Court Tells Company To Hire Outside Vendor To Retrieve ESI

Posted by Gregg Mayer on Wednesday, February 27th, 2008   

In a lawsuit involving the movie trilogy The Lord Of The Rings, a court ordered New Line Production, Inc., the distributor of the movies, to hire an outside vendor to search for electronically stored information (“ESI”) needed for the litigation.

The judge in the case seemed more than frustrated that New Line apparently failed to retrieve and disclose all of the ESI needed for the litigation. Rather than allow New Line another chance to redo the search on its own, the judge ordered a separate, outside vendor to come in and do the work – at New Line’s expense. The judge wrote:

New Line’s failure to perform any structured search for emails and other electronic documents from the company’s servers and from individual employees’ desktop or laptop computers requires a different solution. Nor does the Court have any confidence that once again ordering New Line to conduct a good faith search for electronic documents will be any more effective than it has in the past. The Court has determined that, under the circumstances here presented, New Line should be required to retain an outside vendor experienced in electronic document retrieval to collect responsive documents.

As noted previously on this blog , it is important for companies to not just archive ESI, including email, but also to be able to implement solutions that permit cost-effective retrieval. Generally, companies have to pay to produce their own ESI during litigation. The more efficiently a company can retrieve ESI, the less it should cost.

As brief background on the lawsuit, director Peter Jackson’s Wingnut Films is suing New Line for not calculating the movie revenue properly, as reported in The Sidney Morning Herald and The New York Times.

As part of the contentious litigation, Wingnut complained New Line was not disclosing all of the information it should, including ESI. The court agreed. On New Line’s efforts to retrieve ESI, the court summarized the problems:

The testimony of New Line’s custodians demonstrates that New Line’s efforts to locate and collect electronic documents has been less than diligent. Ken Horowitz, who was the designated custodian with respect to documents relating to participant audits of Lord of the Rings and other films, testified at his first deposition that he was not aware of any search for electronic documents on New Line’s servers, on any individual’s desktop or laptop computer, or otherwise…At the second day of his deposition, Mr. Horowitz confirmed that no electronic search had been conducted….

…New Line’s other custodian, Dain Landon, testified that he had undertaken a search of New Line’s servers for documents relating specifically to merchandising agreements. Mr. Landon’s “search” consisted of little more than clicking through various folders on the only two server drives he personally could access…Mr. Landon acknowledged that he did not conduct or arrange for a server-wide search for documents containing the phrase “Lord of the Rings” or any other keywords; indeed, he did not even search for documents with “Lord of the Rings” in the title…

…New Line likewise failed to conduct any search of the company’s email servers for email correspondence containing the phrase “Lord of the Rings” or any other keywords. While some individual employees were asked to collect their emails, others were not; and even those employees who did collect emails were given little or no guidance on where to search (e.g., inbox, sent items, deleted items, archived folders) or how to conduct their search (e.g., keyword searching). Indeed, of the eleven individuals Mr. Landon spoke to in preparation for the second day of his deposition, only three told him that they had even looked for emails, and Mr. Landon had no information regarding how those searches were performed….

With that dismal effort, the court explained what New Line should have done:

At the very least, New Line should have charged its in-house information technology professionals with responsibility to ensure that all of the company’s servers and individual computers were searched, and that they were searched in a manner that was reasonably calculated to capture all responsive documents (e.g., keyword searches of electronic documents and emails). To the extent this could not be accomplished in-house, New Line should have retained an outside vendor…Instead, New Line practically disregarded its obligation to produce electronic documents at all.

Since New Line wholly failed to comply with the court’s order to produce ESI, the court explained that an outside vendor was necessary:

The vendor shall be granted access to New Line’s servers, including without limitation its email server(s), for the purpose of conducting keyword searches for responsive documents and emails. The vendor shall also be granted access to the hard drives from the desktop and laptop computers of specified employees who are connected with this dispute for the purpose of conducting keyword searches. All documents and emails collected by the outside vendor may be reviewed by New Line for privilege and confidentiality designations; however, no documents identified by the vendor may be withheld on relevance grounds.

….The vendor shall prepare a log of all collected documents so that Wingnut can confirm that all such documents are either produced or logged. In the event that the parties are unable to agree upon the identity of the outside vendor, the search protocol, or the individual employees whose desktop and laptop computers will be provided for inspection, those disputes should be promptly submitted to the Court for resolution. New Line shall bear all costs and expenses of the outside vendor.

In short, New Line not only has to redo it ESI disclosures, it also has to pay to let an outside vendor do it. What should have been an efficient retrieval of electronic documents has turned into an e-nightmare.

Courts take the proper disclosure of ESI seriously. With the rapid explosion of email and other ESI, parties must ensure they comply with the Federal Rules of Civil Procedure or face stiff sanctions during litigation. Here, New Line failed to meet its obligations and must pay the consequences.

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.

What are the FRCP and Why Do I Care?

Posted by Gregg Mayer on Friday, February 8th, 2008   

Generally, CIOs don’t have to know much about the Federal Rules of Civil Procedure. That’s why you pay your lawyer. Your lawyer spent three years in law school and years of practice trying to master the rules.

However, with changes made to the rules in 2006 pertaining to electronically stored information (“ESI”), you will want to be on top of what one of the amended rules provides because odds are your lawyer will be rushing to you to ask: “Now, where is the ESI and how much do you have?”

There are more than 80-something Federal Rules of Civil Procedure. These rules govern the procedural dos and don’ts of courtroom activity. Judges and the lawyers before them are bound to follow these rules in federal court.

One rule you should be familiar with is Rule 26, a general rule governing “discovery” in court proceedings. Discovery is a process for both sides in litigation to learn what the other side has.

Effective Dec. 1, 2006, several parts of this rule were amended to include “electronically stored information” as part of the discovery process. Early in the litigation, your lawyers will want to know how many archived databases you have, what is on them, how much is on them, and how they can be accessed. This information is critical to discovery. Most likely, your lawyer won’t know much about how your ESI is archived unless you have already had a face-to-face to talk about it. You should do that. The more you know, the more your lawyer can know, and the better the process will run.

Why is this important? Not knowing – and, consequently, failing to disclose to the other party – a compete and accurate record of your ESI may prove costly down the road. First, discovery proceeds quickly once litigation begins. Within as little as a few weeks you may have to turn over ESI.

Moreover, courts may sanction parties for not complying with discovery. Sanctions may include excluding evidence (no matter how helpful the evidence may be to you), or even giving the jury an adverse jury instruction (that is, an instruction that whatever you did not produce should be considered in the worst possible light against you). Failing to comply with discovery is the quickest way to lose a lawsuit.

To give you the larger picture, here is a list of the rules amended to include ESI, including the multiple changes made in Rule 26:

• Rule 16(b) –The pre-trial scheduling order may address electronically stored information. The lawyers can talk about how much ESI each side has. In all likelihood, your lawyers will rely on you to tell them what ESI you have.
• Rule 26(a) – ESI is included in initial disclosures to the other party. Just like other basic information that parties generally must disclose to the other side (names of people with relevant information, lists of documents that may be relevant), ESI is now part of those disclosures.
• Rule 26(b)(2) – Addresses what happens if ESI is inaccessible, including a court’s authority to require disclosure upon a showing of good cause.
• Rule 26(f) – Parties must meet and confer on e-Discovery issues before pretrial scheduling conference.
• Rule 33(d) – ESI may be referenced as a type of business record to answer interrogatories (written questions to the other side).
• Rule 34 – Discusses what form to produce ESI and notes requesting party may specify how it wants the ESI.
• Rule 37 – A “safe harbor” provision that provides that a party will not be sanctioned for the inadvertent loss of ESI based on the routine, good faith operation of the IT system (*note, it is still unclear the reach of this so-called “safe harbor” and courts still retain an inherent authority to sanction).
• Rule 45 – ESI is subject to subpoenas.

Keep in mind, the case law is developing rapidly to interpret these rules. Check back with this blog to learn more about the individual rules and how they can impact company operations.

Without Effective Email Archiving, ‘Clawback’ and ‘Quick Peek’ Agreements May Be Only Options

Posted by Gregg Mayer on Wednesday, February 6th, 2008   

If you don’t have an archiving system that can quickly and effectively retrieve specific, relevant email and other ESI, then you may be looking at having to open up all of your ESI – confidential material and all. Under the federal rules, “clawback” and “quick peek” arrangements are two possible ways to deal with e-Discovery in litigation. CIOs should know a little something about them because these concepts evolved due to the proliferation of ESI.

The better you understand your ESI archiving, and the better your archiving system, then the better choices you and your lawyers can make when it comes to deciding how to deal with e-Discovery.

Under a “clawback” agreement, you opt to give the other side all of you ESI, and then you “clawback” any inadvertently disclosed privileged material that you shouldn’t have given them.

Under a “quick peek” arrangement, both sides agree that the party requesting the ESI may hire a technology expert to access the other party’s computer system. The expert extracts all of the ESI and turns it over to the party who requested it. That party then reviews the ESI, pulls out what it wants, and then shows it to the producing party to see if anything in there might be privileged. If it is privileged, it cannot be used.

As you might imagine, neither of these arrangements are exactly ideal. In both cases, there is a risk confidential and privileged information may be disclosed to the other side. Even if the other party cannot use it, the cat is still out of the bag.

Your lawyer will want to know from you how your ESI is stored. Whether the “clawback” or “quick peek” is appropriate will depend on how well information is archived and how quickly and specifically it can be retrieved. The better your email archiving system, the better your choices.

Here’s a discussion of clawback and quick peeks.

What Would The Most Famous E-Discovery Judge Do To Ensure ESI Was Properly Maintained?

Posted by Gregg Mayer on Monday, February 4th, 2008   

Judge Shira A. Scheindlin, who gained fame for her multiple opinions on e-Discovery in the precedent-setting Zubulake case, told interviewers the top 10 things she would do if she were suddenly off the bench and general counsel for a Fortune 500 company:

1. I would be sure there is a well-thought-out records retention policy in place for business purposes that takes into account any statutory or regulatory obligations.
2. I would make sure that someone is really in charge of records retention and that she knows what she is doing. This person should probably not be the head of the IT department, but someone whose primary obligation is deciding what should be retained and how.
3. I would set up a records retention committee that meets regularly. The committee should include the general counsel — that’s me! — a senior executive, the head of the IT department and the records retention manager. Minutes of these regular meetings should be kept and circulated among all the participants.
4. I would disseminate the records retention policy to all company employees, and then I would find a way to test them on whether they have understood and implemented the policy.
5. I would set up a response team every time there is a litigation-need to preserve documents.

See the rest of her tips in this transcribed interview.

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