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Dave Walton
Over the past several years, courts have issued numerous decisions on sanctions for spoliation exclusively involving electronically stored information (ESI) issues. According to a Duke Law Journal article from spring 2011, 188 different federal district court judges have issued written decisions on e-discovery sanctions, and another 111 federal magistrate judges have written opinions. These numbers do not include 2010, which all commentators agree was a banner year for e-discovery spoliation sanctions.
It seems like every day we read about a new decision on this issue. As a result, there is a growing sentiment among clients and lawyers alike for preservation and over-collection. "Better to be careful than sorry" is the mantra. As a result, data management costs consume litigation budgets in the blink of an eye. Clients are being forced to settle cases because the ESI costs alone make it too expensive to fight. And, all the while, everyone lives in fear of the next big "spoliation" case.
Is this the end of litigation as we know it? No. Like it always does, the pendulum is swinging back. The future is targeted collections. Preservation is cheap; collection and review is incredibly expensive. Smart clients and lawyers will learn how to use targeted collections as the key to bringing sanity back to their litigation practices.
Normally, the typical ESI production works as follows: Clients receive notice of potential litigation. At this point clients must retain all potentially relevant data. However, they are faced with determining the difficult question of what is potentially relevant in many cases where there isn't even a lawsuit yet. So, they do what any other logical person would do; they cast a wide net to preserve as much as possible.
The next step is to figure out what you need to collect from this broad, massive data set. Once the material is collected, it needs to be processed so it can be further filtered and then ultimately gathered into a review set. This data is then reviewed by counsel for privilege and responsiveness. This step is extremely expensive. Search terms are used to pull documents from the collection set into the review set. The problem is that search terms typically return more than 80 percent false positives.
Moreover, the average gigabyte of data contains about 75,000 pages. Assuming the average review time for an attorney is 200 pages per hour, the review of one GB (i.e., 75,000 pages) can take over 300 hours. Assuming an associate bills at $250 per hour, this means it costs over $78,000 to review one GB of information. This is virtually untenable for clients.
Vendors have tried to address this problem by developing new products. One new line of products is based on the concept of predictive coding. This is based on a complicated array of mathematical algorisms that literally predict how documents should be coded as responsive, privileged, etc. But not every case justifies the use for predictive coding. The tools are expensive, and they work best on very large document cases where you have a large data set from which you can hone the predictive capabilities of the tool. Theoretically, the bigger the sample, the better the tool can accurately predict.
While predictive coding has a ton of potential, it is not for every case. The vast majority of cases involve data amounts that make ESI a challenge but are not enough to justify the expense of using predictive coding or other tools. The best way to control ESI costs is to preserve broad but collect small.
Think of the ESI process as a funnel. Collection is at the top. If you put less information into the funnel before you filter and cull it, the smaller review set will ultimately be. It's simple math, less in/less out.
But what is "targeted collection" and how do you do it? The basis for targeted collections is already at the front of rules. Rule 26(b)(2)(C) is the rule of proportionality. It has been in the federal rules since the early 80s. A very small amount of lawyers, however, use this rule when trying to control the discovery costs.
This rule specifically provides that the court "must" limit the frequency or extent of discovery if it determines one of three things:
• The discovery source is unreasonably cumulative or duplicative, or can be obtained from some more convenient, less burdensome or less expensive source.
• The party seeking discovery has already had ample opportunity to obtain the information by conducting other types of discovery.
• The expense of the proposed discovery outweighs its likely benefit.
The factors that the court uses to evaluate burden or expense include: the needs of the case; the amount in controversy; the parties' resources; the importance of the issues at stake and the actions; and the importance of discovery in resolving these issues.
So what's the best way to use this rule? The three factors themselves are pretty self-explanatory and don't take a lot of illustration. Thus, the key for using this rule is to employ the right process.
This process starts with the same thing we are all doing right now: Broad preservation at the beginning. This is a necessary evil because right now the court standard as a party must preserve all potentially relevant evidence once it has reasonably anticipated litigation. Because this standard is so broad and full of gray, broad preservation is necessary until the rules are amended, if ever.
But that's where the similarities stop. Preservation is cheaper than collection and review periods, so it's OK to preserve broad. But just because you preserve it doesn't mean you have to collect it. And anyone who tells you that you must preserve and collect everything is trying to ratchet up expenses, so they can meet their own revenue goals and budgets.
The next step is custodian interviews. Meet personally with the key custodians of potential evidence to find out where that information is stored. This not only ensures that preservation is proper, but also identifies where this specific information is located. Using this information, you need to make a decision up front as to what information that you believe is the most relevant. That is the set of material that you are going to voluntarily collect.
The next step is contrary to the instincts of many trial attorneys and litigators. Be transparent with the other side. Tell them exactly what you are doing and why you are doing it. Explain to them, in writing, exactly what information you have preserved and which sources you have identified for targeted collection. If the other side complains or objects, go to the judge. Be proactive. Both federal and state court judges are getting tired of dealing with e-discovery. They are looking for litigants to help them actively manage their dockets and to put measures in place to make sure that ESI doesn't interfere with the efficient operation of the judicial system. Thus, don't be afraid to be proactive and raise these issues with the judge early on in the case through motions for protective orders under Rule 16(b) Conference (if you are in federal court).
In this sense, transparency shows strength. Judges are much more amenable to limiting discovery at the beginning of the case if you are willing to be proactive. This is especially true in cases where the e-discovery burdens are asymmetrical. The federal rules on ESI expect attorneys to "collaborate" when dealing with ESI issues. This works best when the parties have close to equal ESI burdens. It's the same concept as "Mutually Assured Destruction" from the Cold War era. You make life difficult for me, I can make life just as hard for you.
Because of this principle, it's usually easier to resolve ESI issues when two big companies are involved in a case. But that's not true when e-discovery burdens are asymmetrical. That's when one side has a much greater responsibility and burden to preserve ESI than the other. In many of those cases, ESI can be used as a sword to try to increase the "blackmail" value of the case to push it towards an early, perhaps unjustified resolution.
When you are faced with an opponent who is trying to use ESI in this manner, then you must be willing to use proportionality concepts as your own sword. Besides, it is better to know early in the case if the court disagrees with your approach. If that happens, the fix is simple. Go back to what you have already preserved and re-collect as per the court's instructions. And, if you tell the other side what you are doing up front and they don't object, then it will be much more difficult for them to complain about it later when their case is going downhill and they are trying to use ESI as leverage.
Indeed, most sanction cases occur when the discovery problem is found in the middle or end of discovery. Again, the best way to avoid this is to be proactive.
It's important to remember that when dealing with ESI, the courts expect parties and their counsel to be reasonable but not perfect. After identifying the key sources of information, you must figure out the most efficient way to collect them. Sometimes it makes sense to conduct stage discovery, where all of the key information is preserved but only the information for the most important individuals and sources is collected first. This means that the most important information gets reviewed and produced first. This helps the argument that the other, less relevant sources of ESI are cumulative of what's already been turned over to the other side.
Targeted collections have another advantage. Trials are becoming increasingly rare in this legal environment. But, if you have ever tried a case, you quickly realize that you need to be able to keep your key documents to a maximum of 10 to 20. No more than that. If you use more than that, the jury's eyes will become glazed over. Targeted collections help you maintain your focus on finding those key documents that are going to help your case. It is easy to become so buried in an avalanche of ESI that the key documents that help you win your case are missed and fall quietly through the cracks.
E-discovery is not going to end the world as we know it. The key is going to be the ability to get those cases to trial without going bankrupt due to ESI costs. Lawyers need to think outside of the box and avoid the "preserve, collect and review everything" mantra that benefits only the e-discovery vendors. Counsel must realize that ESI is a strategic element of every case and one of the key strategic tools you have for resolving ESI issues is targeted collections. Learn the process and love it. Your defense team and judges will be happy that you did.
Dave Walton is a member of Cozen O'Connor and co-chair of the firm's E-Discovery Task Force.
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