Repeat Searches For ESI On Back-Up Tapes Causes Problems For Company

Posted by Gregg Mayer on Monday, March 3rd, 2008   

During discovery for electronically stored information (“ESI”), parties on both sides get together early in litigation and often agree on search terms to use for retrieving ESI. This is especially true when the volume of ESI is extensive, or the litigation involves restoring back-up tapes.

This issue proved troubling recently in a lawsuit in Michigan.

The lawsuit Henry v. Quicken Loans, Inc. involves 422 plaintiffs suing Quicken Loans under the Fair Labor Standards Act. The plaintiffs are suing for overtime pay.

Both parties agreed to search terms to locate ESI on back-up tapes owned by the defendant, Quicken. In addition, the plaintiffs – the 422 “loan consultants” who had done work for Quicken – agreed to pay for the search of Quicken’s back-up tapes. It was also agreed that Quicken’s lawyers would monitor the search. A third-party consultant would do the search.

When the consultant utilized the agreed terms in searching Quicken’s back-up tapes, however, Quicken’s lawyers did not like the results. The lawyers worried the retrieved ESI included too much potentially privileged information – communications between Quicken and its lawyers that should not be disclosed.

Consequently, the Quicken lawyers told the consultant to do the search again with changed search terms. Unhappy again, the lawyers asked for a third search, and then a fourth search, and finally settled on the fifth search.

The plaintiffs had no idea about these multiple searches. Since a single search was supposed to cost around $12,000, the plaintiffs’ lawyers were understandably baffled when a bill arrived for $79,965.

According to the court opinion

Plaintiffs’ counsel contends that without their knowledge, Defendants chose to go beyond the scope of the agreed upon protocol with numerous modified searches, resulting in a bill that bears no relation to the parties’ agreements and the Court’s order.

…

While there is no suggestion that defense counsel was acting unethically in serving his client’s interest, defense counsel’s actions exceeded the scope of the ‘direction and control’ powers this Court vested in him in his unilateral and unauthorized modifications…

The court ordered Quicken to pay for the extra searches. In addition, the court ordered the defendant to show cause – a legal phrase essentially meaning to offer legal arguments – as to why Quicken should not have to disclose all of the results from the first search.

If Quicken fails to convince the court that the modified searches were necessary, then all of the email from the first search will have to be disclosed to the plaintiffs, including the email that the lawyers worried about.

Search terms are critical in ESI retrieval and disclosure. Informed parties know what and how ESI is stored. This enables the parties to better communicate early on about what they think should be searched – and how – to avoid facing the issue of having to turn over more email than intended.

Judge warns: ‘You can’t just throw up your hands’ at ESI obligations

Posted by Gregg Mayer on Friday, February 29th, 2008   

In a slow-developing lawsuit in New York, a federal judge recently took the County of Suffolk to task for its “lack of diligence” in disclosing electronically stored information (“ESI”).

In a nutshell: the county at first said it only had two email messages to disclose; then, the county acknowledged that it had email on inaccessible back-up tapes, including several back-up tapes damaged by a water pipe burst; later, the county said the tapes could be restored at a great expense, and the water pipe burst was not so bad; finally, the county hired a vendor that restored more than 2,400 pages of email, most of which needed to be disclosed.

It is a remarkable case of e-Discovery gone awry.

How The Case Developed

The case is Toussie v. County of Suffolk. As brief background, Toussie sued the county in 2001 for a violation of his civil rights for denying him an opportunity to purchase 31 acres of property, according to The New York Times.  A second lawsuit with additional plaintiffs commenced in 2005 and was joined with the first lawsuit.

During the discovery process – a process where both sides disclose evidence to the other side – the county disclosed only two emails. Toussie complained this was insufficient – after all, what business, let alone a county, only has two emails to disclose with so much communication taking place over computers? The court agreed with Toussie.

The court ordered the county to search its servers for email. The county responded it did not have the resources to fully search the back-up tapes. Moreover, it was clear the county did not implement a litigation hold on email once the litigation was underway. This lapse drew the court’s ire at a subsequent hearing:

You can’t just throw up your hands and say we don’t store email in an accessible form and then expect everybody to walk away. The question is, how can a plan be implemented to provide for some production.

Threatened with sanctions

Pressed by the court to do something, the county estimated it would cost nearly $934,000, and take 960 man hours, to retrieve email. The county said hiring an outside consultant would cost between $617,000 and $672,000. In addition, the county said it would take approximately two-and-one-half years to restore all of the email and complete production.

After receiving the county’s estimates, the court scheduled another hearing to try to implement a less costly and time-consuming search. At this next hearing, however, the county lawyers said a water pipe had burst and destroyed some of the back-up tapes. No one had told the other lawyers or the judge of this disaster.

The court threatened a spoliation sanction for the lost email, and the county responded it would hire an outside vendor to restore the tapes that were not damaged. The cost to hire the vendor would range from $418,000 to $963,500.

Following the threatened sanctions, the county was able to restore some tapes on its own. Then, the outside vendor was asked to restore 417 back-up tapes. Of those, the vendor could not restore 9 percent – or 36 tapes. The water pipe burst, it turns out, had only damaged “one tray of tapes,” and other tapes were not recoverable for other reasons, such as formatting problems. (It is worth noting the vendor was able to restore the 400-plue tapes in under 80 days – far less time than the two-and-a-half years the county initially estimated.)

No Spoliation, But Must Pay Attorney Fees

In the end, the vendor retrieved more than 2,400 pages of email messages, of which only 200 were withheld due to attorney-client privilege issues. There were still problems with this ESI disclosure, according to Toussie, and there were still missing email messages. Toussie still wanted spoliation sanctions against the county.

The court concluded, however, that even if there were some missing email messages, that was not enough to warrant a dismissal or adverse jury instruction:

While the evidence is clear that at least 9% of the back up tapes were destroyed and the plaintiffs may be correct that e-mails have been deleted by users, there is no reason to believe that any of those e-mails would have provided any additional support of plaintiffs’ claims.

Accordingly, the plaintiffs have not sufficiently demonstrated that the destroyed/lost emails were favorable or relevant and the motion for a default judgment or an adverse inference instruction is denied.

The county was ordered to pay Toussie’s attorney fees for the e-Discovery debacle.

For another discussion of this case, and to read the court opinion, see the e-Discovery Team blog.

Employer’s Use Of Employee Email

Posted by Gregg Mayer on Tuesday, February 26th, 2008   

Employees sending email over an employer-owned computer would likely know that the employer could read that email – and possibly use it in litigation against that employee. But what if the employee had sent an email to his own attorney and it was meant to be confidential? Or what if the employee did not know the company had an email policy, or the company did not enforce a policy?

A recent article in law.com explores the question of who owns email. This terrific analysis highlights case law and identifies steps an employer may take in drafting and implementing an email policy. Specifically, the article considers whether an employee may waive attorney-client confidentiality when using a work computer to send email messages. The article explains:

In determining the parties’ respective rights to communications sent from work, the few courts to consider the issue have generally employed a balancing test, which primarily considers the following factors: (1) Does the employer have an e-mail policy? (2) How are employees made aware of the policy? (3) Is the policy uniformly applied? (4) What precautions, if any, did the employee take to protect the confidentiality of the communication?

Read the full article here.

Document Retention Policies In An E-World

Posted by Gregg Mayer on Tuesday, February 26th, 2008   

More than ever, business documents are e-documents that companies must retain as part of their day-to-day business practices. According to a recently published article in the Louisiana Bar Journal, “a recent study concluded that 93 percent of all ‘documents’ now originate in an electronic format.”

This excellent article discusses reasons for retention policies in an e-world, particularly the storage of email and other ESI:

It should be clear why business clients should care about the proliferation of perpetual “e-documents” in the digital age: in those “e-documents,” the litigation adversary is likely to find a gold mine of information — or possibly the single “e-nugget” that may be the ticket to a large jury award. From the Big-6 accounting titan brought to its knees in the wake of the Enron scandal, to the Wall Street banking house dealt the “death penalty” instruction for repeated failures to announce its trove of digital data, incidents of failed document retention and destruction policies have served a wake-up call on corporate America.

There are several considerations a retention policy must take into account. According to the article, effective records management includes:

• identify those documents that must be maintained in accordance with the law;
• identify those documents that the business must keep to effectively function;
• track the company’s maintenance efforts;
• lay out a schedule for the systematic destruction of records in accordance with the above guidelines;
• effectively destroy the documents that are scheduled for elimination under the program;
• and monitor and audit the company’s execution of the program.

The article is available at the LBJ’s Website here.

Compliance Costs and Implementing Solutions

Posted by Gregg Mayer on Monday, February 25th, 2008   

In Wall Street & Technology, a short article reports that compliance costs for financial institutions are growing faster than net incomes. Compliance costs grew from 2.83 percent of net income in 2002 to 3.69 percent in 2006.

One of the primary reasons for the increase in costs, according to Deloitte, is that institutions are responding to regulation by applying human resources to monitor compliance, rather than investing in scalable technology resources to manage the effort. The research report shows that 60 percent of respondents’ compliance-related spending in 2006 was on compensation, while only 19 percent of spending was on consultants and vendors; 18 percent went to capital expenses, including systems, hardware and software.

As the article notes, finding ways to incorporate more technological solutions may help drive down compliance costs.

Speaking of compliance, a recent article in InformationWeek explores using email archiving to keep up with the fast-paced world of ESI.

Companies can implement online e-mail archiving with little to no capital expense in just a few days. In comparison, installing a fixed content storage system and integrating it with e-mail archiving software is a substantial project. This makes online archiving especially attractive to smaller organizations

Read the full article here. 

Glossary For E-Discovery Terms

Posted by Gregg Mayer on Friday, February 22nd, 2008   

The Sedona Conference, a legal think tank, has released an updated glossary of terms related to e-Discovery. Here’s a sample entry:

Legal Hold: A legal hold is a communication issued as a result of current or reasonably anticipated litigation, audit, government investigation or other such matter that suspends the normal disposition or processing of records. Legal holds may encompass procedures affecting data that is accessible as well as data that is not reasonably accessible. The specific communication to business or IT organizations may also be called a “hold,” “preservation order,” “suspension order,” “freeze notice,” “hold order,” or “hold notice.”

The glossary is a helpful resource in maneuvering through e-Discovery terminology. Get the entire glossary here.

‘Smoking Gun’ May Be In Email

Posted by Gregg Mayer on Friday, February 22nd, 2008   

A federal judge in Wisconsin ruled a former county employee, who is suing alleging the county retaliated against him, may search databases of the county in pursuit of “unguarded statements” in email that confirms the county’s liability.

The judge’s ruling, which came last fall, ordered the county to permit the employee to search the archive system, splitting the cost 50-50.

The employee alleges the county eliminated his position for his having filed a false claims complaint alleging improper child support billing.

If there were retaliatory statements made by other county employees, the judge explained, then those employees were unlikely to admit them at depositions or freely say them again. Instead, if those statements were made, then they may be in email where there is often an electronic snapshot of intent.  The judge wrote:

[The county’s email archives are] are a potentially fecund source of relevant information that is not easily obtained from other sources. I say “potentially” because no one can say for sure what’s there without looking, but if defendants or their agents made any unguarded statements tending to show animus toward plaintiff, then they likely did so in their e-mails to each other. (The odds of any defendant in a civil lawsuit remembering and admitting to such statements while being deposed are low).

The case highlights the importance of email in litigation. Lawyers often come looking for the “smoking gun” email once a lawsuit is underway.  It may prove to be a critical source of evidence.

Read the opinion here posted by the E-Discovery Blog, with Lexis’s permission.

Be Ready For E-Discovery Before It Is Necessary

Posted by Gregg Mayer on Thursday, February 21st, 2008   

“Too many CIOs think of litigation as something that belongs to the legal department,” an attorney who heads the e-Discovery team at Arnold and Porter law firm recently told NetworkWorld. The attorney continued:

Litigation is something that belongs to the company, and whether the company is a plaintiff or defendant, the company as a whole must be able to meet document preservation and production obligations.

This brief, but helpful, article in NetworkWorld outlines a series of tips for CIOs to prepare for e-Discovery issues in the event of litigation. Here are a few of the tips:

1. Get in sync with legal and business leaders
2. Get rid of unneeded documents
3. Know where email is stored

Read the full article here.

Once You Have A Retention Policy, Enforce It!

Posted by Gregg Mayer on Wednesday, February 20th, 2008   

Beyond just having a document retention policy, CIOs must ensure that it is also enforced. As one article explains:

Be aware that enforcement can be a ticklish business. Studies have shown 10 percent of employees given an order to destroy documents in accordance with a DRP simply will not do so. Sometimes, they believe they will some day need the document for some reason or another. Some are just lazy. Others are naturally disinclined to obey orders. Whatever the reason, it will create headaches, so anticipate the problem as best you can. Periodically, you might wish to conduct audits to make sure the company’s deletion edicts have been followed.

With so much electronically stored information in the business world, CIOs must ensure employees are actually deleting files in line with the retention policy; this may prove a critical fact in future litigation.

Read the full article here.

Who Pays To Produce ESI?

Posted by Gregg Mayer on Wednesday, February 20th, 2008   

Electronically stored information (“ESI”), particularly old email, can be expensive to retrieve if you do not have an effective archiving system. Moreover, if you move email to backup tapes after you anticipate litigation, the costs could skyrocket.

Why? In litigation you often have to pay to produce your evidence and the other side has to pay to produce theirs.

One exception that has evolved with ESI involves the production of inaccessible information on backup tapes if – and this is a big if – the company could not reasonably anticipate the litigation before it moved the ESI to the backup tapes. Under these circumstances, you may be able to shift the cost to produce the ESI to the other side.

One way to avoid ever worrying about this risk is simply to have an efficient, searchable archive where you store all of your email without resorting to backup tapes. But if you do resort to backup tapes for old email, then cost-shifting may be possible, even if it is for only part of the costs.

An illustrative case for cost-shifting is Quinby v. WestLB, a federal employment discrimination case in New York.

In this case, the company wanted to shift the costs of restoring backup tapes for old email to the plaintiff. The company claimed the tapes were inaccessible and costly to restore. As noted above, backup tapes are generally considered “inaccessible,” so they do not have to be produced for litigation unless the other side shows good cause – or, unless the company reasonably anticipated the litigation for which the email is relevant prior to moving them to backup tapes.

In Quinby, the judge found the company could reasonably anticipate litigation for some email prior to moving them to back-up tapes. As explained by the judge:

(C)ost-shifting may be considered concerning the restoration and search of backup tapes because the process is burdensome and costly, the appropriateness of cost-shifting is less clear here because it appears that defendant converted the Former Employees’ e-mails into an inaccessible format after it should have anticipated this litigation.

It cost the company $226,266.60 to restore the backup tapes. In determining whether any of those costs should be shifted to the plaintiff, the judge walked through a series of factors – a legal test – to determine if any of the costs should be shifted. These factors are:

1. The extent to which the request is specifically tailored to discover relevant information;
2. The availability of such information from other sources;
3. The total costs of production, compared to the amount in controversy;
4. The total costs of production, compared to the resources available to each party;
5. The relative ability of each party to control costs and its incentive to do so;
6. The importance of the issues at stake in the litigation; and
7. The relative benefits to the parties of obtaining the information

After reviewing those factors, the judge decided that the plaintiff – the employee suing – would have to pay 30 percent of the costs. The company had to bear the other 70 percent.

For a nice discussion about cost-shifting written by a federal judge, read this article.

« Previous Entries Next Entries »