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Archive for the ‘eDiscovery’ Category

I suggest that if you are interested in intelligent Enterprise search that you listen to  Steve Akers being interviewed by BeyeNetworks – it is a long session but well worth the time.  

Steve discusses a number of things including the challenges faced by Enterprises, how Digital Reef solves these problems and some customer use cases.  There were also two slides that I thought was a great overview of the Digital Reef solution:

Discover

  • Automatically identify and index all unstructured data
  • Provide tools to find and understand the data: 
  • Boolean searches (freeform, fuzzy, metadata, phrase, proximity)
  • Similarity searches using example files
  • Email thread reconstruction
  • Exact and near duplicate identification 
  • Pattern expression recognition
  • Organize the data using automatic classification 

 Manage

  • Transform files into common file types
  • Collect and move data
  • Manage data retention policies

 

Designed for Scale and Security

  • Grid-based, distributed architecture provides performance and resiliency
  • Multi-tenant, role-based security model
  • Easily deployed and maintained
  • Indexes and prepares the full content and metadata of up to 10TBs of data in 24 hours with a standard configuration

 

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Special thanks to Yoav Griver and Siddartha Rao for their contributions to this series.

ESI and technology issues relating to data storage and retrieval are often critical to litigation; there are many examples of high-stakes litigation that has turned on issues involving data management and e-discovery. See, e.g., United States v. Microsoft, 253 F.3d 34, 71–74 (D.C. Cir. 2001).  New legal frameworks have been created to deal with the reality of electronic data in litigation, and parties considering M&A deals should be aware of the potential litigation issues involving a merging counterparty or target company’s ESI and data management systems.

Data Storage and Potential Litigation Issues

Counsel must perform data due diligence that includes identification of existing legacy systems and the data stored within them.  Failure to do so may create integration issues, as well as data loss and data recovery issues that will create substantial costs and dangers in the event of future litigation.

For example, the ability to present data in multiple forms can raise the cost of discovery because courts can order litigants to convert discovery data into new formats.  This makes it all the more important that parties to M&A transactions conduct data due diligence to discover the location and formats of ESI in legacy data systems of M&A counterparties.  In the 1980 case of National Union Electric Corp. v. Matsushita Electric Industrial Co., 494 F. Supp. 1257 (E.D. Pa. 1980),  the defendants requested National Union to provide a “computer readable tape” copy of documents already produced in paper form. See National Union, 494 F. Supp. at 1258.   National Union resisted the motion on the grounds that under discovery rules National Union had an obligation to produce already existing documents, but had no such obligation to manufacture data in a new format. Id. at 1259.  The court acknowledged the distinction, but ultimately rejected the argument as inconsistent with the realities of data use and storage:

We now live in an era when much of the data our society desires to retain is stored in computer discs.  This process will escalate in years to come. We suspect that by the year 2000,  virtually all data will be stored in some form of computer memory.  To interpret the Federal Rules which, after all, are to be construed to “secure the just, speedy, and inexpensive determination of every action,” in a manner which would preclude the production of material such as is requested here, would eventually defeat their purpose. Id. at 1261–63

At the time of this opinion, the court could confidently state that it found “no case in which the court has ordered the programming of a computer to manufacture a computer tape not theretofore in physical existence.” Id. at 1261.  In contrast, today, “[t]he law is clear that data in computerized form is discoverable even if paper ‘hard copies’ of the information have been produced, and . . . the producing party can be required to design a computer program to extract the data from its computerized business records, subject to the Court’s discretion as to the allocation of the costs of designing such a computer program.” See Anti-Monopoly, Inc. v. Hasbro, Inc., 1995 U.S. Dist. LEXIS 16355, 1 (S.D.N.Y. Nov. 3, 1995).

When ordering the preservation or production of ESI, courts are sensitive to the relevance of the ESI to the litigation, the value of the ESI to the requesting party, and the cost to the producing party—courts will not foist irrational discovery requirements and costs upon litigants. See, Wright v. AmSouth Bancorp, 320 F.3d 1198 (11th Cir. 2003).

Nonetheless, where it is the producing party’s own document retention scheme which escalates the costs of production, courts may order the producing party to bear these costs.  For example, in In re Brand Name Prescription Drugs Antitrust Litigation, Brand, 1995 U.S. Dist. LEXIS 8281, defendant CIBA-Geigy Corporation argued that the class plaintiffs’ motion to compel the production of inter-corporate emails was overly broad, burdensome, and expensive and that the class plaintiff should bear the estimated $50,000–$70,000 costs of culling through over 30 million stored email documents. Id. At 2-4.  The court rejected this argument, noting that at least four other defendant manufacturers had produced emails without requesting payment of costs and succinctly stating that ”Class plaintiffs should not be forced to bear a burden caused by CIBA’s choice of electronic storage.” Id. at 6–7

Not surprisingly, the course of events has vindicated the predictions of the National Union court, and requests to produce data in specific formats are no longer unusual. See L.H. v. Schwarzenegger, 2008 U.S. Dist. LEXIS 86829 (E.D.Cal. May 14, 2008).

However, without proper data due diligence that accounts for document retention or legacy data management systems, such routine requests can create large litigation costs.  To the extent such costs are avoidable with proper data due diligence, the failure to conduct data due diligence on a counterparty’s legacy systems or ESI is tantamount to ignoring a potentially large liability when valuing a merging counterparty or target company.

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I came across an article on Digital Reef that I think has some excellent points.

Here is an excerpt:

“…it turns out that Digital Reef has built something fairly new and interesting, a “similarity search engine” for big corporate networks that can start with one document—say, a Word or Excel file—and find others that resemble it.

That could be very useful if, for instance, you were a compliance officer at a big health plan and you wanted to see whether any of your employees had unsecured patient records sitting around on their laptop hard drives (which would be a big violation of federal healthcare privacy regulations). Just plop an example of a patient record into the Digital Reef system, and it will scour the network for other examples. Or say you were a lawyer at a big firm writing a brief in an employment case and you wanted to find out whether any of your colleagues working on similar cases in the past had already assembled the relevant citations. You could simply submit your entire draft to Digital Reef, and see what washed up.”

The author, Wade Roush does an excellent job of explaining the value of the Digital Reef similarity engine.  He cites two examples but the possibilities are numerous.  The power of similarity helps with discovery, compliance, efficient workflow, research, analysis, etc.

http://www.xconomy.com/boston/2009/03/03/digital-reefs-similarity-based-search-helps-corporate-data-speak-for-itself/

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One of the persistent puzzles surrounding mergers and acquisitions (“M&A”) activity is its propensity for failure. In fact, hundreds of studies suggest that fifty to eighty percent ofmergers and acquisitions are failures. Thus, while the goal of an M&A deal is that the whole is worth more than the party, the converse is frequently true. An important determinant of any M&A transaction’s post integration success is data due diligence. In today’s M&A environment, where transaction experience substantial scrutiny and technology plays a crucial role, data due diligence is tantamount.

Nonetheless, merging or acquiring companies often fail to perform adequate data due diligence and fail to consider the electronically stored information (“ESI”) and data storage systems of the target company or merging counterpart. This oversight presents substantial risks and can cause substantial post-integration problem and, in turn, increase the likelihood of M&A failure.

Creating an E-Discovery Checklist

One of the crucial ways that in-house and outside counsel can fail to conduct proper data due diligence is by ignoring potential eDiscovery issues as part of the M&A deal.

Why is this important?

eDiscovery issues may well affect the value of the company being acquired, the cost and difficulty of merging the two companies, or heighten litigation risk going forward. Corporations and law firms have fine-tuned due diligence checklists to account for various traditional business risks such as legal, contractual, regulatory, securities, financial and undisclosed liabilities, yet eDiscovery is noticeably absent.

This failure of counsel to conduct data due diligence on a target company’s e-discovery issues, e.g. preservation and cost obligations regarding its ESI, can cause substantial losses for the acquiring company, impacting the expected return.

An e-discovery checklist could have many elements and would vary with respect to the industry and company, but regardless, it should account for:

  1. The state of the target company’s ESI, ensuring that it has been thoroughly identified, categorized, and sourced;
  2. Existing preservation and litigation holds;
  3. The cost of preserving data for existing or anticipated legal holds;
  4. and Both structured and unstructured data

I would like to hear your comments on this checklist, including additions. More thoughts on M&A coming in future posts.

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In March of this year, a court noted that a corporation’s failure to adopt appropriation information polices can results in potentially costly legal sanctions. While sanctions themselves may or may not be substantial, the legal fees leading up to the sanctions will likely to be weighty. See, Phillip M. Adams & Assoc. L.L.C. v. Dell, Inc., 2009 U.S. Dist. LEXIS 26964 (N.D. Utah. Mar. 27, 2009). This decision and other recent holdings serve notice that it is in technologist’s best interest to bring potentially sub-standard retention policies or irresponsible data retention practices that may result in loss of data to the attention of their legal and business archiving/eDiscovery counterparts. The courts, by holding corporations responsible, are certainly acting within the dictates of logic. A corporation deploying a solution that seamlessly allows for additional search, preservation, or production burdens without imposing additional burdens individual employees may be in a stronger position to assert that they fall within the ambit of safe harbor.

Technologists who knowingly withhold such information from their legal and business counterparts, place their employers and their employment at risk. While many grey areas exist as to what constitutes a failure of policies/practices to synchronize with systems, there seems to be clarity on one thing: when policies and practices are in-place, but the systems fail to retain data, a potentially sizable legal problem may arise for the entity.

Technologists are not policy or legal experts, but it is arguably within their domain of expertise to inform the legal and business creators of these policies about the technological feasibility. Moreover, it is evident that a company’s position around discovery is a great deal stronger when a particular employee is responsible for the execution of the preservation, search, and production of information. However, the reality is that placing additional burdens on already overworked employees is a fiction and the information is not likely to be preserved. In addition, companies that elect to place the burden for implementing data retention or preservation orders on their employees–effectively placing the operational execution of preservation, search and production at the mercy of an individual employee’s practice–are making a potentially bad decision.

The extent of personal liability for an individual responsible for ensuring that the corporation policies, practice, and systems operate to some standard is still yet to be established. Irrespective of the legal finding, it can potentially impact your attractiveness to an employer.

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Trial lawyers of America, via the American College of Trial Lawyers, recognized that the trial system of America is too expensive and that resolving matters takes too much time.  Trial lawyers also recognize that expense exceeds the actual value in all but the most important matters.  Several organizations, including the ACTL and the Sedona, propagate to reformulate the litigator mindset from combative to cooperative.

The great trial litigators need to resist the temptation to “out cost” their opponents. However, the courts deliver the message via the application of the construct of “techno-legal proportionality”.  The axiom rests on the precept that the value of the information sought exceeds the cost of extraction, respective to the issue in dispute, accounting for the societal benefit catch all.  The success of this requires that attorneys and Judges be more informed about the technological side, so that informed common sense can be applied.

The electronic discovery problem is exacerbated by the high costs of identifying, collecting, preserving and reviewing information.  The questions are, “Why do organizations today have so much information?” and “Why shouldn’t an organization that preserves less information be rewarded?” Companies might be generating more information than ever before, but should the cost abdicate them from responsible and effective enterprise information management principles? It seems that the problem of electronic discovery might actually be a symptom of a larger problem of digital information responsibility.

Shouldn’t companies that have high discovery costs be forced to ante up? If they did, economics would dictate the evolution of new technologies and the adoption of a smarter information management infrastructure.    No lawyer enjoys mindless document review.  The money earned from review is nothing to sneeze at, but increased job satisfaction on the part of lawyers and substantially lower legal bills for clients might be compelling enough to drive lawyers to forgo the additional revenue.

Finally, it seems to me that companies adopting technologies that allow them to effectively manage their information so that there is less retained and that which is retained can be seamlessly collected, preserved, and reviewed would save millions and millions in legal and technology fees. Of course, selecting the right solution and synchronizing the solution with a company’s policies is critical, but it is certainly feasible that most lawsuit-prone organizations would show a fast ROI by selecting the right technology tools.

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Recently I attended an IQPC conference where John Muldoon, from EMI Capital, and I were co-presenters, speaking about the Legal Business Marketplace and how rapidly it is growing

One question that was raised during our presentation was, “Is the EDRM model outdated, based on the technology toolsets currently available?” This question inspires another question, “Is the EDRM model, so heavily relied on, hampering the evolution and delivery of the techno-legal solutions that enable the market to evolve?”

edrm1
Depicted above is the traditional eDiscovery model that a great number of vendors use to position their products in the marketplace. The IQPC attendees suggested that perhaps In-house counsel , the people on the front lines, can use technologies that collapse the identification, preservation, collection, and first pass review into a single step enabling “early case assessment” and allowing them to achieve substantial cost savings.

While my personal position on this question is still evolving, I certainly feel that the attendees raised valid points. It is beyond refute that organizations that acquire the ability to seamlessly identify, preserve, collect, and review when seeking to establish the specific facts relating to a particular issue potentially place themselves in a stronger legal position.

Irrespective of the legal benefit, it is clear to me that if In-house legal departments could achieve visibility into the “creation-to-court” cost of information it would be easy to measure the effectiveness and cost-benefit of e-Discovery technologies. In addition to the business benefits, the same information could be presented to the court to support cost shifting arguments. With this information, the courts could make more informed findings on shifting costs.

I welcome comments and thoughts about the legal process and technology–especially thoughts related to the questions, “Has technology evolved beyond the confines of the EDRM model?” and “Is there monetary and/or legal value in having email creation- to-court cost breakdowns?” and “Can this cost be calculated?”

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