Document Retention Policies

Still got that 5.25 floppy disk in the back of your desk? If so, it just may be time to put together a document retention policy (DRM). For more on what a DRM entails and all the bad things that can come from not having one, check out my latest post on IowaBiz.com

Brett Trout

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Electronic Discovery Comes to Iowa

In the past few weeks I have examined the new federal rules for electronic discovery in fairly great detail (at least for a blog). Now Iowa has proposed electronic discovery rules for Iowa state courts. A Supreme Court advisory committee is taking public comment on the proposed rules until May 1, 2007.

This should come as a great relief to computer savvy Iowa attorneys and should serve as a call to arms for the neo-luddites. If you would like information on Lawpportunities' seminars covering what every Iowa business needs to do to prepare for the new rules changes, contact Rush or myself. For more information on the proposed rules, including a link to a podcast discussing the new federal rules, which are fairly similar to the propsed Iowa rules, check out this post by business lawyer Rush Nigut on Lawpportunities.

Brett Trout

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eDiscovery 101

I have just finished my comprehensive series of blog posts on eDsicovery. Just click on the hyperlinks to review each topic.

1. What is electronically stored information (ESI)
2. By the time you get sued, it is already too late
3. Preparing your game plan
4. Clawback
5. ESI Subpoena power
6. Safe Harbor
7. Implementing an ESI management system

I am especially interested in any comments, suggestions or war stories you may have regarding eDiscovery. Also, please contact me if you have anything you would like me to add to the series. In the meantime, for some additional eDiscovery links, check out Rush Nigut's eDiscovery blog post. If that is not enough Rush for you (and seriously, can you ever have enough Rush?) listen to Rush interview me about eDiscovery on hisBlog Talk Radio podcast.

Remember, if anyone has any "best practices" suggestions they would like to share, I would love to hear them.

Brett Trout

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Electronic Discovery Rules - Safe Harbor

The Federal Rules of Civil Procedure (FRCP) mandate that parties identify and produce all discoverable electronically stored information (ESI). The Rules also provide for harsh sanctions against companies destroying relevant ESI. Modern corporate computer systems destroy ESI every day. The simple act of turning on a computer, or turning off a cell phone, can destroy ESI. So then, if you cannot help but inadvertently destroy ESI, why make the effort to comply with the FRCP?

Luckily FRCP 37 provides a "safe harbor" for companies that inadvertently destroy relevant ESI. The safe harbor only applies, however, to ESI destruction associated with the routine, good-faith operation of an electronic information system. So what constitutes "good-faith" in the context of the FRCP?

In accessing whether your inadvertent destruction of ESI was in good-faith, and whether sanctions are in order, a court will look at several factors. Most importantly, a court will examine the steps you took to comply with any court order or agreement with the other side requiring the preservation of ESI. While the factors will obviously vary from case to case, one overarching theme is the existence of a corporate ESI management policy. Companies with an ESI management policy are more likely to be afforded safe harbor under the FRCP and those without such a policy are more likely to find themselves santioned by the court.

An appropriate ESI management policy includes items such as:
1) A document destruction policy
2) A litigation “hold” policy – including the tagging and preserving of relevant documents
3) ESI agreements with third party vendors - including litigation hold provisions
4) ESI destruction “sign-off” and deletion log
5) Process for removing “hold” after appeal period ends

Investing a little in an ESI management policy up is a good insurance policy against court sanctions down the road. The ESI safe harbor provisions of the FRCP are broad, but without an appropriate ESI management policy in place, it may be difficult to convince a judge that you merit its protections.

Brett Trout

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No Company is Immune From eDiscovery Rules

So, you never plan on getting sued or suing anyone. Do you still need to worry about ediscovery and implementing an electronically stored information (ESI) management system? Yes. Federal Rule of Civil Procedure (FRCP) 45 now extends the reach of federal court subpoena power to include ESI. That means that you may have to find and produce ESI even if you are merely a customer, vendor or other tangential contact with one of the parties to a federal lawsuit.

FRCP 45(c)(1) does direct the party requesting ESI to take reasonable steps to avoid imposing any undue expense or burden on you. Claiming that you are an ESI rube, however, is going to do little to convince the court to take you out of the subpoena crosshairs. Having an ESI management system in place makes it simple to identify and produce responsive ESI with minimal cost and disruption. It will also assist you in any claim that certain responsive ESI is privileged and should not be produced.

On the other hand, feigning ESI ignorance will simply result in a lot of disruption and cost for your company. More importantly, failing to have your ESI ducks in a row when you receive the subpoena will increase the chances that you will inadvertently turn over privileged or confidential information. Also. if you do not have the capability to find ESI responsive to the subpoena, FRCP 45(a)(1)(B) allows the subpoenaing party to go poking around in your computers to try and find ESI you assert you cannot. While courts are reticent to allow parties to go poking around in subpoenaed party’s computers, failure to implement an ESI management system prior to receiving the subpoena often leaves courts little alternative.

Brett Trout

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Clawing Back Privileged eDiscovery

The Federal Rules of Civil Procedure (FRCP) anticipate that the volume of electronically stored information (ESI) produced during the discovery phase of litigation will far exceed the volume of hard copy information. As the volume of information produced increases, so does the risk of inadvertent disclosure of privileged information and the time and cost associated with trying to prevent such inadvertent disclosure.

To prevent discovery from becoming bogged down with privilege issues, the FRCP incorporates a “clawback” provision into FRCP 26(b)(5)(B). FRCP 26(b)(5)(B) works in conjunction with FRCP 26(f) to require that the parties discuss the inadvertent disclosure of privileged ESI in preparing their discovery plan. Under FRCP 16(b), the court has the power to include in a court order any agreements the parties reach with regard to discovery and inadvertent disclosure. The court may then consider those orders when determining whether waiver has occurred.

So what is a company to do? As an initial matter, as discovery ESI is located, the company locating the information should mark it prominently with a “privileged” or “confidential” legend. If you are sued, it is critical to assign a corporate liaison to sign off, in writing, that all ESI has been reviewed for privileged information. Discuss privilege issues with your attorney, prepare a privilege log of all privileged ESI and get instructions from your attorney, in writing, as to how you have agreed to handle privileged ESI. Revisit the issue after your attorney has finalized a discovery plan with the opposing party and at regular intervals during litigation.

In the event you determine that you may have inadvertently disclosed privileged ESI, discuss the situation with your attorney immediately. If you and your attorney determine there is an issue, you must notify the other side in writing and request the court review the matter. During the time the court is reviewing the matter, the party receiving the privileged ESI must sequester, destroy or return the ESI at issue and try to retrieve it from third parties. It is absolutely critical that you make any “clawback” claim as soon as possible, as delay can be a determining factor in the court’s decision as to whether to allow the clawback or not.
Brett Trout

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Race Through the Forest - of Electronic Discovery

I hope you have enjoyed this series of articles on the changes to the Federal Rules of Civil Procedure (FRCP) relating to discovery of electronically stored information (ESI). I trust the articles clarify both the scope of the changes and dangers associated with ignoring them. I cannot state it any more succinctly: If you go into a federal lawsuit unprepared against an ESI management guru you stand a good chance of losing the case, and possibly your company, over discovery issues alone.

As more and more companies become ESI management gurus, the pressure is on to become one as well. Why then are some companies dragging their feet? The problem I have encountered is that many companies do not know where to begin. They simply ignore ESI management or take patchwork steps to address perceived issues. Proper ESI management, ESI management that will save your company, requires a project management professional.

Along with writing these articles on ediscovery, I have been reading Timothy Johnson’s new book, Race Through the Forest. Johnson is a project manager and author of the blog Carpe Factum. In Race Through the Forest, Johnson uses a modern day Aesop’s fable to explain the benefits of project management. The book follows Barry Tortisse and Biff Haire as they manage huge competing corporate projects. The tale highlights the benefits of proper project management and warns of the grave consequences of implementing projects without it . Johnson’s book is a quick, enlightening read, offering an excellent primer on the benefits of project management. For anyone interested in getting their ESI management project started, Race Through the Forest provides insight on why project management is critical to any such implementation.

Proper project management pares the daunting task of implementing an ESI management system into manageable components. The right tools and the right professionals, make implementing an ESI management system quicker, cheaper and much less disruptive than any patchwork or steamroller solution. While the litigation benefits of implementing an ESI management system are huge, these benefits spill over to all aspects of the business. One of the biggest spillover benefits is already being prepared for the slew of new state and federal legislation governing document management, destruction and production. This pending legislation promises to become a compliance nightmare for any company still dragging its feet on implementing an ESI management system solution.

Brett Trout

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Avoid exposing yourself in federal court

Q. Why should you care about the changes to the Federal Rules of Civil Procedure (FRCP) relating to electronically stored information (ESI)?

A. You do not want to get caught with your pants down.

In the event you are ever sued, proper ESI management immediately sets the tone for any federal lawsuit. FRCP 26(f)(3) mandates that the parties to a federal lawsuit meet "at least 21 days before any scheduling conference". Consider the in terrorem effect of the other side pushing eight well indexed DVDs and an electronic privilege log across the table and demanding the same from you.

Being unprepared for electronic discovery not only exposes your greatest vulnerability, but you still have to scramble months of activity into a matter of weeks just to play catch-up. Failure to have an ESI management system in place before you get sued will cost you dearly. Not only will you get carpal tunnel from writing checks, but your IT staff will be MIA for weeks or months tracking down and indexing information you should had had at your fingertips.

In addition to running the risk of overproducing confidential documents in the rush, there is an even greater risk of underproduction. Underproducing relevant documents often leads to additional costs, monetary sanctions, adverse rulings from the judge and, potentially, the loss of one or more of your lawsuit claims or defenses.

Within mere weeks of the lawsuit being filed, your own attorneys are going to demand from you a list of:
1) All of the ESI you have that may be relevant to the lawsuit;
2) The type of hardware storing the ESI;
3) The type of software needed to read the ESI;
4) What portions of the ESI are privileged or confidential; and
5) All ESI which may be inaccessible due retrieval issues.

On the upside, your attorneys will be available, at $300-$600/hr, to assist you at doing what your IT department and other staff could have done at $60-$100/hr. Even worse, your attorneys may become disgruntled at having to do the data processing you failed to do. Myself, I will mow lawns and shovel snow for $500/hr, but some attorneys do not see it that way. In addition to irritating your attorneys, poor ESI management will inevitably irritate the opposing party (raising your costs as a result of more hearings), the judge and, eventually, the jury. Poor ESI management leaves everyone thinking you are lazy, stupid or dishonest. As you might imagine, none are desirable points for your jury to deliberate.

From the moment you anticipate a lawsuit, the law requires that you place a “hold” on the destruction of all relevant ESI. A proper ESI management system, with a strict retention/destruction process may destroy "smoking guns" you otherwise would have to produce to the other side. Without a proper ESI management system, and the ability to place a "hold" on the destruction of relevant ESI, you may end up accidentally destroying potentially helpful ESI like metadata. Even worse, in the event you accidentally destroy helpful ESI, the court might very well instruct the jury that they are to assume the ESI destroyed was actually damaging to you.

Having a proper ESI management system in place not only assists you in a lawsuit, but streamlines your business as well. Moreover, having exculpatory ESI at your fingertips significantly increases the odds that you might head off a lawsuit altogether. Proper ESI management allows you to produce a wealth of information to the other side before they even sue. The depth, breadth, organization and content of properly managed ESI can go a long way in convincing another company they do not want to get into an ESI tangle with you.

Conversely, the inability to access ESI may convince the other side to sue you when they might otherwise have walked away. A potential plaintiff utilizing state of the art ESI management may see an adversary much more likely to settle on favorable terms once the adversary’s dark ages ESI management system implodes under the pressure of the new FRCP.

Brett Trout

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Keeping your head in the sand about (ESI) can create a billion dollar headache.

The recent revisions to the Federal Rules of Civil Procedure (FRCP) have made the discovery of electronically stored information (ESI) the second most important aspect of a lawsuit (next to the trial itself). But what does and, more importantly, what does not, qualify as ESI. The new rules do not specifically define ESI.

Rule 34 now states that requests for ESI include writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations from which information can be obtained. The Committee Note to revised Rule 34 state that the breadth of this definition is designed to anticipate future technological advancements which might fall outside a more narrow definition. Rule 34 also allows for inspection, copying, testing and sampling of ESI. ESI includes information stored not only on computers, but on external hard drives, back-up tapes, CDs, DVDs, jump drives, PDAs, cell phones, online databases as well as hundreds of other information storage devices,

So, ESI covers everything everywhere. Right? Well, although the FRCP define ESI broadly, parties need not produce all ESI responsive to one or more discovery requests. Rules 26(b) (discovery scope and limits), 26(c) (protective orders) and 34(b) (procedure) limit the scope of discovery of ESI, just as they do with hard copy documents. Even with these limitations, however, the resulting amount of ESI which a party must produce in a lawsuit will still be one thousand or more times the number of documents that would ordinarily be discoverable in hard copy form.

So what? What does this mean to the average business? Well, courts holding businesses accountable for finding and producing all of the discoverable ESI requested by the other party. What if a business cannot find the requested ESI? What if the company inadvertently deleted the ESI? Even before the most recent change to the FRCP, juries have been dealing out harsh damage awards and courts have been levying draconian fines against companies accused of deleting ESI.

In Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 312 (S.D.N.Y. 2003), a routine employment discrimination case turned into one of the largest damage awards ever handed down, when the plaintiff proved the defendant had not produced all of the emails requested in discovery. The defendant’s failure to find and produce the requested emails led the judge to order an adverse instruction to the jury, resulting in a $29.2 million damage award.

In U.S. v. Philip Morris USA Inc, (D.D.C. 2004) the court sanctioned Philip Morris to the tune of $2.75 million after Philip Morris continued to delete email which was the subject of outstanding discovery request.

In Coleman v. Morgan Stanley & Co., Inc., 2005 WL 674885 (Fla. Cir. Ct.) the defendant’s failure to disclose the existence of over 1,000 back-up tapes led to the court issuing an adverse instruction to the jury, resulting in a $1.45 billion award.

How do you avoid a billion dollar ESI headache? Implement a document retention/destruction/hold policy. An appropriately implemented policy allows a company to take advantage of the Safe Harbor provisions of the new rules. These Safe Harbor provisions insulate a company against sanctions for documents destroyed in good faith. They key is to contact your lawyer and implement a freeze on document destruction at the first hint a lawsuit is brewing against your company. Otherwise, it may not be YOUR company for long.

Brett Trout

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Everything You Ever Wanted to Know About Electronic Discovery

One of the hottest areas of information technology law is electronic, or “e” discovery. Why? The rules have changed.

If you are never going to be sued, sue anyone or even be tangentially related to a lawsuit, you may be safe in ignoring the new Federal Rules of Civil Procedure (FRCP) relating to ediscovery. For everyone else, however, ignoring the new rules is likely a painful and costly proposition. Unless you have a penchant for writing checks, losing your IT staff for months on end and non-stop tongue lashings from a federal judges, listen up.

Given the breadth and scope of the rule changes, I will devote one post to each general change in the FRCP relating to ediscovery. These changes include:

1. What is electronically stored information (ESI)
2. By the time you get sued, it is already too late
3. Preparing your game plan
4. Clawback
5. ESI Subpoena power
6. Safe Harbor
7. Implementing an ESI management system

These changes are still quite new. Companies are still working out bugs in implementing their best practices to address these changes. Our best practices, therefore, are not only untested in battle, but cannot address the nuances of every conceivable business. Take these best practices with at least three grains of salt. They will not work for everyone, and may not work for anyone. They may, however, provide a template upon which you can begin building an ediscovery policy for your own company; a policy which might just end up saving your job.

If you cannot wait for the posts on this blog, business lawyer Rush Nigut has a great post with links to lots of ediscovery information. Rush has also posted an interesting Blog Talk Radio interview we did highlighting the changes to the rules.

If anyone has any "best practices" suggestions they would like to share, I would encourage you to share your comments to these posts.

Brett Trout

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