Welcome to Module 2-B.

e-Discovery Teams Can Meet the Challenges of the “Zubulake Duty” and Control Excessive Costs.

United States District Court Judge Shira A. Scheindlin, now retired, is a leading figure in the field of electronic discovery. She is credited with first establishing what has become known as the Zubulake duty. Judge Scheindlin (shown right) held that all attorneys who litigate have an affirmative duty to understand their clients’ computer systems sufficiently to know where all of the potential electronic evidence is stored. Judge Scheindlin even specified how she expects outside counsel to fulfill that duty. She required them to speak directly with the key players in a lawsuit about their computer files and other electronic documents. She also required them to speak directly with their clients’ IT personnel about their data retention architecture, policies, and practices. This duty presents a challenge of epic proportions to most attorneys litigating cases today.

Judge Scheindlin stated this principle in the most famous e-discovery case of all, Zubulake v. UBS, 229 F.R.D. 422 (S.D.N.Y. 2004) (Zubulake V). Here are Judge Scheindlin’s actual words on the subject in Zubulake V:

Counsel must become fully familiar with her client’s document retention policies, as well as the client’s data retention architecture. This will invariably involve speaking with information technology personnel, who can explain system-wide backup procedures in the actual (as opposed to theoretical) implementation of the firm’s recycling policy. It will also involve communicating with the “key players” in the litigation, in order to understand how they stored information.

Zubulake Duty Started in New Jersey

We refer to this obligation as the “Zubulake duty” because it first became widely known in this decision. See: E-Discovery: Current Trends and Cases (ABA 2008) at pgs. 55-65. But the truth is, it could probably also be called the “New Jersey duty” because it was required by local rule in New Jersey district courts even before Judge Scheindlin’s Zubulake opinions. L.Civ.R. 26.1(d) of the Local Rules of the U.S. District Court, District of New Jersey. The New Jersey local rules states:

Prior to a Fed.R.Civ.P. 26(f) conference, counsel shall review with the client the client’s information management systems including computer-based and other digital systems, in order to understand how information is stored and how it can be retrieved … including currently maintained computer files as well as historical, archival, backup and legacy computer files.

The New Jersey rule also requires counsel to locate an “IT witness”:

Counsel shall also identify a person or persons with knowledge about the client’s information management systems, including computer-based and other digital systems, with the ability to facilitate, through counsel, reasonably anticipated discovery.

Locating a good IT witness can be more difficult than you might think.

The federal courts in the rest of the country have uniformly followed the lead of New Jersey and Judge Scheindlin on these requirements. In most district courts today, and a growing number of state courts, attorneys are not permitted to just rely on the assurances of senior management and in-house counsel concerning e-discovery compliance. They are supposed to personally verify that all discoverable electronic information has been identified, preserved, gathered, and produced. This requirement is a natural outgrowth of Rule 26(g), Fed. R. Civ. P., which requires outside counsel to make a reasonable inquiry of the facts before signing a discovery pleading.

The district court judges and magistrates today demand that the attorneys who appear before them have enough technical competence, somewhere on their litigation team, to know where the electronic evidence is located and how to preserve, collect, and present it in court in a forensically sound manner. Attorneys, especially outside counsel of record, are required to understand their client’s computer architecture, policies, and actual practices, both company-wide and user-by-user. That is part of their duties of reasonable inquiry under Rule 26(g). Ignorance of the technology is no defense. Martin v. Northwestern Mutual Life Insurance Company, 2006 WL 148991 (M.D Fla. Jan. 19, 2006). (Magistrate rejected the attorney’s excuse of “computer illiteracy” as “frankly ludicrous”). This is a huge challenge for most attorneys; but especially for experienced litigation attorneys who have been trained in the “paper chase,” and typically have little, if any, specialized computer skills.

Trial Lawyers Unprepared to Fulfill the Zubulake Duty

Most trial lawyers lack the necessary skills and knowledge to fulfill the Zubulake duty. They do not have a clue what data retention architecture even means, much less how to speak the “heavy geek” needed to talk to their client’s IT. As a result, in today’s world one of three things generally happens:

1. Trial lawyers ignore the Zubulake duty, putting themselves or their clients at risk when e-discovery problems develop, and it is revealed that they have not done their job. See Eg.: Phoenix Four, Inc. v. Strategic Resources Corp., No. 05-CIV-4837, 2006 WL 1409413; 2006 U.S. Dist. LEXIS 32211 (S.D.N.Y. May 22, 2006) (Defendant and its lawyers each sanctioned and ordered to pay $22,581 a piece for breaching the Zubulake duty and failing to find “hidden server partitions” containing crucial evidence, a failure which the judge described as “gross negligence,” but which I contend, most trial lawyers do not even begin to understand); Louis Vuitton Malletier v. Dooney & Bourke, Inc., 2006 U.S. Dist. LEXIS 87096 (S.D.N.Y. Nov. 30, 2006) (Attorneys depend on the client’s IT personnel to collect evidence from a database, and they do not supervise nor understand; the corporate IT staff is untrained in e-discovery and they mess it up, fail to produce relevant email, and the result is sanctions).

2. They go through the motions of trying to fulfill that duty, and do a poor job, usually by assigning the tasks to the youngest associates in the blind hope that kids who grew up with computers might innately know how to do this (they don’t). When e-discovery problems develop, and they often do, the results are only slightly better than when the duty is ignored altogether. Diabetes Centers of America, Inc. v. Healthpia America, Inc., 2008 U.S. Dist. LEXIS 8362, 2008 WL 336382 (S.D. Tex. Feb. 5, 2008) (“Plaintiff’s counsel conceded at the hearing that the task of searching Plaintiff’s records for relevant emails in response to Defendants’ discovery request was entrusted to a junior associate. It is apparent that the associate worked with little or no direction or supervision. The search terms used by the associate were inadequate — they did not even include the term “phone” — and, as a result, she failed to locate or perceive the significance of the emails about which Defendants now complain.”); Danis v. USN Communications, Inc., 2000 WL 1694325 (N.D. Ill. 2000) ($10,000 fine imposed against CEO personally when the young general counsel he hired to supervise ESI preservation was grossly negligent).

3. They delegate the duty to others who claim expertise in this area and hope for the best. Typically this means they either bring in specialized co-counsel to handle the e-discovery aspects of a case (although very few such attorneys exist today, and so this “gold-standard” option is now limited), or they hire consultants or e-discovery vendors to help them with the technical facts, and sometimes also the strategies, and try to handle the legal issues themselves (since by law consultants and vendors are not permitted to provide legal advice).

Recipe for Crushing e-Discovery Expenses

Today, the situation of marginal competence and over-delegation leads to two things. First, an unnecessarily adversarial approach to e-discovery; and second, excessive vendor input and control over the amount of Electronically Stored Information (“ESI”) that needs to be reviewed in any one case. These two factors, in turn, significantly increase the costs of e-discovery to the point that the costs are turning parties away from the courts. Defendants are forced into extortion type settlements and plaintiffs are forced into ADR (alternate dispute resolution) systems, such as arbitration, where all discovery is prohibited or severely limited.

Marginal Competence Works Against New Cooperation Paradigm

When a trial lawyer does not fulfill the duty, or just delegates it without real understanding of the processes involved in the overall e-discovery work, he or she will not understand that the “business as usual” adversarial model is counter-productive in e-discovery. They will focus only on ABA Model Rule of Professional Conduct 1.3 on diligence, and ignore Rules 3.2, 3.3, and 3.4 on expediting litigation, candor, and fairness. They will not appreciate or understand how cooperation and transparency can significantly reduce e-discovery costs and are thus in their clients’ best interest. This is something that the Sedona Conference is now focusing on.

Over-delegation to Vendors Drives Up the Costs

Another factor impacting e-discovery costs is the natural tendency of e-discovery vendors to increase the amount of ESI collected and processed for review in a case. When inexperienced trial attorneys hire vendors to help them, they typically buy these services as uninformed, or at least under-informed consumers. They do not know the right questions to ask, much less strategies, to minimize data review. They are easy to doubletalk and dazzle with technical lingo. Often, they fall for hype and over-promises. Typically this leads to dissatisfaction at the end of a project and so the trial lawyers chooses a different vendor for the next project. Also, they tend to blame the vendor for any mistakes that happen in the e-discovery process. This explains why law firms usually do not work together with the same vendor on multiple projects as part of a team.

Most trial lawyers today do not understand the technical processes involved in e-discovery, nor even the specialized law of e-discovery. As a result, they are easily convinced to err on the side of over-collection and review of too many computer files. This poor strategy is also profitable for law firms, so you do not see much push-back. After all, this over-review generates very profitable work for teams of law firm associates or contract lawyers. No one complains, except for the clients who pay the bills. The trial lawyers then blame the judges and the new rules, saying they, not them, are to blame for the excessive costs. This is a common practice that is totally inappropriate. The truth is, the bills are too high because the lawyers are untrained and working without the proper support of IT.

This uninformed-consumer, over-collection, excessive review model prevalent today suits the typical vendor’s pricing model. They typically charge on a per gigabyte basis. For that reason, some vendors encourage this kind of overuse of their services, or at least, they do not direct uninformed consumers to a more reasonable model. After all, they sometimes convincingly argue, it is safer to review too much than to risk sanctions for missing key evidence. Also, the vendors would have to stray too far into the area of legal advice and legal strategies to forcibly redirect the trial lawyers. They are not permitted to do that. This provides them with a perfect cover to stand back and get paid for the over-conservative, over-collection of ESI.

Some vendors even exploit the fears, inexperience, and lack of knowledge of their customers to fulfill their duties to their shareholders to maximize profits.

Call For a Change to Avoid Crushing Expenses

The situation described has to change. We can no longer afford to continue with the same paradigm. We must begin to envision and implement a different model.

Analysis of the problem suggests the answer. The only viable solution is the team approach where technology savvy lawyers, e-discovery technicians, trial lawyers, clients, records managers, and vendors all work together to fulfill the Zubulake duty. This is an interdisciplinary model where the technical fields of law, information technology, and information management each contribute. At a minimum, a person from each of these three fields must be included on a good e-discovery team. Then, they must all be taught a base level of competence in the other two fields. Finally, all three have to be taught the specific issues of law and technology that are unique to e-discovery.

The Duty Will Not Just Go Away
and Should Not Be Shifted to the Parties

The first avoidance type solution to this fundamental problem is to simply get rid of the duty altogether. Under this argument, New Jersey, Judge Scheindlin and the dozens, if not hundreds, of judges who have adopted this doctrine are simply wrong and appeals courts should reject the tenet. They argue that it is unfair to impose such duties on attorneys. The parties who own the data should be solely responsible.

That argument is not likely to be accepted by the courts because discovery has traditionally been the joint responsibility of the parties and their lawyers. In fact, some e-discovery issues have always been the sole responsibility of attorneys as officers of the court, for example legal objections to discovery. Further, as mentioned, Rule 26(g)requires every discovery disclosure, request, response or objection to be signed by an attorney of record. The signature “certifies that to the best of the person’s knowledge, information, and belief formed after a reasonable inquiry,” the disclosure is complete and correct. See: Mancia v. Mayflower Textile Services Co., Civ. No. 1:08-CV-00273-CCB (D. Md. October 15, 2008). That is also why it is well established that both litigants and their attorneys can be sanctioned for the failure to supervise discovery. Metro. Opera Ass’n Inc. v. Local 100, Hotel Employees and Restaurant Employees Int’l Union, 212 F.R.D. 178, 218-219 (S.D.N.Y. 2003). This is based upon the practical reality that “discovery is run largely by attorneys, and the court and the judicial process depend upon honesty and fair dealing among attorneys.” In re September 11th Liability Insurance Coverage Cases, 2007 WL 1739666 (S.D.N.Y. June 18, 2007).

To date, no judge (to my knowledge) has rejected the imposition of the Zubulake duty upon the counsel of record, nor listened favorably to an argument by an attorney that he or she just assumed that their client did the right thing without asking, much less counseling them about it. The logic behind the duty is too compelling. It makes sense for lawyers to be responsible to search out and find the evidence. That is, after all, the job of trial lawyers, not the parties, unless they are unrepresented. It makes sense to have a party’s lawyer take reasonable steps to try and prevent their client’s destruction of evidence.

On the other hand, I will concede that there are situations where a lawyer has made reasonable efforts, and has thereby fulfilled the Zubulake duty, but the client was untruthful or grossly negligent. In these circumstances, when ESI is lost or withheld, the client alone should be sanctioned. Lawyers are not insurers of their clients’ actions, nor should they be. Parties to litigation must be responsible to meet the Zubulake duties too. It is their data and their lawsuit.

Another slightly different argument is to accept the duty of lawyers to make reasonable efforts to satisfy Zubulake duties, but try to handoff the duties from outside counsel to in-house counsel. This is an attempt to shift the duty from the officers of the court, the trial lawyers who appear of record to represent parties in litigation, to in-house lawyers. Of course, this argument only applies when the parties are big enough to have their own law departments. But when they do, some argue that the duty should not still be imposed on outside counsel.

One such commentator is Thomas Y. Allman, who was himself an in-house attorney for many years. He thinks that outside counsel should be able to rely upon the representations of their clients that e-discovery has been handled properly. He contends it should be sufficient for in-house counsel to speak to the IT personnel, and relay pertinent points to outside counsel. Many in-house counsel agree with Tom on this point, and certainly it has merit and can reduce costs. But in my view, this proposed modification to the Zubulake duty is unlikely to be accepted by the courts.

Judges want the attorney with these important evidence preservation and collection responsibilities to appear before them; in other words, to be a counsel of record in a case. By doing so, they subject themselves to the ethical obligations and duties of an officer of the court, not to mention personal jurisdiction of the court to sanction them for misconduct, including violation of the Zubulake duty. In-house counsel do not appear of record in cases and so they do not assume the same ethical duties and responsibilities. Also, the court lacks personal jurisdiction over in-house counsel. They only have jurisdiction over the company. This means the judge can only sanction the corporation, not the in-house counsel personally. Finally, in-house counsel do not sign discovery pleadings, only counsel of record do that. For that reason, the duty of reasonable inquiry under Rule 26(g) applies solely to outside counsel, and cannot be delegated to the party or the parties in-house attorneys.

Tom has written a short article on this subject, arguing that outside counsel should be excused of these duties and instead be allowed to rely on their clients’ in-house counsel do it for them. The article was published in Law Technology News. Pandora’s Box: Compliance Quagmires Can Alienate Legal Teams, 15 Law Technology News No. 8 at pg. 26 (August 8, 2008). Here is an excerpt from Tom’s interesting article:

The implication — when applied literally to clients with significant in-house e-discovery capability — is that retained counsel may not rely upon the reasonable assurances by a client about discovery compliance. However, entities that can afford to do so are increasingly responding to electronic data discovery demands by designating in-house teams to be responsible for accomplishing the task of EDD management in a cost-effective and compliant manner. …

The quest for a single best practices rule, focusing on a duty to supervise by retained counsel, is understandable, but misplaced.

Aside from the anticipated opposition to this proposal from the judiciary, I think the timing of this proposed shift is all-wrong. It goes against the grain of experience in e-discovery where parties to litigation have often shown a need for independent outside counsel to act as a guardian of proper conduct. Many people, even large corporations, can get caught up in the turbulence of litigation. One of the important roles of outside counsel is to serve as a kind of ethical gatekeeper and restrain the impulses of some clients to win a case at all costs, even if it means bending the law, or even lying to opposing counsel or the court. That is one of the reasons that Rule 26(g) requires counsel of record to personally sign every discovery pleadings to certify that a reasonable inquiry has been made and the disclosure is complete and correct.

The Qualcomm v. Broadcom case shows the importance of ethical outside counsel and the wisdom behind Rule 26(g). It shows how bad it can get when outside counsel do not fulfill the Zubulake duties and instead rely on in-house counsel to do it. Qualcomm, Inc. v. Broadcom Corp., 2008 WL 66932 (S.D. Cal. Jan. 7, 2008); Qualcomm Inc. v. Broadcom Corp, No. 05-CV-1958-B(BLM) Doc. 593 (S.D. Cal. Aug. 6, 2007) (two of several relevant orders entered in this case). Qualcomm is an unfortunate situation where outside counsel’s over-reliance on in-house counsel led to apparent unethical behavior. They signed numerous discovery pleadings certifying the absence of key email, when in fact thousands of such emails existed, and, according to the court, any reasonable inquiry would have discovered that.

Although Tom Allman’s position may someday prevail, to date there is no court decision criticizing Judge Scheindlin’s ruling, nor even an order allowing the handoff of the duty to in-house counsel. In view of the chilling lessons of Qualcomm, none are likely soon – no handoffs, no passes, no punts. For the time being, the placement of the Zubulake duty remains squarely on the shoulders of outside counsel, and then secondarily upon the litigants themselves.

The Team Solution to the Zubulake Duty

perry.mason.paul.drakeThe days of a lone trial lawyer preparing for trial by himself, with perhaps a few trusty associates to assist, are over for all but small cases. That was the Nineteenth Century model followed by Abraham Lincoln and his associate, William Herndon. It worked well enough through most of the Twentieth Century too, although the numbers of lawyers involved in bigger cases began to increase steadily in the second half of the last century, as did the addition of private investigators to the lawyer team a la the Perry Mason model. But this limited team started to become inadequate in the 1990s when clients started to switch to computers for creating and storing documents and other evidence.

By now the old solo trial lawyer or one-dimensional small team model is obsolete in most cases of any significant size. The only viable model to meet the Zubulake duty is through larger scale teams that incorporate computer and other technical specialists as key members of the team. I call this new paradigm the “CSI” type team, after the popular television program, where technical specialists encompassing a wide variety of disciplines are used for forensic investigation to solve crimes.

The trial lawyer today needs to be a part of a larger team, a key part to be sure, but not a one-man team as in Lincoln’s day. Trial lawyers need to retain and rely upon lawyers specializing in e-discovery, their own computer science specialists (i.e. – law firm techs), their own favored e-discovery vendors and consultants, and ideally their client’s own multidisciplinary litigation readiness team. This CSI/ESI-type team model frees trial counsel to do what they do best — try cases, and not mess around with computers.

Also, and somewhat unexpectedly, the larger multidimensional team reduces the total cost of litigation by maximizing efficiencies and driving down e-discovery expenses. Although there are more individual professionals billing time on a case, they require less time overall to do the work. They are specialists in niche areas and can do the work much more quickly and effectively. Most importantly, the team is an informed consumer of e-discovery services and as such is well positioned to control costs.

Although there is some territorial type of resistance by the trial bar to this proposal, once they try it (or it is forced upon them by the client), they see how well it can work and are pleased. It alleviates them of the burden to try to learn IT systems, and pretend like they know what they are doing in this new area of the law. The truth is, the IT systems of most large companies are so complicated, that only an attorney who specializes in this area of law can do it properly, and even then he needs the support and contributions of other non-lawyer team members who are specialists in various technologies. This is a highly arcane area, and lawyer dabblers, as well as IT dabblers, often get themselves (and their clients) into deep trouble before they even realize what happened. The curing of mistakes is a very expensive process, not to mention a way to lose an otherwise winning case.

The e-discovery teams in law firms, and in companies often subject to litigation, can act together to efficiently meet the Zubulake duties and thus significantly reduce the costs and risks of e-discovery. The efficiency is maximized for larger companies when they have their own internal e-discovery team that works with the team of their outside counsel. When there is an internal corporate team in place, outside counsel can then more efficiently discharge their duties, and focus on their specialty skills of supervision and communication to the court and opposing counsel.

The efficiencies are further maximized when corporate counsel uses national or regional discovery counsel to coordinate the activities of local counsel and appear where necessary to discharge the Zubulake duties. Specialty discovery counsel become familiar over multiple cases with their clients’ ESI storage architecture, employee practices, and the data itself. The learning curve for any one case becomes far less. The same holds true with the corporate utilization of national or regional e-discovery vendors. Just like specialty legal counsel, the vendors can act more efficiently in any particular case when they already know the client’s systems and practices from multiple past cases.

Where possible, the outside specialty legal counsel and select vendors can also serve directly on the corporate readiness and response teams. This dual role improves knowledge and communication, and thus maximizes cost reduction and risk management. Although this is ideal, in truth, very few vendors and even fewer attorneys are qualified to serve on both teams in an effective and impartial manner. That takes not only extensive knowledge and experience in both law and technology, but also maturity and leadership skills to operate effectively in the two types of teams, both law firm and corporate.

Long Term Impact of the Team Approach

The multi-specialty team approach to e-discovery, an approach which includes vendors and their products where needed, will, in time, overcome the situation prevalent today of marginal competence and over-delegation to vendors and consultants. As the law firm teams and corporate teams train and become skilled players, they will come to understand that the only way to win this game is through the Sedona approach of cooperative and transparent e-discovery. Experience shows that this move from an unnecessarily adversarial approach to e-discovery will, in itself, lead to significant cost reductions.

The second factor driving excessive e-discovery costs, which is seldom spoken about but well-known to industry insiders, is the unsophisticated e-discovery buyer. The naive lawyer or naive corporation purchaser of e-discovery vendor services often not only pays too much, but also usually over delegates to vendors. Without an expert team, it is typical for parties in litigation and their attorneys to rely too much on vendor input and control as to the amount of ESI that needs to be reviewed and produced. The new teams will not only know how to control that, but when vendors are a part of the team, and better assured of longer lasting relationships, they will be less likely to fall for this temptation.

Over time, different types of e-discovery vendors are likely to participate on e-discovery teams. At first, especially when larger projects and cases are involved, the full service type A-Z vendors will predominate. As the teams mature and begin to take more of the functions of e-discovery in-house, they will rely less and less on service vendors to do the work for them. They will not only handle the preparation and enforcement of litigation holds, which is the first and most basic function of any e-discovery team, but also move on to collection and processing the ESI themselves. Some internal corporate teams will mature to the point where they even conduct their own ESI review. This requires a lot of time, experience, and commitment. They will then transmit the culled data set to the outside counsel members of their team for final analysis and preparation of privilege logs and productions. Of course, since outside counsel is still responsible for supervision of discovery, including signing discovery responses, and the Zubulake duty, this must be done with their close supervision and fully integrated teams.

All educated teams know that the highest costs in e-discovery are from review. They also know that the best ways to control these costs are by: (1) reducing the amount of ESI to be reviewed, which is done by aggressive culling and advanced search techniques; and, (2) faster and better review tools. This means that products that search and process ESI so as to reduce volume, coupled with products that speed up the actual review process itself, will be in high demand by tomorrow’s review teams. We have the answers with software that includes predictive coding. See TAR Course (Losey’s other free, online training program).

It seems to me that the winners in the vendor circle of tomorrow will be the companies that provide software and other tools to empower e-discovery teams to play the game better. Aside from the processing and review types of software mentioned above, other types of software that will be in high demand for teams are litigation hold and collection type software. These are the tools that e-discovery teams need and want.

When and Why Should You Start an e-Discovery Team?

Should every organization have an e-discovery team? If a company has only a few computers, say less than 100, or rarely gets sued and has less than 3 lawsuits going at a time, then it does not need one. It is probably cheaper to just hire outside counsel and vendors to handle e-discovery cases when they occasionally arise. But for everyone else, especially in these times of cost-cutting budgets, it is a necessity. It saves on outside counsel fees and e-discovery vendor costs. It also saves on inflated settlements to avoid the expense, hassle and risks of e-discovery. Yes, a corporate e-discovery team does cost some money to setup, but as Benjamin Franklin said: “An ounce of prevention is worth a pound of cure.”

Today millions of British pounds and U.S. dollars are being spent on e-discovery cures. This expense is a harsh reality of litigation. So too are the risks, mistakes and sanctions that frequently occur when a company puts its fate in the hands of ill-prepared legal counsel or profit-motivated vendors. Even in the best of circumstances, it is all too easy for a medium or large size company to burn through a few million dollars in e-discovery expenses in just a couple of months. See Kentucky Speedway, LLC v. NASCAR, 2006 U.S. Dist. LEXIS 92028 (E. D. Ky. Dec. 18, 2006). The solution is for a company to take control of its information and its e-discovery activities, and not ignore the problem or over-delegate it to others. This means forming an internal e-discovery team.

But don’t just take Ed Foster’s word for it. Ask the people and companies who have already formed e-discovery teams. For instance, ask Jeff Ghielmetti of Cisco Systems, who has more experience at this than anybody. Jeff often tells the story of how Cisco established the first internal corporate e-discovery team after the stock market crash of 2000-2001. At that time, Cisco was hit with a flood of litigation, often involving millions of pages of electronic documents. One of the first cases came with a $23,500,000 bill for e-discovery! Cisco could not continue at that kind of burn rate, so out of necessity they decided to try something new, and go in-house. For help they turned to Jeff, a Cisco engineer, not a lawyer, but he had the full backing of Cisco’s forward-looking (a/k/a “desperate”) legal department.

Under Jeff Ghielmetti’s direction, Cisco turned away from the traditional model of hiring law firms and e-discovery vendors to manage their data preservation, collection and analysis, and they started to do it themselves. Cisco set up the first internal, multi-disciplinary corporate e-discovery team. It also developed its own proprietary software and computer systems to help the team perform its tasks. Jeff reports that Cisco’s program has been a huge success, not only in cutting costs, but also in better management of risks. According to Cisco’s case study, “Cisco has been able to reduce its discovery costs by approximately 97 percent-for an overall reduction in litigation expenses of 64 percent.” Those are pretty impressive numbers. For detailed information on the Cisco team and the centralized Storage Area Network (SAN) it developed for e-discovery, see How Cisco IT Uses SAN to Automate the Legal Discovery Process.

If you don’t want to take both Ed and Jeff’s word for it, then you could also ask Laura Kibbe. She is the young attorney who helped Pfizer form its first e-discovery team in 2005. As a result of her work, Laura was named one of four of Corporate Counsel Magazine’s trailblazers in 2006. The magazine article on Laura summed up the benefits of her work:

Why pay millions for an in-house e-discovery system when, as most companies do, you can outsource the work? Simple — farming it out to law firms and consultants, all of whom really want the job, can cost even more. Especially when you are an oft-sued drug company like Pfizer. In just one year, Kibbe says, the new system saved “multiple millions of dollars,” and served up several side benefits. She gave Pfizer a “repeatable process” that can find and extract information quickly.

Pfizer GC Allen Waxman is proud of what Kibbe has accomplished in just under two years. Her response team, Waxman says, has reaped “substantial efficiencies and added effectiveness.” . . .

Probably the best thing Kibbe brings to the tech table is the fact that she’s a lawyer who has to use the system. That means that she doesn’t need to rely on outside firms, who sometimes make promises to produce data that their client can’t keep. This way, Kibbe can make sure that what Pfizer tells one court it can or can’t do remains consistent in all courts.

You could also ask Kevin Esposito, the Pfizer attorney who was director of its e-discovery team. He is adamant that the key to significant costs savings in the long run is to spend the time and money up front to develop an effective e-discovery team. He states this requires careful mapping of all a company’s data, and establishment of sound processes and procedures for preservation, identification and collection.

You could also ask Jonathan Eisenberg of Merrill Lynch. He was co-heads of its Global Litigation department and supervised its e-discovery team. Jon realized that Merrill Lynch should begin to take e-discovery in-house when he saw how many of his experienced outside counsel were becoming ineffective in securities cases because of the complexities of e-discovery. The attorneys were experts in securities law and litigation, but not in e-discovery. Merrill Lynch responded and now has a well-developed team that performs most of the e-discovery work itself, instead of relying on its outside counsel or vendors.

Jonathan describes an eight-step process that Merrill Lynch developed to manage e-discovery:

1. Established a full-time in-house interdisciplinary team of legal and IT professionals dedicated to electronic discovery, i.e., formed and funded an e-discovery team.

2. Established detailed litigation hold procedures that were later refined and improved over hundreds of cases. Jonathan describes this key process as having seven steps: a) ID the custodians; b) inventory and map the data sources, which takes many months the first time through; c) send written notices and reminders to all impacted employees; d) monitor and enforce compliance with the lit-hold; e) interview the key players; f) collect the discoverable information; g) export data for production to outside counsel. To that list, I would add the imposition of automated software holds and suspension of usual document retention procedures.

3. Rewrote and implemented an aggressive document destruction policy. In my experience, this is a very challenging and time-consuming process, especially if a company does not already have an effective electronic document retention policy in place.

4. Purchased and refined custom search software to quickly locate electronically stored information across all of their systems that might be relevant to a particular case.

5. Developed a system and software tools to process all ESI and filter out all duplicates and other obviously non-responsive data before export to vendors for further processing and analysis.

6. Purchase and use what Jonathan calls Encase-type software tools to image and search for non-email ESI.

7. Located and trained a pool of reliable contract lawyers to review pre-productions.

8. Trained several of their IT technicians to be forensic experts.

If Ed, Jeff, Laura and Jonathan’s references were not enough, you could also ask James Wright. He was the project manager who leads Halliburton’s team. Jim used to use a power-point that began by summarizing some of the benefits of taking e-discovery in-house.

Why should Corporations participate in E-Discovery?
1. Corporations own all the risk of litigation and pay all the costs.
2. It’s just not a paper world anymore: data volumes changed everything.
3. Corporations know their E-data better.
4. E-Discovery management is inconsistent among law firms.
5. Law firms risks & incentives differ from corporations: law firms have a more conservative methodology towards discovery; a de-facto disincentive exists for data reduction.

The fifth point made by Halliburton’s team captain is two-fold. First, law firms are naturally more cautious is making decisions and will always err on the side of including more data in the preservation, collection and review set. Secondly, there is a “disincentive,” which Jim in person bluntly calls a conflict of interest, for law firms where attorneys are paid by the hour to review documents they decide may be responsive. He implies it’s like hiring the fox to guard the hen house. Vendors are of course in the same position, since most charge by the megabyte of processed data.

And if all that were not enough, you could also ask Patrick Oot, who was counsel at Verizon who led its e-discovery team. Patrick says that:

Managing electronic discovery is probably a number-one initiative at all legal departments. Depending on the volume of litigation an organization has, this can be one of largest line items in your [legal] budget.

Patrick reported that his team approach kept vendor prices very competitive and Verizon’s overall e-discovery costs were under control. Still, you need good vendors and outside counsel to represent you and handle much of the work. Patrick also complained about staffing and observed that it is difficult to find experienced senior e-discovery counsel at many law firms. He urges law firms to invest in their own e-discovery teams so that they can better assist their clients’ teams.

The culture at many law firms dictates electronic discovery counsel and director positions as nonpartner track positions. Although firm culture is shifting, many firms fail to place leadership emphasis with true decision-making power on this crucial position.

It takes months to find a solid project management candidate. Firms need to re-educate their teams.

As an e-discovery attorney in a law firm myself, a partner by the way, I could not agree more.

All of the outside consultants with real expertise in the area agree with the need for e-discovery teams, at least the ones not employed by some of the smaller e-discovery vendors. In fact, Ben Hawksworth of Ernst & Young calls the internal corporate team approach the new “holy grail” of e-discovery.

Still not convinced? Then it is unlikely that more references will persuade. To be honest, most companies are not moved by reason to form an e-discovery team, they are moved by experience, bad experience. Typically, a team is not formed until after a bad case. By that time, boatloads of money have already been spent for fees, costs, and a settlement with the plaintiff. The size of the loss in one case is typically far more than the total cost of team formation. Remember, Cisco was motivated to start the first e-discovery team by a $23,500,000 bill. This tendency of large organizations to ignore the advice of Ben Franklin makes the plaintiff’s bar quite happy, and more Zubulake type judgments happen every day. I hope that does not happen to you, but without an effective team in place, it is very likely.

It is just like Robert D. Owenliked to say: instead of taking the time to get prepared, many companies have decided to play “the e-discovery lottery. They have decided to take the chance that they won’t be hit. It’s a gamble.” I agree completely with Bob. Many companies are gambling a boatload of money they won’t be the next Morgan Stanley or Qualcomm. It’s a bad bet. The only thing uncertain is the size of the boat and when it will sink.

SUPPLEMENTAL READING AND EXERCISES: Study all of the cases cited and check out all of the links. Some of these opinions are quite long. When a reading assignment like this includes numerous cases, many of which are long, you may just read the sections of a case that pertain to e-discovery, but be sure to read the background facts and procedure of the case so that you can understand the context of the dispute. Which one did you find most interesting and why?

See if you can find any funny e-Discovery videos or cartoons, but obviously don’t spend too much time of this (unless you really want to). They come and go. One of our favorites though is a video by John Cleese on Rule 26.

Students are invited to leave a public comment below. Insights that might help other students are especially welcome. Let’s collaborate!

Copyright Ralph Losey 2015


Ralph Losey is a practicing attorney who specializes in electronic discovery law. He is a principal in a U.S. law firm with over 50 offices & 800 lawyers where he supervises electronic discovery work and litigation support. Ralph has written over two million words on law and technology, including six books on electronic discovery. His latest books are "E-Discovery for Everyone" (ABA 2017) and "Perspectives on Predictive Coding" (ABA 2017) (ed. & contributor). His blog is widely read in the industry: "e-DiscoveryTeam.com." Ralph is the founder and principal author of "Electronic Discovery Best Practices" and "e-Discovery Team Training," a free online course covering all aspects of e-discovery. Ralph's sub-speciality is the search and review of electronic evidence using multimodal methods, including artificial intelligence. He also has a free online training program to teach these advanced methods - the "TAR Course." Ralph has devoted a month of his time each year since 2013 to research and test various AI-enhanced document review methods. In 2015 and 2016 Ralph and his Team participated in the TREC Total Recall Track experiments sponsored by the National Institute of Standards and Technology. Ralph has been involved with computers and the law since 1978. His full biography is found at RalphLosey.com. Ralph is the proud father of two children, Eva M. Losey and Adam Colby Losey, a high-tech lawyer married to another e-discovery lawyer, Cat Jackson Losey, and, best of all, Ralph has been married since 1973 to Molly Friedman Losey, a mental health counselor and life-long friend.

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