Legal Issues re: Electronically Stored Information

Matthew D. Austin, Esq.
matt.austin@btlaw.com
(614) 628-1409

Dangers and Best Practices
of Living in The Electronic AgE

CONFIDENTIAL
© 2010 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is confidential, proprietary and the property of
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may not be reproduced, in any form, without the express written consent of the author or presenter. The information on this page is
intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.

Today’s Roadmap

• Proliferation of Electronic Media at
Work
• What is ESI
• What are ESI rules
• Compliance with ESI rules
• Best Practices to Minimize Cost/Risk

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How Have Electronics Taken Over
Our Work Life

E-Mail Voicemail to Email
E-Reader Social Media
E-Billing Smartphones
E-Payment Telecommuting

CONFIDENTIAL
© 2010 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is confidential, proprietary and the property of Barnes & Thornburg LLP, which may not be disseminated or disclosed to any person or entity other
than the intended recipient(s), and may not be reproduced, in any form, without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as
legal advice or a legal opinion of Barnes & Thornburg LLP.

Proliferation of Social Media

http://socialnomics.net/video/

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How Can These
Create Smoking Guns for Lawsuits

• Nothing is gone forever

• Everything done on computers can be
subpoenaed and reviewed

• Courts are allowing unprecedented access to
Electronically Stored Information

• Companies should create and follow ESI
policies

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Symantec Statistics
June 2010 based on 1680 senior IT and legal executives in 26 countries.

Infinite retention results in infinite waste
Highlights why proper deletion policies and efficient search capabilities are critical

87% Believe proper retention strategy
46% Have formal information retention plan in place
75% Backup storage consists of infinite retention
25% Data backed up is not needed for business or should no be backed up
40% Data placed on legal hold is not relevant for that litigation
50% Improperly using backup and recovery software for archiving
51% Prohibit employees from creating their own archives on local machines
65% Admit employees regularly create their own archives on local machines
41% IT Administrators don’t see a need for a document retention plan
29% IT Admins said cost was the main reason for no document retention plan
58% Legal said cost was main reason for no document retention plan
48% Legal said lack of experience reason no document retention plan
1500% More expensive to review data than to store it

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Example of a Typical Lawsuit

• Harassment or Discrimination Suit
– He said/she said situation
– P’s attorney must prove ABC
– P’s attorney will want to see XYZ

• Breach of Construction Contract
– Which side didn’t do what they were supposed to do
– P’s attorney must prove ABC
– P’s attorney will want to see XYZ

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Anatomy of a Lawsuit

• Complaint (or Charge) is Filed
• Answer is Filed
• Written Discovery Begins
– Even in arbitration

• The Duty to Retain ESI
– “Litigation Hold”
– Failure to preserve may be gross and/or reckless negligence
with stiff penalties

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Request for Production of Documents

• Plaintiff will want to see everyone’s
– Computers (both work and home)
– Cell phones (both work and home)
– Emails (both work and home)

• Defendants may have to provide
access
– Not overly broad request
– Tailored to issues in dispute

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Must Turn Over Some Things Before
Request for Documents is Made

“A party must, without awaiting a discovery
request, provide to the other parties …a copy
– or a description by category and location –
of all documents, electronically stored
information, and tangible things that the
disclosing party has in its possession,
custody, or control and may use to support its
claims or defenses.”

(Fed. R. Civ. P. 26(a)(1)(A)(ii))

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What ESI Must Be Produced

“Any designated documents or electronically
stored information – including writings,
drawings, graphs, charts, photographs, sound
recordings, images, and other data or data
compilations – stored in any medium from
which information can be obtained either
directly or, if necessary, after translation by
the responding party into a reasonable
useable form.”

(Fed. R. Civ. P. 34(a)(1)(a))

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How Must ESI Be Produced

• If no specification, a party must produce
it in a form or forms in which it is
ordinarily maintained or in a reasonably
usable form or forms; and

• A party need not produce the same
electronically stored information in more
than one form.”
(Fed. R. Civ. P. 34(E)(i)-(iii))

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What About Mirror Images of Hard Drives

• Forensic duplicate

• Parties negotiate search protocol

• Computers made available to expert

• Expert will release a report to the parties’
counsel regarding the finding of its inspection

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Can Opposing Side Copy
an Entire Hard Drive

• Defendants sought relief from order to inspect through forensic
imagining the entire hard drive of work and home computers of
50 key custodians.

• Discovering party was not specific enough why mirror imagining
was required.

• “Mere skepticism that an opposing party has not produced all
relevant information is not sufficient to warrant drastic electronic
discovery measures.”

• That wide of net assured confidential information unrelated to
the litigation would be exposed.

John B. v. Goetz

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Slight Modification for Ohio Courts

• Parties can mandate the form that ESI is
produced

Example: The party propounding discovery seeking
electronically stored information could request that a party’s
internal memorandums on a particular subject be produced in
Word format, while financial records be provided in an Excel
spreadsheet format or other commonly used format for financial
information.

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What About ESI From Non-Parties

• Not if it imposes undue burden or expense.

• The person from whom ESI is sought must show that
the information is not reasonably accessible because
of undue burden or expense.

• Court may still order production of ESI if the
requesting party shows good cause.

• The court may specify the format, extent, timing,
allocation of expenses, and other conditions for ESI.
(Ohio R. Civ. P. 45(D)(3))

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Who Pays For ESI Production

Zubulake gave us the 7-Factor test for who pays
1. Extent the request is specifically tailored to discover relevant information

2. Availability of information from other sources

3. Total cost of production compared to amount in controversy

4. Total cost of production compared to resources of each party

5. Relative ability of party to control costs and its incentive to do so

6. Importance of the issues at stake in the litigation

7. Relative benefits to the parties of obtaining the information

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What is Spoliation

• The destruction of relevant evidence before
either side can see it
• Nearly impossible to destroy ESI, and attempts
to do so are easily uncovered

Leon v. IDX Sys. Corp.

Nucor Corp v. Bell

Connor v. Sun Trust Bank

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Spoliation (continued)

• Preservation Duty applies even if
litigation is not imminent

KCH Services, Inc. v. Vanaire, Inc.

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Spoliation (continued)

• Spoliation can occur even when preserving
documents if you change the format of the
document. The downgrading of an electronically
searchable document to a .pdf was considered
spoliation.

In re Classicstar Mare Lease Litig.
The rule does not require a party to produce electronically stored information in the form in which
it is ordinarily maintained, as long as it is produced in a reasonably usable form. But the option to
produce in a reasonably usable form does not mean that a responding party is free to convert
electronically stored information from the form in which it is ordinarily maintained to a different
form that makes it more difficult or burdensome for the requesting party to use the information
efficiently in the litigation. The information should not be produced in a form that removes or
significantly degrades this feature.

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What About Metadata
• Metadata is “data about data”
• Technically, it’s “information about a particular data set that
describes how, when, and by whom it was collected, created,
accessed, or modified and how it is formatted”
• Not addressed in the rules that govern discovery
• Presumption against discoverability

• Compelled when party can show relevance

Sanchez v. Bland Farms
May be used for Prevailing Wage calculations?

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What About GPS

• GPS can be key evidence as it can
establish the whereabouts of a party
which may be determinative of factual
disputes regarding and person’s
whereabouts.

Bicking v. Deiter Brothers

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Internal Threats of Data Security

• ESI easily transmitted outside company
– Disgruntled employees
– Corporate spy
– Unsecured Access Point
– Trade secret theft

• Social media makes this a common,
everyday occurrence

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What About Social Network Sites

• Ledbetter v. Wal-Mart (Good for Employers)
Plaintiffs were injured while performing electrical work in a Wal-Mart store for their
employer and sued Wal-Mart. They claimed to suffer ongoing and permanent
physical and psychological injuries, and one of their wives brought a consortium
claim. Wal-Mart subpoenaed social networking sites. Physician-patient and marital
privilege claims were asserted, but the court enforced the subpoenas.

• Williams v. Wells Fargo (Good for Employees)
Plaintiff filed race discrimination suit after being fired for violating information
security and sexual harassment policies when he sent emails containing sexually
suggestive jokes and picture attachments. Plaintiff won because he showed that
Wells Fargo did not terminate white employees engaging in the same conduct after
searching several MySpace pages.

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What About Privacy on an Employer’s
Electronic Equipment
• Generally no right to privacy for files and emails on
employer’s equipment when employer has and enforces
a policy telling the employee no such right to privacy
exists.

• However, emerging case law holds that an employees
may still have an expectation of privacy regarding
attorney-client privileged communications even if they
are made on an employer-provided computer or
computer system and the employer has a monitoring
policy.

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What About Privacy on an Employer’s
Electronic Equipment (continued)

• Stengart - Email to attorney on company-issued laptop computer
through the former employee’s personal, web-based email
account is confidential

• Curto - Employer with e-mail monitoring policy went too far when it
accessed emails an employee had sent to her attorney while
working at home via her company-issued laptop computer.
Employee had reasonable expectation of privacy where she
sent email using a personal web-based email account which
did not go through employer’s server

• Kaufman - Employee waived attorney-client privilege by sending emails
to her attorney on company email system where company
policy clearly notified all emails on company system were
subject to monitoring, searching, or interception at any time.

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Examples of ESI Litigation
I Have Been Involved In

• State of Indiana v. IBM

• Lusby v. Rolls Royce Corp.

• The Sandel Corp. v. Int’l Assoc. of Heat
and Frost Insulators, Local 50

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Trending Corporate ESI Strategies

• Reactive

• Disconnect with running business
– CFO/GC has to fund it, CEO has to run business
– View ESI strategy as optional insurance policy
– No tangible value to risk mitigation

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ESI / Data Retention Policy

• Absent ongoing destruction of unnecessary ESI
pursuant to policy, the cost of locating and retrieving
ESI for litigation can be extraordinarily high

• Litigation holds often go back as far as documents
are available
– I’m currently involved with one going back to 1987
– Several computers, formats, etc.

• Risks and cost of reviewing documents that should
no longer exist

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Good v. Bad ESI / Data Policy

• Good Policy:
– Know where data is stored
– Control how it is accessed
– Strategy to locate only relevant records when request is
made

• Bad/No Policy:
– Increases complexity, chaos, cost, and reduced productivity

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Reasons Not to Purge All ESI

• Should keep some ESI readily available

– Pursuant to records management or retention policy
– Compliance with laws and regulations

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Are You Confused on What to Do
• Retain a few weeks of backup (30-60 days); then delete or
archive data in an automated way

• By using backup only for short-term or disaster recovery
purposes, companies can backup and recover faster while
deleting older backup sets within months instead of years. This
results in a vast amount of storage that can be confidently
deleted or archived for long-term storage.

• Implement deduplication everywhere

• Develop and enforce information retention policies (what can
and cannot be deleted, and when). Automated, policy-driven
deletion creates less risk than ad-hoc, manual deletion.

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Practical Guidelines for
Searching Employees’ Stuff

• Develop and distribute a company policy clearly
stating that the company reserves the right to search
an employee’s belongings, work station, computer,
locker, and other work-related areas.
– Be careful not to appear implementation is retaliation

• A well-publicized policy will weaken an employee’s
argument that he or she had a reasonable
expectation of privacy.

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• Conduct a thorough investigation before
searching the employee or his/her work area
or belongings
– Includes directly communicating with the person who
accused/suspected the employee of wrongdoing.
– Includes questioning the suspect

• Keep track of the investigation to
demonstrate that the employer had a
reasonable and particularized suspicion that
justified the search.

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• When questioning the employee,
observe the following guidelines:

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a. Don’t question an employee based on a mere assumption. Wait until you
have collected some evidence that supports this assumption.
- assumptions = harassment

b. Be careful to keep questioning sessions short, and avoid using any
physical restraint or threatening the employee with arrest or termination.
- no false imprisonment, coercion, intimidation

c. The actual interview should be tape-recorded if possible. Any tapes made
for this purpose should be kept in a designated place and the employer
should keep track of who has had access to the tape.

d. Ask the employee for permission to conduct the search. If the employee
refuses, remind the employee of the company’s policy regarding searches.
If the employee continues to refuse to consent to the search, ask him or
her to sign a statement that he or she knows the company’s search policy
and refuses to agree to a search.

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e. Ensure that searches are conducted discretely and professionally by
properly trained security and management personnel.

f. Keep notes of the circumstances that lead up to the search, the
reasons for the search, how the search was conducted, and any
statements that the employee made during the search. If the employee
admitted any wrongdoing, prepare an have the employee sign a written
admission.
- have a line that says “refuses to sign”

g. Avoid conducting any forcible searches. If such a search is needed,
call the police and ask them to handle the matter as part of their own
criminal investigation.

h. Consult legal counsel before terminating an employee who withheld his
or her consent to search.

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Matthew D. Austin, Esq.
matt.austin@btlaw.com
(614) 628-1409

THE END

CONFIDENTIAL

Legal Issues re: Electronically Stored Information

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