After much fanfare, Judge McMahon of the Southern District of New York Federal Court upheld the lower court’s ruling in the case of Pippins v. KPMG LLP that the defendant, KPMG must preserve all hard drives that may be related to the case. How does this ruling affect future cases? It is important to first understand the basis of this case.
Audit Associates and Audit Associate Seconds, which worked in the KPMG Audit practice group, filed a class action against KPMG. They claim KPMG misclassified their employment to avoid paying overtime salaries.
KPMG was asked to preserve existing hard drives that may be relevant to the case. KPMG argued using the Proportionality Claim[1], that because the number of plaintiffs was so high, preserving all of this data would be unnecessarily expensive.
KPMG had to preserve any hard drive that could contain relevant information to this case and the “key players” in the case. “Relevant” could be interpreted as anything that could reasonably lead to other information that could have an effect on the case, and “key players” are anyone who is likely to have any discoverable information that may be used to support claims of the defense or plaintiff. When these definitions were applied to the court’s view that any person who might opt into the class action would be a potential plaintiff which meant that their data would also have to be preserved. One can readily see how the costs of preservation could potentially skyrocket. .
Yet the decision of Judge McMahon, and the lower court, was a rejection of this proportionality claim on the basis that the court could not conduct an accurate cost-benefit analysis since neither the cost nor the benefit of preservation had never been determined, even on a partial basis. Judge McMahon decided that he, alongside the plaintiffs, were never given adequate opportunity by KPMG to understand the costs or benefits of preservation thereby making the proportionality test impossible.
What does this mean for the future of eDiscovery? If you are a big-name company with a lot of data to preserve, an inexpensive and efficient means to preserve all of your data should be one of your top priorities. Additionally, the retrieval process must be fast enough for both sides to have ample opportunity to review it.

[1] The Proportionality Claim (or Proportionality Test) is a cost-benefit analysis in which the court weighs the cost of producing evidence against the benefit of producing it. This is done in order to limit the frequency or extent of discovery where the expense of it likely outweighs its benefit. What is interesting about this case is that this test is being applied to preservation and not production.

By Elle Byram. Esq., CEDS

While some destroy records through shred days (no names mentioned), others do it by burning technology. I presume that’s one way to try to ensure your data is destroyed. It’s also one way to ensure you will be sanctioned. Which is exactly what happened in Evans v. Mobile County Health Department, 2012 WL 206141.
Sandra Evans brought suit against her employer for reverse discrimination and retaliation. Plaintiff filed suit in November 2010 and was subsequently ordered in the spring of 2011 to retain all relevant electronic materials. In June or July of 2011, Plaintiff’s computer allegedly “crashed” and she was advised by the Geek Squad at Best Buy to just buy another computer. Despite her suit and preservation requirements, plaintiff chose to burn her computer. She did not transfer the contents from the old computer to the new computer she had purchased. And, she did not to mention in her deposition that she had burned her computer. Her rationale for burning the computer: she did not want anyone to access the confidential information she had on the computer. But who would when you are in the midst of a lawsuit?
In discovery, defendant learned that plaintiff had taken notes of the alleged discrimination and had other emails and materials as well. Plaintiff produced excerpts of her notes but not complete copies. Defendant repeatedly asked for the information to no avail. The reason for plaintiff’s failed production are now, of course, obvious.
The court gave little credit to plaintiff’s cries that she needed to protect her confidential information and did not seem to understand why protection such as burning a computer would be bad in the middle of a lawsuit. “Given that plaintiff knew enough about computers to know someone could access the information/data on her computer even though it had ‘crashed,’ the [Court] finds that plaintiff fully appreciated that she could have transferred the information from her ‘crashed’ computer to the new computer she purchased.” Id. at 12. The court determined that plaintiff’s “culpability is excessively high. After all, she burned her personal computer after she filed her lawsuit … and an order was entered by this Court that she take steps to preserve all relevant electronically-stored information in her possession.” Id. at 19.
As a result of her willful destruction of evidence, the Court ordered an adverse inference instruction – if plaintiff survived summary judgment – and was required to pay attorney’s fees and expenses for the defendant’s motion to dismiss as a result of the destruction. If plaintiff fails to pay up, her suit will be dismissed.

Kim Dotcom, one of the founders of Megaupload.com, was arrested last week for his website that took away over 500 million from copyright holders and promoted online piracy. Dotcom is under fire once again for a ‘joke email’ he sent out two years ago that authorities got a hold of. Since Dotcom has a long track record of previous run-ins with the law, it comes as no surprise that authorities did not take his joke so lightly. In April of 2010, Dotcom sent the following out to his neighborhood watch.

Dear Neighborhood-watch,
As you all know I recently moved into the Neighborhood and I am a former hacker. Well I was just hacking into a local mail server and guess what I found.
First of all let me assure you that having a criminal Neighbor like me comes with benefits.
1. Our newly opened local money laundering facility can help you with your tax fraud optimization.
2. Our network of international insiders can provide you with valuable stock tips.
3. My close personal relations with other (far worse) criminals can help you whenever you have to deal with a nasty Neighbor.
In all seriousness: My wife, two kids and myself love New Zealand and ‘We come in peace’.
Fifteen years ago I was a hacker and 10 years ago I was convicted for insider trading. Hardly the kind of crimes you need to start a witch hunt for. Since then I have been a good boy, my criminal records have been cleared, and I created a successful Internet company that employs 100+ people.
All the media has to report are old news. Why? Because I have chosen to avoid the media. Just look what the media did to this Neighborhood. Scary.
Now you can make a choice: 1: Call Interpol, the CIA, and the Queen of England and try to get me on the next plane out of New Zealand. 2: Sit back, relax and give me a chance to do good for New Zealand and possibly the Neighborhood.
If you feel like it come over for coffee sometimes. And don’t forget to bring the cocaine (joke). All the best, Kim.
The Guardian

Though I found the email humorous, neighbors did not, reporting that it “scared the hell out of everybody”. Dotcom may have had the right intention in trying to ease his neighbors’ worries, but he can only regret sending that email now, as it alludes to his past criminal behavior and possible current drug use. This email was sent almost two years ago, and Dotcom probably thought nothing would come of a harmless email. Boy, was he wrong!

More and more companies are investing in email archiving solutions, as they help litigation processes run more smoothly, provide a clearer picture to trials and cases, and save time and money! This is bad news for people like Dotcom, but good news for everyone else in the world.

While email usage may have started out as a casual means of communication, it has recently transformed into the lifeblood of most organizations and serves as the primary mode of communication for almost all businesses. In an increasingly paperless world, emails have replaced written memos as a standard business record, and transferring files in the form of attachments have become commonplace. This coupled with the increase in spam and marketing promos have employees’ inboxes cluttered, hitting email storage restrictions faster than ever before.

So what can companies do for relief from the steady stream of spam? Investing in an email archiving solution can alleviate the pains of spam by providing the following benefits:
-reducing the load on the company’s mail server
-enable users to self-restore any deleted email from backup
-maintain an archive of all email, which can be easily searched for compliance or eDiscovery
-save time for employees as they no longer need to organize their inboxes

Times are changing, and it is up to you to keep up with the ongoing trend of increasing email and spam levels. Email archiving solutions represent a viable solution to meet most of these ongoing demands.

It’s not too often that you see a case in which both the plaintiff and the defendant receive sanctions for spoliation. This is exactly what happened in Patel v. Havana Bar, Restaurant and Catering, 2011 WL 6029983 (E.D. Pa. 2011). The case arose from injuries sustained by plaintiff when he fell from a second floor balcony at an engagement party in the defendant’s bar. Both parties, perhaps one more egregiously than the other, spoliated evidence.

Defendant, who routinely recorded video surveillance of the bar, and which was recorded on the night of the injury, failed to preserve the video. The surveillance system was programmed to record over the existing footage every three weeks. Defendant, claiming that he attempted to prevent the footage from the night of the accident being erased, was unsuccessful in such attempts.

The plaintiff’s part appears to be substantially more egregious. About a year after plaintiff was injured, plaintiff’s sister-in-law sent a Facebook email to the engagement party guests to request a statement of what they witnessed that evening. However, her email requested that the guests state that plaintiff was not intoxicated at the time of the fall and that he is “a hyper guy who acts all wild and crazy without being drunk… .” No statements from this request were ever produced to defendants. Two years after this email, plaintiff’s sister-in-law again requested statements, but because the direction of the case had changed, her request sought statements indicating that plaintiff was in fact drunk.

Note that reading the sister-in-law’s emails sent to the guests requesting their statements is painful. No attorney ever wants a written word requesting evidence to be tailored to the outcome you desire.

Defendant knew nothing about either of the emails requesting statements or the purported statements until one of the plaintiff’s witnesses was deposed and admitted to sending a statement to plaintiff. Despite this admission and defendant’s subsequent requests to plaintiff to produce the statements, no statements from the first email were produced and only 16 of the 20 from the second email were produced in a piece-meal fashion. The court found plaintiff spoliated evidence as well.

The result of both parties’ spoliation: an adverse inference sanction was granted for defendant’s spoliation of the video and for plaintiff’s spoliation of the statements from the earlier email request. Plaintiff was also sanctioned for defendant’s costs for the original requests for production as well as re-deposing witnesses.
And so the lessons to be learned? Make sure you halt routine destruction of evidence. This cannot be emphasized enough. Additionally, if you are advising your clients on a suit, don’t let them create evidence that could impact the case. It should go without stating that you should not let your witnesses fabricate evidence either, but it never hurts to remind some attorneys.

It never reflects positively on you when the judge starts off the opinion stating “This case highlights the dangers of carelessness and inattention in e-discovery.” Fortunately for the plaintiff in I-Med Pharma v. Biomatrix, 2011 WL 6140658 (D. N.J. 2011), it all worked in its favor. However, this case seems to emphasize the need for good records management.

In attempting to resolve plaintiff’s breach of contract and fraud dispute, the I-Med Pharma parties entered into a discovery stipulation for materials from plaintiff’s computer network, servers, and storage devices. Defendant hired an expert and ran a number of keyword searches that produced – in the unallocated space alone – 64,382,929 hits representing an estimated 95 million pages of data. Yikes. The court, to its credit, questioned the accuracy of the parties’ estimation. However, the court stated that it had no choice but to accept the parties at their word.

Of course such a vast number of documents that it would need to review for privilege produced a visceral response in plaintiff. It quickly sought relief from the stipulation that would allow it to withhold the data found in the unallocated space, which the court granted. Defendant, desiring to acquire the voluminous data, appealed asserting that the Magistrate Judge had abused his discretion in granting plaintiff relief from the stipulation.

To provide plaintiff relief, defendant claimed that there needed to be exceptional circumstances that would cause plaintiff to suffer manifest injustice if required to perform its obligations under the stipulation. In support of its claim, it used a personal injury suit in which one of the defendants stipulated to its liability in order to bifurcate the trial and have damages tried first. When things didn’t turn out so well for that defendant, it tried to back out of the stipulation.

The court easily distinguished this personal case noting that the stipulation dealt with the liability of the parties and not a discovery dispute. Even more importantly, the court found that the factors used in the personal injury dispute to determine if there would be manifest injustice went against upholding the I-Med Pharma stipulation. First, plaintiff’s privilege review of 65 million documents would be too time-consuming and too expensive to perform. Second, defendants had failed to demonstrate a likelihood that relevant non-duplicative information would be found in the unallocated space files. Third, although plaintiff should have been more cautious before stipulating to broad search terms, its failure to do so did not justify requiring the plaintiff to perform such a review.

It worked out favorably for plaintiff this time. But, the lesson to be learned: you can never be too careful in e-discovery. Not all courts will express sympathy for poor decision-making. Being cognizant of your data and managing it properly cannot be understated. In fact, tools exist today that would enable reviewers to identify the number of keyword hits instantaneously, and if coupled with proximity search capabilities, these would likely fine tune the number of hits by several orders of magnitude if not more. It is likely that many of the documents in plaintiff’s unallocated space could have been deleted before any preservation obligations had kicked in. Had they actually have been forced to adhere to the stipulation, plaintiff might have been kicking themselves for not properly managing their data to begin with.

I was excited to read a recent blog by Greg Bufithis that connected neuroscience, and yes, e-discovery. In an earlier career, I pursued neuropsychology. Long before the electronic discovery days I must admit. But I’ve never lost my fascination for the power of the brain. When I saw Greg’s blog I felt a little tinge of excitement.

In the blog, Greg references a discussion he had with a neuroscientist about e-discovery, algorithms and predictive coding. The neuroscientist explained that when humans change their minds, those changes are generally based on heuristics, those “ah-ha” moments where the brain connects-the-dots as we are being told a story. Heuristics generally happen in the right side of the brain. Most of us recognize this as the artistic side. The other side, or the left side, is the logic side, which is less frequently deployed by the human brain when we change our minds.

This of course begs the question, should artists, who are legal folks’ right-brained brethren, actually be doing document reviews? I would venture a guess that the answer most often will be no. And, I highly doubt too many artists would leap on the opportunity to sit hour-upon-hour, week-upon-week plastered in front of a computer merely to review some of the most tedious communications in existence. (Sigh. And what was wrong with me when I chose to sit behind the computer and week-upon-week review mind-numbingly dull documents. Alas.)

Notwithstanding, over the past few years, many e-discovery professionals have been searching for new technologies pushing predictive coding, which uses algorithms to assist with e-discovery review. For at least one obvious reason, it’s certainly received quite a splash: those mind-numbingly dull reviews produce frequent errors that have on occasion had serious consequences. This of course is not to say that technology doesn’t produce errors, especially with technology that is in its infancy. However, it seems that technology may be winning over the human reviewer, not just in accuracy, but in speed and cost. And, it appears that it’s winning by overcoming some of the weaknesses of the human brain in e-discovery reviews.

Greg’s blog goes on to mention that perhaps the key, which seems to be what some of the predictive coding technologies are attempting to crack, is to allow algorithms – i.e. logic – to change the way the human mind makes decisions. By providing a formulaic approach based on a small sampling of data, predictive coding can provide the reviewers with specific information about what is being reviewed. This will in turn allow the reviewer to make even more accurate logic-based decisions resulting on a more effective review.

Would elimination of all internal email be an effective records management strategy? Could it potentially reduce the costs of e-discovery? Perhaps. But at what cost to the business? Do we need email to effectively conduct business? I would imagine the answer would be, as any good lawyer will say, it depends. However, we may soon find out.

Atos SA’s chief executive Thierry Breton recently made the decision to stop using all internal email – company-wide – by mid-2013. Breton is in turn requiring the $13 billion company that operates in 42 countries to use “instant messaging and a Facebook-style interface to communicate.” The decision was not made as a records management strategy but as a business strategy. The rationale for ceasing the use of emails is based on the conclusion that too many employees waste too much time sending useless emails. (And text messages, instant messaging and Facebook posts don’t constitute predominantly useless communication, which because of their inherent and intended limitations are difficult to make truly useful?)

Atos estimated from its own research that only 15% of its internal emails were actually useful. In a records management world, this seems to be a very generous proportion of emails. Some studies have found that less than 5% of all corporate emails have business value. Perhaps the Atos employees are actually more focused and efficient in their use of email compared with the average corporate employee. Something we should applaud. Or maybe their definition of “useful” is so broad as to actually be a tad bit wasteful.

Regardless of their motives, Atos may end up with fewer emails that could impact both their records management and e-discovery. The halting of all email communication is something a lot of records managers and legal departments would love. However, whether Atos’s alternatives will actually lessen the burdens that email causes companies is yet to be seen (and may never be intentionally made public). Their alternatives – instant messaging and a Facebook-style interface – may be more challenging forms of communication to retain causing more headaches for records managers and the legal department. However, if the alternative communication methods truly produce a reduction in the amount of information sent, no doubt a debatable point, perhaps this will offset the complications of retaining this type of information making retention of it about equivalent to the retention of email.

Amidst the grogginess and sluggishness typical of American post-Thanksgiving overindulgence, the White House slipped out a short but interesting memo near and dear to The Modern Archivist’s heart. Published in the Federal Register on Monday, November 28, 2011, was a Presidential Memorandum on “Managing Government Records,” from the Office of President Obama to the heads of all executive departments and agencies.

Inside, it establishes a Records Management Directive, which focuses on six key items:

• 3(a)(i) creating a Government wide records management framework that is more efficient and cost effective;
• 3(a)(ii) promoting records management policies and practices that enhance the capability of agencies to fulfill their statutory missions;
• 3(a)(iii) maintaining accountability through documentation of agency actions;
• 3(a)(iv)increasing open Government and appropriate public access to Government records;
• 3(a)(v) supporting agency compliance with applicable legal requirements related to the preservation of information relevant to litigation; and
• 3(a)(vi)transitioning from paper-based records management to electronic records management where feasible.

It also references the Archivist of the United States and several requirements and deadlines towards Records Management Reform, including:

• 2(a)(iii) where a senior agency official must be assigned to supervise a review of records management practices, “in coordination with the agency’s Records Officer, Chief Information Officer, and General Counsel,” within 30 days.
• 2(b) which states that within 120 days, “each agency head shall submit a report to the Archivist and the Director of the Office of Management and Budget (OMB) that,” describes the agency’s current plans for improving or maintaining its records management program, “particularly with respect to managing electronic records, including email and social media,” and outlines the obstacles to adopting sound record management policies and practices as well as any policies and programs that would improve the agency’s efforts in records management per guidance from NARA and the Records Management Directive.

Ignoring for now the fact that Presidential memos do not carry the weight of laws or regulations, it does seem that the direction is being given from the White House for the federal government to step into the next century, and a paperless one at that.

I give significant credit to the fact that the memo specifically points out under Section 2(a)(iii), the need for “coordination with the agency’s Records Officer, Chief Information Officer, and General Counsel.” Raising the visibility, importance, and attention of this issue to these specific stakeholders, both technical and business related, has been one of the critical elements for success in the deployments that we have seen to date. Without appropriate buy-in from these groups, most records projects fail.

And while we shouldn’t dismiss the current efforts by NARA and other institutions that are already being explored and implemented, records management is not easily instituted. Like many other worthwhile endeavors, it can be likened to pushing on a string. The more support given by the President and any other thought leading agencies the greater our chances of seeing the benefits of an updated infrastructure in our lifetime.

See the original memo here: http://www.whitehouse.gov/the-press-office/2011/11/28/presidential-memorandum-managing-government-records

1) Keeping data that has no legitimate business purpose (“Honey pick up the milk” emails).
2) Keeping data that has passed its useful business lifecycle.
Replicating data again and again for multiple matters, which includes collections, processing, review, and hosting.

In the paper days, one file on any given transaction constituted the “corporate record”. What happened? Why can’t we do that in the electronic world? As new technologies developed, it became easier and easier to replicate information. Consider those emails, with the attachments, that are sent to the entire department or members of the team. Not to mention the number of replies to all compound the problem. How do we get control of this problem?

Imagine if there was only one instance of any given document. For litigation matters, you could place a hold on the data without going through the traditional process of collecting, processing and hosting it for review. What if you could put a legal hold on the data in your environment so that it isn’t deleted? What if you no longer had to export your data for review but could have counsel link into your environment and review the documents, in place, that satisfy the request? What if you could eliminate collection, processing and hosting charges while at the same time reduce review costs? What if, once you learned that the data no longer has a legal or business purpose, you could click a button and it would just go away?

There is technology today that can solve this, but companies have to make the move. Many companies have built enormous IT infrastructures as well as implemented eDiscovery processes and workflow that compound the problem. We have to stop looking at the way we do business just because “this is the way we have always done it.” But who is driving the bus when it comes to looking at corporate data from a holistic approach? Legal is focusing on legal, records on records, and compliance on compliance. And IT? They wait for their “internal customer” to tell them what they need and then find a targeted solution to fix that specific problem.