 71 ELECTRONIC DISCOVERY IN THEIR CASES RESPONDENTS REPORTING NO 44 ELECTRONIC DISCOVERY IN THEIR CASES

4. Magistrate Judge Survey 2000

5. Magistrate Judge Survey 2000

6. KEY PROBLEM AREAS THAT MAKE E-DISCOVERY DISPUTES SUCH A BIG DEAL • PRESERVATION AND SPOILATION • SCOPE, FORM AND COST OF PRODUCTION • PRIVILEGE

7. WHEN THE E-DISCOVERY PROBLEMS ARISE, THEY ARE A BIG DEAL • THEY CONSUME A TREMENDOUS AMOUNT OF THE PARTIES’ TIME AND MONEY • THEY CONSUME A TREMENDOUS AMOUNT OF THE COURT’S TIME

8. WHY ARE THESE PROBLEM AREAS MORE SIGNIFICANT WITH E-DISCOVERY THAN WITH TRADITIONAL PAPER DISCOVERY? • BECAUSE OF THE ENORMOUS VOLUME AND MANY SOURCES OF E-INFORMATION

9. THE VOLUME OF ELECTRONIC INFORMATION • AS OF 1999, 93 PERCENT OF ALL INFORMATION IN THE UNITED STATES WAS GENERATED IN DIGITAL FORM • 80-90% OF DISCOVERABLE INFORMATION IS IN THE FORM OF E-MAIL • MUCH OF THIS INFORMATION IS NEVER REDUCED TO HARD COPY FORM

10. SOME TYPES OF ELECTRONIC EVIDENCE • ACTIVE DATA • METADATA • SYSTEM DATA • OFF-LINE ARCHIVAL DATA • OFF-LINE BACKUP OR DISASTER RECOVERY DATA • ERASED, FRAGMENTED OR DAMAGED (“RESIDUAL”) DATA

11. SOME OF THE MANY LOCATIONS OF E-INFORMATION • OFFICE COMPUTERS (DESKTOPS, LAPTOPS AND WORKSTATIONS) • OFFICE NETWORK SERVERS • OFFSITE SERVERS • REMOVABLE STORAGE DEVICES • FAX MACHINES AND PRINTERS • PERSONAL COMPUTERS AT HOME • THIRD PARTY COMPUTERS • PDAs AND CELL PHONES • INTERNET SERVICE PROVIDER SERVERS

12. THERE ARE MANY POSSIBLE LOCATIONS FOR A SINGLE FILE • AN INDIVIDUAL USER’S OFFICE COMPUTER • AN INDIVIDUAL USER’S CD OR FLOPPY • AN INDIVIDUAL USER’S HOME COMPUTER • ATTACHMENT TO E-MAIL SENT BY USER • ATTACHMENT TO RECIPIENT’S E-MAIL • COMPANY’S NETWORK-SHARED FOLDER • COMPANY’S BACK-UP TAPES

13. THOSE LOCATIONS CAN HOLD PLENTY OF E-INFORMATION • EVEN A LITTLE FLOPPY DISK HOLDS 1.44 MBs, OR THE EQUIVALENT OF 720 TYPED PAGES • A CD-ROM HOLDS 650 MBs, OR THE EQUIVALENT OF 325,000 TYPED PAGES • ONE GIG HOLDS THE EQUIVALENT OF 500,000 TYPED PAGES • LARGE NETWORKS CREATE BACKUP TAPES MEASURED IN TERABYTES -- WHICH EQUALS 1,000,000 MBs, OR THE EQUIVALENT OF 500 BILLION TYPED PAGES

14. AND IN FACT THEY DO CONTAIN LOTS OF INFORMATION • E-DOCUMENTS ARE EASY TO CREATE, LEADING TO MULTIPLE DRAFTS • E-MAIL REPLACES TELEPHONE AND WATER-COOLER CONVERSATION • E-DOCUMENTS ARE CHEAP TO STORE • E-DOCUMENTS ARE HARD TO DESTROY

15. WHAT PROBLEMS DOES THIS CAUSE FOR PRESERVATION, PRODUCTION AND PRIVILEGE? • MORE POSSIBLE PLACES TO LOOK • MORE DATA TO SIFT THROUGH • MORE DATA THAT IS DIFFICULT TO ACCESS • MORE RISK OF PRODUCTION OF PRIVILEGED INFORMATION • MORE OPPORUNITIES TO GATHER USEFUL DATA • MORE OPPORTUNITIES TO MAKE ERRORS IN PRODUCTION

16. SOME PRESERVATION AND SPOILATION PROBLEMS • WHEN DOES A PARTY’S PRESERVATION OBLIGATION BEGIN? • WHAT CAN BE JETTISONED WITHOUT RISKING A CHARGE OF SPOILATION? • WHAT IS THE APPROPRIATE BALANCE BETWEEN PRESERVING POTENTIALLY RELEVANT INFORMATION WITHOUT IMPOSING UNDUE COST AND DISRUPTION?

17. SOME PRODUCTION PROBLEMS • HOW FAR MUST A PARTY GO IN LOOKING FOR E-INFORMATION? BACK-UP TAPES? DELETED DATA? • CAN A PARTY FOCUS THE SEARCH USING PROTOCOLS (SUCH AS KEY WORDS AND DATE PARAMETERS)? • IN WHAT FORM MUST E-INFORMATION BE PRODUCED? DOES THE METADATA HAVE TO BE PRODUCED? • AT WHAT POINT SHOULD THERE BY COST-SHIFTING?

18. SOME PRIVILEGE PROBLEMS • WHAT IS THE LIKELIHOOD THAT PRIVILEGED INFORMATION WILL BE INDISCRIMINATELY INTERMINGLED WITH THE RESPONSIVE DOCUMENTS FOUND? • HOW CAN A RESPONDING PARTY PROTECT PRIVILEGE WITHOUT BREAKING THE BANK? • HOW CAN A PARTY DO THAT WITHOUT RISKING WAIVER?

19. THESE PROBLEMS ARE MADE WORSE BY THE FAILURE OF MANY LAWYERS AND CLIENTS TO UNDERSTAND THAT IGNORANCE IS NOT AN OPTION

20. ABA LITIGATION SECTION SURVEY -- 2000 22% DID NOT KNOW IF THEIR CLIENTS HAD ELECTRONIC RECORDS COLLECTIONS 40% BELIEVED THEY DID 83% SAID THEIR CLIENTS LACKED PROCEDURES TO SEARCH FOR E-INFORMATION IN RESPONSE TO DISCOVERY REQUESTS 75% SAID THEIR CLIENTS DID NOT KNOW THAT ELECTRONIC RECORDS ARE DISCOVERABLE

21. ABA/CORPORATE COUNSEL ASSOCIATION SURVEY – 1998 92% OF RESPONDING COMPANIES HAD ELECTRONIC RECORDS 40% HAD AN ELECTRONIC RECORDS MANAGEMENT PROGRAM 28% MONITORED COMPLIANCE WITH THE PROGRAM

22. APPROACHES TO DEALING WITH E-DISCOVERY PROBLEMS • CASE-BY-CASE ADJUDICATION • RULE MAKING • BEST PRACTICES PROMULGATED BY PRIVATE ORGANIZATIONS

23. CASE LAW REACTS TO AN E-DISCOVERY PROBLEM ARISING IN A SPECIFIC CASESEVERAL DISTRICTS HAVE TRIED TO DEAL WITH E-DISCOVERY PROBLEMS PROACTIVELY, BY LOCAL RULE

24. DISTRICT OF ARKANSAS, LR 26.1 • DISTRICT OF DELAWARE, DEFAULT STANDARD FOR DISCOVERY OF ELECTRONIC DOCUMENTS • DISTRICT OF KANSAS, STANDING ORDER • DISTRICT OF NEW JERSEY, LR 25.1 • DISTRICT OF WYOMING, LR 26.1

25. THESE LOCAL RULES ALL TRY TO FORCE PARTIES TO ADDRESS E-DISCOVERY EARLY IN THE CASE, AND TO REACH AS MUCH AGREEMENT AS POSSIBLE ON ISSUES OF PRESERVATION, PRODUCTION AND PRIVILEGE

26. AMENDMENTS TO FEDERAL RULES OF CIVIL PROCEDURE • 08/04: JUDICIAL CONFERENCE COMMITTEE ON RULES OF PRACTICE AND PROCEDURE ISSUED DRAFT AMENDMENTS • 11/04-02/05: 254 WRITTEN COMMENTS, AND LARGE TURNOUT AT PUBLIC HEARINGS IN D.C., SAN FRANCISCO AND DALLAS • 04/05: COMMITTEE REVISED DRAFT RULES • 06/05: JUDICIAL CONFERENCE STANDING RULES COMMITTEE APPROVED DRAFT • 09/95: JUDICIAL CONFERNCE APPROVED DRAFT • 05/06: DEADLINE FOR SUPREME COURT TO ACT • 11/06: DEADLINE FOR CONGRESS TO ACT

27. THE PROPOSED CHANGES TO THE FEDERAL RULES CHANGES TO ELECTRONIC DISCOVERY PLANNING (RULES 16, 26 AND FORM 35) CHANGES TO ELECTRONIC DISCOVERY EXECUTION (RULES 26, 33, 34 AND 45) CHANGES TO STANDARDS FOR IMPOSING SANCTIONS FOR ELECTRONIC DISCOVERY VIOLATIONS(RULE 37)

28. BEST PRACTICES • SEDONA CONFERENCE (2004) • ABA DISCOVERY STANDARDS (2004) • MANUAL FOR COMPLEX LITIGATION FOURTH (2004)

29. SEDONA CONFERENCE • INFLUENTIAL THINK TANK WHICH OUR KEN WITHERS NOW HAS JOINED AS ITS MANAGING DIRECTOR • www.thesedonaconference.org

30. GUIDELINES MANAGING INFORMATION AND RECORDS IN THE ELECTRONIC AGE • ISSUED IN SEPTEMBER 2004 • RECOMMENDS THAT COMPANIES CREATE, AND ENFORCE, POLICIES ON RETENTION AND DESTRUCTION • RECOMMENDS THAT THE POLICIES PROVIDE FOR THEIR SUSPENSION (A LITIGATION HOLD) WHEN NECESSARY

31. PRINCIPLES FOR ELECTRONIC DOCUMENT PRODUCTION • ISSUED IN JANUARY 2004 • URGES PARTIES TO ADDRESS E-DISCOVERY ISSUES EARLY IN THE CASE • MAKES RECOMMENDATIONS ABOUT LIMITS ON SCOPE AND FORM OF PRODUCTION • RECOMMENDS WHEN COST-SHIFTING AND SANCTIONS SHOULD BE ORDERED • CARROLL AND WITHERS ARTICLE COMMENTING ON THESE PRINCIPLES

32. ABA CIVIL DISCOVERY STANDARDS • ISSUED AUGUST 2004 • URGES THAT PARTIES ADDRESS E-DISCOVERY AT THE PLANNING CONFERENCE • IDENTIFIES CONSIDERATIONS FOR COURTS TO USE IN ADDRESSING E-DISCOVERY DISPUTES • ADDRESSES PRIVILEGE ISSUES

33. MANUAL FOR COMPLEX LITIGATION FOURTH (2004) • LARGELY CONTAINED IN ONE, BRIEF SECTION (11.446) • CONTAINS A USEFUL DESCRIPTION OF CERTAIN BASIC TECHNICAL TERMS • GENERALLY HIGH-END, NOT AS SPECIFIC AS SEDONA AND ABA

34. ADDRESSING THE PROBLEMS OF PRESERVATION AND SPOILATION

35. MEDIA COSTS • Wiginton v. Ellis, 2003 WL 22439865 (N.D. Ill.) • $50 per tape x 125 servers x 1 e-mail backup tape = $6,250 per day to preserve daily tapes • Keir v. UnumProvident Corp., 2003 WL 21997747 (S.D.N.Y.) • Weekly backups plus incremental backups during week; recycled every 30-60 days

36. BUSINESS DISRUPTION • Can’t delete e-mail • Must segregate e-mail by topic • Can’t turn on computer

37. TRANSACTION COSTS • A “litigation hold” must be disseminated and monitored • In re Old Banc One Shareholders Security Litigation, 2005 WL 3372783 (N.D. Ill.) • Danis v. USN Communications, Inc., 2000 WL1694325 (N.D. Ill.) • E-mailing employees may be insufficient! In re Prudential Sales Practices Litigation, 169 F.R.D. 598, 615 (D.N.J. 1997)

38. “Identifying the boundaries of the duty to preserve involves two related inquiries: when does the duty to preserve attach, and what evidence must be preserved?” Zubulake v. UBS Warburg LLC, 220 F.R.D 212 (S.D.N.Y. 2003) (Zubulake IV)

39. THE WHEN PROBLEM • Choosing the right “litigation hold” date • Speedy implementation • Preserving newly created data

40. THE WHAT PROBLEM • Preserve metadata? • Williams v. Sprint/United Management Co., 230 F.R.D. 640 (D. Kan. 2005) • Pueblo of Laguna v. United States, 60 Fed. Cl. 133, 143 (2004) • Preserve ephemeral data? • Convolve Inc. v. Compaq Computer Corp., 223 F.R.D. 162, 176-77 (S.D.N.Y. 2004)

41. MEANS OF PRESERVATION • Litigation Hold • Cease autodelete • Segregate discoverable files • Cease recycling • Imaging • Sampling for preservation • Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 432 (S.D.N.Y. 2004) (Zubulake V)

42. STANDARDS FOR PRESERVATION ORDERS: PRELIMINARY INJUNCTION • Madden v. Wyeth, 2003 WL 21443404 (N.D. Tex.) • Pepsi Cola Bottling Co. v. Cargill, Inc., 1995 WL 783610 (D. Minn.) • Cunningham v. Bower, 1989 WL 35993 (D. Kan.)

43. STANDARDS FOR PRESERVATION ORDER: MULTIFACTOR TEST • Treppel v. Biovail Corp., 2006 WL 278170 (S.D.N.Y.) • Pueblo of Laguna v. United States, 60 Fed. Cl. 133 (2004) • Capricorn Power Co. v. Siemens Westinghouse Power Corp., 220 F.R.D. 429 (W.D.N.Y. 2004)

44. THE MULTIPLE FACTORS • The risk of destruction (including proof of prior spoliation) • Content of any destroyed documents (were they discoverable) • The burden of preservation

45. COST-SHIFTING? • Treppel v. Biovail Corp., 2006 WL 278170 (S.D.N.Y.) • Keir v. UnumProvident Corp., 2003 WL 21997747 (S.D.N.Y.)

46. SPOLIATION • Gates Rubber Co. v. Bando Chemical Industries, 167 F.R.D. 90 (D. Colo. 1996) (destruction of data by computer expert) • Danis v. USN Communications, 2000 WL 1694325 (N.D. Ill.) (failure to communicate preservation order; adverse inference; fine for CEO) • Trigon Insurance Co. v. United States, 204 F.R.D. 277 (E.D. Va. 2001) (deletion of drafts and backup for expert report; adverse inference)

47. SPOLIATION CONT’D • Strasser v. Yalamanchi, 783 So.2d 1087 (Fla. 2001) (physical destruction of hard drive; adverse inference) • Mathias v. Jacobs, 197 F.R.D. 29 (S.D.N.Y. 2001) (deletion of data from Palm Pilot; monetary sanctions) • Metropolitan Opera v. Local 100, 212 F.R.D. 178 (S.D.N.Y. 2003) (complete disregard of preservation, production obligations; default judgment, award of attorneys’ fees)

48. STILL MORE SPOLIATION • Coleman Holdings, Inc. v. Morgan Stanley, 2005 WL 679071 (Fla. Cir. Ct. 2005) (defendant overwrote e-mails for year in violation of preservation order, submitted false certification of compliance, failed to report spoliation for 6 months; court shifts burden of proof to spoliator) • Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004) (Zubulake V) (destruction and tardy production of e-mails; adverse inference and costs of reopened depositions)

49. STATE OF MIND “The sanction of an adverse inference may be appropriate in some cases involving the negligent destruction of evidence because each party should bear the risk of its own negligence.” - Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 108 (2d Cir. 2002)

50. PROPOSED SAFE HARBOR Rule 37(f): “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 system.”