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1. eDiscovery Best Practices Stephanie A. “Tess” BlairDirector, Morgan Lewis Resources Legal Logistics Legal Logistics Nuts & Bolts Best Practices Series: Litigation Hold – Sorting Through Record Preservation Issues www.morganlewisresources.com

2. Talking Points for Today’s Discussion • Defining “eDiscovery” • Current state of the law • Zubulake post mortem • trigger of obligation to preserve • scope of preservation • Proposed amendments to FRCP • The litigation hold • Beyond the hold: counsel’s ongoing obligations • Getting it wrong: sanctions • Getting it right: MLB Best practices

3. Defining eDiscovery

4. eDiscovery can involve production of electronic files and data compilations of all sorts, including: • internet cache files, cookies, favorites • instant and text messages • voicemail • videotape • data stored on cellphones • email and attachments • text files, such as Word, Excel, Powerpoint, Access • transmissions and data stored on blackberries and PDAs • backup tapes • proprietary applications and databases

5. eDiscovery Data Measurements

6. The eDiscovery problem: • eDiscovery, by it very nature, is easier to get wrong than it is to get right • Review of this volume of data is beyond human capability and growing exponentially • Cost and disruption to normal business operations can be enormous, thus some companies are reluctant to cooperate • BUT Counsel has affirmative obligations beyond issuing a litigation hold

7. The Morgan Lewis solution Firmwide Best practices that emphasize: • DEFENSIBILITY • COST EFFECTIVENESS

8. The Current State of the Law

9. Zubulake Post Mortem • Single plaintiff gender discrimination and retaliation case • Request #28: “All documents concerning any communication by or between UBS employees concerning plaintiff” • UBS produced 100 pages of email BUT plaintiff produced 450 pages of UBS documents including a “smoking gun” email

10. Zubulake - UBS’ Efforts • UBS issued oral litigation hold after EEOC Charge in August 2001 • UBS claimed that it had collected and produced “all existing responsive email sent or received between 1999 and 2001” • BUT UBS did not preserve back up tapes until August 2002

11. Zubulake: Key Holdings • Trigger: Obligation to preserve is triggered upon notice of anticipated litigation • Testimony indicated that UBS anticipated litigation at least as early as April 2001, 4 months before the EEOC charge • Scope of Preservation: UBS had an obligation to preserve back up tapes to capture deleted email

12. Zubulake Nut Shells • Zubulake I: • Scope of preservation obligation • Active online data - yes • Near line data -yes • Offline storage/archives -yes • Backup tapes - possibly • Erased fragmented or damaged data - rarely • Cost Shifting - 7 factor test

13. Zubulake: Key Holdings • Zubulake III: Cost Shifting • No cost shifting for accessible data • Application of 7 factor test for restoration of inaccessible data • No cost shifting for review and production

14. Zubulake: Key Holdings • Zubulake IV: Duty to Preserve • Trigger: • notice of anticipated litigation • testimony and evidence may be used to establish trigger date • Scope: • General Rule: no obligation to preserve inaccessible data • Exception: inaccessible data must be preserved if information is not otherwise available, such as when potentially relevant records may have been deleted

15. Zubulake V: counsel’s ongoing obligations • A lawyer’s obligations go beyond the drafting and issuance of a litigation hold • An attorney’s obligations continue throughout the “holding period”

16. Zubulake V: counsel’s ongoing obligations • Counsel has a duty to effectively communicate to the client its discovery obligations so that all relevant information is discovered, retained and produced. • Once the duty to preserve attaches, counsel must identify sources of discoverable information, such as • Key players • IT personnel

17. Zubulake V: counsel’s ongoing obligations • When the duty to preserve attaches, counsel must put in place a litigation hold and make the fact of the hold known to all relevant employees. • The instructions must be reiterated regularly. • Compliance with the instructions must be monitored and, when needed, corrective action taken.

18. Zubulake V: counsel’s ongoing obligations • In addition, when it comes to electronic media • Counsel must also call for employees to produce copies of relevant electronic evidence. • Counsel must arrange for the segregation and safeguarding of any archival media that the party has a duty to preserve.

19. Zubulake V: The Result • Held: • UBS failed to preserve all potentially discoverable data • Counsel failed to communicate litigation hold to all key players • Counsel failed to understand key players’ document management habits • Employees defied preservation obligation • Result: Adverse Inference Instruction and costs

20. Trigger of the Obligation to Preserve

21. Trigger • “The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.” Zubulake IV, infra.

22. Trigger • “The duty to preserve exists as of the time the party knows or reasonably should know litigation is foreseeable.” Mosaid Tech., Inc.

23. Trigger • Duty applies to all potential litigants • See Rambus, Inc. v. Infineon Techs. AG, 220 F.R.D. 264, 286-87 (E.D. Va. 2004) (plaintiff, knowing that it was likely to commence patent litigation, could not institute systematic destruction of records during so-called “Shred Day”) • See Institute for Motivational Living, Inc., et al. v. Doulos Inst. For Strategic Consulting, Inc., 2004 WL 2241745 (3d. Cir. 2004)(pro se litigant)

24. Trigger • Duty exists in the absence of preservation order or discovery request. • Keir v. Unumprovident Corp., 2003 WL 21997747 (S.D.N.Y. Aug. 22, 2003)(observing that parties have obligation to preserve even while negotiating preservation orders and scope of discovery) • Capricorn Power Co. v. Siemens Westinghouse Power Corp., 220 F.R.D. 429 (W.D. Pa. 2004)(denying cross motions for preservation order).

25. Scope of Preservation

26. Scope of Preservation • The rules of discovery have not changed; only the level of effort it takes to comply has changed.

27. F.R.C.P. 26 (b) (b) Discovery Scope and Limits. Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows: (1) In General. Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter.  For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action.   Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.  All discovery is subject to the limitations imposed by Rule 26(b)(2)(i), (ii), and (iii). (2) Limitations. By order, the court may alter the limits in these rules on the number of depositions and interrogatories or the length of depositions under Rule 30. By order or local rule, the court may also limit the number of requests under Rule 36.  The frequency or extent of use of the discovery methods otherwise permitted under these rules and by any local rule shall be limited by the court if it determines that:   (i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues.  The court may act upon its own initiative after reasonable notice or pursuant to a motion under Rule 26(c). Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party . . .

28. Scope of Preservation • “While a litigant is under no duty to keep or retain every document in its possession . . . it is under a duty to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.” (Zubulake IV).

29. The Proposed Amendments to the Federal Rules of Civil Procedure

30. Proposed Amendments • Rule 16 conferences to include early meet and confer on electronic discovery • Rule 26 disclosures to include electronic discovery and custodian of records • Rule 37 Safe Harbor: protection from sanctions for destruction of edata where failure resulted from routine operation of party’s IT system.

31. The Litigation Hold

32. The Litigation Hold • Design your “litigation hold” with the following questions in mind: • Whose documents must be retained? • Who are the key players? • Which business units, locations, departments have information relevant to the claims or defenses of any party?

33. The Litigation Hold • What time period is implicated by the hold? • Documents extant at the time the obligation is triggered • Newly created materials

34. The Litigation Hold • What kind of information is likely to be implicated? • Hard-copy documents? • Computerized or other digital data? • Voice, video data? • Is this data accessible?

35. The Litigation Hold • Key Components: • Subject • Directive regarding preservation of potential discovery materials and electronic data • Description of Scope • Define potentially relevant information • Explain breadth of definition • Caution re: underinclusive v. overinclusive • Definition of “Document” • Expansive meaning includes hard-copy paper, electronic data, email and attachments, databases, drafts, notes, calendars, etc.

36. The Litigation Hold • Specific Instructions to Halt routine destruction of each document type as appropriate: paper, email, text tiles, databases, etc. • Instructions highly contingent on: • Sophistication of client’s IT infrastructure • Client’s IT resources • volume of implicated data • amount at stake in litigation • likelihood of discovery dispute • agreement of parties

37. The Litigation Hold • Distribution list: • all “key players” • others with potentially relevant records • Sender – someone with “corporate heft” • GC or in-house counsel • Company’s compliance officer • Other • Identify who the employees can call for help • In-house contact • Morgan Lewis contact

38. Beyond the hold: counsel’s ongoing obligations

39. Beyond the Hold: Counsel’s Affirmative Obligations Counsel no longer has the right to rely on the client to comply with proper instructions and advice. • Counsel has a duty to communicate effectively to the client its discovery obligations so that all relevant information is discovered and retained, and that all relevant, non-privileged information is produced. • Once the duty to preserve arises counsel must identify sources of discoverable information, such as that in the possession of key company personnel or in the possession of IT staff.

40. Beyond the Hold: Counsel’s Affirmative Obligations • When the duty to preserve attaches, counsel must put in place a litigation hold and make the fact of the hold known to all relevant employees. • Counsel must reiterate the hold instructions on a regular basis. • Counsel must actively monitor the instructions and, when needed, corrective action must be taken to ensure continued compliance.

41. Beyond the Hold: Counsel’s Affirmative Obligations • When dealing with electronic media, counsel must communicate to all relevant persons that the obligation to preserve information includes electronic data. • Counsel must arrange for the segregation and safeguarding of any archival media that the party has a duty to preserve.

42. Getting it Wrong: Sanctions

43. Sanctions • Factors: • culpability • prejudice • Frequency: • Defendants 4x as often as plaintiffs • For destruction of edata - 84% of the time

44. Recent Sanctions Cases: Preclusion • Defendant precluded from introducing 80K emails into evidence, even to refresh witness recollection, for failure to produce until after discovery cutoff; plaintiff permitted to use records on direct and cross. Thompson v. United States Dept. of Housing and Urban Development, 219 F.R.D. 93 (D. Md. 2003) • Alleged patent infringer precluded from offering any evidence of invalidity or unenforceability where found to have used Evidence Eliminator to destroy requested records. Kucala, Enter., Ltd v. Auto Wax Co., Inc., 2003 WL 22433095 (N.D. Ill. May 27, 2003)

45. Recent Sanctions Cases: Default • Default judgment entered where defendant reformatted hard drive before production to plaintiff. QZO, Inc. v. Moyer, 594 S.E.2d. 541 (S.C. Ct. App. 2004) • Default judgment entered where defendant engaged in systematic discovery abuse, including refusal to produce and making outlandish excuses, such as earthquake. Computer Task Group, Inc. v. Brotby, 364 F.3d 1112 (9th Cir. 2004) • Dismissal with prejudice for systematic discovery abuse, including violation of three discovery orders and late production on eve of depositions. Mariner Health Care, Inc. v. PricewaterhouseCoopers LLP, No. 02VS037631-F, slip op. (Ga. Fulton Cty. Nov. 9, 2004)

46. Recent Sanctions Cases: Default • A default judgment was entered against a defendant corporation when its counsel (1) failed to give adequate instructions to the client about client’s overall discovery obligations; (2) failed to implement a systematic procedure for the retention of documents, knowing that the client had no document retention plan in place; and (3) delegated the document production tasks to a lay person who lacked an understanding of how broadly the term “document” was defined by the document request. Metropolitan Opera Ass’n, Inc. v. Local 100 Hotel Employees & Restaurant Employess Int’l Union, 212 F.R.D. 178 (S.D.N.Y. 2003), motion for reconsideration denied, 2004 WL 1923760 (S.D.N.Y. Aug. 27, 2004) (court criticizes counsel and client for their “ parallel know-nothing, do-nothing, head-in-the-sand behavior in an effort consciously to avoid knowledge of or responsibility for their discovery obligations. . . .)

47. Recent Sanctions Cases: Fees & Costs • The failure to take reasonable steps to preserve data at the outset of discovery resulted in a personal fine levied against the defendant’s CEO.Danis v. USN Communications, 53 Fed. R. Serv. 3d 828 (N.D. Ill. 2000) • Defendant fined $2.5M for destroying email and barred from presenting key witnesses at trial who failed to follow litigation hold.U.S. v. Philip Morris, Inc. No. 99-2496 (D.D.C. July 21, 2004) • Prudential fined $1M for failure to prevent unauthorized destruction of discovery materials. In Re Prudential Insurance Co. of America Sales Practice Litigation, 169 F.R.D. 598 (D. N.J. 1997)

48. Recent Sanctions Cases: Adverse Inference • Jury allowed to infer that evidence UBS failed to produce would have been unfavorable. Zubulake V, 2004 WL 1620866 (S.D.N.Y. July 20, 2004)(also awarding fees and costs) • Similar adverse instruction given for failure to issue litigation hold resulting in non-production of any email. Mosaid Tech., Inc. v. Samsung Elec. Co., 224 F.R.D. 595 (D.N.J. 2004)(also issuing monetary sanction).

49. Getting it Right: MLB Best Practices

50. A Good Record Management Plan . . . • Is defensible • Satisfies current and future discovery obligations • Minimizes business disruption • Is Efficient • Is Cost effective