"Because Something Must Be Done": The Dangers of Trying to Save E-Discovery Costs by Treating Data Like Paper

This article was published by Wendy Akbar and Bill Hamilton.

Remember the days before the computer, the typewriter, the printing press, and even carbon paper? The days when, to copy a book, one needed to sit down and re-write it by hand? Every letter of every word of every sentence-dappled paragraph, had to be painstakingly copied one by one. With all the technology available today, no publisher would ever consider copying a book by hand rather than re-printing a copy saved on the computer. To do so would be a waste of time -- a return to the Dark Ages.

When it comes to e-discovery, unfortunately, the Dark Ages still occasionally guest stars in modern-day electronically stored information (ESI) retrieval and production. The dangers of being such an e-discovery ostrich were most recently highlighted in Multiven, Inc. v. Cisco Systems, 2010 WL 2813618 (N.D. Cal. July 9, 2010). Plaintiff Multiven, along with the two counterclaim defendants, originally elected to undertake a manual review of the full set of voluminous ESI it possessed prior to production. Sound conscientious? Not exactly. It means they turned the clock back about 15 years (in e-discovery time, akin to 150 years) and:

(1) Refused to use an outside vendor to help organize ESI information;
(2) Refused to utilize any search terms to narrow the "giant mass" of data to be reviewed;
(3) Instead used approximately five attorneys for six months to a year, to manually review every unfiltered page of "that giant mass" for responsive documents.

Why? They wanted to save on cost, particularly the expense of hiring an outside vendor to help whittle down potentially responsive information. Perhaps they adopted a manual review for other strategic reasons. (Never mind, of course, the hourly billing rate of five attorneys doing eight hours of document review five days a week for over six months, which more likely than not was more expensive than hiring a vendor to narrow the "giant mass" to a more reasonable review load for the attorneys).   The end result, however, was not exactly what was intended . . .
 

What sounded like a Great Idea to Multiven ultimately backfired. The process bogged everyone down, taking months and months. Finally, the district court became distressed when it became apparent that the delays associated with the manual review of all electronic files was causing the case to extend well beyond the boundaries of the scheduling order:

[I]t has become clear to this Court that [the plaintiff and counterdefendants] cannot complete their review and production of documents with enough time before the close of discovery to allow Cisco time to actually do anything with them. [They] so far have insisted on a review process that guarantees that they will not finish this extensive project in any reasonable amount of time.

Id. at *2. The trial court thus adopted the Report and Recommendation of Magistrate Judge Lloyd, required Multiven to utilize a vendor to assist in e-discovery, and appointed a Special Master to manage certain e-discovery disputes that potentially threatened to derail the litigation. In short, the Court concluded (id. (emphasis added)):

Because something must be done, this Court recommends that the District Court order the parties to promptly retain a third party vendor to assist with this increasingly perilous situation.

So first, Multiven was not only stuck having to hire the very vendor it had hoped to avoid, but on top of it had to pay its attorneys the hundreds of thousands it cost to conduct the months of document review that were done to avoid hiring a vendor in the first place. Instead of saving money, their gamble multiplied the cost of e-discovery in the case. Second, by this point, even Multiven was so fed up with the document review process that it was amenable to hiring a vendor before the court order even issued. Sure, part of it was because the defendant, Cisco, had offered to pay for part of the vendor cost, but Multiven had finally learned that it was in over it head, and that in trying to save money, it had wound up spending significant more cost on e-discovery.

While the Court's intervention was necessary to get the case back on track, one wonders what possessed the Multiven and its counsel to undertake a prolonged manual review, especially when Cisco appeared to be urging Multiven to employ modern technology all along. Delay was only one by-product of Multiven's decision. A second by-product was the likely extraordinary costs such manual reviews entail. The most substantial e-discovery costs arise from the attorney review process, regardless of whether that review is done internally by firm lawyers or outsourced to vendors in the United States or abroad.

One might think that a manual review is the "gold standard" and the most thorough, comprehensive way of searching. In other words, while you can place fistfuls of hay at a time into a hay-sorter to separate out those few stray needles, there's still a margin of error. You're more likely to find them if you use the time-consuming method of picking up one strand at a time and eyeballing it. Right? Oddly, no. In truth, the so-called gold standard of manual review is mythological, and the human eye can miss a lot more than a well-crafted keyword search protocol can capture. A widely-regarded study, Blair et al., Wittgenstein, 'Language and Information:  Back to the Rough Ground!' 302 (2006), found that manual review teams only found 20% of the relevant documents!  Ralph Losey and Jason Baron have also demonstrated that adding conceptual search tools to key-word searching further improves results and reduces cost. So Multiven's Dark Ages strategy not only multiplied costs and delayed the proceedings, but likely would have missed most of the relevant documents -- leading to potential sanctions and do-overs. Some cost-saving strategy!

In truth, there are very limited circumstances in which a case or production might require every e-document to be reviewed: the all-consuming, unfiltered, manual document review is dead, and for good reason. Today's staggering volume of ESI makes such a manual review both cost and time prohibitive. Utilizing the broad array of tools to cull down, de-duplicate and search data volumes is generally accepted and is even becoming mandated practice, as Multiven learned too late. While all searches are not created equal, the Text REtrieval Conference (TREC) Project -- co-sponsored by the National Institute of Standards and Technology (NIST) and U.S. Department of Defense-- has demonstrated a better search results by machines than plowing through data manually. While a search methodology utilized by a party has to be defensible, standards are slowly emerging, as documented by The Sedona Conference® in its May 2009 Commentary on Achieving Quality in the E-Discovery Process: Best Practices for Document Retention and Production. There is no reason to be stuck in the Dark Ages of linear, manual review.
 

Documents Kept in the . . . Irregular Course of Business?

In yet another example of why records managers should be coordinating with legal on storage of documents, the U.S. Federal Court of Claims has held that documents archived in a manner other than the regular course of business do not comply with Rule 34 of the FRCP. 

In Ak-Chin Indian Community v. United States, 85 Fed. Cl. 397 (2009), documents stored in a different filing system than they were kept prior to transfer to storage were held not to have been kept in the ordinary course of business.  In that case, the plaintiffs were suing the government and wanted to get their hands on responsive documents kept in a bunch of boxes at the American Indian Records Repository (AIRR).  The boxes were indexed using an off-the-shelf commercial software package that "captures information about the source, files, and documents in [each] box [which information is subsequently] entered into the . . . database."  Id. at 398.  People digging around the database for, say, documents responsive to discovery requests, could run queries to search for them.  Id.  So, when served with discovery requests, the government turned to its handy database, ran a few queries to find the boxes that likely contained responsive documents, and sent the database query results along to the plaintiffs.  Id. at 399.  The plaintiffs filed a motion to compel, arguing that this didn't constitute a production of responsive documents organized and labeled by category of request as required by Rule 34 of the Rules of the U.S. Court of Federal Claims.  Id. 

Under Rule 34, "[a] party must produce documents as they are kept in the ordinary course of business or must organize and label them to correspond to the categories in the request."  Id. (quoting RCFC 34(b)(2)(E)(i)).  The Ak-Chin court held that the documents at the AIRR were not maintained in the ordinary course of business under Rule 34, because prior to transfer to the facility, they were reorganized from the filing system of the local agency offices to conform with the AIRR filing system (not wholly surprising, considering that AIRR was a records repository and records are not always in tip-top shape, organizationally-speaking, when they are first unearthed from the mess that makes up most people's filing cabinets). Id.  The court explained that "documents in storage are no longer in the usual course of business, they are kept in the usual course of storage," such that the only option under Rule 34 was to label and categorize the documents.  Id. at 400.  For documents transported to storage to still be kept in the ordinary course of business, the court said, the documents must be stored in the same way they were kept.  Id. The court was also concerned that the filing system at AIRR did not permit a meaningful review if the plaintiff was dissatisfied with the production.  Id. at 401.  Because only the boxes were indexed, not the specific documents in the boxes, the government was out of luck.  Id.

Take home message? Know just how your documents are arranged in storage in relation to how they're kept before they're retired to archives, boxes, and closets or you may incur additional costs to produce them.

Getting TIFFed Off: The Dangers of Not Going Native with ESI . . . Or, The Perils of Killing the Bunny

For a full understanding of the Great TIFF v. Native Debate and the dangers of choosing the wrong side, try this. Picture a bunny.

Why not? Spring is near, and Easter is only a month away. So, picture a bunny. You can cuddle it, watch its little nose twitch, listen to its heartbeat, even observe its behavior and follow it home. If you are one of those lucky creatures who speak bunny -- like computer programmers speak source code -- you can politely inquire where it's been, what it's seen and who it has spoken with.

Electronically-stored information (ESI) such as e-mails and spreadsheets, is like that living bunny. It exists in pure native form, possessing an exotic birthday suit from which can be gathered the hidden details known as metadata -- who authored the data, who sent and received it, the underlying formulas behind the numbers in an Excel spreadsheet, where files or e-mails were stored, who read or possessed them, when they were created, accessed, modified and saved. Such ESI produced by a party is fully searchable. Like the bunny, it can talk to your opponent, and tell them things.

But herein lies the nasty little secret: attorneys and their clients do not want the bunny to talk to their opponents. In fact, they would love to produce ESI in such a way that their opponents cannot communicate with the bunny. But in most cases, their opponents' requests for production specifically ask them to turn over the bunny. So what can they do?

Picture that bunny, dead. Whacked. A poor dead bunny, handed over to the other side. No pulse. No heartbeat. You can't follow a dead bunny home. You can't talk to it, and it certainly can't talk back. That dead bunny is a TIFF, or "Tagged Image File Format," like a PDF. When the bunny is snuffed and the electronic data "TIFFed" -- i.e., printed out in hard copy and then re-scanned -- it becomes dead and frozen, rather than dynamic and searchable. What you see is what you get. The hidden information, the ability to search millions of pages of text for smoking gun language, and to peek at its living history, is lost. And your opponent has no way to recreate it. There is no way for him to resuscitate that bunny. Sure, he can take a DNA test of the dead bunny: convert the tiny elements of TIFF images -- the individual letters, like the Ts, As, Gs and Cs of a double helix -- into searchable text format through optical character recognition ("OCR"). But OCR does not solve the main problem: identification of the lifeblood, the living metadata of the bunny's life history (the who, what, where, when and why) that does not appear in the TIFFs.

Still, what's wrong with this? Why not always produce ESI in TIFF rather than native metadata form? Why not always produce a dead bunny? Isn't this a perfect solution? Unfortunately, no -- as one law firm, two lawyers, and their very unhappy client just learned in Bray & Gillespie Mgmt. LLC v. Lexington Ins. Co., No. 6:07-cv-222-Orl-35 KRS (M.D. Fla. Mar. 4, 2009). In short, Lexington wanted a live bunny and requested all ESI in native format without any alteration or deletion of metadata. Its opponent Bray & Gillespie (B&G) produced a very dead bunny, and was called out by the court for doing so. And that was before B&G's counsel began lying about who killed the bunny and when.

At issue were material misrepresentations made by two individual partners at B&G's counsel, Reed Smith: Berringer (who was involved in discovery) and Ellison (who was not). Berringer told the court that its client B&G killed the bunny by printing its ESI in hard copy and sending it to its former counsel Anderson Kill, who then scanned the documents to create the TIFFs that Reed Smith later produced when they took over the case. But Berringer's information was third-hand, and wrong. He could have contacted Anderson Kill, reviewed the original database, or talked to his client to determine the truth. He did nothing. Even an early draft of a declaration from B&G's vice president stated "electronic documents were extracted directly from individual computers" and given to Anderson Kill. These paragraphs were mysteriously omitted from the final version of the declaration.

The court found that B&G and its counsel had deliberately ignored evidence that in fact, the ESI had been obtained from the client in native and fully-searchable electronic form with metadata, in an Introspect database. In other words, Anderson Kill obtained a live bunny from the client. The bunny was then killed -- converted to TIFFs "using a program that was set to selectively exclude certain types of metadata" before production, which "removed or significantly degraded Lexington's ability to search the ESI and, accordingly, that it was not in a reasonably usable form as required" by Rule 34 of the Federal Rules of Civil Procedure.

Berringer waited until near the end of a hearing before the court to admit that the bunny had been obtained alive. Even then, he did not disclose what metadata was in the Introspect database or how the ESI was transferred to the database; did not disclose the existence of the Target Hard Drive with the original production or that Reed Smith had a copy of it. Instead, Berringer and Ellison made material misrepresentations as to why they did not produce this live bunny: they blamed Anderson Kill's refusal to allow them access to the database, which was not true. The court found that B&G “directly or through their agents deliberately manipulated the electronically stored information in such a way as to withhold from the defendants the information that had been requested, specifically metadata,” and ordered production of the live bunny.

The end? Not even close. B&G produced the bunny -- alive, but with an impaired memory, or limited metadata. In short, they gave up a lobotomized bunny. The court responded by requesting a supplemental response addressing why sanctions should not be imposed upon B&G and its counsel. After a second hearing, the court found that Lexington was severely prejudiced, and ordered production of the entire Introspect database in whatever form Lexington wanted, with all costs borne by B&G, and 60 days of extra discovery for Lexington to conduct any follow-up. The court then turned to the issue of Rule 37 sanctions for killing the bunny, lying about it, and then following up with a brain-damaged bunny:

Anderson Kill, the original law firm that gathered the data: NO SANCTIONS. The firm, Anderson Kill, was off the case by the time production occurred and gave Reed Smith full access to all data. While responsible for putting together the TIFF disks, it was open with Reed Smith about the fact that had been transferred from native electronic format with metadata, to TIFF format. And it did not produce the TIFFs.

A new attorney on the case who joined after the discovery misconduct: NO SANCTIONS. But the court warned him against "blindly relying on outside counsel falls short of the duty he has as an officer of the court, as counsel of record, and as an advocate for his client."

Ellison, counsel of record that was not responsible for the discovery misconduct: SANCTIONS. The discovery misconduct was done under his supervision, making him “an attorney advising” the defendant on the discovery misconduct, and thus personally liable for Rule 37 sanctions.

Berringer, counsel of record responsible for the discovery misconduct: SANCTIONS, pending a hearing. The court issued an order to show cause as to why Berringer should not be personally sanctioned for his misconduct.

Reed Smith, the law firm of both counsel of record: SANCTIONS. Law firms that employ attorneys who "have engaged in a pattern of withholding and concealing information concerning discoverable material and misrepresenting to the court and opposing counsel material facts about numerous failures to comply with discovery requests and Court orders -- including falsely blaming a lack of third-party cooperation and fabricating a false story about the form in which ESI was gathered and stored" are subject to "significant sanctions." The Firm and its counsel were jointly and severally liable for Lexington's fees and costs.

The court rejected all of B&G counsel's excuses for killing the bunny, including that: (1) Lexington did not provide adequate notice of its requests for metadata because they was buried in "five pages of boilerplate definitions and instructions"; (2) re-production would be too burdensome as it would require a new privilege review -- which was not true, because the documents in the Introspect database had already been reviewed for privilege; and (3) B & G was entitled to produce ESI as maintained in the usual course of business and in a reasonably usable form -- an odd argument, since maintenance of ESI in the "usual course of business" was in native metadata form anyway.

The lessons here are many, and clear.  Counsel at Reed Smith could have avoided this whole mess by confirming the trail and treatment of ESI as it passed hands from the client to opposing counsel. Similarly, the court noted that B&G and its counsel could have easily resolved the dispute before either hearing by handing over the live bunny: "by producing the complete metadata load files from the Introspect database for the TIFF images." So, don't kill the bunny. Don't lie about who killed the bunny and when. Don't try to get away with it using lame excuses as to why you killed the bunny. And don't try to redeem yourself with a brain-damaged bunny. Instead, to avoid sanctions, especially when document requests specifically ask for ESI in native format (as almost all do now), turn over the bunny.

Alive and kicking.
 

Ode to E-Discovery in 2008

Flooding the internet, they consistently accrue:
Blawgs offering e-discovery 'Year in Review's;
But these go on about facts and case histories too,
Before getting to the point of what you can and can't do.

Why not cut to the chase? Why not give it up straight?
Stripped below are the basics of two thousand and eight.
We'll start off with the general dos and the don'ts;
The haven'ts, the shouldn'ts, the emphatically won'ts.

Quite instructive are Canon's and Keithley's examples
Of "lackadaisical attitude" of defendants. As samples:
Do not find that hard drive behind the client's home door,
When discovery has been ongoing for a year or for more.

Do not stumble on computer reports you said "did not exist"
In an e-folder marked "Reports" that you for some reason missed.
And periodically remind clients and their IT personnel
Of the need to preserve the source code that was written on that Dell.

When you don't produce e-mails, the court said in Peskoff
Explain your search method and why, at production, you scoffed.
But if you contributed to information deletion or loss
And the court orders recovery, you won't get your costs!

Do not say you've e-searched when it's just a tall tale:
This was sanctioned under Rule 26 in R&R Sails.
There were costs sanctions also in Ajaxo, among a larger plethora.
And sanction of termination in Arteria and also Pandora.

In Keithley sanctions were imposed even on a party pro se
And in Schwarzenegger for "foot dragging" and a "litany of delays."
But take heed, warned O'Keefe -- don't request termination on whim.
Do not "strike at a king" unless you're sure you'll "kill him."

O'Keefe (plus Equity, Victor) gave lawyers heart attacks.
For saying that search term effectiveness is for experts to crack;
And that if lawyers pick and evaluate the key words instead
They are moving toward places "where angels fear to tread."

The courts warned that when using a method of searching
Learn first of its weaknesses through prior researching.
This was why D'Onofrio rejected what both experts said
And created a brand new search protocol method instead.

Rule 502 on preventing waiver through "reasonable steps"
Saw decisions pronouncing judgment on various missteps.
Alcon acknowledged that the Rule's very recent debut
Was designed to avoid "expensive, painstaking review."

Despite this pronouncement, some courts have cried "waived"
As to attempts made in hindsight to have privilege saved.
Rhoads found possible waiver for documents mistakenly produced
If they were not in the privilege log – there could be no excuse.

And failure to take measures that could prevent waiver
Like claw-back agreements, or Sedona-type saviors
Led to Victor’s conclusion, which uncommonly held
That the attorney-based privilege at issue was quelled.

Moving on, Mancia addressed the Rule 26 obligation
To meet early on regarding e-preservation,
Proclaiming "adversarial conduct" in e-discovery condemned
As a "burden to the American judicial system."

Some courts dove in early to prevent such discord,
Ordering forensic exams to preserve evidentiary records.
To conserve ephemeral info in Xpel, it was fair;
And when defendants were evading service, it was ordered in Allcare.

Other examples included when a party was unable
or unwilling (in Canon) to preserve/produce on the table.
Just remember: as emphasized in Sterle and Square D
Do not interfere with a court-ordered forensic decree.

Rodman, Reinhard and Younessi addressed nonparty subpoenas
And the protection of confidential, trade secret arenas.
Where nonparties are concerned and offer up much resistance
In-house searches are fine, or neutral expert assistance.

The debates continue on metadata versus non-native tracks
And Aquilar labeled metadata as being "the new black."
That court ordered re-production of non-natives with meta
Though the recipient was required to pay costs, as pro rata.

But not all courts required conversion to a metadata mode.
Extra burden led D'Onofrio to an "only if necessary" ode.
And Autotech said doc requests must actually require "native" --
You can't ask for it in hindsight by getting creative.

Yet if e-documents already exist in original native form
And the requests do not contain any language that informs,
White condemned the conversion to non-native in litigation
Since this is done just to increase the opponent's frustration.

Finally, social networks are making an appearance in law
And becoming a most popular e-discovery draw.
The field is wide open on the extent to which these
Are discoverable and admissible, or cannot be seized.

Flagg required defendants to give ISPs consent
And to produce ISP-retrieved records of texts that it sent.
And in Australia a court made clients even more nervous
By allowing Facebook to be used as a method of service!

We hope you've enjoyed this short "Year in Review"
And that all of this knowledge is useful to you.
We await more developments in two thousand and nine;
And wonder whether and where courts will draw any lines.

 

**For a complete list of the cases discussed above, please contact the author.
 

Offshoring document review?

As many of us are all-too-painfully aware, technology has been a mixed blessing to both business and the law.  The ability to generate and store information electronically has allowed us to be more productive, but has increased exponentially the amount and types of documents and data we produce and store. 

In turn, this proliferation of ESI has dramatically changed the nature and the cost of litigation, and, in particular, the nature and cost of discovery.  In large-scale civil litigation, the lion's share of litigation costs stems from first-level document review:  that initial review, usually conducted by junior attorneys or paralegals, to analyze documents for responsiveness, confidentiality, privilege, and to identify and flag key or "hot" documents.   

When you're facing millions upon millions of pages of ESI that need first-level document review, do you (1) staff it with lawyers from your firm or from outside counsel, (2) staff it with a mix of lawyers and paralegals from your firm or outside counsel, (3) hire temporary / contract attorneys and/or paralegals to staff the review, or (4) outsource to a U.S. firm specializing in document review?  Now, yet another option grows in popularity:  "offshoring" or "nearsourcing" your first-level ESI review to lawyers in another country. 

Offshoring your document review to another country - like Canada, India, Israel or South Africa - has its benefits, as this article outlines, but it also poses serious risks.  Some issues to consider when contemplating offshoring all or part of your first-level review:

  • How do the laws of the country to which you are offshoring treat attorney-client privilege, work product privilege, privacy, confidentiality, and ethical issues?
  • What are your rights and recourse in the case of data theft or misappropriation?
  • Are language issues are surmountable?
  • What employee screening and training processes employed by the outside vendor to insure that the most competent, ethical individuals are working on your project?
  • What quality control measures does the outside vendor employ to insure that documents are being coded correctly and key documents are not being missed?
  • What processes can you put into place to quality control the work from your end?
  • What security measures does the outside vendor employ to prevent misappropriation?
  • What type of professional liability insurance does the outside vendor retain?
  • Can you "audition" the outside vendor first, by quality checking their review of a previously-reviewed set of documents?

The Legal Process Outsourcing blog also has a nice checklist of concerns to consider.

Although legal process outsourcing seems like an attractive cost-cutting option, missing key documents in first-level review can have dire consequences.  As we have seen over the past few years, failing to produce relevant documents - even inadvertently - can lead to costly discovery disputes, sanctions, and public embarrassment for the company involved, and for the inside or outside lawyers who delegated the task.   

2007 E-Discovery Cases - Year in Review

Kroll Ontrack, an electronic discovery and computer forensic service provider, has put together an interesting analysis of the electronic discovery case law that has been decided since the new federal rules were enacted a year ago.

According to Kroll, of the approximately 105 e-discovery opinions reported since December 1, 2006, the major issues involved in these cases break down as follows:

  • 25% of cases addressed discovery requests and motions to compel
  • 24% of cases addressed spoliation/sanction
  • 23% of cases addressed issues involving the form of production
  • 9% of cases addressed preservation/litigation holds 
  • 7% of cases addressed attorney-client privilege and waiver 
  • 6% of cases addressed production fees 
  • 6% of cases addressed admissibility of electronic evidence

The moral of the story?  75% of the cases analyzed by Kroll Ontrack dealt with discovery requests, motions to compel, the destruction of electronic data, sanctions, and the format in which electronic data must be produced.  E-discovery is not going away any time soon and corporations must have a game plan and a document retention policy in place that permits them to respond efficiently and cost effectively to document requests and motions to compel that request electronic data.  Without a game plan, corporations could, quite unintentionally, find themselves in the quarter of the cases that discuss sanctions and the spoliation of evidence.