All posts tagged archiving

Manage Unstructured Data with Unified Archiving: A Case Study

As data volumes grow in today’s digital workplace, so do costs and risks associated with storing large amounts of data for litigation, investigations, regulatory requests, compliance and other requirements. To address these costs and risks, organizations need one technology system to seamlessly address information management, bringing together data from disparate systems while eliminating duplicate data sets. The compliance and ediscovery challenges of one organization are documented in a recent case study, developed by ZL Technologies and KrolLDiscovery.

An Archiving Case Study

A large, international bank, based in Switzerland, operated two instances of a compliance technology solution. These compliance tools were incompatible and incapable of merging, thereby creating an unnecessarily complex compliance process. Also, the bank sought a platform that would facilitate searching for documents across the enterprise to aid in collecting and producing documents in legal discovery matters.

The bank understood that while compliance and ediscovery are often treated as separate functions, the two are closely interrelated and use much of the same data. This relationship led the bank to look for a solution that could offer a single repository for both systems in order to streamline compliance and ediscovery processes. The bank turned to KrolLDiscovery and its partner ZL Technologies to assist in implementing such a solution. Combining KrolLDiscovery’s experts in data management with ZL Technologies’ dynamic information governance platform, enables enterprises to better understand what data they have and where it resides.

The ZL solution was initially deployed in the bank’s Americas region, specifically in the United States and Canada. Once proven successful in these locales, the bank decided to launch the solution in other international locations, deploying it in its Bahamas, Europe and Asia offices. Beyond standardizing on a unified, global compliance and ediscovery technology platform, the bank also established its governance and data management principles as well as compliance and ediscovery workflows, critical goals for the global enterprise.

ZL and KrolLDiscovery: A 10+ Year Partnership

With the ZL Unified Archive platform, KrolLDiscovery helps to eliminate common business problems that go along with the unrelenting growth of data. Recently, KrolLDiscovery and ZL celebrated more than 10 years of partnership helping organizations manage unstructured data for ediscovery, compliance, records management and knowledge management.

Cooperation & Proportionality – Essential Pieces to the Ediscovery Puzzle

Cooperation & Proportionality – Essential Pieces to the Ediscovery Puzzle

Like an unstoppable force meeting an immovable object, the rapid pace of technology and the staunchly conservative nature of the law could hardly be in greater conflict.

As the two forces continue to clash, the fallout can be seen in attorneys – doing what they believe is best – battling relentlessly while costs continue to soar. Caught in the middle of it all are the clients and courts, desperately searching for a resolution to the madness. In the midst of this chaos, two familiar concepts have emerged in an attempt to restore order – cooperation and proportionality.

Love it or hate it, electronic discovery is here to stay and parties must work together to curb the exorbitant (and increasing) costs involved in locating, reviewing and producing data in a lawsuit or regulatory matter. U.S. courts’ strong appetite for liberal discovery is tempered by the concept of proportionality, which recognizes that at some point ongoing discovery results in diminishing returns. Aside from its common law roots, proportionality is embodied in Federal Rule of Civil Procedure 1, stating that the rules should be “construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding,” as well as Rule 26, which permits courts to limit discovery if they determine the burden outweighs the benefit. As for proportionality’s counterpart, cooperation, its spirit can be found throughout legal opinions, scholarly commentary and model codes such as the American Bar Association’s Model Rules of Professional Conduct – particularly in Rules 3.2 and 3.4.1

With both of these concepts’ illustrious presence and history in litigation, one would think their application in ediscovery should be fairly straightforward. Yet court-ordered sanctions and costs related to ediscovery continue to rise at a startling pace.2 It is evident that although the basic framework to support proportionality and cooperation is in place, we still need to fill in the gaps. Thankfully, commentators and scholars from both the bench and bar, along with industry experts, have provided the missing pieces – we just need to put them together.3

Fear of the Unknown

In the ediscovery context, knowledge is power and ignorance is disabling. Unfortunately, the latter is far more common. No matter your professional background, the e-discovery process can be complex and daunting. Litigators who do not fully understand the process and intricacies are far more likely to make mistakes that can significantly prolong litigation and increase costs. Fear of the unknown and resulting defensiveness can be as (or more) problematic than being uneducated in this space. All attorneys naturally fear the fatal mistake of disclosing the proverbial “smoking gun” that sinks their client’s case.4 However, when discovery involves millions of pages of documents – as e-discovery commonly does – it is no wonder why costly production and spoliation disputes dominate e-discovery jurisprudence.

Thankfully, the solution is relatively simple and something attorneys are no stranger to – education. In the past few years, many organizations have been formed to encourage and help attorneys, clients and the judiciary to work together and better understand the nuts and bolts of ediscovery. For example, the Seventh Circuit’s Electronic Discovery Pilot Program’s Principles Relating to the Discovery of Electronically Stored Information has recognized the need for cooperation, proportionality and education “to reduce the rising burden and cost of discovery . . . brought on primarily by the use of electronically stored information (ESI) in today’s electronic world.”5 Important concepts from this effort include Principle 1.02, which states “[a]n attorney’s zealous representation of a client is not [emphasis added] compromised by conducting discovery in a cooperative matter” and also acknowledges that the “failure of counsel . . . to cooperate in facilitating and reasonably limiting discovery requests and responses raises litigation costs.” In addition, Principle 1.03 instructs that the application of the proportionality standard in discovery will be furthered by crafting discovery requests and responses that are “reasonably targeted, clear, and as specific as practicable.” Further, Principle 3.01 stresses the pressing need for education by calling for judges, attorneys and parties to “become familiar with the fundamentals of discovery of ESI,” and Principle 3.02 establishes a duty to pursue continuing education in this regard. According to the Phase One report from May 2010, “92 percent of the judges agreed that the Principles [set forth in the program] had a positive effect on counsels’ ability to resolve discovery disputes before requesting court involvement.” Also according to this report, Principle 1.02 was often viewed as incredibly useful and allowed counsel to cooperate with each other while fulfilling their obligation to zealously advocate on behalf of their clients.6

It is no secret that a lack of knowledge is at the root of many ediscovery failures and is a necessary precondition to effective cooperation, yet the calls for increased education have focused on short-term solutions. Familiarity with rules and best practices is not enough to solve a systemic problem. A long-term solution in the form of more in-depth, formalized education is necessary. Law schools must educate future attorneys on ediscovery principles, and knowledgeable practitioners must share their ediscovery expertise with their colleagues through continuing legal education (CLE) courses.

Building a Solid Foundation

While education may help foster cooperation, it is only one piece of the puzzle. In the meantime, courts still need practical tools to address the current lack of cooperation and skyrocketing discovery costs.

One of the more novel approaches has been the use of phased discovery. In a recent discovery order from the Northern District of Illinois, Magistrate Judge Nan R. Nolan (chair of the Seventh Circuit Pilot Program, discussed earlier) ordered the parties to engage in a “phased discovery schedule.”7 After familiarizing themselves with ediscovery principles including cooperation, the parties were ordered to engage in “cooperative discussions to facilitate a logical discovery flow.” Consistent with principles of proportionality and the Federal Rules of Civil Procedure, this flow was to begin with completing Rule 26(a) initial disclosures, followed by a narrowing of the discovery scope to “claims most likely to go forward” and, finally, prioritizing discovery efforts according to sources that are least “expensive and burdensome.”8 Last, and arguably most important, Judge Nolan dictated that “nothing in this Order shall prejudice the parties from conducting all forms of discovery” if necessary in the future, making clear that phased discovery does not mean limited discovery.

The concept of proportionality in the context of document production is well-suited to address many of the cost problems. Although relatively few courts have expressly ordered it, there is little conflict over its value. In the production context, proportionality is logical, cost-effective and in harmony with the underlying principle of liberal discovery.9 Unfortunately, production is only one part of the ediscovery process.

Preservation is no less important to the ediscovery process than production; however, its relationship with proportionality may be slightly more dubious. In Orbit One Communications v. Numerex Corp., the Southern District of New York rejected the standard of “reasonableness and proportionality” advocated in Victor Stanley II and Rimkus Consulting Group as “too amorphous to provide much comfort to a party deciding” what information to retain. Instead, the court favored the Zubulake IV standard of retaining “all relevant documents . . . in existence at the time the duty to preserve attaches.”10 Courts are understandably reluctant to grant too much leeway to parties to determine what information is worth saving on the reasonableness and proportionality criteria dictated throughout case law and the rules. Proportionality and “phasing” have become critical because litigants have been unable to effectively manage their growing masses of ESI. Data proliferation has shown no sign of slowing down, so there is little reason to believe that proportionality and phased approaches to ediscovery can be a viable long-term solution when neither addresses the underlying issue – proper ESI management.

Technology is designed to make difficult tasks easier. Many corporations are in a quandary, however, because they have adopted technology to create information more efficiently without also implementing technology to manage it more efficiently. In regard to ESI preservation, enterprise archiving technology that can manage vast stores of data with remarkable efficiency is readily available. In addition, hosted discovery repositories provide a cost-effective and secure location to preserve, filter and search large volumes of ESI that are, or may likely become, relevant to litigation and investigations. On the other end of the ediscovery process, technology-aided document review tools are poised to revolutionize this part of the process, which is typically the most expensive and time-consuming. Historically, there simply may not have been a strong enough countervailing incentive to manage the growing stores of information, but it is a safe bet that the interests of justice will soon fill that void and litigants will be expected to responsibly manage their information throughout its life cycle.

Conclusion

No doubt cooperation is imperative to managing an effective ediscovery process, but court orders and sanctions only go so far. Fostering cooperation in the long term will require a paradigm shift in the way litigators approach the ediscovery process. A key piece of this lies in ensuring that jurists and litigants understand this complicated process. As for proportionality, novel approaches such as phased discovery may be sufficient to stave off the tradition of liberal discovery for now, but there is a demonstrated need to revolutionize the process in terms of technology and efforts used to manage data more cost-effectively and efficiently. While the best answer may be unclear, what is perfectly evident is that we already have all the pieces to solve the puzzle – we just need to put them all together.

1 See American Bar Association Model Rules of Professional Conduct, Rules 1.1, 3.2 and 3.4, available at: www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/model_rules_of_professional_conduct_table_of_contents.html.

2 See Kroll Ontrack, Fourth Annual ESI Trends Report (2010) (Finding 13: On average, companies spend $1.25 million per year on discovery); also The Kroll Ontrack Year in Review 2010, available at: www.krollontrack.com/company/news-releases/?getPressRelease=61500.

3 The Sedona Conference® has provided numerous commentaries on proportionality and cooperation that practitioners should read. See The Sedona Conference® Cooperation Proclamation; also The Sedona Conference® Commentary on Proportionality in Electronic Discovery, available at: www.thesedonaconference.org.

4 See Mt. Hawley Ins. Co. v. Felman Prod., Inc., 2010 WL 1990555 (S.D.W.Va. May 18, 2010) (Plaintiff’s failure to perform critical quality-control sampling and other discovery failures resulted in the inadvertent production of an alleged “smoking gun” e-mail).

5 Available at: www.ilcd.uscourts.gov/Statement%20-%20Phase%20One.pdf.

6 Seventh Circuit Electronic Discovery Pilot Program Phase One Report available at www.7thcircuitbar.org/associations/1507/files/05-2010%20Phase%20One%20Report%20and%20Appendix%20with%20Bookmarks.pdf.

7 Tamburo v. Dworkin, 2010 WL 4867346 (N.D. Ill. Nov. 17, 2010).

8 Id. at 3.

9 Fed.R.Civ.P. 26(b)(1) (“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense”).

10 2010 WL 4615547 (S.D.N.Y. Oct. 26, 2010).

Note: The above post appeared in the May 2011 issue of the free, monthly e-newsletter, Case Law Update & Trends published by Kroll Ontrack. This newsletter is designed to help busy legal professionals keep pace with case law and information pertaining to electronic evidence. Subscribe and gain valuable and timely information on new ESI court decisions, as well as informative articles and tips for both the corporate and law firm audience.

Selecting Your Corporation’s Ediscovery Team: Who Will Be in Your Lineup?

Selecting Your Corporation’s Ediscovery Team: Who Will Be in Your Lineup?

Selecting members of your organization’s ediscovery team requires as much strategy as a professional baseball coach putting together the most efficient infield or a card player selecting the best hand. As corporate counsel, your insights regarding the strengths of the individuals comprising the company’s ediscovery team are imperative in selecting the most effective cadre of members – long before the summons arrives.

The composition of your team will depend on your risk exposure and the size of your company. An effective team, regardless of its size, should be comprised from a representative cross-section of corporate responsibility. A senior management member is essential to stress the importance of the team function to all members of the organization. Other designated individuals should include: legal counsel (inside and outside), records manager, human resources manager, chief information officer, chief financial officer, compliance officer and training professional. In addition, many organizations and firms are finding value in bringing in outside professionals to assist with ediscovery team responsibilities (e.g., reputable electronic discovery service providers, insurance companies and risk assessment professionals)

Members of the ediscovery team must have knowledge of the existence and location of electronically stored information (ESI), and should understand and appreciate the needs and functions of the enterprise. They should also be effective communicators. Knowledgeable, concerned, articulate team members will be of valuable assistance to counsel in forming a dialogue with employees – stressing the importance of information content, management, authentication and preservation.

Before a lawsuit arises, one of the fundamental purposes of the ediscovery team is to assist with the creation of an inventory and map of your company’s records systems (a data map). The data map is a snapshot to assist counsel in explaining the company, its information resources, information locations, retention and destruction practices, and the relative ease of information accessibility. Effective ediscovery team members should be able to assist counsel in making the data map a user-friendly, graphical depiction of the information enterprise.

Likewise, ediscovery team members should also understand and inform counsel regarding the use of new forms of communication utilized by employees. This knowledge may be invaluable as counsel reviews the potential legal issues concerning instant messaging, wikis, blogs, social networking sites and other emerging forms of electronic communication. As information locations shift and practices change, ediscovery team members can assist counsel in periodically assessing the data map to ensure accuracy.

Ediscovery team members should also have the knowledge to assist counsel in locating and selecting effective witnesses in the event it is necessary to authenticate electronic information.  We all know the challenges placed on witnesses during discovery; witnesses called to authenticate ESI may be challenged just as zealously as other witnesses. Effective ediscovery team members may provide important insight to counsel regarding the knowledge and effectiveness of potential witnesses in providing testimony necessary for electronic records authentication. As such, witnesses must be articulate, knowledgeable and unflappable; counsel may have a tough time identifying custodians with these qualities across a large enterprise.

Though oversight of a records management policy and process is not the fundamental purpose of an ediscovery team, it will become a problem for the team if policies and procedures are not followed by other employees. As a continuing service, the ediscovery team should also have the ability to provide additional insights about whether your company’s current records retention and destruction strategies are effective and whether communication and record retention would be better handled through an archiving system. 

A solid knowledge of the tasks performed by an ediscovery response team is a key factor in selecting the right people for the team. Not only do you need to consider a representative cross-section of corporate responsibility, but you should also be cognizant of the team members’ abilities to perform the relevant tasks. Selecting the best lineup for your ediscovery team will help your organization knock the next litigation out of the park.

ESI Discovery Strategies on the Rise – Is Your Company a Have or Have Not?

What’s your ESI discovery strategy? Will it work when it needs to? If you’re not sure about the answers to these questions, you are not alone – but you may be taking unnecessary risks. Developing an ESI discovery strategy requires pre-defining a systematic process for identifying, preserving, collecting, analyzing, filtering, processing, reviewing and producing ESI in preparation for or in response to litigation, investigations or regulatory matters. For the fourth consecutive year, Kroll Ontrack has conducted a survey of IT and in-house counsel addressing how they are managing ESI preparedness and response to litigation, regulatory matters and internal investigations, with its findings presented in an annual ESI Trends Report.[1] Over the past decade, electronic discovery has rapidly evolved and many organizations remain under-prepared to implement sound ESI discovery strategies.

It is not all doom and gloom – marking a positive shift, over half of the companies surveyed had an ESI discovery strategy in place for responding to litigation or investigatory matters, which is an increase of 13 percent from 2009. However, 27 percent of in-house counsel and 18 percent of IT were unaware whether such policies existed, which is disconcerting since legal is likely to be responsible for policy implementation. A comprehensive ESI discovery strategy requires the ability to swiftly implement a legal hold while also protecting potentially relevant data. Without the right people involved, organizations may be unprepared to face legal risks when it comes time to respond to requests for ESI.

Simply possessing a policy is not sufficient. Just as with emergency procedures and drills, testing and tweaking ESI discovery strategies could go a long way toward increasing the effectiveness of the process when the time comes to actually put it to use. However, compared to 2009, fewer respondents believed their organization’s ESI discovery strategy is repeatable and defensible, and only 38 percent of respondents had tested their policies. The survey also indicated that legal is less likely than IT to know whether their company has tested its policy, raising the same concern as above – without the key players involved, the strategy is less likely to succeed.

Despite the gap in awareness between IT and legal, corporations are exerting more control over the discovery process and are shifting the roles IT and legal are expected to play. Only 4 percent of companies believe the CIO/IT alone should manage discovery strategy, compared to 20 percent in 2009. In addition, more respondents indicated a cross-functional team should share discovery strategy responsibility, while 44 percent of respondents indicated that discovery strategy should be a shared function of both legal and IT. This marks an increased realization that the complexities of ediscovery require dual expertise and thus, collaboration of multiple departments.

In addition, most organizations – almost 80 percent in the U.S. – have now created and implemented a document retention policy, and enforcement has become a largely routine practice. Systematically retaining and disposing of a company’s documents is important for managing data storage, and an effective policy is critical for regulatory compliance, investigations and litigation preparedness and response.

Turning to information management technology and strategy, many companies have adopted comprehensive archiving technology to manage data storage and execute document retention schedules. This technology enables organizations to adjust the parameters as needed, and ensures that the document retention policy is applied consistently. Nevertheless, executing a document retention policy poses many significant challenges which require the coordination of an organization’s people, infrastructure and processes. Even though over half of companies tend to agree their archiving solution is successful and defensible, experts suggest that reality may paint a somewhat different, less optimistic picture because many of these companies are not fully implementing or optimizing the tool’s functionality.

Finally, implementing an archiving solution and effective document retention policy is just one step toward minimizing the time and money spent on decreasing data volumes which translates into less money spent on document review. Organizations can and should take additional action to reduce costs and time spent on legal discovery matters. Early case assessment (ECA) technology has proven vital in the management and reduction of costs associated with discovery, particularly with regard to document review and production. ECA technology is also useful in enabling companies to make sound and defensible decisions, and has proven to reduce data stores and decrease the cost and time spent in document review. Still, only 29 percent of respondents have used ECA technology despite the fact that document review continues to generate the bulk of discovery costs. Thus, many more companies could benefit by getting on board.

In sum, the findings in the Fourth Annual ESI Trends Report indicate that organizations have come a long way, but there is much to be learned and plenty of action to be taken. While the past decade marked an unprecedented transition in the way companies deal with discovery, more changes are sure to come. Thus, not only is it important to get up to speed, but it is critical to consistently stay abreast of changes in technology, case law and best practices for ediscovery in the corporate world.

Archiving Today Means Less Headaches Tomorrow

A significant majority of business communication is conducted via e-mail. Once other forms of electronically stored information are calculated into the mix, organizations that are heavily regulated and targeted in litigation face an increasingly significant risk regarding information management and storage. The growing data volumes coupled with decreased human resources in IT and other corporate departments require a proactive approach to managing data. Corporations must begin taking steps now to manage the mountainous volume of electronically stored information (ESI), while ensuring proper preparedness to comply with various regulations and litigation discovery rules.

Why Is Archiving Important?

Archiving enables efficient records management that not only facilitates business and storage efficiency, but also ensures compliance with legal and regulatory requirements. An effective e-mail and file archiving solution will allow legal, IT and compliance teams to appropriately preserve, manage, locate and produce relevant ESI, in addition to allowing for quick enforcement of the company’s document retention policy. An archiving tool allows the organization to update and modify retention and disposal parameters as the needs of the business and regulatory requirements evolve, and ensures that the policies are consistently applied across the whole enterprise.

Implementing an effective archiving system also eases the strain on organizations’ storage requirements and IT resources. An important component of an archiving tool is the ability to reduce the organization’s storage footprint with compression and single-instance storage via de-duplication technology. Archiving tools can also reduce user reliance on local storage, such as individuals’ personal storage tables of messages (.pst files), by housing retained e-mails and attachments in centrally managed repositories.

In addition to storage concerns, human resources are tight in IT departments. According to a 2010 Gartner report on IT spending, 50.3% of respondents cut IT head count by 1-15%, while 12.4% of respondents cut IT head count by more than 15%.1 This decreased head count further strains already overburdened IT resources and makes responding to incidents outside the normal business operations and responsibilities far more difficult. Deploying appropriate archiving technology to better manage the storage, retention and disposal of business records will provide a much needed helping hand for IT departments.

Electronic Discovery Impact

In addition to the aforementioned qualities archiving systems must have, an important functionality is the ability to administer legal holds. Failure to adequately issue hold notices and properly preserve information may create trouble for an organization in the courtroom. As demonstrated in Kroll Ontrack’s 2009 Year in Review report, 39% of the cases in 2009 involved sanctions, and of those, almost 67% addressed sanctions regarding preservation and spoliation issues. An archiving solution will facilitate efficient identification of potentially relevant ESI through enterprise-wide searching and enables immediate implementation of litigation holds, preventing liability for preservation issues.

Courts are not tolerating the excuse that a company lacks the technological capability to retrieve data in this modern age. This point is clearly demonstrated in a recently released opinion from the Western District of Washington, Starbucks Corporation v. ADT Security Services., Inc., 2009 WL 4730798 (W.D. Wash. Apr. 30, 2009). In this case, the defendant argued against producing e-mails stored in an antiquated format. Originally, an IT employee cited estimates of $88,000 to produce the emails but then decided to “up the ante” to $834,285. The court was incredulous that a company as sophisticated as the defendant would fail to migrate data to its now-functional archive system, and ordered the defendant to “implement an immediate plan to make copies of the archive…disks, and to save them to an appropriate storage medium.” Furthermore, the court explained that even if the information was ruled not reasonably accessible, good cause existed to order production. Proper retention management (in this case scheduled disposal) could have alleviated the issue in the first place. This case makes it clear that if data is being stored, even in an antiquated form, the courts will no longer tolerate poor or outdated IT infrastructure as a reason to not order the production of that ESI.

Conclusion

It is far more cost-effective for organizations to proactively implement archiving technology and properly manage retention and litigation holds, rather than incur the costs to file and defend motions for preservation failures later. In addition, it is important to remember that the courts do not require perfection, but rather expect necessary steps to be taken to properly preserve relevant records for collection, review and production. See Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010). Implementing an archiving system is a great proactive step toward reducing litigation expenses, while strengthening defensibility through a repeatable, well-documented process.

Archiving & Legal Holds – An ESI Recipe for Efficiency and Cost Reduction

Organizations that are heavily regulated and targeted in litigation face increasingly significant risks when attempting to optimize and tailor information management and data storage practices to meet business, legal and regulatory requirements. The tendency to over preserve electronic data leaves organizations with mountainous volumes of electronically stored information that should be reduced to only what is needed to support business continuity and ensure compliance with legal hold and regulatory obligations. Through technology, organizations can proactively minimize many of the burdens and risks associated with failing to execute ongoing retention and destruction protocol, while properly implementing and monitoring legal holds.

Archiving Technology

Organizations operating within tightening budgets or decreased resources may question why archiving is an important investment. The reality is archiving technology can help predict and control electronic discovery costs, which is often the largest unbudgeted business expense. Maintaining data in an archive will also allow the organization to meet short timelines to preserve, collect, process, review and produce data, while delivering electronic information in a form conducive to cost-effective document review. This will prevent the expense of searching through unorganized data that is often scattered across various mediums within an organization when litigation or an investigation is imminent.

Archiving also allows organizations to meet regulatory requirements for record retention, by helping to prevent the spoliation of records. As demonstrated in recent case law, failing to properly preserve data may result in severe consequences, perhaps leading to a harder battle during trial, a dismissal of claims or significant monetary penalties.

Operational efficiency may also be increased by archiving and creating an effective retention policy. Over preserving electronically stored information is a bad business practice that can set the organization up for liabilities down the road, particularly in electronic discovery. Preserving and disposing of data through an automated, repeated process will also conserve IT resources that are often consumed during attempts to locate data that is relevant to a legal or investigation matter.

Legal Holds

Another important archiving functionality is the ability to administer legal holds. Once litigation or an investigation is anticipated, an authorized user from the organization can search the archive, employing initial filtering techniques to narrow the volume of data. A legal hold may then be placed on the content that is responsive to the litigation or investigation. The user can then conduct additional filtering, sending non-relevant data back into the retention and disposal schedule. The remaining relevant and responsive documents can then be exported from the archive for processing and document review.

This process allows data stores to be narrowed before the data encounters the processing phase of electronic discovery, which starts a discovery project off on an efficient and cost-effective note. The archiving process also ensures that the data relevant to a litigation or investigation is properly identified and preserved. As demonstrated by several recent cases, failure to adequately issue hold notices and properly preserve information may create serious trouble for an organization in the courtroom.

One such recent case has received significant attention throughout the legal community. In Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC,1 Judge Scheindlin found all thirteen plaintiffs worthy of monetary sanctions since they conducted discovery in an “ignorant and indifferent fashion,” and imposed a permissive adverse inference instruction against six of the thirteen plaintiffs, who were grossly negligent in failing to issue a written litigation hold at any point in the discovery process.

Another recent case from the Southern District of Texas, Rimkus Consulting Group, Inc. v. Cammarata,2 addressed preservation and spoliation issues in the context of intentional actions. In this case, the defendants claimed they routinely deleted e-mails as part of their business practice. However, the court determined the defendants intentionally lost, altered and deleted e-mails and found it appropriative to send the case back to a jury with a permissive adverse inference instruction.

The Cammarata opinion drew several distinctions between it and Pension Committee, particularly in regard to the differences between circuits in relation to culpability of parties. In particular, case law in the Second Circuit as applied in Pension Committee, allows sanctions to be imposed for negligent evidence destruction, whereas in the Fifth Circuit and some others, negligent destruction, as opposed to intentional, bad faith destruction is insufficient for imposing an adverse inference instruction. Judge Rosenthal concluded that these circuit differences in culpability levels limit the applicability of the approach in Pension Committee. Based on these differences in approach, counsel must approach education with a broad stroke, consulting experts when needed, to determine when the preservation duty arises and what must be preserved.

Conclusion

The above cases are just two recent examples of parties being punished for failing to properly preserve relevant ESI. These matters demonstrate that it is far more cost-effective for organizations to proactively implement archiving technology and properly manage retention and litigation holds, rather than later incur the costs and burdens associated with defending motions for preservation failures and possible sanctions that may result. It is important to remember that the courts do not require perfection, but rather expect necessary steps to be taken to properly preserve relevant records for collection, review and production. Investing resources in proper preservation and legal hold management from the outset will return dividends by ensuring discovery practices withstand judicial scrutiny in the unfortunate event opposing counsel files a motion seeking spoliation sanctions.

1 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010).
2 2010 WL 645253 (S.D.Tex. Feb. 19, 2010).

Archiving – Retain Only What You Need to Comply

A significant majority of business communication is conducted via e-mail and other forms of electronic communication, such as social media and instant messaging.

As such, organizations that are heavily regulated and litigated face increasingly significant risks that are tied to the manner in which electronic information is managed and stored. Growing data volumes coupled with decreasing human resources in many organizations require a proactive, thoughtful approach to managing data. Corporations are well-advised to take steps now to manage the mountainous volume of electronically stored information (ESI) while ensuring proper preparedness processes to comply with regulations and civil discovery rules.

The Problem: Records Management

Corporations today must balance the need to comply with legal and regulatory requirements with the business efficiency and storage capacity concerns of IT. To achieve this objective, companies should find a way to retain records as required for compliance, while appropriately disposing of non-essential data to free storage space. Engaging in these proper retention protocols will also allow companies to prevent risks and inefficiencies caused by duplicate copies and over-retention.

One factor that increases the complexity of proper records management is the various state, federal and international regulations, such as Sarbanes-Oxley, SEC 17a, Gramm-Leach Bliley Act and HIPPA, that pose strict records retention requirements. In actuality, these regulations merely represent the tip of the regulatory iceberg. Each industry faces unique and numerous regulatory requirements, and it is important to consult with an expert regarding how a corporation can cost-effectively and efficiently demonstrate compliance with the applicable regulatory obligations.

Another factor corporations must consider is the risk of over-preservation. Simply preserving everything is not scalable and poses additional significant concerns. One such concern is the ability to produce relevant information in the event of litigation or an investigation. The larger the data stores, the more data there is to be reviewed for relevancy and responsiveness. Proactively managing this data by instituting retention and disposal protocol will decrease data storage leading to smaller sets of ESI that may be requested in an investigation or litigation. Companies will also save on IT staffing and storage needs, which is invaluable during a time of tighter budgets.

The Solution: Archiving

Implementing a high-quality archiving solution will help companies manage the problems and risks inherent in managing corporate records. Archiving can actually help control electronic discovery costs by providing structure to what is often an unchartered morass of ESI. Instead of searching through disparate mediums for responsive data (wasting valuable time and money), teams can simply refer to the archive and meet short deadlines for preserving, collecting, processing, reviewing and producing electronic data.

Archiving also allows for the quick and efficient implementation of legal holds when investigations, litigation or regulatory issues arise. According to Kroll Ontrack’s Third Annual ESI Trends Report, only 57% of U.S. companies have an identified means to preserve potentially relevant data. Not possessing the ability to administer legal holds to comply with legal and regulatory requirements poses a great risk to companies (and counsel) in the courtroom.

For example, the Middle District of Florida recently sanctioned in-house counsel for the defendant corporation for failing to issue a legal hold.1 Despite receiving preservation notices from the plaintiffs, the in-house counsel only forwarded a copy of the letters to senior-level employees and did not follow up to ensure the key custodians were properly preserving data. This failure to issue a legal hold and monitor compliance led to the imposition of an adverse inference sanction and the awarding of attorneys’ fees and costs, holding both the defendant company and the in-house counsel jointly and severally liable.

Another reason companies are putting themselves at risk by not possessing a legal hold implementation policy is the fact that courts are not accepting the excuse that an organization lacks the tools needed to identify, retain, preserve and retrieve electronically stored data given the modern technological era. For example, in Starbucks Corporation v. ADT Security Services., Inc.,2 the Western District of Washington was incredulous that a “sophisticated” company – the defendant – failed to migrate electronic data to its now-functional archive system. Despite estimates from the defendant’s IT employee ranging from $88,000 to $834,285 to produce the e-mails, the court ordered the defendant to “implement an immediate plan to make copies of the archive…disks, and to save them to an appropriate storage medium.” Proper retention management (in this case scheduled disposal) could have alleviated the issue in the first place. This case makes it clear that if data is being stored, even in an antiquated form, the courts will no longer tolerate poor or outdated IT infrastructure as a reason to not order the production of that ESI.

Conclusion

The above cases demonstrate that it is far more cost-effective for organizations to proactively implement archiving technology and properly manage retention and legal holds, rather than incur the costs to file and defend motions for preservation failures later. It is important to remember that the courts do not require perfection but rather expect necessary steps to be taken to properly preserve relevant records for collection, review and production. Investing resources in proper preservation and legal hold management from the outset will return dividends by ensuring discovery practices withstand judicial scrutiny in the unfortunate event opposing counsel files a motion seeking spoliation sanctions.

1 Swofford v. Eslinger, 2009 WL 3818593 (M.D. Fla. Sep. 28, 2009).
2 2009 WL 4730798 (W.D. Wash. Apr. 30, 2009).

 
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