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ELECTRONIC
DISCOVERY: AN OVERVIEW AND PRACTICAL POINTERS
By
Joseph P. Lang and James Baffa
ELECTRONIC DISCOVERY OVERVIEW
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Electronic
data storage is quickly becoming the preferred medium.
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Over 70% of commercial data and files are stored in
electronic format. (Rodger Moore, Ten Tips for
an Effective Electronic Discovery Project, Defense
Research Institute, Technology Committee Newsletter,
April 15, 2005 ).
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Over 80% of corporate communications are sent via
email. Id.
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92% of all newly recorded information is stored electronically.
Id.
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Approximately, 31 billion emails are sent every day,
in the United States alone. Id.
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Courts
have found that many forms of electronic data fall
within the scope of FRCP 34's “data compilations,”
including:
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Emails. Rowe v. William Morris , 2002 U.S.
Dist. Lexis 8308 (S.D.N.Y. 2002);
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Data Processing Cards. Quadrini v. Sikorsky Aircraft
Corp. , 74 F.R.D. 594 (D. Conn. 1977);
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Input data. Adams v. Dan River Mills, Inc. ,
54 F.R.D. 220 (W.D. Va. 1972);
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Backup tapes. Zubulake v. UBS Warburg LLC ,
216 F.R.D. 280 (S.D.N.Y. 2003); and,
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Databases. Crown Life Ins. Co. v. Craig ,
995 F.2d 1376 (7 th Cir. 1993).
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Theoretically, discoverable “data compilations” under
the Federal Rules include voice mail, text messages,
internet usage histories, “cookies,” instant messages,
etc.
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Moreover, discoverable “data compilations” under the
Federal Rules are retained in a plethora of host sources,
including: computers, servers, personal digital assistants
(“PDAs”), “blackberries,” pagers, cell phones, jazz
drives, zip drives, optical disks, disaster recovery
backup tapes, data processing cards, etc.
CASE
LAW ADDRESSING FAILURE TO COMPLY WITH E-DISCOVERY REQUESTS
AND OTHER CASES OF INTEREST
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Courts
are increasingly imposing sanctions upon litigants
and their counsel for e-discovery abuses, including:
negative jury inferences, awards of attorneys' fees,
and dismissal of claims.
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In Zubulake v. UBS Warburg LLC , 229 F.R.D.
422 (S.D.N.Y. 2004) a former employee was awarded
a $29 million verdict in a gender discrimination claim.
The court imposed an adverse jury instruction, which
directed jurors to presume that certain emails, which
were not produced, would have contained information
detrimental to the defendant.
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In U.S. v. Philip Morris , 327 F. Supp. 2d
21 (D.C. Dist, 2004), $2.75 million in sanctions were
imposed against Philip Morris for e-discovery violations,
including the deletion of relevant e-mails. Philip
Morris failed to preserve e-mail messages pursuant
to an October 1999 Court Order, as well as to preserve
documents pursuant to its own electronic discovery
policy. Phillip Morris was also precluded from calling
witnesses who failed to comply with its own internal
document retention program.
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In Coleman Holdings, Inc. v. Morgan Stanley &
Co., Inc. , 2005 WL 679071 ( Fla. 15 th Jud.
Cir., March 1, 2005), the court found that Morgan
Stanley had failed to provide any excuse as to why
it hadn't searched or produced thousands of back-up
e-mail tapes during discovery. As sanctions, the court
instructed the jury that it may infer that Morgan
Stanley had helped to defraud investors, and the court
allowed plaintiff to argue that Morgan Stanley's behavior
was evidence of malice or evil intent. The jury returned
a reward of punitive and compensatory damages of $1.4
billion.
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In Metropolitan Opera Assoc., Inc. v. Local 100,
Hotel Employees & Restaurant Employees, Int'l
Union , 212 F.R.D. 178 (S.D.N.Y. 2003) the court
imposed sanctions and attorneys fees for e-discovery
abuses, finding that counsel failed to instruct the
defendant of its discovery obligations, and that counsel
disregarded the fact that the defendant had no document
retention system.
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In Kucala Enterprises, Ltd. v. Auto Wax Co. ,
2003 WL 22433095 (N.D. Ill. Oct. 27, 2003), the plaintiff
destroyed relevant documents and information through
the use of computer software entitled “Evidence Eliminator”
after a court order directed an inspection
of the plaintiff's computer. The court imposed sanctions
of attorneys' fees and expenses, as well as instructed
that jurors would hear of the document destruction
to assess potential damages on a counter-claim brought
by defendants.
- Other
recent cases of interest provide guidance:
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In Experian Information Solutions, Inc. v. I-Centrix,
L.L.C. , Case No. 04 C 4437 (N.D. Ill. July 21,
2005), the court ordered an independent expert to
review the defendants' bitstream copy for contextual
information and metadata that was within the scope
of the plaintiff's discovery requests. To allay the
defendants' fears that this review would be too intrusive,
the independent expert was subject to the protective
order in the case and the court ordered the expert
to destroy all records gathered after the litigation
concluded.
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In Arthur Andersen LLP v. United States ,
125 S.Ct. 2129 (2005), the U.S. Supreme Court overturned
Arthur Andersen's conviction for obstruction of justice.
The Court found that the statute requires proof of
consciousness of wrongdoing to convict someone of
withholding testimony or destroying records to be
used in an official proceeding. The statute also requires
proof of a connection between the “corrupt persuasion”
of another to destroy records and the foreseeable
official proceeding.
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In Galvin v. Gillette Co. , 2005 WL 1476895
(Mass.Super. May 19, 2005), the Secretary of the Commonwealth
of Massachusetts sought an order requiring the defendant,
at its own expense, to permit a vendor to search all
e-mail, servers, archives, discs, back-up tapes, and
all hard drives and other databases to investigate
and accomplish retrieval, preservation and copying
of certain documents. The court denied the Secretary's
order and noted that the effort was impossible to
undertake due to the size of the defendant's organization,
the sheer volume of computerized information, the
defendant's email retention policy, and the effort
required to conduct a privilege review of all that
information.
STEPS
YOU CAN TAKE TO AVOID E-DISCOVERY LIABILITY
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The Zubulake Factors
- Institute
a litigation hold to strategically retain, preserve,
and access electronic documents and data during litigation.
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Other steps to consider
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Meet with underwriting and marketing departments
to explain the implications of electronic communications
regarding pending claims. Advise all personnel that
attorney-client privileged communications and/or
attorney work-product protected materials may be
communicated easily via electronic media. To the
extent that privileged and protected communications
are forwarded to third-parties (e.g., brokers),
not only may privileges be destroyed, but also the
electronic communications are only a mouse-click
away from being disseminated to insureds.
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Encourage claims personnel to communicate business-related
issues in a formal letter that is attached to an
email. By drafting formal letters, writers are far
less likely to fall into the pitfalls of electronic
communication (e.g., informal/colloquial language;
inappropriate discourse; disjointed structure).
Additionally, if the substance of the communication
is ever at issue in litigation, the defense of a
formal letter is dramatically more efficient, because
counsel only depose a witness on a formal letter.
In contrast, using endless email strings to formulate
critical business decisions opens an insured to
potential discovery attacks on the meaning of each
and every disjointed passage in the email string.
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Meet with internal as well as regular external counsel
so that counsel comprehend and appreciate the scope
of electronic data generated, stored, and retained.
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Meet with IT professionals to convey the potential
liability for failing to preserve electronic communications
and data and to ensure proper data retention and
litigation hold processes.
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Familiarize all personnel with document retention
policy and litigation hold procedures.
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Dedicate Quality Assurance/Quality Control procedures
to ensure compliance. Significant liability arises
from having the mechanisms for data retention in
place, but failing to properly implement them.
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Alter litigation hold to comport with scope of litigation.
Anticipate potential litigation so that implementation
of litigation hold is proactive rather than reactionary.
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Preach retention and compliance with internal procedures
among all likely personnel whose electronic communications
may be targeted in litigation.
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Investigate electronic forensic vendors to assist
in collecting, searching, analyzing, preparing and
producing electronic data.
For
assistance in preventing electronic discovery liability,
or for more information on the issues above, please
contact, JLang@BatesCarey.com
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