eDiscovery News & Events

The eMag Newsletter Articles

September Edition

How the Industry Is Adopting & Understanding the New FRCP Environment
Survey Shows E-Discovery Best Practices
Developing Retention Policies

How the Industry Is Adopting & Understanding the New FRCP Environment

The adoption of the revised Federal Rules of Civil Procedure (FRCP) and recent high-profile court cases with eye-popping damage awards were supposed to change the way corporations manage the discovery process and improve transparency during litigation. But more than a year and a half after the revised federal rules took effect, many organizations have not rushed head-long into major changes in the way they do business and manage their information assets.

The sheer amount of electronically stored information (ESI) that the average business must grapple with has exploded in recent years, overwhelming companies and the legal system alike. Trailblazing cases such as the series of rulings in Zubulake v. UBS Warburg and the $1.5 billion in damages awarded in Coleman v. Morgan Stanley have also increased the pressure on companies to improve the way they manage data that could end up in litigation.

The revised federal rules were intended to provide guidance to organizations and their law firms in managing a changing litigation environment. Major changes in the rules include a new timetable for the "Meet and Confer:" According to Rule 26(f) of the FRCP, parties must meet "as soon as practicable" and at least 14 days before the scheduling conference is held, to propose a discovery plan.

Discovery in the Real World

Yet even in such a challenging litigation environment, many companies and law firms have been reluctant to adopt far-reaching changes. There are many reasons for this--change often comes slowly to the corporate world, and it usually proceeds even more slowly in the legal industry.

And while the new regulations have done a great deal to clarify both the obligations of parties involved in litigation, as well as the intent behind those obligations, there are still questions about and room for interpretation of many aspects of the new rules. For example, the new rules dictate when a Meet and Confer must take place; the rules do not require that the two sides emerge from the Meet and Confer with tangible results.

Companies and law firms must also take into account the different makeup of courts in various jurisdictions throughout the country. The rules are still new enough that very little precedent has been set using them, so different judges often look at identical rules and interpret them in different ways. There are also differences in the levels of sophistication and technological expertise in various courts. Some courts, often those with less crowded dockets or that tend to see fewer cases that hinge on new technology, may adopt a wait-and-see attitude until other courts have issued rulings.

Even when companies have the best of intentions to prepare for litigation, there can be many stumbling blocks. Information silos between the legal department, the IT department and other key players can exist at even the smallest companies. And often, the missions and goals of legal and IT are at cross-purposes; the legal department wants to limit the amount of information that is saved, and the IT people are more concerned with retaining records that are as thorough as possible.

The process of revising records retention plans also can be daunting, in terms of manpower and cost. It is one thing to get buy-in from top management to change the way that ESI is handled and stored; it's another matter entirely to get the project accomplished. Different departments must come together to develop the new plan, and the upgrades in software and hardware required for a state-of-the-art system can be prohibitive. And in a faltering economy, it can be tough to sell management on the need to pull people away from other projects to focus on records retention, particularly if no major lawsuits are looming on the horizon. Developing and enforcing new policies is a huge task, and even the biggest companies with the greatest resources struggle with it.

In many cases, law firms are not leading the charge to push clients when it comes to upgrading record retention programs to make them more in line with the FRCP. There so far has been little pressure from the courts or from clients themselves. When necessary, many courts seem willing to grant extensions for litigants that can't meet the shortened timetables. Without a compelling legal reason to push clients, many law firms are reluctant to do so.

Upcoming Trends

The new federal rules were revised in December 2006, so cases under those rules are only now beginning to work their way through the court system. Attorneys at both legal departments and law firms should be aware of emerging trends that will play out in the future.

Along with court precedent for the new rules, technology also will continue to evolve, and that will create new challenges. The ascendance of Web 2.0 and other breakthroughs will doubtlessly raise issues that the FRCP and the courts haven't even considered. The creation of virtual workstations, for example, could present questions about how information is stored and tracked.

The disconnect between the products and services that law firms and corporations need and what e-discovery vendors are providing also will continue. The lack of uniform standards has exacerbated that situation, but hopefully it will become more mitigated in the future. Those who work on the front lines of discovery are beginning to form associations and affiliations. As those groups become more formalized, they should move closer to creating uniform standards.

While much of the legal focus has been on ESI, paper will continue to remain an issue for some companies and some industries. Young companies that have mostly been in existence in the digital era won't have to worry much. But some older companies with litigation that stretches back for decades, such as pharmaceutical or tobacco companies, will continue to grapple with the reams and reams of papers that still exist and could have potentially discoverable information.

A faltering economy could also slow the adaptation of new processes for managing ESI. There are substantial costs associated with being prepared for upcoming litigation. Companies with a finite amount of both time and money must weigh the risk of investing early in their records retention programs for lawsuits that may never come. In a struggling economy, efficiencies are very important, and the economic realities for one company may move that company in a different direction than another, similar company. Small companies in particular may struggle with accomplishing significant changes to their programs in the short term.

Because of these economic pressures, many organizations are working to do more internally, rather than hire outside vendors. Areas that companies are working on in-house can include data mapping and systems for implementing a legal hold. Organizations also are becoming smarter about what data to restore, conducting limited scans to guide decisions on moving forward rather than simply restoring everything. In response, vendors are looking to become more proactive and serve as risk consultants, rather than limiting their services to hardware and software sales.

As attorneys become more familiar with the revised Federal Rules, many of those with initial concerns are adopting a wait-and-see approach. While few organizations have rushed to make wholesale changes in direct response to the FRCP, the true effect of those rules could take years to move down through the legal system and often labyrinthine systems of large corporations. In the meantime, though, attorneys should closely monitor court rulings that relate to managing ESI under the federal rules-if and when the time comes to make significant changes to the way potentially discoverable data is managed, no one wants to be blindsided.

Survey Shows E-Discovery Best Practices

By Ari Kaplan

In a telephone research study, of 28 legal professionals from Fortune 500 corporations conducted between March 25, 2008 and April 18, 2008, New York-based Ari Kaplan Advisors engaged corporate counsel responsible for litigation in a conversation to spark a dialogue on legal holds, data management, vendor selection, the amendments to the Federal Rules of Civil Procedure, litigation readiness, technology and e-discovery cost drivers.

Twenty-six of the respondents were lawyers who managed litigation in some respect, and two were non-lawyers with significant responsibility for e-discovery. The companies were in financial services, health care, manufacturing, pharmaceutical or technology.

The research revealed that:

Technologists and lawyers are working more closely than people think.
The most significant investments are being made in legal hold and e-mail archiving tools.
The amendments to the Federal Rules have been, to many, much ado about nothing.

CROSS-FUNCTIONAL TEAMWORK IS KEY

Teams of people are overwhelmingly responsible for e-discovery in the modern corporate legal department. Despite the fact that almost 57 percent of the respondents advised that an associate general counsel or senior counsel-level attorney managed the day-to-day e-discovery process, most indicated that the effort was more of collaboration between litigation support and IT.

Another 89 percent reported that their organization has an e-discovery response team in place, and they are cross-functional interdepartmental teams comprised of lawyers, paralegals, litigation support and IT. Some companies also included records management and forensic document specialists as well.

This integrated relationship between the technical experts and the legal department was evident in almost every metric. Seventy-nine percent of the respondents reported working "very close" with IT, and 61 percent noted that legal is "often" consulted when IT adopts new technology.

Stronger internal structuring may also be responsible for the fact that 46 percent of the respondents do not have a long-term agreement in place with a preferred e-discovery services provider, and that only 14 percent of the respondents engage national e-discovery counsel.

Most were also candid about the role of their general counsel. Thirty-nine percent of the respondents indicated that their GC has little to no involvement in the management of e-discovery. While there were unique issues of ongoing litigation or regulatory matters at some companies that required the GC's oversight, 79 percent of the respondents noted that their GC is involved at a level of 3 or below (on a scale of 10).

LEGAL HOLD MANAGEMENT IS CRITICAL

Despite the bottom-up approach, 75 percent of the respondents ranked their organizations at a 7 or higher (on a scale of 10) in terms of how well legal holds are enforced, documented, re-issued and monitored. This has been tested since 61 percent of companies have completed a litigation-readiness assessment, mostly with the assistance of an outside source.

The primary legal cost drivers are fairly evenly divided in corporate America between patent/IP (29 percent), regulatory investigation and compliance (29 percent) and products liability/class action (25 percent) matters. A few attributed their costs to general commercial matters and others selected an option based on unique issues occurring at the moment (e.g., subprime investigations, employment litigation and merger activity).

An overwhelming 79 percent of respondents reported investments in technology over the past 12 months. Of those that reported such investments, it was primarily in tools for e-mail archiving (39 percent) or legal hold management (50 percent). Others had also invested in case management software (11 percent), review programs (11 percent) and data hosting and storage (22 percent).

While they know where the money is being spent, only 43 percent of the respondents admitted that they did not know how much the company is spending in its entirety on e-discovery.

THE FEDERAL RULES ARE AMENDING THE LANDSCAPE

A majority of respondents (61 percent) did not feel that their organizations were particularly impacted by the amendments to the Federal Rules of Civil Procedure, ranking the impact at five on a scale of 10.

Surprisingly, the respondents were almost evenly divided on this issue. Forty-three percent reported that their organizations were minimally impacted by the amendments to the FRCP and selected a rating below five. Thirty-nine percent reported being more substantially impacted by the changes and selected a rating of six through 10. The majority of the responses landed at five.

The reason for the balance is that most companies reported some level of preparation prior to December 1, 2006. While a few organizations created a new position, "The amendments are a non-event," said one participant. Another commented, "We would have made all the changes without the rules."

The perceived impact and the material impact are, however, markedly different. Many reported a substantial increase in e-discovery processing, notwithstanding the fact that there has not been any increase in the number of cases filed. This can be attributed to the heightened awareness of e-discovery along with a new intensity from judges and plaintiffs.

COST IS PARAMOUNT, BUT NOT EVERYTHING

Cost is a major factor for 61 percent of the respondents, and the slowing economy came up in a few conversations. That said, while cost was raised most often as a factor in selecting vendors and support products, most people simply offered it as the obvious choice. Surprising was the passion with which individuals spoke about the responsiveness, experience and collaborative nature of their partners. They want skilled individuals that provide solutions to their problems and honest relationships founded on integrity.

One person commented, "Candor is a huge issue; someone who tells me their limitations makes me feel more comfortable than one who makes promises on which he or she cannot deliver." The issue came up frequently enough to suggest that some may have already had a disappointing experience with a vendor.

TECHNOLOGY LEADS TRENDS

Automate legal hold: Despite the fact that a majority of respondents gave themselves a seven or higher in terms of how well legal holds are enforced, documented, reissued and monitored, many still had lingering concerns about perfection. The assurance of accuracy in a sea of litigation raises insecurities, particularly around the difficulty in determining what ESI is subject to a hold notice and what is not. Those insecurities prompted 33 percent of the respondents to purchase or create litigation hold programs for managing and automating the process in the past 12 months. Fourteen percent are planning to do so in the coming year.

Comments included, "it is not a perfect science," "there is always room for improvement," and "every time you think you have gotten everything, you find something that remains."

Centralize e-mail: E-mail management is the biggest concern after legal hold oversight. In fact, 39 percent of the responding organizations have recently added e-mail archiving and related software to address preservation and collection issues. Another is planning to do so in 2008.

Increase insourcing: More control of e-discovery is coming in-house, especially with increases in staffing as the most popular addition in 2008 (25 percent of the respondents reported that they will be adding at least one team member). With almost 79 percent of the participants reporting the addition of technology in the past 12 months to address e-discovery, there is clearly a campaign to manage more of the process internally.

Invest in the Future: Ultimately, companies want to reduce the volume of material that human beings need to review. Many plan to adhere to stricter destruction policies while others hope that the growth of concept searching and artificial intelligence will solve certain cost and control issues. One respondent commented, "The company needs to spend more time counseling IT and other business clients on the proliferation of electronic records at the creation stage."

Organizations will more fully standardize their retention policies with respect to e-mail and expand it to other forms of communication, such as instant and unified messaging. It will also include centralized control and storage of electronic documents, improved sorting and enhanced identification of electronic records.

Any solution to ballooning costs, however, must begin with knowing how much is being spent. Only 57 percent of respondents knew or could easily find out the extent of their costs. There will be a major push toward readily identifying costs, both in the aggregate and in narrowly tailored segments for quick evaluation purposes. Outside counsel will need to bill their time more specifically and according to a uniform code system, which will enable in-house teams to make these calculations.

Electronic discovery is no longer a mystery in the legal community. The rules are well defined and the case law is mature. Every company in America has digital records, but the responsibility and maintenance for those records is shifting. A single person or department no longer manages them. Rather, companywide teams influenced by business interests across the entire spectrum are accountable.

The transformation in how the discovery of ESI is viewed throughout an organization requires corporate counsel to adjust their practices and adapt. They must collaborate, understand the technical aspects of the process and anticipate shifts in the landscape. Perhaps more importantly, they must demand the same from their outside counsel and their e-discovery partners. It is only through this seamless integration that they can persuade judges and adversaries to support their positions.

On the bright side of these challenges, laughed one participant, "One of the benefits of being sued all the time is that you have to be ready to respond." Incorporating industry-accepted best practices should help you do so more effectively.

Ari Kaplan is the founder of Ari Kaplan Advisors and author of "The Opportunity Maker: Strategies for Inspiring Your Legal Career Through Creative Networking and Business Development" (Thomson-West, 2008).

Developing Retention Policies

With the changing legal landscape and increasing scrutiny over regulatory and compliance issues, response times for discovery requests and production of information have been dramatically reduced, creating new pressures on companies to install and enforce effective data retention policies.

A document retention policy provides for the systematic review, retention and destruction of documents received or created in the course of business. Document retention policies will identify documents that need to be maintained and contain guidelines for how long certain documents should be kept and how they should be destroyed. It would not be an exaggeration to state that many companies in this country do not have a defined and cohesive retention policy. During litigation, this can cause huge additional costs and expose a company to additional liability, all because documents were kept too long or deleted improperly.

Retention policies include many different types of data, not the least of which are emails and other electronic information (ESI). Electronic information is not just found on laptops and desktop computers; ESI includes instant messaging programs, websites, voicemail, cell phones, data recorders, PDA's & Blackberry devices, flash drives, and the list continues to grow.

EVERY company should have a formal document retention policy, and this policy must be actively enforced. When an organization is aware of or reasonably expects the likelihood of pending legal matters, it is required to implement a "Litigation Hold" to retain any information or documents that the organization reasonably believes are discoverable in the anticipated litigation/investigation.

Outside of industry regulations and litigation hold requirements, a company only needs to keep electronic information for as long as is necessary for business purposes, but no longer than that. A well-developed retention policy can also serve as a tool to prepare for litigation, providing both in-house and outside counsel with a roadmap for finding information or documents in case of document requests.

Steps in Developing Retention Policy

1) Identify Information Assets
Identify types of information assets (esp. electronically stored information) the organization holds (i.e. email, client contracts, vendor service agreements, compliance documentation, product/service logs)

2) Legal/Regulatory/Compliance Issues
Identify any particular regulatory agencies or statutes that may govern the industry you are operating in
Identify any past/anticipated issues facing the organization from a litigation, regulatory, or compliance perspective

3) Establish Decision makers & Key Timelines
Identify key decision makers within the organization in IT, Legal, Human Resources, Records Management, Compliance, as well as C-Level executives and lay out appropriate time period for retention of organizational information or categories of organizational information

4) Prepare existing IT Infrastructure Roadmap
--Map existing IT architecture, including disaster recovery, storage infrastructure, and backup media/environments
--Prepare an organizational chart to identify key functional areas within the company/reporting relationships that may impact retention policies
--Identify any specific areas that need to be carved out from the general policy (i.e. financial records may need to be kept for 7 years, regardless of how the organization's retention policy treats general data)

5) Implement, Monitor, & Review
--Implement new policy, monitor enforcement, and review policy periodically to ensure any new issues are addressed

A company's retention policy is only as effective as its implementation
Retention policy must receive buy-in at the top management level and be enforced down through the organization

Retention policies should be easy to follow & should include periodic audits
Retention policies must also be renewed every few years, to allow for adjustments in company operations and changes in technology
Policies must recognize and address that different people store information in different ways
- Hard drive
- Network drive
- Blackberry/PDA
- Archived email folders
Retention policies should explicitly spell out how backup tapes are handled

If a company is to develop a functional retention policy, then it must know where all of its information and documents are kept and how that information is stored, including: names of custodians and types of servers and backup tapes used. eMag Solutions provides assistance in development of retention policies as part of its Electronic Discovery Preparedness Consulting and also offers its proprietary software as an effective tool in helping companies to organize and catalog their backup tapes. eMag can also help organizations define media policies and implement litigation holds. For more information, please contact us today.

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Article by eMag Solutions. For more articles on eDiscovery and Data Restoration, subscribe to our e-mail Newsletter by sending a blank email to newsletter@emaglink.com or by going to http://www.emaglink.com.