• Electronic Discovery Overview

• The Prevalence of Electronic Data

Electronic data storage is quickly becoming the preferred medium.

• 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 ) .

• Over 80% of corporate communications are sent via email. Id.

• 92% of all newly recorded information is stored electronically. Id.

• Approximately, 31 billion emails are sent every day, in the United States alone. Id.

• What Electronic Data is At Issue Here?

Courts have found that many forms of electronic data fall within the scope of FRCP 34's “data compilations,” including:

• Emails. Rowe v. William Morris , 2002 U.S. Dist. Lexis 8308 (S.D.N.Y. 2002);

• Data Processing Cards. Quadrini v. Sikorsky Aircraft Corp. , 74 F.R.D. 594 (D. Conn. 1977);

• Input data. Adams v. Dan River Mills, Inc. , 54 F.R.D. 220 (W.D. Va. 1972);

• Backup tapes. Zubulake v. UBS Warburg LLC , 216 F.R.D. 280 (S.D.N.Y. 2003); and,

• Databases. Crown Life Ins. Co. v. Craig , 995 F.2d 1376 (7 th Cir. 1993).

• Theoretically, discoverable “data compilations” under the Federal Rules include voice mail, text messages, internet usage histories, “cookies,” instant messages, etc.

• 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

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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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

• The Zubulake Factors

• Reissue litigation hold to advise new employees and remind others

• Periodically remind and monitor major players in the litigation of duty to preserve

• Direct client employees to search and produce electronic files

• Coordinate with IT department to ensure safe storage/ shielded from recycling

• Other steps to consider

• Mitigation 1: Meet with underwriters to discuss implications of communications regarding pending claims.

• Mitigation 2: Encourage key discussions regarding claims to take place in a letter attached to an e-mail, as opposed to in the text of the e-mail itself.

• Set meetings with outside counsel and your IT people to discuss basics of your data storage technology. Teach IT people implications of Zubulake .

• Become familiar with document retention policy

• Ensure that it is being adhered to; avoid implications of bad faith

• Create a litigation hold that may alter the policy as necessary when litigation is anticipated or pending

• Interview all key witnesses to understand electronic retention and instruct them accordingly regarding production AND retention as a claim approaches litigation

• Investigate electronic forensic vendors and gather pricing information and references

• What will you do when hundreds of thousands of e-mails are produced in litigation?

• What will you do when a court grants you access to hard discs or back-up logs?

• Electronic Discovery Overview

• The Prevalence of Electronic Data

Electronic data storage is quickly becoming the preferred medium.

• What Electronic Data is At Issue Here?

Courts have found that many forms of electronic data fall within the scope of FRCP 34's “data compilations,” including:

• CASE LAW ADDRESSING Failure To Comply With E-Discovery Requests and other cases of interest

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.

• STEPS YOU CAN TAKE TO AVOID E-DISCOVERY LIABILITY

• The Zubulake Factors

• Other steps to consider

For assistance in preventing electronic discovery liability, or for more information on the issues above, please contact, JLang@BatesCarey.com .