Top Trends in E-Discovery: Noted At ITLA Discovery

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09Nov2007

Top Trends in E-Discovery: Noted At ITLA Discovery

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By Ralph E. Losey Co-Chair, e-Discovery Group Akerman Senterfitt

Akerman Senterfitt

I attended the annual convention last week of the International Legal Technology Association (“ILTA”). This conference is a big event for law firm IT staff, and a few lawyers like myself. Over 2,300 techies turned out to attend 190 different educational sessions and to check out the 150 vendors on display. The ILTA event is also a networking and IT-social heaven; the big multi-vendor sponsored 007 party is rumored to have cost over a half million dollars. The seminars related to e-discovery were filled to capacity; whereas, other areas seemed nearly empty. My favorite CLE-type event was a panel presentation on e-discovery trends by attorneys and IT specialists from several large firms, including DLA Piper and Sullivan & Cromwell. Browning Marean, the chair of Piper’s e-discovery team, whom I have heard before, was particularly effective in delivery. I understand from panelist Art Smith, of Husch & Eppenberger, that he prepared most of this list, and so Kudos to him, too.  Here is their top ten list:

  1. Courts Set Minimum Standards to Supplement the New Rules.
  2. Discovery Battles Take Center Stage.
  3. Sanctions Become Meaningful Threat.
  4. Erosion of the Attorney-Client Privilege.
  5. Inaccessible Data Not Really Inaccessible.
  6. Best Practices Standards Begin to Emerge.
  7. Abundance of Electronic Resources.
  8. Law Firms Adopt New Approaches.
  9. Corporations Finally Starting to Recognize the Risks.
  10. Vendors Consolidate and Expand.

Although for the most part I think the panel got it right, I do have a few points of disagreement. Here is my take on the trends they discuss.

1. Courts Set Minimum Standards to Supplement the New Rules.

All Rules of Civil Procedure are typically general in nature, and deliberately avoid specifics of application or detail. A certain degree of vagueness and ambiguity are inevitable. The new Federal Rules of Civil Procedure on e-discovery are no exception. They substantially change the conduct of e-discovery, especially its timing, where parties are now required to confer within the first 100 days and reach agreement on e-discovery issues. But the rules do not spell out the details of the conferences and agreements. This leads to the situation we have now of vastly different interpretations and implementations between practitioners. It can also lead to unfair “gotcha” situations caused by non-compliance, either through inadvertence or lack of knowledge.

Everyone expects years of litigation before any bright lines of conduct come out of new e-discovery rules. In the meantime, several district courts have begun to issue guidelines of conduct they expect from counsel to comply with the new rules, especially new Rule 26(f) on the “meet and confer” conferences. This trend is very likely to continue and accelerate, and eventually to spill over into the state court systems.

Many of the new guidelines specify exactly what the local court expects the parties to discuss and agree upon. These guidelines thus serve an important function to supplement and clarify several aspects of the new FRCP, and thereby help establish minimum standards of professional conduct.

While I agree this is indeed a current trend in e-Discovery, I do not think it is the number one trend, or even close. In truth, there are still only a small number of judges involved in this infant effort.

Chief among this still small group of minimum standard setters is Magistrate Judge Paul Grimm. He is a leader in e-discovery whose thoughts and published decisions in this area are discussed frequently in this blog. With the help of the local bar in Baltimore, he has written “Suggested Protocols” of what should happen at 26(f) conferences, and the “best thinking” on minimum standards for the kind of information to be exchanged. His suggestions include a very extensive list of discussion topics for any case involving discovery of electronic documents, including the scope of the litigation hold; identification of key custodians; nature and types of E.S.I. involved; metadata concerns; IT network infrastructure, back-ups; legacy systems with potentially discoverable E.S.I.; records management policies; form of production; de-duplication issues; preservation of data on “dynamic” systems and application of the Rule 37 “safe harbor” for document destruction; quick peek or clawback strategies for privileged documents; E.S.I. “deemed not reasonably accessible”; document tracking or Bates numbering; cost sharing issues; possibility of two-tiered discovery; protective orders for confidential information; and Rule 30(b)(6) depositions on IT systems.

2. Discovery Battles Take Center Stage.

This is a trend for discovery battles to take on a life of their own, and become far more important to the case than the actual merits. This trend in e-discovery started several years ago, and is still increasing every year. In fact, I would call this the number one trend. The new rules were in part designed to try to counter this trend, because it often results in cases being tried or settled based on side issues, instead of the merits of the underlying dispute. Unfortunately, I see no end in sight to this trend, and predict that it will continue for the next five to ten years, if not longer.

Although not discussed by the panel, in my view, this trend is driven by four forces:

  1. businesses and governments have not spent the time and money required to organize and control their electronic records, and prepare for e-discovery;
  2. the Bar, especially litigators, have not learned enough about e-discovery, nor their clients’ IT systems, and do not yet understand the importance of e-discovery to dispute resolution today; instead, most law firms still tend to relegate e-discovery to young associates, just like they did paper discovery;
  3. the judiciary also needs to improve its understanding in this area, and recognize the special problems inherent in the preservation, search and production of ESI; and
  4. the Plaintiff’s Bar is starting to recognize that e-discovery is a powerful litigation weapon, especially when suing companies with large IT systems and voluminous ESI storage.

The presenters at ILTA focused on the last factor as the driving force behind this trend and for authority, quoted a Plaintiff’s Bar publication on the subject of e-discovery, “Maximizing Damages from the Defendant’s Spoliation of Evidence” by Maury and Steve Herman, Trial Magazine May, 2005:

“Attorneys who can build a case of spoliation, therefore, may gain a significant advantage in the presentation of his or her case to the jury, even in the absence of a separate cause of action or formal sanction by the court.”

The threat of sanctions for spoliation, and the tactical advantage that it can provide, is present in any case involving large amounts of ESI. In view of the ease with which ESI can be lost, it can happen to any large organization involved in a lawsuit, even when they are operating in good faith and trying to implement a reasonable preservation plan. In many jurisdictions, it is not necessary to show bad faith to have sanctions imposed. It is only necessary to show the negligent loss or destruction of potentially relevant evidence at a time when the party was under a duty to preserve.

3. Sanctions Become Meaningful Threat.

This is directly tied to the last trend of e-discovery battles becoming the center of attention in many lawsuits. The goal of the battle is to obtain sanctions. Another goal, one that is unethical but in practice happens all too often, is to make the cost of e-discovery so high that the other side is forced to settle or capitulate.

The presenters referred to two recent cases for more information on sanctions: “United Medical Supply Co., Inc. v. United States,” 2007 WL 1952680 (Fed. Cl. June 27, 2007) and In Re September 11th Liability Insurance Coverage Cases, 2007 WL 1739666 (S.D.N.Y. June 18, 2007). The court in “In Re September 11th Liability Insurance Coverage Cases” imposed Rule 11 sanctions of $750,000 against several attorneys of record and an insurer for asserting unfounded denials and preventing discovery. The court also imposed discovery sanctions of $500,000 against the attorneys and insurer for delays in disclosing relevant documents and unjustifiably increasing the costs of discovery. I discuss the “United Medical” and several other similar cases throughout this blog. Suffice it to say that spoliation sanctions do not always require intentional egregious conduct. It can sometimes result from “gotcha” situations or even traps laid by clever opposing counsel. (No, I will not discuss those traps!) The sanctions that a court can impose range from allowing comments to a jury about the conduct (which is not really a sanction, but is often in itself very effective as the above quote from the plaintiff’s Bar magazine indicates), to monetary penalties, preclusion of evidence, adverse inference instructions, or entry of a default judgment.

4. Erosion of the Attorney-Client Privilege.

This is a general trend today in all areas of law, not just e-discovery. The attorney-client waiver issue is a much discussed problem in the context of government investigations and criminal prosecutions. There is a waiver problem in e-discovery, too, but for different reasons related to the enormous amounts of electronic documents that sometimes have to be reviewed and produced. When you review documents on a large scale, it is far easier to make a mistake and inadvertently produce a privileged document that should have been withheld and logged. The new rules also try to address this trend in the clawback provisions of Rule 26(b)(5)(B).

The presenters also noted that in the context of the side show of e-discovery spoliation, courts often allow erosion of attorney client privilege. These mandatory waivers typically happen in depositions of in-house counsel concerning production issues and in depositions of witnesses on what instructions they received from counsel regarding document preservation and collection. Further, most attorneys find that “transparency” is a very effective strategy to try to avoid these disputes. The parties and their attorneys freely disclose to opposing counsel the actions taken to try to determine what ESI is relevant and should be preserved, and the methods employed to then preserve and collect the ESI. This transparency in e-discovery can avoid, or at least mitigate, later charges of spoliation when a mistake is discovered. This kind of protection requires disclosure of what was previously hidden from opposing counsel under the veil of attorney-client or work product secrecy.

5. Inaccessible Data Not Really Inaccessible.

Here the panel was observing the beginning of a trend to extensively litigate Rule 26(b)(2)(B). This rules states that a party does not have to produce ESI that is “not reasonably accessible by reason of undue burden or costs.” But, the rule also provides that even if a party proves no-reasonable-accessibility, they may still be required to produce that ESI if the requesting party proves good cause. To make matters more complex, and ripe for litigation, if good cause is shown, the court may still order cost shifting, where all or part of the production expenses are shifted to the requesting party. Rule 26(b)(2)(B) is discussed at length elsewhere in the Blog and the Rule itself is included in the Blog Page above.

Although the panel pointed to litigation of 26(b)(2)(B) as a trend, I would enlarge that trend to include litigation of all of the new rules, but especially new Rule 34. Rule 34(a) includes for the first time, but does not define “electronically stored information.” This is already a hot button as is shown by the recent decision in Los Angeles interpreting ESI to include RAM memory, even though the electronic information may only be stored for less than a second. “Columbia Pictures Industries v. Bunnell”, Case No. CV 06-1093 (FMC(JCx)) (Doc. No. 176). The “Columbia Pictures” case and its implications have previously been discussed at length in this Blog.

Litigation of the requirements of Rule 34(b) as to form of production is another important trend, one that is here to stay for many years. It allows parties to specify the form of production of the ESI, and states that if no form is stated in the requests, the default is the form in which it is “ordinarily maintained,” or in a “reasonably usable form.”

This in turn raises the whole issue of native files and metadata, addressed at length in the Metadata Blog Page and elsewhere many times in this Blog. This is directly related to Rule 34(b) form litigation because ESI is “ordinarily maintained” in its native state with full preservation of metadata. In fact, concern and disputes about metadata is an important trend by itself, one which, oddly enough, the panel completely overlooked. Based upon the case law and interest among attorneys I have seen on this subject, I would put metadata in the top five of trends. Attorneys are concerned with whether they should produce ESI in native format with full metadata, or convert first to an image file, such as TIFF. They are also paranoid about inadvertently disclosing confidential information by not properly stripping metadata, and even about whether it is ethical to look at the metadata in another party’s production.

6. Best Practices Standards Begin to Emerge.

In addition to some Courts setting minimum standards, at least two private groups are working on the related task of establishing best practices standards. The dominant group by far in e-discovery is The Sedona Conference and their numerous publications in this area, but primarily the Sedona Principles. (As a member of this group I am admittedly somewhat biased, but at this point everyone seems to agree with this assertion.) These principles were updated in 2007 and are described in detail in an earlier Blog. Another group primarily made up of vendors is starting to have more influence, the “Electronic Discovery Reference Model Project.” They developed the now industry-standard nine-step description of e-discovery described previously. Like almost everyone else, I consider this a very effective model to understand and explain how e-discovery should work.

In the future, several new groups will probably emerge to help establish best practices for e-discovery. The most likely candidate is the ABA itself, which convened the “First Annual National Institute on E-Discovery” in 2007 described previously in this Blog. Moreover, in 2004 the ABA completed a well conceived e-discovery addition to the ABA Civil Discovery Standards. A lot of good work went into this project in 2004 to add e-discovery related Standards, and they are certainly worth a close study. You will see that even though they were prepared in 2004, the Standards closely track the new federal rules on e-discovery that went into effect on December 1, 2006.

Perhaps even more important than these public groups to the actual practice of law are the activities of private law firms around the country to establish their own internal best practices standards. The panel pointed out that such standards and forms have already been developed by a few of the leading firms in the country, and circulated to all litigators in the firm, but they knew of only one firm so far that actually required all litigators to follow the rules. Litigation shareholders in law firms are an independent bunch, and resist being told what to do. Browning Marean even admitted that trying to get the litigators in his firm to follow the guidelines he had come up with was like “herding cats.” Instead, they are more likely to wait until something goes wrong and then ask for help. Most of the best practices and forms that have been developed by law firms are kept secret, and not circulated outside of the firm. I know I have spent many days, if not weeks, working on creating and refining my law firm’s best practices standards, which I call check lists and forms, and these will most certainly not be found in this Blog.

7. Abundance of Electronic Resources.

This is the trend of increasing quality information on e-discovery. It is now relatively easy to find valuable resources in both electronic and paper form. Google will lead you to dozens of on-line sources, including blogs like this one. I also happen to know that several more paper books in this area are planned for publication soon. Of course, when you have a superabundance of information, a new problem arises of quality control. Many contradictory statements are being made, especially among competing e-discovery vendors, some of whom make shockingly inaccurate statements, or routinely engage in hyperbole and misstatements of the law. The misstatements are especially rife in summarizing what the new rules supposedly require companies to do (typically buy their software).

8. Law Firms Adopt New Approaches.

Private law firms are beginning to form interdisciplinary teams to render e-discovery services where litigation attorneys, litigation support paralegals and IT technicians, and other experts in the firm are blending their expertise. This is indeed a trend, but an even more important trend in my opinion, which the panel only briefly mentioned, is the formation of interdisciplinary teams in business and government to address e-discovery issues. This is the client’s e-discovery team concept discussed frequently in this Blog and the About Page above.

Instead of recognizing this all-important client trend, the panel focused on internal law firm teams. They also pointed out that law firms are now out-sourcing document review to lower-paid contract-lawyers to try to cut costs. Actually, this contract-lawyer trend started years ago, and some firms have even gone so far as to outsource relevance and privilege review to lawyers in India. This trend is expected to continue, not only for cost-savings, but also to fight the “boredom factor” for young associates and paralegals in some large firms. They would rather quit, no matter what the pay, than spend all of their time for weeks on end reading other people’s email, most of it boring. It may require cultural familiarity and speed reading skills, but no real legal expertise. So, let the hungry lawyers in India do it, but do they have the cultural familiarity to do it right? Many doubt that, and so almost all outsourcing today is to laid-back U.S. lawyers who do not want a regular nine-to-five job at a law firm for a variety of reasons.

The panel also suggested that it was a trend for law firms to keep e-discovery IT-type processing in-house, instead of shipping it to outside vendors, or allowing the clients to do it themselves. Personally I disagree, and do not think this is a new trend, but rather the final gasps of an older e-discovery paradigm. For years, many large law firms have tried to keep all of the services in-house. The firm would take responsibility for all e-discovery IT services, and would bill for it. They would bill a lot for it. This became a significant profit center for many law firms. In my opinion, this old model accounts for some of the high costs in e-discovery, and clients will no longer stand for it. Moreover, it turns law firms into IT business ventures with their own agendas, and moves attorneys away from the profession they were trained for. There are also many ethical issues raised by this questionable model of legal services, although I am sure that most firms do a good job balancing the competing interests involved.

Even the panel admitted that management in law firms with large in-house capacity were now struggling with these issues, and subjecting their business model to careful risk and reward analysis. I believe that the real trend here is, or soon will be, to move away from this captive exclusive model into discovery teams paired with clients and assisted by vendors. In the new model, a law firm IT department would only infrequently process client data , typically only in smaller and less complex projects. The larger projects would be performed by clients and vendors, under the supervision of law firms. This would not be a popular message at an ILTA conference, many of whose members make a living processing the data of the firm’s clients, and so would be at risk in the new paradigm. For that reason, I am not surprised that it was never mentioned at this event as an emerging trend.

9. Corporations Finally Starting to Recognize the Risks.

The panel thinks that corporate America is finally starting to get it, and recognize that they must get a better handle on their records, and be prepared for e-discovery. They correctly noted that for many years most large organizations have taken a kind of “ostrich” approach to the looming problem, and tried to ignore the disastrous law suits that happen to other companies. Consistent with that policy of denial and avoidance, they have instructed their legal counsel to adopt what the panel called “don’t ask, don’t tell” agreements with opposing counsel. This has worked in the past when two large companies were suing each other, and is usually referred to as the “MAD” approach, “Mutually Assured Destruction,” and e-discovery is the nuclear weapon that both sides informally agree not to use.

If one company did dare to drop a bomb of an e-discovery request, the other would respond in kind. It kept the peace for many years, but is now as passé as the cold war itself. Of course, this approach has never worked in “David and Goliath” type lawsuits, typical in employment claims, as Zubulake shows. It is impractical today even in suits between “big boys” because if you “don’t ask, don’t tell” with e-discovery, you will never find out what really happened. Since almost all of the evidence is now electronic, if you ignore e-discovery, you ignore discovery. This is especially true for email, which is where most of the “smoking guns” in litigation today are found.

The panel contends that these days are now over, and the trend is for companies to wake up and get with the program. They are getting ready by:

  1. appointing e-discovery liaison within corporate hierarchy, which is a start to the full-blown internal e-discovery team that I advocate in this Blog;
  2. updating records retention policies on electronic records;
  3. adopting new software tools for data recovery;
  4. adopting new content management strategies;
  5. selecting preferred e-discovery vendors; and
  6. retaining one or two law firms to act as national e-discovery counsel to coordinate all e-discovery issues in litigation pending in various jurisdictions around the country.

They put this as the second to last trend, and I tend to agree with that. Not because it is not important; it is obviously very important, but because this is a new trend, still in its infancy. Many companies have not yet received the message; or they have heard the buzz, but do not understand its importance, and so continue to put it off until later. The truth is, most of the companies that are already pursuing e-discovery programs are driven by past e-discovery disasters, or at least big problems. Maybe they lost a case outright because of e-discovery mistakes, or they were slapped with sanctions, or maybe they won a case but in the process had to pay outrageous e-discovery costs and fees. More likely they had to settle a case, or pay too much to settle, just because of the e-discovery exposure. Some companies have had to be burned several times before they reacted. The sanctions and forced settlements continue as the number one trend in e-discovery is in large part due to the failure of businesses to respond promptly or take proactive measures.

10. Vendors Consolidate and Expand.

The final trend noted was in the e-discovery vendor industry, which by all accounts now has income of several billion dollars a year. The larger vendors are buying up the smaller ones, and services are moving away from multiple specialty vendors, to a few full service vendors. The trend appears to be toward the one-stop solution vendor that handles all stages of e-discovery from records creation and retention to collection, review and production.

There are a few more major trends in the vendor area that they did not mention. First is the move to all on-line review, using secure connections to vendor computers, instead of storing ESI on law firm servers. Related to this trend is the move to a pricing structure based solely on ESI size alone, i.e., a charge per gigabyte for everything, including the software needed for attorney review. Another trend only briefly mentioned by the panel is the move away from simple keyword searching to more efficient “concept searches.” This is very significant, and will become much more so in the coming years. I have explored this further in prior blogs. Finally, there is the strong but controversial trend towards pure “native file review,” and away from image file review in TIFF-like formats. Many promote this development as a way to save costs by eliminating the conversion step, from native to TIFF. Others oppose it for a variety of reasons, including fear of inadvertent metadata disclosure.
Copyright © Ralph Losey 2007. All Rights Reserved.

About the Author
Ralph E. Losey
Akerman Senterfitt

This article was posted on attorney Ralph Losey’s blog site: http://ralphlosey.wordpress.com; you can also visit his website: FloridaLawFirm.com, which is an information resource “to help bridge the knowledge gap between the disciplines of Law and IT”.

Also, the article, “Top Trends”, will be part of the upcoming release by the ABA on e-discovery entitled, “e-Discovery: Current Trends and Cases”. It is due out in December and will be the ABA’s major release on e-Discovery in 2008 and the nation’s first legal “blook”.

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