This month's featured expert:
Wondie Russell, Esq.
Shareholder | Heller Ehrman, LLP
Wondie Russell joined the firm in 1978 and has a litigation practice emphasizing insurance coverage, commercial tort litigation and product liability (including toxic tort). She has represented a diverse range of clients in counseling, negotiations, arbitrations and jury and non-jury litigation. Russell has been active in the coordination of multiple plaintiff toxic tort litigation on behalf of manufacturers. Over the years, she has been involved in a wide variety of products liability, workplace safety, toxic tort and "right to know" matters. Her experience includes issues arising in the processing, manufacture and distribution of minerals, steel and other metals, asbestos and other building products, industrial equipment and products, sports and recreational products, foods, paints, dyes, chemicals, restaurant and office equipment.
Russell has unique experience in the design, development, implementation and supervision of projects and litigation requiring the management of mega-document collections and the use of a wide variety of computerized litigation support systems. She graduated from University of Florida with a B.A. in English & Political Science in 1966 and earned her J.D. at Santa Clara University in 1977.
What type of cases or investigations are most prone to court sanctions when e-discovery is involved?
This is not a simple question, and it would be misleading to suggest that only certain kinds of cases may result in sanctions. The history of e-discovery and thus the decisional law to date has been effected by the evolution in sophistication of lawyers. While electronic databases have been the subject of discovery for decades, the potential importance of other electronic records was recognized initially in the context of divorce and family law (where financial assets and illicit relationships were the focus), and next in employment disputes (where discriminatory or otherwise inappropriate e-mail was targeted by the claimants). So, if you had asked me a few years ago, those would be the kinds of cases most likely to result in sanctions. (In large commercial disputes, where both sides typically have vast amounts of e-data, there has been an "I won't demand yours if you won't demand mine" strategy. Thus, neither side requested or provided comprehensive e-discovery nor did they complain to the court.)
But the context changed dramatically through e-discovery battles arising principally in three contexts. The first involves securities broker/dealers; the second involves companies suspected of financial mismanagement and reporting, including fraud cases; and the third involves disputes over rights to intellectual property. Equity traders are required by the SEC to maintain records of virtually all trade-related communications, expressly including email, voicemail, and instant messages. The SEC and other government agencies charged with regulation of competition have recognized that successful enforcement is dependent on their developing expertise in e-discovery and they have accomplished this goal. In addition, shareholder derivative and other suits by private parties also require mining this same trove of electronic records and the major plaintiff side securities firms have either developed sufficient expertise in-house or, more frequently, rely on an expert vendor. Major patent litigation and suits alleging the theft or misuse of IP trade secrets have required sifting through gigabytes of data and when that data has not been produced or has been destroyed the courts have been asked to sanction the responding party.
What are the leading causes of an award of sanctions?
Certainly, the situation in which sanctions are most probable is where the court has ordered the retention or production of e-data that was subsequently destroyed. This makes complete sense since if the courts allowed their Orders to be ignored without penalty, compliance would be the exception. Short of a Court Order, the more egregious the facts surrounding destruction of data or late production after earlier representations and/or certification that all requested discoverable material were produced, the more likely that sanctions will be awarded and the more severe the sanctions are likely to be. The Morgan Stanley case in Florida turned on the court's finding what it characterized as numerous flagrant failures to prevent destruction.
As a general practice, one cause of destruction that has been the basis of sanctions in several cases is the failure to put a stop to the practice of automatic deletion of email once a dispute is reasonably foreseeable and a hold required. It was essentially this failure by Philip Morris that resulted in a $3 million sanction along with a ruling precluding a dozen company witnesses whose email was destroyed from testifying. Similarly, the failure to stop overwriting backup tapes has gotten a number of companies into spoliation difficulties.
How can advance planning reduce the risk of sanctions?
Every company needs to evaluate and address records risk and the sooner the better. Ideally, a company should take a hard look at the law firms it currently uses for specific types of work and determine which of them is also sophisticated in e-discovery. If none is, then the company needs to find a firm that is and work with it to plan ahead for e-discovery. The starting point is to examine the company's retention policies and practices and its various IT platforms, and to identify the key personnel involved. Then the company should be guided through a fire drill of trying to impose a litigation hold by pretending that a hypothetical suit has been filed and that the destruction of potentially relevant electronic and paper records must be put on hold immediately.
This exercise quickly educates a company in the complexities of this process and the pitfalls. Using the lessons derived, the company and the law firm can develop a list of steps to improve systems and procedures before a genuine crisis comes along--as it will. For the lucky company that addresses these needs in advance much can be done to organize records, bring practices into conformance with policies, revise policies in light of current retention requirements, educate employees and create a team and communications plan that can be used when the time comes that it must impose a real hold to prevent spoliation and the risk of sanctions. If a company waits until litigation, it is very difficult to plug all the holes quickly enough and its fate then largely becomes a function of how sophisticated the opposing party and counsel are in ferreting out electronic evidence issues.
Are there specific practices that companies must consider altering, changing or implementing to reduce their exposure and ensure defensibility of actions in court?
For many years conventional wisdom has taught that companies need a reasonable document retention and destruction policy. Most companies adopted policies and made some effort at compliance chiefly through Records Managers who were charged with overseeing storage facilities. They kept track of boxes and perhaps retention periods. When shelf space was filled some companies acquired more space and others routed materials past their retention periods for disposal. Eventually, however, with almost no notice, the vast preponderance of records became electronic and might or might not ever be printed. In the past, important records might be microfilmed and these files sent off site. Few companies' retention policies adequately address electronic records other than to say something along the lines of "this policy also applies to electronic records." The burden shifted to the "user" to take steps to select appropriate materials and place them into records systems, most often by opting to print and route to a paper file. Ultimately, neither the Records Managers nor secretaries nor file clerks have control over records, and the users either do not recognize a responsibility or do a poor job of compliance.
As computer memory has grown ever cheaper the only impetus for records reduction in many companies is the IT group which must contend with pressures on application speed and an ever lengthening system backup time. If companies were to change only one practice in the hope of reducing e-discovery burdens it should be to stop saving unnecessary backup tapes. These tapes are intended for one purpose: disaster recovery. The way that data is recorded on backup tapes makes them unsatisfactory and expensive as a long term archive. When a company loses some or all of its active data and can only restore it from the backup tapes, the cost and commitment of IT time is acceptable. But when a company saves these tapes "just in case" it makes no sense and exposes it to potential expense in e-discovery if coupled with the deletion or destruction of records post dispute from its active system. In the Zubulake case, email was deleted from the active system after a litigation hold was or should have been in place. For this reason, the court ordered a sampling of backup tapes to see whether they contained relevant email. They did, and defendant U.B.S. Warburg and its key witnesses were seriously impeached and ultimately sanctioned by this proven deletion.
Because convenient technology to allow companies to automatically, or at least efficiently flag e-documents and emails for long term retention in a non-editable, non-erasable format has been slow in coming, backup tapes have been overused. But this era is coming to an end and fortunately, newer and far better tools have become available. This is particularly timely in the light of recent developments in e-discovery and also with the compliance standards set by more recent legislation and regulations mandating retention. Before long e-discovery software will sit on top of sophisticated content management and retention applications. This goal should be adopted by companies.
What's your number one advice to General Counsels to help them better take control of the e-discovery process?
Do not assume that because a law firm has an excellent litigation reputation that it also has expertise in e-discovery. Particularly in litigation between large corporations there has been an implied gentleperson's agreement whereby neither side has exploited e-discovery fully since it was viewed as a two edged sword. Many law firms are still low on the learning curve; and within firms individuals' experience varies. You cannot afford to overlook e-discovery as a factor when assigning your cases. And the key is not whether the firm has a special department or group called e-discovery, but whether it can field a team with the right experience and skills and give these issues the prominence they deserve. Choose a discovery maven just as you would a lead trial counsel. They are two different species but they are of equal importance to the company's success in litigation and to the management of its costs in that litigation. Keep a direct dialogue going with the attorney in charge of your e-discovery and keep asking questions. Never allow games playing in the e-discovery process or you will be flirting with sanctions and a public perception problem that could dwarf your immediate litigation exposure.
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