Brett Burney, Burney Consultants, and Marta Farensbach, Sherpa Software, describe how small and medium size companies can effectively manage their electronic data so they are better prepared for litigation. This white paper will detail some best practices in handling e-Discovery inquiries and how to work with IT professionals and outside legal counsel.
Litigation is inevitable in today's business climate, regardless of the size of your company. It is also expensive, primarily due to the massive amount of electronic information (e.g. email, documents, etc.) that must be collected and reviewed in e-Discovery litigation. Larger companies that have had to endure multiple lawsuits have developed policies and procedures to keep the litigation costs under control. But small and mid-sized businesses find it difficult to justify the time and cost required to plan for litigation.
The ultimate goal of any company should be to reliably manage electronic data and have a litigation preparedness plan in place to keep costs low and reduce unwanted exposure and risk to the business. View this white paper to learn how to accomplish these goals.
Information Management is Key to Litigation Preparedness
1. Information Management is
Key to Litigation Preparedness
By: Brett Burney, Burney Consultants
and Marta Farensbach, Sherpa Software
456 Washington Avenue, Suite 2 ● Bridgeville, PA 15017
p (412) 206-0005 ● f (412) 206-0018
information@sherpasoftware.com ● www.sherpasoftware.com
3. Information Management is Key to Litigation Preparedness
Litigation is inevitable in business, which is why there are only two types of companies: those that have
been sued, and those that will be sued.
The key to litigation preparedness is proactive management of electronic data. Organizations can reduce
litigation costs and corporate exposure by implementing effective policies and routine audits around their
continuosly increasing volume of electronic data.
Larger companies that have endured multiple lawsuits have well developed policies and procedures to
manage their electronic data which helps to lower litigation expenditures. Mid-size and smaller
companies, however, find it difficult to justify the time and costs required to plan for litigation. But it is clear
that effective information management can take much of the cost and guesswork out of preparing for
litigation.
Effective Information Management
Information Management (also called Information Governance) is a catch-all term for processes and
procedures that a company employs regarding the creation, storage and deletion of its electronically
stored information (ESI). The primary objective of effective information management is to support the
overarching goals of an organization.
The Information Governance Reference Model clearly outlines how different stakeholders should work
together:
In a basic information management framework, an organization should be able to:
• Understand how ESI is created, stored and used
• Identify where ESI resides
• Establish effective policies to control ESI
• Selectively be able to retain, access or search ESI
With these steps in place, litigation preparedness becomes so much easier.
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4. Information Management is Key to Litigation Preparedness
Putting the "E" in Discovery
Thorough When a thief breaks a window with a hammer, that hammer becomes an important
Litigation piece of evidence in the criminal prosecution. But in civil litigation, the evidence is
Preparedness comprised of information in the form of emails, documents, spreadsheets,
presentations, pictures, video, etc., all of which happen to be electronic in nature.
No one wants to go
through litigation – In litigation, all of the electronic information that is relevant to the matter must be
it's unpleasant and identified, collected and produced to the opposing party so they can judiciously
expensive. It is, build their case. This is traditionally known as the "discovery" phase of litigation.
however, a reality When electronic information is involved, it becomes known as "electronic discovery"
of doing business (e-discovery).
today. For an
organization to Keep in mind that e-discovery is not only limited to the legal sphere. The ability to
effectively answer find and process key electronic data stores is highly relevant for Freedom of
litigation they Information requests, government subpoenas, and respondents to regulatory or
should be able to compliance inquiries as well as internal investigations on audits.
utilize efficiencies
in their information
management
processes to A Company's Duties and Responsibilities in E-Discovery
accomplish basic In December 2006, e-discovery guidelines were formally adopted into the Federal
1
steps of litigation Rules of Civil Procedure . Many States today have adopted similar amendments to
2
including the their own rules which means e-discovery will be a factor whether a lawsuit is in
creation of the Federal or State court.
following:
A major theme of the amendments is that parties to a lawsuit must understand
- Litigation where and how their electronic data is stored so that they can intelligently describe
Response Team their information systems to the opposing party. For example, it's not enough to
- Litigation Profile simply state that your company has an email server; you must be able to answer
- Detailed Data specific questions on how the server is set up and how long the company keeps
Map messages. Based on this information, the opposing party can dictate how the
- Policy Creation relevant email will be produced.
- Electronic
Discovery Process These responsibilities persist whether or not the company believes the lawsuit has
- Legal Hold merit. In other words, even if the company believes the lawsuit is unfounded or will
Process settle quickly, the company is still required to be prepared to discuss their
information systems with the opposing party.
Furthermore, the company must take precautions to prevent relevant data from
being deleted or modified as soon as they have knowledge about the lawsuit.
1
The Federal Rules of Civil Procedure (FRCP) govern the process and related procedures of a civil lawsuit in federal
courts. Part of the procedures that the FRCP governs is how the parties to the civil lawsuit exchange evidence. The
FRCP were amended on December 1, 2006 to include references to "electronically stored information" (ESI) and
equate the exchange of ESI with the exchange of paper documents. See generally "E-Discovery Amendments to the
Federal Rules of Civil Process Go Into Effect Today," Electronic Discovery Law blog, December 1, 2006
http://www.ediscoverylaw.com/2006/12/articles/news-updates/ediscovery-amendments-to-the-federal-rules-of-
civil-procedure-go-into-effect-today/
2
See "Current List of States That Have Enacted E-Discovery Rules," Electronic Discovery Law blog
http://www.ediscoverylaw.com/promo/state-district-court-rules/; and "State Rules of Civil Procedure for e-
Discovery," Fios Knowledge Center http://www.fiosinc.com/case-law-rules/e-discovery-state-rules-civil-
procedure.aspx
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5. Information Management is Key to Litigation Preparedness
These critical steps are impossible if there is no method for managing the extensive (and constantly
growing) storehouse of electronic data.
Avoiding the Downsides of Litigation
The chief motivation for effective information management is to ensure the smooth running of daily
business activity while mitigating risk and exposure for the company. This includes keeping the costs of
litigation low, ensuring compliance with applicable regulations, and protecting the company (and
executives) from negative publicity and liability.
E-discovery is often costly. A survey of the Chief Legal Officers from Fortune 1000 companies found that
45%-50% of respondents' civil litigation costs were related to discovery activities due in large part to
3
having to deal with increasing mountains of electronic information .
The processing and review phases account for the lion's share of e-discovery expenses because there is
a direct correlation between the amount of data collected and the amount of data that must be processed
and reviewed. An effective information management process allows a company to pragmatically cull the
collected data so that only the relevant, responsive information is passed on for processing and review.
These costs, however, don't take into account the potential for monetary and disciplinary sanctions that
can be applied to a faulting party. For example, if a court finds a party failed in their e-discovery
responsibilities, they can order the party to pay the expenses of the opposing party, or simply find in favor
of the other party.
4
These responsibilities recently came to the forefront in the much-publicized Apple v. Samsung litigation
matter. Both parties were admonished by the judge for not properly preserving email that was relevant to
the matter. In Samsung's case, the company failed to suspend an automatic policy that deleted emails
after two weeks. In Apple's case, there was a policy in place that limited the amount of email employees
were able to retain.
5
In another case , a court found a defendant was "negligent in discharging its discovery obligations"
because it failed to "prevent emails from being deleted, to prevent data from being overwritten, or to
identify and preserve backup tapes which might contain the only electronic evidence." As a result, the
court ordered the defendant to spend more time and money on searching for relevant information, as well
as pay the lawyers' fees for the plaintiff.
3
"The State of Discovery Abuse in Civil Litigation: A Survey of Chief Legal Officers, Interim Findings – Released
October 29, 2008," U.S. Chamber Institute for Legal Reform, see generally the Microsoft PowerPoint presentation
by Navigant Consulting located at
http://www.law.northwestern.edu/jep/symposia/documents/2008_CJS_Materials/5b_Kelly_eDiscovery.ppt
(referencing page from Northwestern University Judicial Education Program Symposia at
http://www.law.northwestern.edu/jep/symposia/).
4
Initial opinion at Apple, Inc. v. Samsung Elecs. Co. Ltd., No. C 11-1846 LHK (PSG) (N.D. Cal. July 25, 2012)
5
Naaco Materials Handling Group, Inc. v. Lilly Co., 278 F.R.D. 395 (W.D. Tenn. 2011)
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6. Information Management is Key to Litigation Preparedness
6
In yet another case , an individual sued a company alleging sexual and racial
discrimination and the court determined that the company was "grossly negligent
in its attempts to secure relevant documents" for the litigation matter. The
Forming a company was ordered to spend more time and money on collecting relevant
Litigation information, pay the lawyers' fees for the other side and have the jury instructed
Response Team that the company failed in their duty to preserve all relevant electronically stored
information.
For essential
litigation
preparedness, an
organization needs a Planning to Work and Working the Plan
form a team that will A company enjoys many positive advantages when it decides to proactively
handle the setup and manage their electronic information. The bottom line is that the company can
response to litigation
or information
save money on multiple levels.
requests. This team,
which may consist of First, from a pure numbers perspective, managing large stores of unstructured
a single person, data is expensive in terms of both physical storage space and excessive
needs to buy-in from processing by enterprise software. When considered in terms of litigation, the less
key stakeholders data a company has to collect for a litigation matter means that there will be less
including Legal, IT, data to review and produce to the other party. When a company consistently
and Business. It follows an information management plan that includes the prudent destruction of
should have the unnecessary documents and information, there will simply be less data to collect
power to set policy,
enforce it and have a
when litigation ensues.
very good idea how
the key steps in the Second, lawsuits and compliance requests are un-welcome interruptions to
process will be business. The disruption can be lessened when the company has a plan in place
accomplished. The to collect and preserve relevant data. This may include setting up a "litigation
responsibilities of the response team" internally at the company, creating policies to support the team
Litigation Response and employing technology platforms that can automatically collect the required
team can include: data. A "litigation readiness plan" gives a company much more control over the
entire litigation process.
- Acting as the key
contact point for
litigation Why don't all companies implement a litigation readiness plan if it will
preparedness unquestionably save the company money and reduce risk? Many small and mid-
- Creating litigation size businesses believe that the project would be too expensive, which
and risk profiles completely ignores the cost-savings that such a plan would provide not just during
- Establishing and litigation, but in day to day operations.
auditing policy and
process The reality is that most companies just don't know where to start. The thought of
- Coordination of
trying to understand complex electronic data stores and information systems
response for
litigation, compliance
seems overwhelming, not to mention that there's a business to run. Preparing for
etc. the "what if" litigation scenario takes a low priority in the multitude of daily
- Issuing and auditing business activities.
Litigation Holds
- Identifying key
personnel, software,
consultants and Where to Start?
vendors The first step in developing a litigation readiness plan is to understand the
company's "litigation profile." Manufacturing companies need to be prepared for
product liability issues while financial institutions may be more worried about SEC
lawsuits or compliance obligations. The relevant electronic data will be different in
6
Northington v. H&M Int., No. 08-CV-6297, 2011 U.S. Dist. LEXIS 14366, 2011 WL 663055 (N.D. Ill. Jan. 12, 2011);
Northington v. H&M Int., No. 08 C 6297, 2011 WL 662727 (N.D. Ill. Feb. 14, 2011)
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7. Information Management is Key to Litigation Preparedness
each scenario as will the areas of risk. Ascertaining these details will provide a good starting point for
litigation readiness.
For example, if the pricing of a product could be an issue, then spreadsheets and databases may be
important to collect. In patent disputes, diagrams and design conversations are key factors. If an
employee brings suit against the company for discrimination, then emails from supervisors and/or
managers will be important in the ensuing litigation.
One of the universal low-hanging fruits of the e-discovery world is email since it's chock-full of juicy
conversations and noteworthy attachments. Email is one of the first items requested in any litigation.
Companies can curb their litigation costs by simply implementing a destruction policy that deletes non-
essential email older than 30 or 60 days. If there's no qualified business reason to keep an email
7
message, then the company is fully justified in deleting it . Many companies implement a strict deletion
policy on the main Inbox of employees, but allow employees to move important messages into sub-
folders that have longer retention periods.
A company should also consider utilizing an email archiving system that can assist in implementing an
email retention and destruction policy. Such a system effectively takes the work of identifying and
preserving relevant messages out of the hands of individual employees and places the task into the
hands of legal counsel and company executives. Products such as Sherpa Software's Archive Attender
allow companies to access archived email messages so they can quickly identify relevant conversations
and properly preserve the data.
After email, a company must prioritize what electronic information should be managed next according to
their litigation profile. Data backup procedures, for example, should be examined from a practical
perspective on the rotation periods and the amount of data that is retained. Backup tapes are not ideal for
e-discovery purposes, but they can become important to a litigation matter and the company must be
prepared to answer questions about the data that is (and is not) being backed up. Records management
systems, cloud based information tools and the all important social media should all come under scrutiny.
Taking the Next Steps to Prepare for Litigation…
Regardless of the size of an organization, it is imperative that the company set up a "litigation response
team" or identify someone that can take charge of the activities required during litigation. A typical
litigation response team is composed of representatives from IT, records management (if applicable) and
the legal department.
When the company becomes involved in litigation, the team takes responsibility for initiating the process,
identifying the custodians and outlining the locations and accessibility of relevant data. This task can be
made easier through the creation of a "data map" that can be shared with legal counsel and the opposing
party. A data-map is less complex than a full-scale network diagram, but it generally outlines the locations
and purposes of a company's data.
The litigation response team can also be responsible for overseeing the delivery and follow-up of the
"legal hold" notifications at the company. The "legal hold' is issued when litigation is anticipated. It
requires that all data that might be relevant to the case or associated with certain custodians be secured
and preserved from deletion or modification that occurs as part of standard business processes. For
7
See Arthur Anderson v. U.S., 125 S.Ct. 2129, 2135 (U.S. May 31, 2005):
"Document retention policies, which are created in part to keep certain information from getting into the
hands of others, including the Government, are common in business. …It is, of course, not wrongful for a
manager to instruct his employees to comply with a valid document retention policy under ordinary
circumstances."
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8. Information Management is Key to Litigation Preparedness
example, if a supervisor at a company is accused of discrimination, then a "hold" is typically placed on
that supervisor's email and electronic records. Automated deletions of the data as part of retention policy
must be suspended so relevant information is not lost.
Legal holds can be issued as a communication to employees describing the relevant data that might be
in their possession and direct them as to what items they are required to preserve. Alternately, many
data management systems have the ability to automate the legal hold process. However a legal hold is
instituted, it is imperative that the litigation response team conduct routine follow-ups with individuals and
systems to ensure that the relevant data is being collected and preserved (i.e. not allowed to be
modified).
Lastly, the litigation response team could also lead the charge in revising the company's policies
regarding the retention and destruction of electronic data. In developing a legally defensible policy, a
company must balance their need for archival information against the expense of storing and maintaining
that information.
Don't get overwhelmed with the thought of crafting a full retention policy from the beginning. Start by
deciding a default corporate policy, and then investigate the exceptions. Common exceptions often are
legally mandated by regulatory limitations. For example, in some cases, financial records must be stored
for 7 years, while HR records are stored permanently.
Once the time period is established, move on to set retention periods for email, and follow up with other
electronic information. The company's policy will develop in due time, and then the task turns to educating
employees and the company on how to properly follow the policy.
Keep in mind that retention is not the only policy concern for many organizations. Social media, back up
and internet policy should all be discussed as part of a thorough planning process.
Just remember, a policy that is not uniformly enforced tends not to be much of a policy at all. Without
proper auditing, your policies may have the unintentional consequences of increasing a company's risk
rather than reducing it.
Conclusion
Companies do not have to tackle any of these steps on their own. Help is available from a variety of
sources. Online resources, consultants, vendors and the company's own legal counsel can provide critical
insight into the best solution for effective information management and litigation preparedness for your
organization.
By effectively managing electronic information, a small or mid-size company will realize cost savings and
reduced exposure in litigation. It may seem like a difficult project to push through, but all the work will pay
off once the inevitable happens.
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9. Information Management is Key to Litigation Preparedness
About the Authors
Brett Burney, Burney Consultants
Prior to establishing Burney Consultants, Brett Burney spent five years at the law firm of Thompson Hine
LLP in Cleveland, Ohio, where he worked extensively with litigation teams in building electronic document
databases, counseling on electronic discovery issues, and managing the technical responsibilities of
presenting electronic evidence at trial.
Brett was responsible for several other projects at the law firm including document automation and the
wireless e-mail system.
Brett Burney is a featured speaker at numerous legal technology conferences including the ABA
TECHSHOW, LegalTech and ILTA.
Brett is also a well-respected author on legal technology topics. You can find an extensive library of
articles and columns written by Brett in LLRX.com, Law Technology News magazine, Legal Assistant
Today magazine, and Law.com.
Marta Farensbach, Sherpa Software
Marta oversees the development and growth of Sherpa Software's electronic discovery products for the
Microsoft environment and is responsible for ensuring customer satisfaction with Discovery Attender and
supporting utilities. Since joining Sherpa in 2003, she has done extensive research on Electronic
Discovery while expanding her expertise in Compliance and Content Searching.
Prior to joining Sherpa Software, Marta oversaw the development and management of the information
technology department for a leading logistics firm. During her tenure, Marta was instrumental in
increasing profitability and efficiency of real-time data inventory products and subscription based data
transfer services, while guiding the deployment of new web-based offerings.
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