Comprehensive and Crucial Preservation Obligations in Small v. University Medical Center

The recent dramatic District Court order in Small v. University Medical Center highlights the importance of due diligence and care in preservation, collection and production of ESI and the extreme risks that arise when failures occur in preservation, collection and production. The decision details a host of discovery failures and omissions committed by the defendant including failing to preserve network shares, laptops and mobile devices utilized by the majority of relevant custodians.

The defendants in this Fair Labor Standards Act class action had received a preservation notice at the start of the action directed at both hard copy and electronically stored documents. Apparently, the defendant’s legal hold policy didn’t address electronic records in any way, because the testimony recounted in the decision demonstrates clearly that the hold notice was never put in front of the IT department until it was far too late.

The ownership of the devices and drives varied – some were corporate-owned devices, others were personal devices used for business purposes. Ownership, however, was ultimately irrelevant to the preservation obligation – defendant was held to be responsible for preservation of those personal devices, as it permitted employees to use them for business purposes.

The court found that the preservation failures irreparably prejudiced the plaintiffs, who as a result lacked vital responsive material such as various iterations of relevant corporate policies as well as text messages to and from key custodians. The failure to preserve these vital information sources was so egregious, the court held, as to merit sanctions…but not any old sanctions – this court actually entered a judgment in favor of the named plaintiffs as a result of the defendant’s discovery failures and abuses.

By any standard, entry of judgment is an extreme measure – in effect, this is a determination that the Defendant’s actions muddied the evidentiary waters so completely that a determination of the merits of the case was no longer necessary.

As extreme as this measure may be, its imposition is premised on the Defendant’s conduct. The emphasis on communication and cooperation that permeates recent discovery-related decisions is present here. “Counsel and parties” the court noted, “have duties to clearly communicate, cooperate in the discovery process, and undertake an adequate investigation of facts before making representations. These duties arise irrespective of whether relevant evidence is electronic or non-electronic.”

Moreover, the court added a wake-up call for attorneys and others involved with preservation and compliance, imposing a duty to fully understand the role of electronically stored information such that it may be properly preserved and produced. “Ignorance of technology,” said the court, “does not excuse counsel or clients from their duties to preserve and produce ESI.”

Preservation and Collection In The Evolving Data Landscape: Cloud, Mobile and BYOD

EDiscovery begins with preservation and collection. Errors and omissions in preserving and collecting data create the greatest risk of spoliation and sanctions than any others, because when data is missed at the source it may never be collected or, worse, it may disappear. If an adverse party, agency or court then identifies the collection gap later, the results can be disastrous.

When the eDiscovery industry began to evolve from the seeds of the litigation support industry which had provided processing for paper records, preservation and collection began, naturally, with PCs and servers. Virtually all electronic records would be found on a network resource or a user’s local PC. Fear of sanctions resulted in broad retention policies, which in turn gave rise to enormous data stores which then needed to be culled and processed for litigation.

The high cost of handling these data stores caused corporations to get serious about retention policies and litigation holds, in order to ensure that necessary data was preserved and junk wasn’t. This meant that collection efforts were carefully targeted so that only the data that was actually needed was harvested for processing and review. The common practice evolved – relevant custodians were identified, then their PC’s were imaged and network email was preserved. In most cases, that sufficed as an exemplary collection process.

Fast forward to 2014. Most of us still do use PC’s, and most corporations do still have networks and email servers, but those devices really aren’t where most of us live our electronic lives. Most of our activity takes place on our phones and our tablets. That’s where we email, where we text, and where we network.  That’s where we take our photos and our notes and even our entertainment. On an average day, most of us use our phones far more than our desktops or laptops. Business communication occurs principally on our phones and only secondarily elsewhere.

In addition, the “cloud” has evolved into a leading data store and source, for both individuals and businesses. Most of us have a cloud-based email account and at least some documents and photos stored in the cloud. Business use of the cloud continues to evolve and grow and supplant traditional LAN-based storage models.

A key factor here, as well, is the growth of Bring Your Own Device (“BYOD”) policies, in which employers allow or even encourage employees to use their personal devices for business purposes. Those diverse devices then come to hold discoverable information subject to preservation and production obligations, making them targets for collection in the eDiscovery context.

These developments have indelibly altered the data landscape for eDiscovery. PC’s and servers are still relevant, but they’re not where the true action is. Any effective collection effort needs to target phones, tablets and relevant cloud-based resources in order to be complete and ensure that gaps won’t be revealed later, bringing the risk of sanctions, adverse inferences, and all the other consequences of incomplete production and compliance.

Five Signs Your eDiscovery Project Is In Trouble

You've compared pricing and capabilities and selected a vendor. You've sent your initial set of data. You've had your initial kickoff call. Now you can sit back and relax, right?

Wrong. Now comes the time when you need to become particularly vigilant. EDiscovery projects can go sideways in an infinite number of ways. The infinite variety of data in the world renders it inevitable that eventually everyone will encounter something anomalous.

Even the best vendors do make mistakes, and your ability to identify them will help you address them in a timely way. Recognizing the warning signs is your most important tool for anticipating issues and problems. Look for these five harbingers of trouble and you'll know when to press for information and results so you can manage effectively.

1. Repetitive Questions. Any time your vendor asks you the same question more than once it's a bad sign. Someone hasn't properly memorialized your answer or they simply weren't listening in the first place. Either way, it should make the hair on the back of your neck stand up. When you find yourself saying the same things again and again, it's a good idea to ask for specific confirmation of all your specs and requests.

2. Slow Responses. When you ask a question you deserve a speedy response. Delayed responses suggest that your project manager is overworked or inattentive, neither of which is a good thing. What's worse, though, is the possibility that a simple question can't be answered quickly because something has gone wrong. Press for timely answers and informative responses.

3. Amorphous Timelines. Upon receipt of data, your vendor should be able to give you a fairly precise timeline for delivery. When the timeline is vague, or when it seems to shift and evolve as days go by, you may begin to assume that something is wrong. Ask for precise turnaround times and hold your vendor to them.

4. Missing Data. When data is delivered you should take care to review the reports, the source information and the document counts and sizes. Most vendors have audit processes in place to ensure that no data is "missed," but there are often manual processes at work in this stage. Conduct your own mini-audit to ensure you know that all your data has been properly processed and delivered.

5. Anomalous Hit Rates. Take time to examine hit reports and rates for every custodian. Request delivery reports in the form of a time plot showing the distribution of documents over your relevant time period. Compare hit rates for custodians to identify custodians or periods of time that may have been omitted or missed in collection, processing or filtering. Ask your vendor to explain anything that doesn't "look right" in those reports.

These five warning signs can serve as simple guideposts as your project gets underway. Above all else, remember that for customers there are no "stupid questions" - any concern of yours should be treated with courtesy and respect and should merit a helpful answer.

Avoiding eDiscovery Sticker Shock: A Guide to Proactive Budget Management

Every eDiscovery project starts with a budget. That budget begins with an estimate of the amount of data to be collected. That estimated number is multiplied by the vendor’s filtering rate, and then an estimated cull rate is applied and the result is multiplied by the processing fee and the monthly hosting fee to come up with estimated costs. Then an estimated number of documents is divided by the estimated review rate to come up with an estimate of the attorney hours.  In addition, estimates for other professional services as well as production costs need to be added.

If that strikes you as too many estimates and not enough certainties, you've grasped the root cause of the eDiscovery “sticker shock” that accompanies monthly invoices. EDiscovery isn't cheap, and its cost often comes as a surprise to consumers whose realities exceed their expectations.

Information, planning and critical thinking are essential to managing eDiscovery costs. A few simple steps before, during and after your project begins can reduce and control costs and avoid end-of-month headaches.

Comparison Shop. Begin by shopping a little. You should always shop for eDiscovery services before you need them. Keep in mind that vendors use different terminology and cost structures. Ask as many questions as you need to permit you to make a true comparison. Consider, too, that the lowest bidder may not always be your best choice. Find a comfortable balance of price and quality.

Obtain Enterprise Pricing. Most vendors offer better pricing with the promise of potential repeat business. You need not get locked into a single vendor relationship in order to get the best possible pricing. Develop a list of preferred vendors, and request pricing from suppliers for inclusion on that list. Most vendors will happily offer their best rates to get on that list.

Request Weekly Accruals. At the start of a live project of any kind, request a weekly report estimating current costs and comparing them to your budget. This will allow you to see potential areas of concern while you still have an opportunity to control them.

Collect and Process Selectively. Collect only data that you reasonably expect to need. Collection itself is a cost, but what happens to that data next is even more significant. Process only those parts of the collection that you are required to review and produce. Ask the vendor to eliminate non-data files, which can occupy 80% (or more) of your average hard drive.

Monitor Scope Creep. The biggest and most frequent source of eDiscovery cost overruns is scope expansion. When formulating your budget, always overestimate the data size. Then, as data is collected, carefully monitor the amount of data you’re sending to your vendor to be sure you’re not exceeding your expectation (or if you do, that you’re aware of it and can make appropriate adjustments to accommodate the additional cost.)

Anticipate Professional Services. Every vendor has some tasks for which they bill on an hourly basis. Request a list of those services and ask to be informed any time a billable task is requested. This allows you to actively manage these tasks and to make intelligent decisions about their value.

Monitor Hosting Size and Duration. At $20 per GB, the annual hosting cost for a half a terabyte case reaches $120,000. Take time to understand the elements that comprise your hosting size – it's not only the amount of data that you've processed. Tiff files add to your hosting footprint. Many vendors also charge for the cost of storing the database itself, and some also charge for offline storage of data you’re not even reviewing.  In addition, make sure you’re retiring any data you no longer need. Explore the archiving options your vendor offers and take data offline as soon as it’s not needed for active review or preparation.

Watch Out for Data Anomalies. When your budget is based on assumptions and estimates, things can go awry if the data doesn't behave as you expected it to behave. If your budget assumes you’ll be able to filter out a certain amount of data via search terms, take notice of your hit rate. If it exceeds your expectations, you’ll end up with more data than you wanted. In addition, different data types can produce widely varying document counts. 1GB of data may produce as many as 10,000 documents for review or as little as 2,000. Watch those document counts to keep your review budget on track.

Manage Review Complexity. Unless you are paying for review at a “per document” rate, your budget is based on an assumption of an hourly review rate. If your review criteria are particularly complex, however, the pace of review will be slower and hourly costs will rise. Take care to tailor your budget to the expected complexity of the review and to limit the complexity of review to suit the budget.

There are inevitably some unpredictable elements to any eDiscovery project, and they do often bring unexpected costs. Taking an active, informed approach to eDiscovery project budgets can serve to minimize the impact of unexpected events and project changes.

Balancing Work Product, Predictive Coding, Cooperation and Transparency in Bridgestone and Progressive

A pair of recent decisions emphasize the need for transparency, cooperation and openness in eDiscovery in general, and in particular where predictive coding is used. These cases are in conflict with the expectation that predictive coding may be an element of eDiscovery strategy, which is part of an overall case strategy which merits privilege protection under the work product doctrine.

In May, in Progressive Casualty v. Delaney the District of Nevada rejected Progressive's application to amend the operative ESI order to permit it to make use of predictive coding. The court made made particular mention of the fact that Progressive was "unwilling to engage in the type of cooperation and transparency that is needed for a predictive coding protocol to be accepted by the court or opposing counsel as a reasonable method to search for and produce responsive ESI."

In July, the Tennessee District court in Bridgestone Americas v. IBM permitted Bridgestone to utilize predictive coding on a set of documents already culled via search terms, noting however that "openness and transparency in what Plaintiff is doing will be of critical importance..."

These cases draw on the spirit of the Rule 26(f) conference, which is designed to promote cooperation among parties in eDiscovery. Courts have long expected litigants to approach discovery obligations in the spirit of cooperation and to develop collection, review and production strategies for discussion in the meet-and-confer. These recent predictive coding cases extend the idea of cooperation and create an expectation of disclosure and openness that cuts close to strategic areas that many litigants have long considered to be protected work product.

Litigants have often claimed that eDiscovery strategies including search terms and methodologies are protected by the work product privilege. EDiscovery plans including strategies and techniques for culling data reflect the mental impressions of the attorney, the argument goes. Requiring disclosure of those strategies and tactics would expose those mental impressions and inhibit zealous representation.

Predictive coding arguably falls into the same bucket as search terms and other elements of eDiscovery strategy. Counsel's decision to use predictive coding can be viewed as a strategic decision reflecting overall discovery strategy and intimate knowledge of the landscape of the collection gathered via witness and custodian interviews. The predictive coding process itself almost inevitably involves counsel's mental impressions of seed or training documents as well as decisions about what sorts of documents might or might not be responsive.

The argument for such work product protection is supported by the pre-eDiscovery case Sporck v. Peil, 759 F.2d 312 (3d Cir. 1985) in which the Third Circuit held that "the selection and compilation of documents by counsel...in preparation for pretrial discovery falls within the highly protected category of opinion work product."

Of course, a number of courts have rejected the claim that Sporck mandates protection of search terms. See, for example, Romero v. Allstate Ins. Co., 271 F.R.D. 96 (E.D. Pa. 2010) (search terms related to facts and did not fall under the protection of the work-product doctrine); FormFactor, Inc. v. Micro-Probe Inc., 2012 U.S. Dist. LEXIS 62233 (N.D. Cal. May 3, 2012) (rejecting plaintiff’s argument that disclosure of search terms would reveal privileged information); Apple Inc. v. Samsung Electronics Co., LTD., 2013 U.S. Dist. LEXIS 67085 (N.D. Cal. May 9, 2013) (third-party ordered to produce the search terms it used in responding to request for production, citing traditional principles of transparency and collaboration in discovery).

The recent decisions in Bridgestone and Progressive Casualty suggest that courts place predictive coding in the same category as search terms and other "fact work product" not entitled to privilege protection. These cases reflect a trend to require further transparency in the pursuit of cooperation, and the drive to openness has extended to the use of predictive coding.

Litigants who expect to make strategic use of predictive coding without disclosure may find themselves the subject of judicial disapproval, not because courts don't approve of the use of predictive coding technology but because they expect litigants to be transparent about its use. At a minimum these cases suggest that fine distinctions will need to be made between the strategic aspects of predictive coding's use and the purely factual ones.

Clearing the Jungle: A Buyers' Guide for eDiscovery Consumers

It's a jungle out there, and the eat or be eaten mentality permeates the eDiscovery industry. As the typical size of eDiscovery projects has grown, price compression has eaten away at profits, and competition for new sales is fierce and often furious. There are still big clients and big projects out there, but the budgets are tighter and the consumers are smarter and more focused on the bottom line.

At the same time, eDiscovery is not easy to sell. The most technically savvy individuals are, more often than not, reporting to some higher-level decision makers. The benefits of particular software, services or security can be difficult to express in economic terms, which means that contracts are most often awarded to the supplier who offers the lowest price. It takes a special mix of relationship cultivation, personal connection and technical "fit" to successfully sell these products.

In any sales pitch, some puffery is to be expected. Salespeople are rarely, if ever, noted for their brutal honesty. We all expect a little smoke and mirrors, a bit of misdirection in a sales pitch. It's part of the game, and everyone knows to keep their antennae up and ready when anyone is selling.

Consumers of eDiscovery should be particularly vigilant when receiving sales pitches, given the state of the market and the potential risk. Critical thinking by eDiscovery buyers should include attention to key areas for scrutiny and items of preparation.

Know your scope. The size of your project affects budget, obviously, but there also needs to be a connection to the vendor's capacity and the project timeline. It is crucial to be as precise as you possibly can about the amount of data you expect to process, and to ask vendors to provide high/low estimates based on a potential range of collection sizes. The most common cause of budget excess and extended timelines in eDiscovery is a change in scope. Your best tool for avoiding these unpleasant surprises is a solid estimate of your project's size.

Prepare your questions. As you develop your requirements, frame them into written questions. Form those questions into a checklist and ask vendors to answer those specific questions. Questions about file types, production specs, turnaround time, and specific review features should all be submitted in writing and answers should be collected for your review and reference.

Look out for vagueness. Most vendors will want to leave themselves some wiggle room around capacity, deadlines and budget. Particular attention should be paid to answers which are vague or loaded with caveats. Don't assume that things will simply work out even if the answers don't fill you with confidence. Press for specifics and examine those caveats until you know exactly what you should expect.

Red flag buzzwords. Common words and phrases will appear in RFP responses, proposals and presentations. Take note of them and press at them a bit to ensure you fully understand their contextual meaning. Some terminology to note includes:

• "Scalable" - this term implies flexibility but may also signify that capacity will need to be ramped up to accommodate your project requirements.
• "Technology agnostic" - ideally this phrase signifies that the vendor will utilize whatever software is best suited to your project. Few vendors, however, are that open-minded. Typically this phrase suggests that the vendor offers two or three options and they'll help you choose one of them.
• "Integrated" - this word sounds great but as a practical matter means very little. Ask how integration works for the end user and what benefits it would actually provide.
• "100% quality control" - this impressive phrase is an operational impossibility. No one can afford to QC everything. Press for the real meaning and context of the vendor's quality control processes and procedures.

Kick the tires. Do more than listen to a sales presentation - a hands-on approach will be far more revealing and informative.

• Try the software. Most vendors will happily allow you to log into a demo database for a test drive. Trying it "live" will tell you far more than a canned demonstration.
• Meet operations and client service leaders. Ask to meet or speak to a high level operations resource and your client service contact. Getting to know those folks in advance will provide a great sense of what sort of service you can expect to receive. 
• Ask for process documentation. Ask for workflow diagrams and process documentation from prospective vendors. Any solid vendor will be able to provide these relatively quickly. If they can't, it suggests that documentation may be lacking.

Make side by side comparisons. Create a chart summarizing the key features, costs and benefits of all your potential vendors. This process will enable you to make informed decisions about who is best equipped to provide the services you need within your budget.

Critical thinking should be applied at every stage of the eDiscovery sales cycle. Informed consumers get the benefit of their own knowledge and avoid the unhappy surprises that can lurk in eDiscovery services.

Sales Engineers: Key Links in the eDiscovery Chain

In the highly competitive eDiscovery market, there is no shortage of salespeople who will tell you almost anything they think you want to hear. Price compression has created a fairly level economic playing field among vendors, but the nature of the business defies apples-to-apples comparisons among suppliers. While many of the services that are offered may be uniform, there are differences in pricing structure, terminology, capacity and applications that can be difficult to navigate from vendor to vendor.

Good eDiscovery salespeople have sufficient technical knowledge to speak intelligently about products and services, but salespeople are first and foremost skilled at selling - at making potential clients comfortable with the products and services they offer, at building connections and relationships, and at presenting high level options with polish and persuasion.

Even the best salespeople won't get too deeply mired in technical details, which are most effectively handled by others. The worst salespeople will promise you the moon (and the stars, and the sun) without much regard to whether it can actually be delivered. Of course, this creates some awkward moments when the project is handed off to the operations team, who are then left to figure out how to meet those expectations.

The best eDiscovery vendors strive to bridge (or eliminate) that sales-operations gap, and this is where the sales engineer becomes vital. The role of the sales engineer is to become involved early in the sales cycle to manage the technical aspects of the sales process. The sales engineer works with the traditional salespeople to provide technical advice, to facilitate smart product choices, and to ensure that what has been sold can, in fact, be delivered.

The sales engineer bridges the gap between business and technical requirements to provide a seamless hand-off to operations. The sales engineer will identify technical issues in advance of project commencement, will advise on potential solutions to expected technical or operational hurdles, and will ensure that the operations team understands the requirements and expectations prior to project execution.

Without the involvement of a sales engineer (or comparable, technically-equipped consultant) there is a significant risk of a project being oversold or, worse, mismatched with the technology and capacity of the vendor. This can result in delays, budget overruns, frustration and, worst of all, an inability to ultimately execute projects as expected or required.

Informed, savvy eDiscovery consumers can and should ask for a sales engineer's involvement early in the sales process. The presence of a technical resource who can speak effectively to capacity and product features, who can effectively identify potential unexpected costs, and who can facilitate development of customized solutions where they are needed will reduce risk and contribute greatly to satisfactory project execution and results.