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Douglas S. Grandstaff – Litigation Counsel – Caterpillar Inc. FDCC Corporate Counsel Symposium

Best Practices in Preserving, Managing and Producing Electronic Documents – The Practical Problems and Solutions. Douglas S. Grandstaff – Litigation Counsel – Caterpillar Inc. FDCC Corporate Counsel Symposium September 29-30, 2005. Electronic Discovery :

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Douglas S. Grandstaff – Litigation Counsel – Caterpillar Inc. FDCC Corporate Counsel Symposium

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  1. Best Practices in Preserving, Managing and Producing Electronic Documents – The Practical Problems and Solutions Douglas S. Grandstaff – Litigation Counsel – Caterpillar Inc. FDCC Corporate Counsel Symposium September 29-30, 2005

  2. Electronic Discovery: The identification, location, retrieval, preservation, review and production of electronic documents and information in regulatory and civil discovery . . . And the policies and procedures for records management, information technology and corporate compliance to support the process and minimize its risks.

  3. A Week in Electronic Discovery Hell (Day One) • Receive service of Complaint • filed in Judicial Hell Hole Jurisdiction • alleges generic toxic tort injuries to class • Involves product Company X does NOT manufacture – Company X is a consumer of the product • Receive Ex Parte Order, filed and signed day after Complaint was filed, requiring all defendants to: “. . . suspend all routine destruction of documents including, but not limited to, recycling backup tapes, automated deletion of e-mail, and reformatting hard drives . . .” • Order broader than preserving documents related to issues in Complaint – applies to all electronic data bases regardless of relevance

  4. Day Two in Electronic Discovery Hell • Issue One: Literal Compliance • Can we comply with this order? • Suspension of “recycling backup tapes, automated deletion of e-mail, and reformatting hard drives” • And if so, at what cost? • Issue Two: Reasonable Compliance • Do we have to comply literally? • What are the rules? • Is “reasonable” compliance sufficient? • At what cost literal “non-compliance”?

  5. Word Processing Files Electronic Mail Electronic Calendars CAD/CAM Spreadsheets Financial/Accounting Personnel Records Voice Mail Video Mail Internet Chat Rooms Mainframes LANs Servers Desktop Computers Home Computers Laptops Palm Pilots Printers Telecom Equipment Intranet Blackberries Types and Residences of Electronic Data/Documents 30%-70% Never Printed Thousands of Systems

  6. Caterpillar Systems • 45,000 + desktop computers • 55,000 + individual e-mail accounts • Group e-mail accounts • LAN shares • 2,500 + servers • Numerous additional database store houses

  7. Sender Recipient 2 Recipient 1 INTERNET DiskStorage Disk Storage Backup Backup MailServer Mail Server Backup Backup Mail Server Backup Backup Backup Disk Storage Laptop

  8. Caterpillar’s Document Retention Policy • Applies to both paper and electronic documents • Documents retained for continuing legal, regulatory and business purposes • Set retention periods for classes of documents • If no continuing legal or business purpose, documents are not retained. • When implemented in early 1990s, saved millions $$ in storage alone • Implemented by individual employees

  9. (1) Suspending Backup Tape Recycling • Multiple systems/servers • Backups for disaster recovery only • Not Searchable • Backups performed nightly • Backup tapes rotated for reuse every two weeks • Suspending recycling possible, but not practical • Significant costs – tapes, storage, etc. • Significant business disruption

  10. (2) Suspending E-mail Auto-deletion • 2,500 + Servers • App. 55,000 + employees with e-mail access • Assume each employee stores 20 e-mails/day, 22 business days/month: 55,000 x 20 x 22 = 24,200,000 monthly – very low estimate • Plus attachments • Documents automatically deleted in 30 days • Suspension of automatic deletion would exceed system capacity in days, potentially crippling company • Enormous expense, little value • Only a handful employees involved in area related to litigation

  11. (3) Suspending Hard Drive Reformatting • PCs replaced on a three year rotation • Thousands of other computer data bases • Constant upgrading • Many legacy systems • In practice, may be impossible to implement suspension • High cost – little value • only a handful of systems could conceivably have relevant documents

  12. Day 3 – Literal Compliance • Can we comply with this order? • Doubtful • Costs: • Potential crash of e-mail system, potentially crippling to a multinational company • Enormous costs, for little value • Not a CAT product at issue • Scope of order is general, rather than specific to issue • CAT a consumer of product (should be a plaintiff?) • Few employees involved in issue

  13. Electronic Documents are Different • Massive volume – created at much greater rate • Backup tapes, archives • Not indexed, not searchable • Incompatible, widely dispersed systems • Old software, hardware • Easy, profligate, replication • ‘Hidden’ information – metadata • Delete delete • COSTS

  14. E-Discovery Costs • Locating responsive information • Reconstructing ‘legacy’ data • Reconstructing deleted files • Reconstructing ‘metadata’ • Restoring, searching backup tapes • Reviewing for privilege, relevance • Business disruption • Production anomalies

  15. Day 4 – Reasonable Compliance • Do we have to comply literally? • Oppose Ex Parte Order as a Temporary Injunction • Dodge Warren & Peters Ins. Serv. Inc. v. Riley, 105 Cal.App.4th 1414. 2003 WL 2455586 (Cal. 4th App. Dist. Feb. 5, 2003) (applying standards for injunctive relief to “freeze” electronic data) • Oppose with affidavits, evidence related to: • Unreasonable cost of compliance • Minimal value • Reasonable compliance efforts • Outcome dependent on: • the Rules, and • the Judge

  16. Electronic Discovery -- What Rules? • Generally – Discovery rules of the applicable Federal or State Rules of Civil Procedure • Adopted before electronic data became an issue • FRCP 34 include “data compilations” as documents • A few state and local federal rules address electronic discovery • Texas R. Civ. P. 196.4 • Several local federal rules requiring discussion of issues during Rule 26 conference • Case law guidance on issues unique to electronic discovery

  17. Is “Reasonable” Compliance Sufficient? • Institution of Legal Hold • Identification and interviews of key personnel • E-mail: • Timely key word searches and sequestration of responsive documents, and/or • Timely sequestration of e-mail files of employees identified as potentially having relevant information • Hard drives, data bases: • Timely searches and/or sequestration of hard drives and data bases that may contain relevant information or responsive documents • Answer: depends on the judge

  18. Day 5 – Key Issues addressed by Courts Preservation: • To avoid spoliation claim, a party must effectively preserve tangible and potentially discoverable information once notified of potential or actual litigation • Triggered by notice of claim, lawsuit – service of complaint, discovery? • What is the scope of the obligation? Hard drives, backup tapes, deleted data • Types of Failures: • Sunbeam (did not identify and recover e-mail in timely fashion) • Mosaid (did not institute litigation hold on e-mail of key actors) • Phillip Morris (did not adequately enforce broad preservation order or internal records retention policy) • Metro. Opera Ass’n (finding willfulness and bad faith in destruction of computer hard-drives)

  19. Safe Harbors • Preservation obligations apply only to information which has some “semi-permanent” existence. Convolve (SD NY 2004) • Such as E-mail • (“transmitted to others, stored in files, and are recoverable as active data until deleted, either deliberately or as a consequence of automatic purging”) • But not: • “wave forms” (which are “ephemeral” and no business purpose requires even brief retention), • “Instant Messenger functions” ( “may be a close [question]” since some programs can store messages) • Backup Tapes, recycling and restoration • McPeek v. Ashcroft, 212 F.R.D. 33 (D.D.C. 2003) (restoring all backup tapes not necessary in every case) • Linnen v. A.H. Robbins Co., (Mass Super Ct. June 15, 1999) (obligation imposed to cease recycling of backup tapes).

  20. Litigation Holds • Key process to (1) execute preservation obligations and (2) defend against sanctions for loss of information • Often involves “freezing of information” as of time of notice • Zubulake IV (S.D. N.Y. 2003) ( “a mirror-image of the computer system taken at the time the duty to preserve attaches”) • Distinguish between past and forward looking obligations (protected drop boxes for future documents) • Timely Implementation • Mosaid (requiring suspension of otherwise routine deletion and destruction) • Residential Funding Corp. (2d Cir. 2002) (imposing sanctions for negligent failure to take adequate steps to preserve and produce documents in a timely manner) • Complete Not Incremental Implementation • Morgan Stanley (FL Cir. Crt. 2005) (granting partial default judgment and shifting burden of proof due to grudgingly incremental discovery responses)

  21. Who Pays? • Zubulake IV (S.D.N.Y. 2003) (adopting multiple factor test to address cost allocation of electronic discovery burden) • In Re Brand Name Prescription Drugs(N.D. IL 1995) (“The mere fact that the production of computerized data will result in substantial expense is not a sufficient justification for imposing the costs on the requesting party.”)

  22. Sanctions • Sunbeam, 2005 WL 674885(2005) (Florida state court jury ordered to treat allegations of complaint as proven as penalty for willful discovery abuse) • Mosaid, 348 F. Supp.2d 332 (D.NJ 2005)(jury permitted to infer that e-mails not produced because of failure to institute litigation hold would have been unfavorable) • Phillip Morris (2004) ($2.7M fine based on failure of 11 executives to save e-mail) • Morgan Stanley (2005) (burden of proof shifted and partial default judgment entered; resulting in $1.44B fraud verdict for plaintiff)

  23. Day 6 – Proposed Amendments to FRCP • The Federal Civil Rules Advisory Committee has proposed: • Defining electronic documents in Rule 26 • Requiring early discussion of key issues in e-discovery during Rule 16 and Rule 26 Conferences • Including electronic documents in Rule 34 definition of “documents” • Defining a default form of production for electronic documents Rule 34(b) • In a “reasonably useable form” or as ordinarily maintained

  24. Proposed Amendments to FRCP 5. Clarifying burden re retrieving, reviewing and producing inaccessible date under Rule 26 • Two-Tier production of inaccessible information (Rule 26(b)(2)) • “A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost.” 6. Protecting against inadvertent waiver of privilege (Rule 26(b)(5)) 7. Creating a preservation “safe harbor” under a new Rule 37(f) • Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good faith operation of an electronic information systems.

  25. 1993-2003 2004 2005 2006 Timeline www.uscourts.gov/rules/index.html June 2004 Court Standing Committee authorized the Advisory Committee to circulate proposal By May 2006 Supreme Court adopts the amendment June 2005 Standing Committee Action I IV VI V VII Advisory Committee Mini-conferences FJC Correspondence Research Feb. 2004 Fordham conference III II Sept. 2005 Judicial Conference approves and transmits to Supreme Court Dec. 2006 Deadline for Congressional action (can reject, change, or defer). If no action, the amendment becomes law April 2005 Advisory Committee considers comments, sends final amendment to the Standing Committee Sedona Principles ABA Standards Local Rules 08/04 – 02/15/05 Six month comment period

  26. The 7th Day – Implementing Best Practices • Document Retention Policy - • Verify that your company’s document retention policy is in writing, applies to electronic data and that there are procedures to ensure it is followed and enforced. • Information Technology Knowledge • Know where your electronic documents reside. Have a checklist! • Meet with your IT personnel and learn your company’s IT infrastructure • Document and understand: Number and Type of Systems; Current electronic retention policies; Search capabilities and limitations. Update Frequently! • Review retention period for backup tapes – should only be retained as long as necessary to ensure access for disaster recovery. • Understand Costs and Burdens • MONITOR AND UPDATE FREQUENTLY

  27. Legal Hold Policy • Verify that your company’s legal hold policy is in writing, applies to electronic data and that there are procedures to ensure it is followed and enforced. • Verify that attorneys are periodically updating and/or re-issuing holds as cases develop. • E-Discovery Protocol • Written protocol to be followed at notice by every attorney on every case to ensure preservation of responsive documents • Set out roles of discovery personnel: Outside counsel, inside counsel, paralegals, information technology personnel • Set out steps for identification of and interviews of key personnel • Set out instructions for searching and/or sequestrating responsive documents from all relevant data systems, including email, hard drives, and data bases • Develop protected electronic drop-buckets for key personnel for relevant future documents • Provide for compliance monitoring, quality control and documentation

  28. Communication: • Internal: Have written communication plan to ensure that all team members are informed. Particularly important that in-house attorneys and outside counsel are communicating on every step. • External: • Be prepared to share/communicate your e-discovery protocol to opposing counsel and to judge (Remember proposed amendments to Rule 16 for early discussion of e-discovery issues). • Shows candor and willing to do the right thing • Ensure that positions taken with the Court are consistent with plan and implementation • Protocol Implementation • Designated team implements protocol upon receiving notice. Important that in-house counsel is engaged and active (Zubulake V) • Status and progress is tracked, compliance with the plan is monitored, and quality is controlled. • All steps are documented

  29. Responding to Unduly Burdensome E-Discovery Requests • Have “draft” affidavits and proposed 30(b)(6) witnesses ready to go • Costs/burdens of literal compliance • Reasonable compliance already completed by company • See “The Sedona Principles for Electronic Document Production” (2003) • Educate Judge on early on burden of E-Discovery requests, but come with your reasonable and sufficient plan (protocol) • Be prepared to educate judge on your IT systems • Use protective order motions to protect inaccessible information • Request reallocation of costs of electronic discovery to the requesting party (Rowe and Zubulake) where feasible • Use proposed amendments to FRCP to support positions • Learn from Experience • Develop “lessons learned” from each case, update protocol, etc. for common and consistent approach to key issues as they develop across litigation

  30. Artificial Intelligence Solutions • Attenex, Cataphora, Eugenium • Not the comprehensive solutions promised • Use to stage and trend data • Use to help manage review/workflow • Useful, but not the silver bullet • Must still implement and follow best practices

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