3/13/2018. Legal Hold Notices, the Duty to Preserve, and Electronically Stored Information ( ESI ) What is Electronically Stored Information ( ESI )?

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1 Legal Hold Notices, the Duty to Preserve, and Electronically Stored Information ( ESI ) What Every In-House Attorney Needs to Know Presented by Mike Seitz, Attorney at Spencer Fane LLP March 14, 2018 What is Electronically Stored Information ( ESI )? All information on computers, servers, smartphones, in the cloud, etc. s Word documents Spreadsheets PowerPoint presentations Images Databases Archives Deleted files Data on servers & backup tapes Voic s Text messages Instant messages Facebook posts Tweets etc. What is Electronically Stored Information ( ESI )? Includes the content of the /document, as well as the metadata Metadata is information about the document that is not visible to the user (data about data). Typically describes the characteristics, origins, usage, and validity of the electronic file. E.g. filename, author, creation date, date last modified, custodian, page count, to/from/cc/bcc, subject, date sent/received, data about attachments 1

2 What is E-Discovery? The process by which litigants find and produce documents stored in electronic form in response to litigation, corporate investigations, or regulatory inquiries Why E-Discovery Matters Cases are won and lost because of failures in the collection and preservation of ESI GN Netcom, Inc. v. Plantronics, Inc., 2016 WL (D. Del. July 12, 2016): adverse inference, attorneys fees & costs, $3 million punitive sanction, and evidentiary sanctions against the company where senior executive deleted s even though company sent a legal hold InternMatch, Inc. v. Nxtbigthing, LLC, 2016 WL (N.D. Cal. Feb. 8, 2016): evidence preclusion, adverse inference, and attorneys fees awarded where company discarded computers containing relevant ESI Sell v. Country Life Ins. Co., 189 F. Supp. 3d 925 (D. Ariz. 2016): entering default judgment where inhouse counsel failed to perform reasonable search for ESI Mueller v. Swift, 2017 WL (D. Colo. Jul. 19, 2017): party questioned about spoliation before jury after being unjustifiably careless in his handling of evidence that he had a clear duty to preserve Klipsch Group, Inc. v. epro E-Commerce Ltd., 880 F.3d 620 (2nd Cir. 2018): adverse inference, $2.7 million sanction, and $5 million asset restraint because failure to send preservation notice resulted in spoliation Why E-Discovery Matters Attorneys increasingly are required to understand e-discovery ABA Model Rule 1.1 A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. California Opinion No If e-discovery will probably be sought, the duty of competence requires an attorney to assess his or her own e- discovery skills and resources.... If an attorney lacks such skills and/or resources, the attorney must try to acquire sufficient learning and skill, or associate or consult with someone with expertise to assist. W.D. Mo. Principles for the Discovery of Electronically Stored Information 3.01 The Court expects that counsel for the parties... will be familiar with the following in each litigation matter: The electronic discovery provisions of the Federal Rules of Civil Procedure. D. Kan. Guidelines for Cases Involving Electronically Stored Information 7 [C]ounsel should become knowledgeable about their client s information management systems and its operation, including how information is stored and retrieved. 2

3 Why E-Discovery Matters Costs can be huge, but a good plan for e-discovery will significantly mitigate costs A good e-discovery plan opens opportunities to be more aggressive with an opposing party The E-Discovery Life Cycle Information Governance The steps a company takes to control how electronic data is stored and destroyed e.g. data retention and deletion policies 3

4 Information Governance Prior version of Federal Rule of Civil Procedure 37 contained a safe harbor where records were destroyed pursuant to a defensible information governance policy 2015 amendments removed the language, while making it more difficult to impose the most severe discovery sanctions Still, a good information governance policy can insulate a company from allegations that it destroyed records with intent to deprive information from an opposing party Information Governance: Best Practices Develop a records management policy Maintain current and historical organizational charts Identify subject matter experts Consider creating a data map including by identifying what data is or is not reasonably accessible Information Governance: Best Practices Develop a legal hold policy and procedures Develop a preservation plan, including contingency plans to suspend auto-delete and recycling of backup tapes Take into account hardware/software upgrades and exit procedures for departing employees 4

5 Identification of ESI When the company has a reasonable anticipation of litigation, it must send out a legal hold to all people who may have relevant data Good information governance allows the company to readily identify where the data resides Frequently requires witness interviews to identify custodians and their ESI practices Preservation & Collection Ensure potentially relevant ESI is preserved and copy/image data to avoid alteration (including alteration of metadata) Trigger Events Duty to preserve arises when a company should reasonably anticipate litigation can be months or years before a complaint is filed Commonly arises because of demand letter, complaint, subpoena, etc. Also arises when the company threatens litigation. See, e.g., Matthew Enter. v. Chrysler Group LLC, 2016 WL (N.D. Cal. May 23, 2016). Highly fact specific and uncertain 5

6 Legal Holds Send immediately when duty to preserve arises, to all custodians who may possess relevant ESI, including people who had some involvement or knowledge about underlying events, and people responsible for managing the company s ESI and information systems Legal Holds Communicate preservation obligation clearly and in plain language: Identity of the parties to the litigation Brief description of the legal claims and the scope of the legal hold Likely sources of potentially relevant ESI A description of what documents are relevant. Saying preserve all relevant information generally is not sufficient. Explanation of how preservation is to be undertaken Legal Holds Legal holds should be in writing See Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Securities, LLC, 685 F. Supp. 2d 456 (S.D.N.Y. 2010): lack of written notice is negligence per se and raises inference that information was lost or destroyed Enact audit procedures to ensure receipt and compliance Send periodic reminders Distribute legal holds to subsequently discovered custodians 6

7 Affirmative Preservation Measures Suspend auto-delete and purging functions Snapshot or image data that may be altered or destroyed during ordinary use (shared drives, collaborative workspaces, dynamic databases) Suspend recycling of backup tapes Consider making forensic images of key custodians hard drives, smartphones, and/or Rule 37(e) Text Messages 2015 survey by RingCentral found that 80% of respondents used text messaging for business purposes. For 15% of respondents, over half their text messages were for work. The informality of text messaging is cause for concern, and collecting text messages can be expensive Includes not only SMS, but also apps with messaging functions imessage, WeChat, WhatsApp, Snapchat, Google Hangout 7

8 Text Messages Producing text messages implicates employee privacy and the scope of an employer s duty to collect is still being litigated Text messages increasingly are the subject of discovery sanctions, especially when they involve senior executives Some solutions: Educate employees about text etiquette and that work messages may be discoverable BYOD policies regarding retention and collection Consider company-owned messaging application with backup and archiving Methods for Collecting ESI Employee Self-Collection Usually not recommended IT-Assisted Collection In-House IT staff collects ESI using specialized software that does not alter metadata Outside Assistance Outside vendor or certified forensic examiner collects ESI, onsite or remotely A Hybrid Approach Combination of IT-assisted collection, with assistance from e-discovery vendor or consultant Document everything Data Processing After preserving and collecting ESI, the next step is to determine what is relevant (or responsive) versus what is privileged, irrelevant, or nonresponsive Generally requires using a review tool for efficiency and to avoid altering metadata Processing is necessary to index and format data so it can be culled, searched, and loaded into a review tool Processing includes de-duplicating ESI, de- NISTing, excluding certain file types Processing can be expensive. Know what you are processing and why. 8

9 Review & Analysis Attorneys review ESI for relevance, responsiveness, and privilege Important documents are prioritized and identified quickly for case evaluation and strategy It is important to cull data, so attorneys are reviewing as few irrelevant documents as possible Review & Analysis: Strategies for Cost Mitigation Keyword search terms and date limiters Sampling to ensure search terms are optimally precise Comprehensive coding so documents are reviewed once Hiring contract attorneys where appropriate Advanced analytics: threading, clustering Predictive coding Review & Analysis: Cooperation with Opposing Parties See Rule 26(f)(3)(C): parties must discuss any issues about disclosure, discovery, or preservation of electronically stored information prior to first scheduling conference The Court expects cooperation on issues relating to the preservation, collection, search, review, and production of ESI Principles for the Discovery of Electronically Stored Information (W.D. Mo.) The failure of counsel or the parties in litigation to cooperate in facilitating and reasonably limiting discovery requests and responses increases litigation costs and contributes to the risk of sanctions. 2 Guidelines for Cases Involving Electronically Stored Information (D. Kan.) Among the items about which the court expects counsel to reach practical agreement without the court having to micro-manage e-discovery are search terms, date ranges, key players and the like. Pyle v. Selective Ins. Co. of Am., 2016 WL (W.D. Pa. Sept. 30, 2016). Disclosing search protocols can reduce expense and assist motion practice 9

10 Review and Analysis: Cooperation with Opposing Parties Review and Analysis: Cooperation with Opposing Parties Review & Analysis: Proportionality (Amended Rule 26) The proportionality standard set forth in Fed. R. Civ. P. 26(b)(1) should be applied to the discovery plan and its elements, including the preservation, collection, search, review, and production of ESI Principles for the Discovery of Electronically Stored Information (W.D. Mo.) Parties should consider proportionality, now an express component of the scope of discoverable evidence. 1 Guidelines for Cases Involving Electronically Stored Information (D. Kan.) 10

11 Production of ESI Determine production format in consultation with opposing party Ability to claw back privileged material or attorney work product pursuant to Rule 26(b)(5)(B) Presentation of ESI Presentation means using the ESI at trial or in motions. Authenticating ESI can be challenging. ESI is easily altered; can be spoofed ; texts can be sent by anyone with access to a witness s phone or tablet It is important to maintain a chain of custody for ESI Authentication can require expert testimony Thank You Spencer Fane has the expertise and experience to manage large-scale e-discovery projects and to counsel clients about information governance and data retention 11

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