While Micro Strategies Inc. was working with Smith, Gambrell and Russell on one of its active corporate litigation cases, firm attorneys Steven E. Brust and Michele F. Martin authored the following discussion. The topic addresses anticipating and preparing your organization for today’s legal obligations, in a world governed by an ever-increasing amount of electronic communications.
Although companies have always had an obligation to preserve and produce documents relevant to a lawsuit, the prevalence of electronic communications in the business community has rendered historical preservation and production techniques insufficient.
In response, the Federal Rules of Civil Procedure were amended in 2006 to address the procedural issues concerning electronic discovery. Unfortunately, the amendments fell short of setting forth a party’s obligations to preserve and produce documents and the consequences for failing to meet those obligations. While bright-line tests were not given, the Rules as amended and subsequent decisions implementing them do provide guidance on some of the obligations a company and counsel have to preserve and produce documents as well as the harsh and creative consequences for failing to do so.
There are three basic data sets that are part of the litigation hold and response process:
- Matter-specific: The initial information collected from throughout the organization based on a rough run at determining the documentation that represents potential evidence.
- Review-specific: The next subset of the initial collection that attempts to cull out documentation that is not responsive to the order or that is considered privileged information. This is the stage that is key to controlling your litigation support costs.
- Production-specific: This represents the actual material that will be turned over to opposing counsel (the requesting party), and is the result of your own legal team’s review of the review-specific data set.
The first two data sets are often referred to as Matter Information Management and Evidence Preservation respectively.
Matter Information and Evidence Preservation Obligations
A company and counsel must distribute a preservation notice and implement litigation holds in order to meet their preservation obligations. Although this sounds simplistic, it can be a daunting task. At the very least, the litigation hold should always include the following steps:
- Distribute preservation notice
- Suspend deletion policies
- Communicate with the information technology and records management personnel
- Interview key witnesses and other record custodians
- Monitor compliance
- Document actions taken
Distribute Preservation Notice
Although drafting, dispersing and communicating a preservation notice seems straightforward enough, the initial implementation can be a trap for the unwary. In order for the notice to be effective, it must be implemented in a timely manner, communicated to the key witnesses and personnel who control data retention. The notice must describe the issues of the potential litigation known at that time and the types of data that must be preserved. In addition, the notice must emphasize that all disposition/deletion and
retention policies must be suspended until the litigation is concluded.
While many companies and counsel consider the distribution of a preservation notice as meeting their obligation to preserve documents, recent court decisions have consistently held that the notice is only the first step.
Along with dispersing the actual preservation notice, counsel should personally communicate the employee’s obligations and effects of the preservation notice and litigation holds.
The preservation notice and litigation holds should also be approached as living entities that must constantly be monitored to make sure that it grows and evolves throughout the litigation. If a new source of relevant information is discovered, the preservation notice should be modified accordingly and resent to the employees. As new employees are identified as having relevant information, the preservation notice must be dispersed and communicated to them as well.
In practice, preservation notices are frequently dispersed after a lawsuit is initiated. However, most litigation holds should be implemented as soon as litigation is reasonably anticipated even if it is prior to the actual initiation of a lawsuit in order to be deemed responsive. Consequently, companies and counsel should establish a policy requiring the implementation of holds as soon as litigation is reasonably anticipated.
Suspend Deletion Policies
Many companies have automatic disposition/deletion policies driven by their in-house counsel’s approved records retention schedule affecting electronic data and hard copy documents. Counsel must ensure that these policies are suspended until the litigation is concluded. Counsel must also ensure that any backup tapes that may have relevant information are obtained and stored by counsel to avoid disposition/destruction or overwriting.
Communicate with the Information Technology and Records Management Personnel
Counsel must have a complete understanding of the types of documents stored, the location of the documents, the duration of storage, whether copies exist, and the document’s accessibility.
To fulfill this obligation, counsel must meet with information technology personnel in order to fully understand how the company’s computer system stores, retrieves and dispositions/deletes data. In addition, counsel must have a complete understanding of the company’s data retention architecture/data map and policies, including systemwide backup procedures and recycling policies. While both corporate and outside counsel’s duties in this respect may be untraditional, they are necessary in order to effectively implement a preservation notice and associated litigation holds.
Counsel must also meet with records management personnel in order to understand the methods and policies under which the company stores, retrieves and disposes of hard copies of documents.
Interview Key Witnesses and Other Record Custodians
Key employees involved in the case must be interviewed by counsel to determine what relevant information they possess and to ensure that such information is preserved. During this exercise, counsel should determine how each individual stores electronic data and his or her compliance with the company’s data retention policies. This opportunity should also be used by counsel to review the preservation notice again with the employee, and obtain a statement that he or she understands and is in compliance. In addition to instructing employees to preserve data, counsel must also act to obtain
copies of relevant active files, archived e-mail and actual backup tapes. Such data should be secured by counsel to avoid any risk of destruction.
Throughout the litigation period, counsel must actively and continuously monitor the company’s compliance with the preservation notice/order and keep it in front-of-mind with those employees involved in the preservation process.
The preservation notice should be periodically reissued as a reminder to individuals that the litigation is still active. It will also be important to make sure the notice is modified as new information sources and witnesses are identified.
Counsel should periodically communicate with information technology personnel in order to be aware of any changes to the company’s computer systems, storage and retrieval software, and ensure continuing compliance with the preservation notice.
Document Actions Taken
At each stage of the litigation process, the company and counsel should document their actions including:
- Why and when the company determined a preservation notice was necessary
- Recipients of the preservation notice
- Steps taken to apply physical or logical hold orders to documents both electronically and in hard copy
- Documents that have had hold orders applied to them
- Basis for selecting certain documents for preservation
- Basis for imposing the preservation notice on certain employees
Such documentation will help establish that the company and counsel met their obligations to preserve documents.
Once the litigation hold orders are in place, companies and counsel must be prepared to respond to discovery requests that include the production of electronically stored information.
A company’s production obligations are broad and allow a party to seek documents relating to any non-privileged relevant matter. The term “relevant” is construed broadly by the courts to encompass information that relates to any issue that may be raised in the case, including information that may lead to the discovery of information. In other words, discovery is not limited to the issues raised by the pleadings in a case. The broad scope of discovery coupled with large volumes of electronically stored information can result in the production of massive amounts of electronic data at significant expense. A company responding to a discovery request will want to face the onerous task of identifying, extracting, reviewing and producing the information in a manner that is cost-effective and does not unnecessarily disrupt the company’s business operations.
One way to minimize disruption and related costs is to exercise control over the scope and form of documents that are subject to production at the very beginning of the case during the discovery conference. The ability of a company to control forms of production will continue up to and including actual production.
Below are tools every company should use in crafting a document production plan.
The Discovery Plan
The discovery plan is a pivotal weapon in a company’s arsenal to control the production of electronically stored information.
Generally, companies are required to provide electronically stored information in native format (the original file format proprietary to a specific version of an application program) and if the native format is not readily searchable, then in an industry standard format (e.g., EDRM/XML) that is readily searchable and transferable. However, the parties can agree to produce documents in other forms pursuant to their discovery plan provided the court agrees to the plan.
For instance, providing data in native format may be unfavorable to the company. Specifically, the company may not want to disclose metadata which includes historical information about the document (e.g., author, creation date, edits, etc.) captured as part of the native format.
Providing data in native format can also result in production problems. For instance, a company cannot edit and/or expunge sensitive information from such documents, assign identifying Bates numbers and designate certain documents as confidential. Production in native format can also lead to a breakdown of the integrity of the documents produced as the document, including the metadata, can be altered by merely opening the document for review. For example, an Excel spreadsheet that includes formulas that automatically update based on the day the document is opened would alter the document as soon as it was accessed.
At the very outset of the case, it is critical that the company understands, not only its own systems and records, but also the issues in the case in order to negotiate the most beneficial discovery plan which may include a non-native, searchable production format such as TIFF.
Identifying all Potential Sources of Information
A company’s preservation obligations typically reach far broader than a company’s actual production obligations. So even though discovery requests are very specific to each case, a company will be able to narrow the sources of information at the time production becomes necessary.
To commence this exercise, the company must be able to document how potentially relevant electronic information is transmitted and stored for each employee or groups of employees identified as being in possession of such information.
Effective Extraction of Electronically Stored Information
Once the sources of potentially relevant information are identified and located, the information must be extracted for review.
A company needs to assess whether there are systems in place which will be able to identify the locations of potentially relevant information and segregate, copy and index such information including its metadata. If the correct systems are not in place, this process can be costly, disruptive and time consuming.
Decreasing the Electronically Stored Information that Must Be Searched
The amount of potentially relevant electronically stored information can be staggering and many companies may find that they are not equipped to review the information. Various techniques are available to reduce the universe of documents that are subject to review.
Courts have widely accepted the use of key word search terms and Boolean search capabilities; however, the application of key words will inevitably not produce all the relevant information, even if a large volume of key words is applied.
Other search capabilities available to help manage the volume of documents subject to review include; searching by the use of root expanders; clustering documents; de-duplication tools, taxonomy tools, ontology tools, conceptual search tools and fuzzy searches.
Analysis and Production of Metadata
Metadata provides historical information about the document such as creation dates, author, when the file was edited, the author of the edits, the content of the edits and transmission history. Also, in the case of spreadsheets, metadata includes pivotal information such as the formulas embedded within the spreadsheets.
Metadata is an integral component of every document, including e-mail, and is created simultaneously with its associated document. It continues to develop through the life of the document and is finalized upon the last save or transmission of the document. As metadata is integral to the document, the metadata is stored as part as the document in a single data file.
Although metadata is not always subject to production, courts have ordered companies to produce metadata in certain circumstances. As a result, a company needs systems in place in order to produce and analyze metadata prior to production. Specifically, a company should have systems in place that can extract the metadata and index such information in a spreadsheet for easy analysis.
Providing Increased Security for Produced Electronically Stored Information Unlike the production of hard copy documents, which traditionally resulted in opposing counsel reviewing the documents, production in searchable electronic format can result in a review by individuals other than opposing counsel such as information technology specialists, litigation support teams and outside vendors. Therefore, a company should apply security tools to ensure the documents produced retain the
highest level of confidentiality possible. For instance, access to the documents should be granted or denied based on assigned user rights. Also, applications can be applied to preclude attempts to screen capture, copy, send or print documents.
Producing in Viewable/Manageable Formats
A company must have systems in place that index files as separate documents, specify an identifier for each document and organize the documents by the opposing party’s specific requests.
Courts are frequently mandating that a company produce electronic documents in a manageable format. It is not enough to simply search for privileged information for exclusion under non-disclosure through key word applications and then produce the remaining electronic documents. One court commented that such tactics result in “an ocean of production…tantamount to a data dump with an instruction to ‘go fish.'”
Consequences of an Ineffective Litigation Hold and Production Process
Although a company’s obligations to preserve and produce electronic documents seems a daunting task, the consequences for failing to implement an effective preservation notice/litigation hold process and produce documents can be severe. Recent court rulings have shown a trend to issue harsh sanctions against both companies and counsel.
Although courts still issue the more traditional sanctions, (e.g., monetary fines, adverse inferences and default judgments) courts have also used their broad discretionary powers to issue more creative sanctions such as ordering attorneys and the company to attend a discovery obligations class.
However, whether traditional or creative, courts are issuing a wide range of sanctions with much more frequency including:
- Monetary fines
- Striking affirmative defenses
- Prohibiting cross examination of witnesses
- Prohibiting the testimony of witnesses
- Prohibiting the use of certain evidence
- Payment of attorneys’ fees and costs in whole or in part
- Reducing a party’s burden of proof
- Deeming certain facts established
- Providing an adverse inference
- Forwarding the sanctions order to the attorney’s respective bar for an investigation
- Ordering the company and counsel to attend a discovery obligations program
- Rendering patents unenforceable against a party
- Civil contempt charges
- Criminal charges
- Entering a default judgment
Mitigating the Risks and Costs of Litigation
Courts consider the willfulness of the company and counsel when determining the severity of sanctions. By being proactive, companies and counsel can show a court that any alleged action was not willful.
Developing and Documenting Processes
Below are steps every company should implement now in order to ensure compliance with future litigation hold obligations:
- Develop a litigation plan.
- Review the company’s current retention and disposition/deletion policies to ensure they are clear, consistent and enforced.
- Develop a detailed description/data map of the company’s computer system, storage systems and search tools including identification of servers, software and backup systems.
- Develop a policy for human resources and legal personnel establishing their responsibilities regarding preservation notices.
- Develop a preservation notice form that will only require additions as to the specific issues in any future claim.
- Develop a standardized policy outlining the method of dispersing a preservation notice.
- Train the information technology and records management personnel on how to effectively comply with preservation notices and execute litigation hold orders.
- Modify the employee handbook to include a section on preservation notices and litigation holds and include training on this subject during employee orientation.
- Modify the employee handbook and human resources handbook to include a statement expressing the company’s commitment to records and data management compliance.
- Create processes that efficiently locate and segregate documents that may be relevant with minimal disruption to employees.
- Conduct, on a semi-annual or annual basis, an audit of the company’s procedures.
Automating Matter Information Management, Evidence Preservation and Production
For companies faced with a large volume of information, corporate legal departments can control litigation costs and better manage risk through a matter information management system that:
- Stores and preserves all matter-related documents, such as correspondence, case plans, contracts, policies, briefs and precedents, electronic documents and e-mail, in a searchable repository.
- Automates the process.
- Audits the preservation notice communication and litigation hold order process.
This same system should also provide the type of infrastructure that will help ensure compliance with regulatory requirements for preservation of electronically stored information and/or e-mail.
Micro Strategies’ Corporate Solution for Legal Compliance, built on the IBM Enterprise Content Management (ECM) suite of products, offers a scalable and fully integrated platform that eliminates the need for ESI/e-mail information to be manually imported into a separate matter information management solution. Key corporate legal departments requirements addressed include:
- Archiving of aged e-mail for efficient access during the litigation period.
- Crawling network file systems to search and identify relevant ESI/email for automatic ingestion into the matter file management system for preservation.
- Comprehensive storage of all preserved matter-related documents.
- ESI/e-mail search of matter file system for production based on sources of information agreed to in the discovery plan.
- Automated legal hold orders with audit trails for record custodians.
- Automated preservation notifications with audit trails for information systems and records management personnel to prevent data destruction.
- Automatic recurring audits to help ensure adherence to preservation compliance. With the Micro Strategies solution, all functions from corporate legal support to ESI/e-mail archiving to ESI/e-mail search, discovery and production are seamlessly integrated. This enables corporate legal departments to efficiently manage the litigation process, respond to production orders for ESI and impose litigation holds and enforce retention policies.
Courts are sanctioning parties at an increasing rate for electronic discovery deficiencies. As the courts continue to define a party’s obligations regarding the preservation and production of electronic discovery–and the consequences for deficiencies–companies must be proactive to ensure not only that they are compliant if a lawsuit should arise but also to ensure that future litigation is cost-efficient and manageable. Prudent companies will implement an effective eDiscovery plan along with the associated policies and practices now–before litigation arises–to ensure the company can implement an effective preservation notice and litigation hold order process if needed.
Companies should also audit their current systems to determine whether systems are in place to identify, extract and produce electronic information in manageable formats. Although companies may view such actions as unnecessary if litigation is not ongoing or foreseeable, the consequences of not taking action now are reflected in the significant sanctions imposed on companies for electronic discovery deficiencies.
While courts have not provided companies with bright-line tests, the recent trend in court rulings is consistent in one regard–the issue of preservation and production of electronic information is here to stay.
About Micro Strategies Inc.
Established in 1983, Micro Strategies Inc. has distinguished itself as one of the most innovative technology solution providers. As an industry leader, Micro Strategies is at the forefront of architecting and implementing quality technology solutions with a commitment to responsive, client first service.
To learn more on how you can mitigate the risk and cost of litigation through comprehensive matter information management, evidence preservation and production, please contact:
About IBM ECM
As the clear market leader in Enterprise Content Management (ECM), IBM’s ECM solutions help organizations make better decisions, faster by managing content, optimizing business processes and enabling compliance and e-discovery through an integrated information infrastructure. IBM’s ECM portfolio delivers a broad set of capabilities and solutions that integrate with existing information systems to help organizations drive greater value from their content to solve today’s top business
challenges. The world’s leading organizations rely on IBM enterprise content management to manage their mission-critical compliance and e-discovery business content and processes.
- This document was prepared by Steven E. Brust and Michele F. Martin, Esq., of the law firm of Smith, Gambrell and Russell and is provided for informational purposes only. Each IBM customer is responsible for ensuring its own compliance with legal requirements. It is the customer’s sole responsibility to obtain advice of competent legal counsel as to the identification and interpretation of any relevant laws and regulatory requirements that may affect the customer’s business and any actions the customer may need to take to comply with such laws. IBM does not provide legal advice or represent or warrant that its services or products will ensure that the customer is in compliance with any law or regulation.