First Responses Pitfalls and Practical Tips UNIVERSITY

First Responses – Pitfalls and Practical Tips UNIVERSITY OF HOUSTON SUMMER III 2010 – 5297 E-DISCOVERY

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 Risk Management Cost Containment Processing Identification Collection Review Preservation Analysis Production 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.

A Thought… In other words, in the electronic era in “E-Mail is evil… in the which we find ourselves, actions can same way that Bert is evil. ” have long range unintended effects. Case in point: Coleman v. Morgan Stanley. 6

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. 7

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. 8

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. 9

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… 10

The Verdict At trial, Coleman was awarded: $605, 000. 00 in compensatory damages; $805, 000. 00 in punitive damages. $208, 000. 00 in interest. And the interest was still accruing… And you may ask yourself “Well, how did I get here? ” 11

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. 12

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. 13

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. 14

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, and then 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 PHASE 1 COLLECTION Preservation Collection Analysis Meet Rule 16 & Scheduling Conference & SCOPE PHASE 2 PLANNING & NEGOTIATING PHASE 3 EXECUTION Discovery Plan ESI Legal Processing Review Production

PHASE 1 Actions & Decisions Preservation Collection 1. Identify Key Players 1. 2. Publish Lit Hold 2. 3. Interview Key Players 4. Determine Relevant ESI Locations with Data Map 5. Identify Vulnerable ESI 6. Determine Privacy or Confidentiality Issues 7. Determine Need for Forensics 8. Notify Opposing Counsel? 3. Collect Coordinate with Custodians Maintain Chain of Custody Records Analysis 1. 2. 3. 4. Generate ESI Collection Inventory Report Identify File Types of Interest Identify Files where Native is Necessary Identify non-standard File Types 1. Non-Indexable 2. Non-Commercially usable 3. Internal Proprietary

Preservation Cost Mgmt Opportunities Preservation 1. Identify Key Players 2. Publish Lit Hold 3. Interview Key Players 4. Determine Relevant ESI Locations with Data Map 5. Identify Vulnerable ESI 6. Determine Privacy or Confidentiality Issues 7. Determine Need for Forensics 8. Notify Opposing 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 Collection Decide if making collection as a means for preservation is costeffective. 1. 2. 3. Consider internal collections. Will necessitate software, hardware, and people. Collect Coordinate with Custodians Maintain Chain of Custody Records 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]. Perform collections internally with enterprise applications that track Co. C automatically.

Analysis Cost Mgmt Opportunities 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. Analysis 1. 2. 3. 4. Generate ESI Collection Inventory Report Identify File Types of Interest Identify Files where Native is Necessary Identify non-standard File Types 1. Non-Indexable 2. Non-Commercially usable 3. Internal Proprietary

First Responses – Pitfalls and Practical Tips UNIVERSITY OF HOUSTON SUMMER III 2010 – 5297 EDISCOVERY