UNIVERSITY OF HOUSTONSUMMER III 2010 – 5297 E-DISCOVERY

First Responses – Pitfalls and Practical Tips

Overview of The Week

Building on The Duty of Preserve Zubulake v. UBS Warburg Coleman Holdings v. Morgan Stanley Other cases

Litigation Holds Current state Best Practices A word on project management

United Medical Supply Co. v. United States (2007)

“Aside perhaps from perjury, no act serves to threaten the integrity of the judicial process more than the spoliation of evidence.”

“Our adversarial process is designed to tolerate human failings -erring judges can be reversed, uncooperative counsel can be shepherded, and recalcitrant witnesses compelled to testify. But, when critical documents go missing, judges and litigants alike descend into a world of ad hocery and half measures--and our civil justice system suffers.”

Electronic Discovery Life Cycle

Identification

Preservation

Collection

Processing

Review Production

Analysis

RiskManagement

RiskManagement

CostContainment

CostContainment

Presentation

Zubulake v. UBS Warburg

A total of six decisions.

Zubulake V:

“[c]ounsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched.”

Attorneys are obligated to ensure all relevant documents are discovered, retained, and produced.

Litigators must guarantee that identified relevant documents are preserved by placing a "litigation hold" on the documents, communicating the need to preserve them, and arranging for safeguarding of relevant archival media.

6

A Thought…

“E-Mail is evil… in the same way that Bert is evil.”

In other words, in the electronic era In other words, in the electronic era in which we find ourselves, actions in which we find ourselves, actions can have long range unintended can have long range unintended

effects.effects.

Case in point: Case in point:

Coleman v. Morgan Stanley.Coleman v. Morgan Stanley.

7

Morgan Stanley: Timeline #1

February 20, 1998: Morgan Stanley pitches the success story of Sunbeam.

February 27, 1998: Merger agreement signed.March 18, 1998: Morgan Stanley receives comfort

letter about Sunbeam – detailing expected profits for the first quarter.

March 19, 1998: Morgan Stanley helps write press releases about those expected profits.

March 30, 1998: Sunbeam and Coleman merge.

8

Morgan Stanley: Timeline #1, cont.

Here’s the problem:

March 18, 1998: Morgan Stanley receives comfort letter about Sunbeam – detailing expected profits for the first quarter.

March 19, 1998: Morgan Stanley helps write press releases about those expected profits.

These two contain VERY different information.

9

Morgan Stanley: Timeline #1, cont.

By the end of April 1998, Sunbeam stock is in freefall.

By the end of November 1998, the stock is worthless.

10

The Challenge for Coleman

To prove Morgan Stanley was liable for fraud, Coleman needed to show Sunbeam had defrauded, and Morgan Stanley participated in that fraud.

Not so easy… but…

11

The Verdict

At trial, Coleman was awarded: $605,000,000.00 in compensatory damages; $805,000,000.00 in punitive damages. $208,000,000.00 in interest.

And the interest was still accruing…

And you may ask yourself “Well, how did I get here?”

12

Morgan Stanley: Timeline #2

March 2003: Morgan Stanley tells the court it has no emails to produce.

September 2003: Morgan Stanley acknowledges it has not searched its backup tapes.

December 2003: Coleman files a Motion to Compel. April 2004: Court enters an Agreed Order and Morgan

Stanley produces about 1300 pages. June 2004: Morgan Stanley signs a Certificate of Compliance

and submits to the Court. November 2004: Morgan Stanley sends a letter to Coleman

noting that the previous production was not complete.

13

Morgan Stanley: Timeline #2, cont.

Coleman is unhappy. So is the Court. February 2005:

The Court conducts a series of hearings about what documents are available, when they became available, and where those documents are.

Morgan Stanley provides multiple contradictory statements from the same people with a week’s time.

Some of these statements are to the Court (in hearings and depositions). Some are to the SEC.

The Court remains unhappy. Really unhappy.

14

Morgan Stanley: Timeline #2, cont.

March 1, 2005: Court enters adverse inference order against Morgan Stanley.

(March 10, 2005: Even more recently discovered documents produced. Morgan Stanley has now identified almost 7000 additional backup tapes to be searched.)

March 23, 2005: Court enters default order against Morgan Stanley.

Late March 2005: Morgan Stanley fires its law firm and asks for a continuance to right its ship. The Court remains unhappy.

Pension Committee v. Banc of America

2010 WL 184312 (S.D.N.Y.) (January 15, 2010)The subtitle: “Zubulake Revisited: Six Years Later.”

“By now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records-paper or electronic-and to search in the right places for those records, will inevitably result in the spoliation of evidence.”

Important points: The case looks at preservation and spoliation from the

perspective of the plaintiff The issue: when information that should have been preserved

by the plaintiffs after the lawsuit was filed but was not.

Pension Committee v. Banc of America

Discusses/defines levels of culpability -- negligence, gross negligence, and willfulness in the electronic discovery context, identifying “failures”: the failure to issue a written litigation hold (gross

negligence); the failure to collect information from key players (gross

negligence or willfulness); the destruction of email or backup tapes after the duty to

preserve has attached (gross negligence or willfulness); the failure to obtain records from all employees (some of

whom may have had only a passing encounter with the issues in the litigation), as opposed to key players (negligence);

Pension Committee v. Banc of America

Discusses/defines levels of culpability -- negligence, gross negligence, and willfulness in the electronic discovery context, identifying “failures”: the failure to take all appropriate measures to

preserve ESI (negligence). the failure to collect information from the files of

former employees that remain in a party's possession, custody, or control after the duty to preserve has attached (gross negligence); and

the failure to assess the accuracy and validity of selected search terms (negligence).

Pension Committee v. Banc of America

Discusses who should bear the burden of establishing the relevance of evidence that is lost and who should be required to prove that the absence of the missing material has caused prejudice to the innocent party.

Suggests a burden-shifting test in dealing with burden of proof and severity of the sanction requested.

Provides guidance on preservation of backup tapes.

Rimkus Consulting v. Cammarata

2010 U.S. Dist. LEXIS 14573 (S.D. Tex. Feb. 19, 2010).Judge Rosenthal praised the careful analysis in the

Pension Committee, but she also noted the important differences in viewing claims of alleged negligence versus claims of intentional destruction of evidence.

Notable difference: Rimkus permitted a jury instruction about whether to decide the defendants had acted in bad faith, and, even if they did, whether to draw adverse inferences. Pension Committee had issued a jury instruction that required the jury to accept the court’s finding that the plaintiffs were grossly negligent.

Rimkus Consulting v. Cammarata

The acts included: Deleting emails directly relevant to impending litigation Failing to undertake steps to preserve ESI following the

commencement of litigation Conducting only a ‘‘superficial’’ search, even after numerous

discovery requests and court orders Giving away or destroying laptops that contained ESI Making no effort to identify alternate sources of ESI Providing inconsistent testimony regarding preservation and

spoliation of ESI Producing ESI years after applicable requests Producing a key email in a format that left no indication that

six documents had been attached and were not produced

And on May 28, 2010…

Old sentence: “By contrast, the failure to obtain records from all

employees (some of whom may only have a passing encounter with the issues in the litigation), as opposed to key players, likely constitutes gross negligence as opposed to a higher degree of culpability.”

New sentence: “By contrast, the failure to obtain records from all those

employees who had any involvement with the issues raised in the litigation or anticipated litigation, as opposed to just key players, could constitute negligence.”

And now for some nuts and bolts…

Documenting preservation effort

Org charts, past and present.Interview questionnaires.Treat documents as privileged, but

prepare someone to testify about them.

Document any actual collection that occurs – think “chain of custody.” This issue may be critical at the time of trial.

Basics of a Litigation Hold

The basics of a litigation hold include issuing a hold notice, identifying the right custodians (or key

players),coordinating data identification and

preservation, monitoring the implementation of the

hold, andthen releasing the hold.

Key player interviews

Interviewers: knowledge of the company – people and products – and specific matter.

Be substantive: Who do you work for? Who did you work for? Where are they now?

Be an active listener – learn about the next interview.

Practice Tips

Memorialize each step of the collection and production process to bolster reliability.

Use every opportunity during discovery to authenticate potential evidence. For pretrial disclosures under F.R.C.P. 26(a), you have

14 days to file objections or possible waiver Documents produced by opposing party are presumed

to be authentic – burden shifts Requests for Admissions Request stipulation of authenticity from opposing

counsel

Practice Tips

Be ready to provide with enough information to understand the technology issues as they relate to the reliability of the evidence at hand.

Consider case management tools that might assist in addressing evidentiary problems concerning some of the more complex issues (such as “dynamic” data in a database or what is a “true and accurate copy” of ESI).

Keep your audience in mind.

Turn to Hypothetical on p. 109

Which facts change your opinion on the need to preserve?

When do you start?

Turn to Hypothetical on p. 110

Which facts change your opinion on the need to preserve?

When do you start?

The E-Discovery Process-Overview

PreservationPreservation CollectionCollection AnalysisAnalysis

DiscoveryDiscovery

PlanPlan

ESIESI

ProcessingProcessing

LegalLegal

ReviewReviewProductionProduction

MeetMeet

&&

ConferConfer

Rule 16Rule 16

SchedulingScheduling

ConferenceConference

PHASE 1PHASE 1

COLLECTIONCOLLECTION

& SCOPE& SCOPE

PHASE 2PHASE 2

PLANNING &PLANNING &

NEGOTIATINGNEGOTIATING

PHASE 3PHASE 3

EXECUTIONEXECUTION

PHASE 1 Actions & Decisions

PreservationPreservation CollectionCollection AnalysisAnalysis

1.1. Identify Key PlayersIdentify Key Players

2.2. Publish Lit HoldPublish Lit Hold

3.3. Interview Key PlayersInterview Key Players

4.4. Determine Relevant ESI Determine Relevant ESI Locations with Data MapLocations with Data Map

5.5. Identify Vulnerable ESIIdentify Vulnerable ESI

6.6. Determine Privacy or Determine Privacy or Confidentiality IssuesConfidentiality Issues

7.7. Determine Need for Determine Need for ForensicsForensics

8.8. Notify Opposing Notify Opposing Counsel?Counsel?

1.1. CollectCollect

2.2. Coordinate with Coordinate with CustodiansCustodians

3.3. Maintain Chain Maintain Chain of Custody of Custody RecordsRecords

1.1. Generate ESI Generate ESI Collection Inventory Collection Inventory ReportReport

2.2. Identify File Types of Identify File Types of InterestInterest

3.3. Identify Files where Identify Files where Native is NecessaryNative is Necessary

4.4. Identify non-standard Identify non-standard File TypesFile Types

1.1. Non-IndexableNon-Indexable

2.2. Non-Commercially Non-Commercially usableusable

3.3. Internal ProprietaryInternal Proprietary

Preservation Cost Mgmt Opportunities

PreservationPreservation

1.1. Identify Key PlayersIdentify Key Players

2.2. Publish Lit HoldPublish Lit Hold

3.3. Interview Key PlayersInterview Key Players

4.4. Determine Relevant ESI Determine Relevant ESI Locations with Data MapLocations with Data Map

5.5. Identify Vulnerable ESIIdentify Vulnerable ESI

6.6. Determine Privacy or Determine Privacy or Confidentiality IssuesConfidentiality Issues

7.7. Determine Need for Determine Need for ForensicsForensics

8.8. Notify Opposing Notify Opposing Counsel?Counsel?

Consider tiered KP list with different [less rigorous] search criteria for lower tiers.

Technology tools exist to automate much of this process.

Use of questionnaires in advance of personal interviews

Develop a detailed Data Map internally which can be edited for each matter

If forensic collections are deemed appropriate, consider whether outside collectors are needed.

If you intend to exclude any significant ESI from preservation, consider notifying OSC to limit later

spoliation risk.

Collection Cost Mgmt Opportunities

CollectionCollection

1.1. CollectCollect

2.2. Coordinate with Coordinate with CustodiansCustodians

3.3. Maintain Chain of Maintain Chain of Custody RecordsCustody Records

Consider internal collections. Will

necessitate software, hardware, and people.

Establish protocol for collections from PC’s which is

subject to interruption and can be very time-consuming. Consider whether to do this over the network or locally in

user’s office[s].

Decide if making collection as a means for

preservation is cost-effective.

Perform collections internally with enterprise applications that track

CoC automatically.

Analysis Cost Mgmt Opportunities

AnalysisAnalysis

1.1. Generate ESI Generate ESI Collection Inventory Collection Inventory ReportReport

2.2. Identify File Types of Identify File Types of InterestInterest

3.3. Identify Files where Identify Files where Native is NecessaryNative is Necessary

4.4. Identify non-standard Identify non-standard File TypesFile Types

1.1. Non-IndexableNon-Indexable

2.2. Non-Commercially Non-Commercially usableusable

3.3. Internal ProprietaryInternal Proprietary

Confirm the availability of applications or resources that can generate these reports quickly. These can

be desktop apps, or provided by ED vendors.

Consider using “inclusive” rather than “exclusive” approach. Identify hi-qty file types that can be excluded

[e.g. html]

Quantity of these file types can present significant cost challenges

Non-indexable file types cannot be electronically searched, so special process [e.g. OCR], or costly

human review is necessary

Consider the means to produce these in “reasonably usable” forms.

UNIVERSITY OF HOUSTON

SUMMER III 2010 – 5297 E-DISCOVERY

First Responses – Pitfalls and Practical Tips