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An Osterman Research White Paper

Published April 2011

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Key E-Discovery Issues

to Consider in 2011 SPON

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Key E-Discovery Issues to Consider in 2011

©2011 Osterman Research, Inc. 1

Executive Summary The ability to support e-discovery – the process of finding, collecting, analyzing and producing information during civil lawsuits – should be a critical focus for any organization in the context of their information management policies, processes and technologies. There are a number of reasons for this: • Inadequate archiving and data retention practices that create an inability to adequately

preserve and/or collect required information – which can then lead to an inability to conduct proper e-discovery – can result in court-imposed sanctions, adverse inference instructions, charges of spoliation of evidence and other negative consequences. In its 2010 mid-year Report on Electronic Discovery and Information Law, the law firm Gibson Dunn found that of the 21 cases in which courts imposed some kind of sanction, costs and fees were awarded in 14 of them. It also found that the most notable and widely reported cases involving sanctions concerned the imposition by courts of “adverse inference” jury instructions.

• Poor e-discovery can prevent decision makers from fully

understanding their legal position at the beginning of a lawsuit, resulting in poor and ill-informed decisions about how to proceed in particular cases.

• A lack of good e-discovery capabilities, as well as

inadequate technologies that support e-discovery, can drive up labor, legal and other costs. For example, some discovery systems produce up to 1,000 times more content than is actually required, increasing discovery costs unnecessarilyi. However, producing too little content, as in the case of Qualcomm, Inc. v. Broadcom Corporationii, can result in costly sanctions, as well.

Proper e-discovery practices include a number of elements, including corporate policies focused on retention and deletion of business-critical data, technologies that will adequately preserve this content for as long as required, practices and technologies that will place a hold on data when required, capabilities that will determine where all relevant data is stored, and technologies that will produce relevant data in a timely fashion. GOOD E-DISCOVERY TOOLS REDUCE COST, RISK AND LITIGATION Good e-discovery capabilities – as well as the technologies that support e-discovery, such as archiving – can provide a number of important benefits to any organization, including avoidance of litigation, faster response to legal actions, the ability to create better corporate policies, assistance in complying with regulatory obligations, brand protection, and overall defense of corporate reputation. In short, all organizations should take a proactive stance toward e-discovery – addressing e-discovery long before a legal action begins – with a particular emphasis on long-term retention of content.

Poor e-discovery can prevent decision makers from fully understanding their legal position at the beginning of a lawsuit, resulting in poor and ill-informed decisions about how to proceed.



ABOUT THIS WHITE PAPER AND ITS SPONSORS This white paper focuses on the key practices and technologies that organizations should pursue as they seek to improve their e-discovery practices and technologies. It also provides a brief overview on the relevant offerings from Dell, the sponsor of this white paper.

Why Should E-Discovery Be Top of Mind for IT and Business Decision Makers?

WHAT EXACTLY ARE “DISCOVERY” AND “E-DISCOVERY”? As a key component of a civil legal action, discovery is the process of searching for information that may be relevant for use as evidence in a trial or in pre-trial activities. It can include any sort of communications, documents, metadata, posts or other information that might be useful to prove a plaintiff’s or defendant’s case in a civil action. E-discovery is merely the extension of this well-established process to any Electronically Stored Information (ESI) that an organization might possess – email messages, spreadsheets, word processing files, contracts, purchase orders, social media posts and any other communication or information that might be useful in a civil legal action. By extension, e-discovery can extend to anything on which ESI is stored: desktop computers, laptops, smartphones, tablet computers, backup tapes, servers of all types, and even employees’ home computers and other personally owned devices. ELECTRONIC DATA STORES ARE PROLIFERATING Organizations of every size create, receive and store enormous and growing amounts of information. For example, consider the following: • The total amount of digital information created worldwide grew from 494 billion gigabytes in

2008 to 800 billion gigabytes in 2009 to 1.2 zettabytes (1,200 billion gigabytes) in 2010iii. This represents growth in digital content of 50% or more, even during a year marked by a significant worldwide recession.

• IDC’s estimate of the total number of business-to-business and business-to-consumer

transactions by 2020 will be 450 billion each dayiv. • IBM estimates that 15 petabytes of data is created every dayv. • The American Records Management Association (ARMA) has estimated that more than 90%

of records created today are electronicvi. • More than 70% of electronic information is never printedvii.

Complicating the sheer growth of data is the fact that data is stored in a large number of repositories in most organizations, ranging from IT-managed servers to employees’ personally owned smartphones, as shown in the following figure from an Osterman Research survey conducted in February 2011viii.



Location of Electronic Content in Mid-Sized and Large Organizations

Unified communications and unified messaging systems will make these problems much worse as they add additional content to the already crowded mix of data types that organizations must retain and manage. Moreover, organizations of all types are generating and using newer types of electronic content at an ever increasing pace. These types of content include collaboration-related content created by document management and collaboration tools; social media tools like blogs, LinkedIn, Twitter, Facebook and other social media; new types of electronic content like digital media and new software programs; structured data sources like databases; and the other content types that are emerging or will be created during the next few years, such as the growing variety of cloud-based offerings that are increasingly used in a business context, such as Salesforce.com, cloud-based storage repositories (e.g., Dropbox and SugarSync), hybrid cloud tools (e.g., StorSimple), etc. ELECTRONIC DATA HAS BECOME MORE IMPORTANT FOR DISCOVERY While discovery has focused traditionally on paper documents, over the past several years ESI has become a much more important component of discovery for the simple reason that a growing proportion of corporate content is electronic and never meets paper. For example:



• ESI can be changed very easily, in many cases modified simply by turning a computer on and off.

• ESI is normally stored in much greater volume than are hard copy documents.

• ESI can be incomprehensible when separated from the systems that created it.

• ESI contains non-apparent information, or metadata, that describes the context of the

information and provides other useful and important information.

ESI consists of a large number of data types, as noted earlier, that may be in any number of locations: • Collaboration systems like SharePoint® • Real-time communication systems like Sametime • Repositories of structured and unstructured data • Email systems • Social media data stores in the cloud or stored locally • Employees’ home computers • Corporate and employee-owned smartphones • Tablet computers (e.g., Apple iPad, Dell Streak, etc.) • Corporate wikis and blogs • Desktop computers • Laptop computers • File servers • USB storage devices (e.g., flash memory sticks, iPods, etc.)

While email is often the primary source of content in most organizations, there are many other content types – and locations in which it might be stored – that organizations must include among their discoverable content sources. Archiving all of this content without a true archiving system is a challenge for many organizations for a number of reasons: they must the determine where all of their content is located (no easy feat in any organization, let alone a distributed one), they must back up this data to a central location or have ready access to it when required, and they must extract content from backup tapes or disk – an arduous task for IT even under good circumstances.

Organizational Requirements THE GROWING IMPACT AND MATURITY OF THE FRCP The Federal Rules of Civil Procedure (FRCP) are a body of rules focused on governing court procedures for managing civil lawsuits in the United States district courts. While the United States Supreme Court is responsible for overseeing the FRCP, the United States Congress must approve these rules and any changes made to them.

A number of important and substantive revisions to the FRCP went into effect in December 2006. The modifications represented many years of debate at various levels and had a major

While email is often the primary source of content in most organizations, there are many other content types – and locations in which it might be stored – that organizations must include among their discoverable content sources.



impact on electronic discovery within US-based organizations. Many companies have responded to these changes by improving their information management and e-discovery practices, although many have not. The changes to FRCP Rules 16, 26, 33, 34, 37, 45 and revisions to Form 35 are aimed specifically at Electronically Stored Information (ESI). The amendments attempt to deal with the important issues presented by ESI, including:

The changes reflect the reality that discovery of email and other ESI is now a routine, yet critical, aspect of virtually every litigated case. As a result, decision makers need to keep in mind that: • ESI is treated differently than paper-based data. • The FRCP rules now require early discussion of, and attention to, electronic discovery. • Organizations should address the inadvertent distribution of privileged or protected

materials.

• Organizations must now focus on a two-tiered approach to discovery: they must first deal with reasonably accessible information and then later focus on less accessible data.

• Finally, the new rules can provide a safe harbor from sanctions by imposing a good faith

requirement. THERE ARE SEVERAL THINGS THAT ORGANIZATIONS MUST DO The FRCP, as well as recent court decisions focused on the discoverability of data, essentially requires organizations to do several things in the context of their e-discovery capabilities: • Impose legal holds when required to do so

When a litigation hold on data is required, it is imperative that an organization preserve all relevant data, such as all email sent from senior managers to specific individuals or clients, word processing documents that may contain corporate policy statements, and so forth. Serious consequences can result from failure to preserve potentially relevant evidence. Courts have discretion to impose a variety of sanctions, including fines, additional costs for third parties to review or search for data, or even criminal charges. At a minimum, an organization that cannot produce data when required will suffer a damaged corporate reputation.

• Respond to e-discovery requests quickly

Rule 26(a)(1) of the FRCP requires that organizations have a good understanding of their data and are able to discuss it ahead of the initial pre-trial discovery meeting – Rule 16(b) requires that this meeting take place within 99 days from the commencement of a legal action. In essence, any organization must identify all of its available and relevant electronic information in slightly more than three months after a legal action begins, a difficult task for organizations that have not planned ahead for such an eventuality. However, sometimes organizations have much less time than this to produce the required



information. For example, in the case of Best Buy v. Developers Diversified Realtyix, the judge in the case ruled that the latter had to produce electronic content within just 28 daysx.

• Determine what is and is not accessible Every organization involved in civil litigation must also determine what it can and cannot reasonably produce. If an organization determines that certain electronic content cannot be produced because it is not reasonably accessible or it is too expensive to produce, Rule 26(b)(2)(B) still requires that information about this content must be provided. This might include, for example, information describing content on backup tapes that is in a format that can no longer be read because the equipment that could access the information is no longer in use. This further implies that ESI must be preserved even if it is not reasonably accessible.

• Discover an ever-expanding base of content

As noted above, complicating the issue further is that there is a large and growing number of data types and platforms on which this data may be stored. As organizations deploy new collaboration systems and data stores, and particularly as they migrate data to cloud-based service offerings with unknown storage systems, the task of finding, categorizing and producing this content will become more difficult in the absence of good archiving and e-discovery tools.

KEY E-DISCOVERY ISSUES IN THE COURTS There are a number of lessons that organizations can take from court decisions about what to do – and what not to do – in the context of e-discovery. Following are some notable cases that can shed light on best practices when considering how to plan for e-discovery: • Backup tapes are not sufficient for e-discovery

In the case of Johnson v. Neimanxi, the defendant argued that it should not have to produce email messages that were stored on 5,880 backup tapes. Given that it would have required 14,700 person-hours to catalog and restore each tape, and that an additional 46.7 days would have been required for the creation of .PST files, the defendant argued this data was not reasonably accessible. Fortunately for the defendant, the judge in the case agreed. However, a judge could easily have determined that this content should have been archived and ordered the defendants to produce the requested data – at enormous cost.

• A failure to preserve ESI can lead to sanctions

In the case of Pension Committee of University of Montreal Pension Plan v. Banc of America Securities, LLCxii, the Court issued sanctions against parties that did not adequately preserve ESI, citing the “gross negligence” of their actions. This ruling was made even though the judge found that there was no evidence of bad faith on the part of those who did not preserve the required ESI.

As organizations deploy new collaboration systems and data stores, and particularly as they migrate data to cloud-based service offerings with unknown storage systems, the task of finding, categorizing and producing content will become more difficult in the absence of good archiving and e-discovery tools.



• Social media content may be discoverable In the case of EEOC v. Simply Storage Management LLC, et al.xiii, the Court ordered that relevant (but not all) information for two plaintiffs in a sexual harassment case had to be produced from their Facebook and MySpace accounts, including their relevant password-protected and friends-only content.

• Winning a case can still lead to sanctions

In the case of Keithley v. Homestore, Inc.xiv, Keithley won on summary judgment, but was still required by the Court to pay $283,000 in fees for failing to preserve and produce required electronic evidence.

• Do not intentionally delete data that might need to be produced

In Ameriwood Ind., Inc. v. Liebermanxv the defendants deleted electronic content and used disk-scrubbing software on a number of hard drives shortly before they were to be provided to a forensic expert in a case involving misappropriation of trade secrets. The court entered a judgment for the plaintiff and ordered the defendant to pay the plaintiff’s attorney fees and other costs.

• Metadata may need to be produced

Judge Shira Scheindlin, who ruled in the landmark Zubulake v. UBS Warburg case, issued an important ruling in February 2011 that will have important ramifications for the use of metadata. In National Day Laborer Organizing Network v. U.S. Immigration and Customs Enforcement Agency,xvi Judge Scheindlin a) stressed the importance of metadata in her ruling that “certain key metadata fields are an integral part of public records,” and b) that counsel must “make greater efforts to comply with the expectations that courts now demand…with respect to expensive and time-consuming document production.”

• Home computers may constitute part of your discoverable content

In Orrell v. Motorcarparts of America, Inc.xvii, the Court ordered the production of a plaintiff’s home computer for forensic examination.

The Benefits of Sound E-Discovery

LITIGATION CAN BE MORE EFFICIENT WITH THE RIGHT CAPABILITIES Good e-discovery systems, services and tools can help an organization respond to legal actions more effectively. E-discovery tools will help organizations to understand what content they have available and what is not reasonably accessible. The right tools can also streamline the e-discovery process and help organizations respond more quickly and at lower cost. GOOD E-DISCOVERY CAN PROMOTE PROACTIVITY, NOT REACTIVITY Any organization should deploy sound e-discovery capabilities that include the ability to index content, search for it, allow it to be tagged or classified, impose legal holds quickly and with the confidence that all relevant data is being held, and find content that may not have already been archived (e.g., data on mobile devices). The right e-discovery capabilities can help an organization to be proactive in two key ways:



• A focus on good e-discovery and related tools, practices and infrastructure can help avoid legal actions altogether by ensuring that, through the use of good search capabilities and analytics, corporate policies are being followed on a continual (and, perhaps, near real-time) basis. This allows an organization to monitor employee behavior on an ongoing basis to look for potentially actionable statements or activities, and to adjust corporate policies on-the-fly to minimize the potential for legal action.

• In cases where a legal action has already commenced,

robust e-discovery capabilities can help in early case assessment so that decision makers can understand their legal position early on, at times to an organization’s advantage over the opposition. This might include reviewing the likelihood of victory very early in the case, allowing an organization either to settle quickly and avoid significant legal fees or an adverse judgment; or giving decision makers confidence that they can prevail and thereby minimize the likelihood of an adverse judgment. Having the right tools lets decision makers focus on the merits of the case instead of the process, and reduced costs lets an organization fight the case instead of the cost of the e-discovery process.

In summary, the right e-discovery capabilities can help decision makers to make better, well informed decisions, thereby minimizing the negative impact of a legal action. This can lead to lower legal fees, the reduced likelihood of court-imposed sanctions, and reduced disruption to normal business operations. REDUCING THE COST OF EMAIL, BUSINESS MANAGEMENT AND RECORDS MANAGEMENT Good e-discovery capabilities can also help an organization reduce the overall costs of managing email content, records and the business itself. These benefits include: • Reducing the length of the e-discovery process, which can result in hard cost savings of

internal staff time.

• Avoiding many of the costs associated with external legal counsel expenses simply because of the reduced requirement for human review of content that is flagged for review.

• Reducing other related costs, including legal judgements, fines, and public relations damage from negative press.

• Reducing the cost of backing up content by moving older, unstructured data such as email,

to data archive systems. • All of these will mitigate risk and reduce the overall cost of managing the business by

eliminating much of the activity that normally takes place as part of e-discovery.

The right e-disc-overy capabilities can help decision makers to make better, well informed decisions, thereby minimizing the negative impact of a legal action. This can lead to lower legal fees, the reduced likelihood of court-imposed sanctions, and reduced disruption to normal business operations.



An IT perspective on the benefits of good e-discovery capabilities is their ability to reduce storage management problems for email and other types of business records. Osterman Research has found in numerous surveys that most of the serious problems involved in managing email systems, for example, are storage-related, including problems like large attachments sent through email, growing use of attachments and email itself, and storing large volumes of older content on primary storage systems connected to live email servers. These are benefits that can be realized in the management of other types of records, as well, since this content can also be migrated to less expensive archival storage. The right archiving, litigation hold and related solutions can significantly reduce storage costs and provide a number of other email management benefits well beyond just e-discovery.

Other E-Discovery Issues to Understand Beyond the FRCP FEDERAL RULES OF EVIDENCE The Federal Rules of Evidence (FRE), formally enacted in 1975, are a set of rules that determine how evidence is presented during trial in the US federal courts. These rules are focused primarily on the initial presentation of evidence during trials. Individual states may use these rules as the basis for their own rules of evidence, or they may adopt a different set of rules for presenting evidence at trial. It is important to note that for purposes of presenting evidence, a printed or otherwise human-readable version of electronic evidence is considered to be an original and can be presented at trial according to FRE Rule 1001(3). Despite the admissibility of electronic evidence in court proceedings, the authenticity of electronic records is a major issue that many organizations have not considered adequately. A classic case in point is Vinhnee vs. American Express Travel Related Services Company, Inc. In this case, American Express sought payment for more than $40,000 in charges on two credit cards from a California resident who had filed for bankruptcy protection. However, because American Express could not prove the authenticity of the electronic statements it presented during trial, it lost the case even without the plaintiff being present. Authentication is a key part of the e-discovery process because its goal is to prove that a document is what its presenter claims it to be – a true and verifiable representation of an electronic document. Authentication for electronic content is even more critical than for paper-based documents, since electronic documents are more easily altered. For example, an attorney may need to depose a witness who can verify the authenticity of an electronic document, a signature block in an email can be used to provide authenticity, or each party in a legal action can agree to stipulate that electronic records will be considered authentic. Atkinson-Baker has written a good overview of the authentication requirements for electronic recordsxviii. Proving the authenticity of content is one of the more important benefits of an archiving solution, since the right solutions will provide a verified audit trail showing who accessed archived content and when it was accessed. An important case, albeit one from 2007, that deals with the authenticity of ESI is Lorraine v. Markel American Insurance Co.xix This case involved a dispute between the owner of a ship that had been struck by lightning and the insurer of the ship. Although the insurance company



paid for the damages, the ship’s owner subsequently found additional damage and made a second claim, which the insurance company disputed. During arbitration, the damages awarded to the plaintiff were reduced by $22,000. While both parties presented email evidence during arbitration, Chief Magistrate Judge Paul W. Grimm who presided over the case found that the email evidence presented could not be authenticated. In his ruling, the judge wrote:

“…there are five distinct but interrelated evidentiary issues that govern whether electronic evidence will be admitted into evidence at trial or accepted as an exhibit in summary judgment practice. Although each of these rules may not apply to every exhibit offered…each still must be considered in evaluating how to secure the admissibility of electronic evidence to support claims and defenses. Because it can be expected that electronic evidence will constitute much, if not most, of the evidence used in future motions practice or at trial, counsel should know how to get it right on the first try.” “computerized data ... raise unique issues concerning accuracy and authenticity ... The integrity of data may be compromised in the course of discovery by improper search and retrieval techniques, data conversion, or mishandling.”

In short, Judge Grimm ruled that for ESI to be approved for use as evidence, a variety of FRE rules must be taken into consideration, including Rules 104, 401, 403, 801, 901, 902 and 1001-1008. THE ELECTRONIC DISCOVERY REFERENCE MODEL (EDRM) The Electronic Discovery Reference Model (EDRM) Project, diagrammed in the following figure, was a response to the relatively few standards and lack of generally accepted guidelines for the process of e-discovery that existed prior to its development. The team that developed the EDRM was facilitated by George Socha (Socha Consulting LLC) and Tom Gelbmann (Gelbmann & Associates), and included 62 organizations, among whom were software developers, law firms, consulting firms, professional organizations and large corporations.

The Electronic Discovery Reference Model (EDRM) Project was a response to the relatively few standards and lack of generally accepted guidelines for the process of e-discovery that existed prior to its development.



Electronic Discovery Reference Modelxx

Started in May 2005, the EDRM Project had as its goal the creation of a framework for the “development, selection, evaluation and use of electronic discovery products and services”. The EDRM, which was placed into the public domain in May 2006, is designed to help organizations manage the process of e-discovery from the initial stages of managing electronic information through to its presentation. The development of the EDRM was important because it represented a major step forward in the standardization of the e-discovery process. Standardization will become increasingly important for e-discovery for several reasons, most notably because of the growth in quantity and diversity of ESI and the large number of entities that will need to process this data (internal and external legal counsel, senior managers, archiving solution vendors, cloud-based IT managed services, outside forensics firms and others). Following development of the EDRM was the EDRM XML project in the 2006-2007 timeframe. The goal of this project was to “provide a standard, generally accepted XML schema to facilitate the movement of electronically stored information (ESI) from one step of the electronic discovery process to the next, from one software program to the next, and from one organization to the next. The EDRM XML 2 project continued the development of the EDRM XML schema for metadata, developing protocols for the number of electronic files that are preserved in their native format, and developing a compliance validation tool, among other projects. EDRM SECTIONS The EDRM is divided into nine sections that focus on the process of managing an e-discovery effort: • Information Management

This, the initial phase of the EDRM process, focuses on managing electronic content in such a way that an organization can prepare for e-discovery should that become necessary. The



goal of Information Management in an EDRM context is to minimize the risk and cost associated with the entire process of e-discovery. Managed properly, this step can dramatically reduce the effort required in the subsequent phases of the EDRM process.

• Identification Understand the “inventory” of ESI that might be relevant in a particular legal action and that might have to be presented during discovery. At this point in the process, discovery demands, disclosure obligations and other pertinent claims and demands are reviewed and considered. The goal at this stage of the process is to understand the universe of information that might be required in order to respond to appropriate ediscovery requests and then determine the subset of information that will be relevant for further processing.

• Preservation

This is a critical step that ensures that ESI is protected from spoliation and modification, such as through the imposition and enforcement of a legal hold on all relevant ESI. If spoliation does occur, the consequences can be expensive. For example, in the case of Leon vs. IDX Systems Corporation [2006 U.S. App. LEXIS 23820 (9th Cir. Sept. 20, 2006)], the plaintiff deleted 2,200 files from the laptop computer his employer had issued to him. The court dismissed the case and awarded the defendant $65,000 for the spoliation.

• Collection During this phase, all relevant ESI is collected from the various sources that contain it, including messaging archives, backup tapes, file servers, desktops, laptops, employees’ home computers, smartphones and other sources.

• Processing At this point, collected data should be de-duplicated in order to reduce the amount of data that must be processed during subsequent phases of the discovery process. Collected data should also be prioritized into a) that content that will likely be relevant later in the process and b) content that will likely not be relevant. At this point, decision makers may want to convert ESI into a form that will permit the most efficient and thorough review of its contents.

• Review The review phase includes redacting ESI as appropriate, evaluating the content for its relevance, determining if specific items are subject to attorney-client privilege, etc.

• Analysis This phase involves a variety of activities, including determining exactly what the ESI means in the context of the legal action at hand, developing summaries of relevant information, determining the key issues on which to focus, etc.

• Production The production of data involves delivering the relevant ESI to any parties or systems that will need it. It also includes the activities focused on delivering ESI in the appropriate form(s), including DVDs, CD-ROMs, paper, etc.



• Presentation The presentation of ESI is a key consideration at various points of the e-discovery process – as information is reviewed, analyzed, produced, etc. The specific forms of presentation for ESI will vary widely depending on the content; how, where and by whom the content will be presented; and other factors.

THE INFORMATION MANAGEMENT REFERENCE MODEL (IMRM) It is also important to mention here the Information Management Reference Model (IMRM), the goal of which is to “offer guidance to Legal, IT, Records Management, line-of-business leaders and other business stakeholders within organizations. The [IMRM] Project seeks to facilitate dialogue among these stakeholders by providing a common language and reference for discussion and decision-making based on the needs of the organization.xxi” In essence, the IMRM is designed to bring the same level of attention and discussion to information management that the EDRM has brought to e-discovery. Moreover, a key benefit of the IMRM model, and the one that will make it most effective, is that it is designed to bring together all stakeholders in an organization: legal, IT, senior managers, records managers, etc. Information Management Reference Modelxxii



STATE LAWS BASED ON THE FRCP The FRCP represents only the tip of the iceberg: many US states already passed, or will soon pass, their own version of the FRCP for civil litigation that takes place within their respective state court systems, as shown in the following figurexxiii. Status of US States’ Adoption of FRCP Requirements

LAWS OUTSIDE OF THE UNITED STATES While e-discovery in North American legal proceedings is difficult enough, laws in other parts of the world can significantly complicate e-discovery (often referred to as “e-disclosure” outside of the United States). For example: • Canadian e-discovery practices are not as well defined as they are in the United States

given, in large part, to the latter’s greater propensity for civil litigation. However, the requirements for e-discovery are quite similar and are governed primarily by provincial, not federal, rules of civil procedure.

• Australia’s Supreme Court of Victoria, in its Practice Note No. 1 of 2007 (February 2007),

strongly suggested that parties to a legal action should consider using technology to improve the efficiency of legal proceedings, including e-discovery. The Federal Court of Australia has gone further and developed e-discovery rules similar to those contained in the new amendments to the FRCP.

• The European Commission Directive 95/46/EC, adopted in October 1995, was designed to

standardize the protections for data privacy among all of the member states of the



European Union and to protect individuals’ right to privacy. The Directive focuses on the processing of individual’s data within the EU, but also applies to any entity outside of the EU to whom this data might be provided, such as during an ediscovery exercise. The Directive does not permit data to be provided to anyone whose national laws do not adequately safeguard privacy rights.

• France imposes even more stringent requirements than Directive 95/46. French Penal Code, Law No 80 – 538 imposes fines and/or jail time for those who seek, request or disclose information intended to develop evidence for foreign legal proceedings.

• India’s Technology Act of 2000 modified the country’s rules

of evidence, effectively expanding the scope of electronic data in e-discovery efforts and widening parties’ obligations for producing electronic data.

Blocking statutes, such as the French law noted above, have been in place for many years in various countries and were enacted specifically to block discovery proceedings. For example, blocking statutes exist in Ontario, Canada (Business Records Protection Act), the United Kingdom (The Shipping and Commercial Documents Act) and the Netherlands (Economic Competition Act). The key issue to keep in mind with regard to blocking statutes is that even though data has been found, it may not be usable.

Next Steps GET EVERYONE ON THE SAME PAGE Does your IT management know the name of your organization’s chief legal counsel? Does legal counsel know the name(s) of your senior IT managers? Establishing this “legal-IT handshake” is a critical first step toward developing an effective e-discovery strategy. Having each group familiarize itself with the requirements of the other will go a long way toward helping an organization develop an effective e-discovery plan. For example, while IT may perceive that all legal counsel needs is a robust search capability for electronic content, the reality is that the legal workflow is more complex than that, and includes search, creating internal workflows for content, review of the discovered content, marking up the relevance of records, exporting data sets for use in forensics analysis tools, sending to external counsel for review, and taking things to the point of production (such as going through the Bates numbering process to identify data). UNDERSTAND THAT BACKUP TAPES WILL NOT SUFFICE FOR E-DISCOVERY It is critical to acknowledge that backups and archives are not interchangeable. While both are important best practices for any organization to follow, backups are designed for tactical, short-term preservation of content in order to restore servers after a crash or system fault; while archives are strategic tools designed to preserve information for long periods.

Does your IT management know the name of your organization’s chief legal counsel? Does legal counsel know the name(s) of your senior IT managers? Establishing this “legal-IT hand-shake” is a critical first step toward developing an effective e-discovery strategy.



Virtually all organizations perform regular backups of their email system, file servers and other data repositories. While many organizations believe that these backups constitute an “archive” of their business information, this is not the case. A traditional backup takes periodic snapshots of active data so that deleted or destroyed records can be recovered, such as after the failure of a server’s hard disk or an application upgrade gone awry. Most backups are retained typically for no more than 60 to 90 days as subsequent backups on tape or disk are recycled or overwritten. There are a variety of critical problems associated with using backups as an archive, including the fact that backups constitute unprocessed content and lack any sort of indexing, the integrity of backup tapes is not guaranteed, and because backups capture a snapshot of data, information generated and deleted between backups will not be captured. Further, searching through backup tapes for e-discovery purposes can be extremely expensive. For example, in the case of Radian Asset Assurance, Inc. v. College of the Christian Brothers of New Mexicoxxiv, the defendant estimated that the cost to search through 50.5 backup tapes would be $420,315, or an average of $8,323 per tape. APPRECIATE THE IMPORTANCE OF GOOD E-DISCOVERY PRACTICES It is also important to understand that e-discovery is critical to any business or organization, not just enterprises or organizations that serve “litigious” markets. A variety of laws and other requirements, as well as common e-discovery risks and scenarios, can apply to any business of any size in any industry. Moreover, every organization will have a unique mix of policies, processes, business operations, and technologies that may increase its particular risks in the context of civil litigation. As a result, an accurate baseline snapshot of e-discovery and corresponding expenditures today within an organization will help its decision makers to develop, priortize, and justify changes and investments moving forward. FOCUS ON POLICIES FOR RETENTION – AND DELETION It is critical to establish data retention and deletion schedules for all content types, a practice that many organizations do not pursue with sufficient urgency. It is important for any organization to retain all of the electronic data that it will need for current and anticipated e-discovery and other retention requirements. However, many organizations, either by overspecifying the amount of data they must retain and/or not establishing appropriate data deletion policies, retain more information than is necessary, creating greater and unnecessary liability. This can result in dramatically higher e-discovery costs because more data is retrieved and must be reviewed, as well as unnecessarily high storage costs. It is important for any organization to have its legal team work with IT to conduct a review and ensure compliance with regulatory and statutory requirements. Data classification here is a critical step – decision makers must define what needs to be retained, what can safely be deleted, and the disposition method to be used. If a legal action is “reasonably anticipated”, it is vital that an organization immediately begin to identify and preserve all relevant data. For example, a claim for a breached contract with a contractor might require preservation of emails and other electronic documents between employees and the contractor, as well as between employees talking about the contract or the contractor’s performance. A properly configured e-discovery and data archiving capability will



allow organizations to immediately place a hold on data when requested by a court or regulator or on the advice of legal counsel, and retain it for as long as necessary. Litigants that fail to preserve or hold ESI properly are subject to a wide variety of consequences, including reputational harm, additional costs for third-parties to review or search for data, court sanctions, directed verdicts or instructions to a jury that it can view a defendant’s or plaintiff’s failure to produce data as evidence of culpability. An adequate legal hold capability must include technologies and practices that will enable these holds to be imposed, because relying on individuals to hold data may not be sufficient in many cases. Two notable cases in this regard include: • Green v. Blitz USA, Inc.xxv

Blitz put in charge of its discovery an individual who was not qualified and who was personally vested in the casexxvi. After key documents were not discovered in this case, but were discovered in another case one year later, the judge a) issued a $250,000 civil contempt sanction against Blitz, b) ordered the company to inform plaintiffs from the past two years about the sanction, and c) to include a copy of the sanction memorandum in every case in which it will be involved during the next five years.

• Jones v. Bremen High School Districtxxvii

The plaintiff filed an Equal Employment Opportunity Commission charge in October 2007xxviii. The defendant did not issue a litigation hold, but did instruct three individuals in the District to search through email and save relevant messages. However, destruction of ESI continued and only one year after the case was filed did the District implement automated email archiving. Only in Spring 2009 did the defendant instruct its employees to retain emails that might be relevant to this case. The judge in this case did not issue an adverse inference instruction to the jury, but did instruct them that a lack of relevant emails was not evidence that they did not exist. Further, the District had to pay for the cost of court report when witnesses were deposed about recently created emails, and they had to pay the plaintiff’s costs associated with preparing a motion for sanctions.

DEPLOY THE RIGHT DATA MANAGEMENT TOOLS Finally, deploy the storage systems and software tools, services or other capabilities that will enable proactivity in the context of e-discovery. As discussed above, these capabilities will ensure that all necessary data is accessible and reviewable early in the lifecycle of a case. The right technology will help an organization to classify data as it is created and then to discover content wherever it exists. These can include, but are not limited to, email servers, file servers, local computers, and other sources like mobile devices. Good tools will also create a complete e-discovery repository and deduplicate the data. For example, single-instance storage or file/block deduplication applications can reduce the size of some data stores and significantly streamline the entire e-discovery process.



Summary E-discovery is conceptually simple, but it can be practically difficult if organizations do not plan for it accordingly by implementing sound practices and technology to manage their data. In short, a discussion about e-discovery needs to focus on five key issues: • Understand all of the legal and regulatory obligations to preserve content in every

jurisdiction in which an organization operates. Set up procedures and clearly defined processes within your organization to determine what information is critical to retain and the necessary retention time periods.

• Know where all critical business content is located in the organization, including the “unofficial” repositories like employees’ personally owned smartphones, their home computers or department’s use of cloud-based services.

• Preserving every piece of electronic content is a temptation for many stakeholders, but one

that will drive up the cost of e-discovery unnecessarily and make retention impractical. Organizations should save what they will need, delete what they can, and store content where it will be easily accessible.

• As a corollary to the point above, the right amount of content must be produced – too little content can lead to charges of spoliation, but too much can drive up legal and IT costs unnecessarily.

• Retain all of the content that might be required during legal actions, including the ability to

place an immediate legal hold on data that might need to be preserved, but that may not currently be included in a retention schedule.

• Implement data management and archive capabilities that will enable retrieval and presentation of the required content including metadata associated with the content.

Finally, it is important to keep in mind that e-discovery is not just about finding content, but what can be done with it once it has been found.



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© 2011 Osterman Research, Inc. All rights reserved. No part of this document may be reproduced in any form by any means, nor may it be distributed without the permission of Osterman Research, Inc., nor may it be resold or distributed by any entity other than Osterman Research, Inc., without prior written authorization of Osterman Research, Inc. Osterman Research, Inc. does not provide legal advice. Nothing in this document constitutes legal advice, nor shall this document or any software product or other offering referenced herein serve as a substitute for the reader’s compliance with any laws (including but not limited to any act, statue, regulation, rule, directive, administrative order, executive order, etc. (collectively, “Laws”)) referenced in this document. If necessary, the reader should consult with competent legal counsel regarding any Laws referenced herein. Osterman Research, Inc. makes no representation or warranty regarding the completeness or accuracy of the information contained in this document. THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. ALL EXPRESS OR IMPLIED REPRESENTATIONS, CONDITIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARE DISCLAIMED, EXCEPT TO THE EXTENT THAT SUCH DISCLAIMERS ARE DETERMINED TO BE ILLEGAL. i Litigation Cost Survey of Major Companies, Searle Center on Law, Regulation, and Economic Growth, 2010 ii No. 05-CV-1958-B(BLM), 2007 WL 2296441 (S.D. Cal. August 6, 2007) iii http://wikibon.org/blog/cloud-storage/ iv http://wikibon.org/blog/cloud-storage/ v http://www-01.ibm.com/software/ebusiness/jstart/downloads/RaleighInternetSummit2010.pdf vi http://records.jard.gov.jm/news/58-records-a-information-management-month.html?showall=1 vii http://discoverready.com/wp-content/uploads/eDiscovery-Background-and-Best-Practices.pdf viii Content Archiving Market Trends, 2011-2014, Osterman Research, Inc. ix 636 F.Supp.2d 869 (2009) x http://www.inboxer.com/downloads/Whitepaper_FRCP.pdf xi 2010 U.S. Dist. LEXIS 110496 (E.D. Mo. Oct. 18, 2010) xii 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) xiii Case No. 1:09-cv-1223-WTL-DML xiv 2008 U.S. Dist. LEXIS 61741 (August 12, 2008) xv 2007 WL 5110313 (E.D. Mo. July 3, 2007) xvi http://ralphlosey.files.wordpress.com/2011/02/ndlon-v-ice-10-civ-3488-metadata-foia_revised.pdf xvii 2007 WL 4287750 (W.D.N.C. Dec. 5, 2007) xviii http://www.depo.com/resources/aa_thediscoveryupdate/authenticating_email.html xix 2007 U.S. Dist. LEXIS 33020 (D. Md. May 4, 2007) xx Source: EDRM (edrm.net) xxi http://edrm.net/resources/guides/imrm xxii Source: EDRM (edrm.net) xxiii http://www.krollontrack.com/library/staterules_krollontrack_nov2010.pdf xxiv 2010 WL 4928866 (D.N.M.) xxv 2011 U.S. Dist. LEXIS 20353 (E.D. Tex. Mar. 1, 2011) xxvi http://www.kazeon.com/blog/2011/04/the-high-cost-of-self-collection/ xxvii Dist. 228, 2010 WL 2106640 (N.D. Ill. May 25, 2010) xxviii http://blog.legalholdpro.com/2010/06/10/northern-district-of-illinois-makes-its-own-way-with-opinion-echoing-need-for strong-legal-holds/