Proportionality Archives

Government Ordered to Maintain Expensive Custom Database Shared with Criminal Defendant – eDiscovery Case Law

June 6, 2014

In the criminal case of United States v. Shabudin, No. 11-cr-00664-JSW-1 (NJV) (N.D. Cal. Apr. 8, 2014), California Magistrate Judge Nandor J. Vadas ordered the Government to continue to provide access to a Relativity Database used by the parties to review documents produced by the Government, instead of discontinuing access for the defendants several weeks before trial was to begin due to budgetary issues.

The Government had voluntarily created the database to manage the vast quantities of documents being produced for discovery in this action, “because it was in its interest to do so”. An agreement had been negotiated between the parties that would allow the defendants to access the database and review discovery documents, and to employ third-party “project managers” for technical and substantive support. Although the parties stipulated that the database has been “completed” in January of 2013, after more than 9 million documents had been uploaded, the defendants did not gain access until February of 2014.

At some point after beginning to work with the database, the defendants came to realize that not all of the documents produced in the action had been uploaded. Specifically, absent from the database were the contents of three hard drives, and 159 boxes of hard copy material amounting to nearly 1 million pages of documents. Defendants filed a motion to compel the Government to add the missing documents to the database, but, during a hearing on the motion to compel, the Government voluntarily offered to upload 2 of the 3 hard drives, and scan the hard copy materials into the database, asking that they not be ordered to do so.

Following this commitment, the Government indicated for the first time during the proceedings that “the ‘extra cost’ associated with this ‘voluntary’ commitment would draw down on the $1.8 million budget that had been allocated to Database, and ‘for this reason, we anticipate funding for the Database will end” four months from that point. Further, the Government stated that they had looked into “new – and more expensive – alternatives,” namely that they would expend resources to have the materials uploaded to the database within 2 months, and that the defendants would have 2 months to access and review the “old” documents plus the new material, at which point the database would be “transferred to a Concordance database that Defendants could maintain at their own cost.”

The defendants objected to this proposal, and Judge Vadas ordered the Government to provide more information about the effects of transferring the documents to a Concordance database. The Government declared that the cost of the transfer alone would be $118,000, and that it would take 6 to 8 weeks to complete. Further, the Government explained that due to the transfer, some user-created metadata would no longer be viewable or searchable, specifically including “(1) Database user actions (‘audit history’); (2) user searches including save search syntax; (3) image annotations; and (4) Database ‘artifacts’ such as batches, views, or layouts.” The defendants responded that they would “lose our saved searches compiled in files within the database, the very work that we have spent months and many hours putting together. These files essentially represent the virtual entirety of the defense work on the data base.”

Aside from these concerns, when asked when it first explained the possibility that the database could “wind down” before trial, the Government “could not point to a single instance where it had actually informed Defendants that this was a possibility.” Instead, the Government claimed that the “projected” two-year project duration should have been understood by the defendants to have been calculated based on the start of the project in June 2012, rather than the completion of the database as the defendants assumed.

Judge Vadas noted that if the Government had indicated that the database might be shut down prior to trial, and taken this position “when it broached the possibility of using the Database to manage discovery in this case, Defendants would have objected strenuously.” Ultimately, Judge Vadas found that since the Government had “chose to use an eDiscovery platform for this action, selected and managed the eDiscovery provider, and negotiated and agreed to Terms and Conditions for Access to the Database with the Defendants,” and that the Government had never disclosed that the database might wind down, “that winding down the Database before Defendants are ready for trial in December 2014 would prejudice Defendants' ability to prepare for trial and would offend the court's notion of fairness.” Therefore, the Government was ordered to continue to pay for the database through December 2014, and to continue providing the services agreed to in the Terms and Conditions.

So, what do you think? Should the Government have been required to continue to pay for the database, or should exporting it to a Concordance database for the defendants to use have been sufficient? Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Another Case Where Some eDiscovery Costs are Disallowed – eDiscovery Case Law

May 30, 2014

We haven’t covered a good eDiscovery cost reimbursement case in a while (here is a link to those we covered last year), so here is a case from earlier this month where, once again, the prevailing party had its awarded costs for eDiscovery reduced.

In Kwan Software Engineering v. Foray Technologies, 2014 U.S. Dist. (N.D. Cal. May 8, 2014), the amount of the defendant’s previously awarded costs were significantly reduced following the partial granting of the plaintiff’s Motion for Review of Clerk’s Taxation of Costs, after California District Judge Susan Illston ruled that the majority of the costs requested were not recoverable.

In this copyright infringement and breach of contract case, the motion for review had been filed after a motion for summary judgment was granted and entered in favor of the defendant, who was awarded $88,848.13 in costs. The plaintiff disputed these costs, and filed a motion that requested to specifically disallow “(1) $453.29 in costs for service of summons and subpoena; (2) $6,818.54 in costs for printed or electronically recorded transcripts; and (3) $61,312 in costs for exemplification and the costs of making copies.”

With regard to the larger sum of $61,312, the plaintiff specifically challenged the costs related to eDiscovery, citing the defendant’s submission of a total of eight invoices which the plaintiff contended they should not have been awarded any costs for. The plaintiff alleged that the defendant was “seeking a broad range of eDiscovery related costs that go well beyond the costs associated with the actual production of the documents,” and further that the defendant “failed to provide sufficient detail of its eDiscovery costs to allow the Court to determine what are actual copying costs and what are non-taxable intellectual efforts.”

Additionally, the plaintiff noted that there was a discrepancy between the invoices at issue and the actual production submitted by the defendant. During discovery, the defendant produced approximately 229,000 pages of documents, yet the invoices showed charges for producing 344,445 pages of documents, and thus the defendant was seeking to recover costs for documents that were not used in the litigation.

It was noted that with respect to eDiscovery, other courts in the same district have found recoverable copying fees to be defined as “.TIFF and OCR conversion, Bates stamping, load file and other physical media generation.” However, the invoices submitted by the defendant for cost recovery contained, in addition to costs for documents that were not produced to the plaintiff, other charges for “data storage and data management,” as well as “Project Management” fees. The information that the defendant submitted was not sufficient to show that these costs should have been recoverable.

Judge Illston stated that the court declined to award costs to the defendant for data storage, data management, project management, and copying costs for documents that were not actually produced in litigation. Therefore, of the original $61,312 in copying costs, the defendant’s awarded recoverable costs were reduced to $6,870, an amount that represented “a charge of $0.03 per document for Bates stamping and TIFF conversion for 229,000 documents.” With regard to the lesser divided costs of $24,199.14 and $1,752.32 which the Clerk awarded to the defendant, these costs were challenged by the plaintiff on the assertion that some of the costs were not recoverable.

Broadly summarizing, the plaintiff argued that delivery invoices for subpoena and summons, and costs related to printed or electronically recorded transcripts, specifically “(1) expedited deposition transcripts; (2) multiple copies of deposition transcripts; (3) additional CDs containing deposition transcripts and exhibits; (4) synchronization of video depositions; (5) multiple copies of DVDs; (6) rough transcripts; (7) color exhibits; (8) shipping of transcripts; and (9) transcripts of proceedings” should not be recoverable.

Judge Illston accordingly reduced the amounts to disallow categories 1 and 2 above ($453.29 and $6,818.54) respectively, leaving the defendant with a total of $32,983.59 in awarded costs.

So, what do you think? Should the costs of labor or intellectual effort be considered recoverable with regard to eDiscovery? How detailed should the level of reporting be when requesting recoverable costs following a judgment? Please share any comments you might have or if you’d like to know more about a particular topic.

Predictive Analytics: It’s Not Just for Review Anymore – eDiscovery Trends

April 29, 2014

One of the most frequently discussed trends in this year’s annual thought leader interviews that we conducted was the application of analytics (including predictive analytics) to Information Governance. A recent report published in the Richmond Journal of Law & Technology addresses how analytics can be used to optimize Information Governance.

Written by Bennett B. Borden & Jason R. Baron (who was one of our thought leaders discussing that very topic), Finding the Signal in the Noise: Information Governance, Analytics, and the Future of Legal Practice, 20 RICH. J.L. & TECH. 7 (2014) is written for those who are not necessarily experts in the field. It provides a synopsis of why and how predictive coding first emerged in eDiscovery and defines important terms related to the topic, then discusses aspects of an information governance program where application of predictive coding and related analytical techniques is most useful. Most notably, the authors provide a few “early” examples of the use of advanced analytics, like predictive coding, for non-litigation contexts to illustrate the possibilities for applying the technology. Here is a high-level breakdown of the report:

Introduction (pages 1-3): Provides a high-level introduction of the topics to be discussed.

A. The Path to Da Silva Moore (pages 3-14): Provides important background to the evolution of managing electronically stored information (ESI) and predictive coding (fittingly, it begins with the words “In the beginning”). Starting on page 9, the authors discuss “The Da Silva Moore Precedent”, providing a detailed account of the Da Silva Moore case (our post here summarizes our coverage of the case) and also references other cases, as well: In re Actos (Pioglitazone) Products Liability Litigation, Global Aerospace Inc., et al, v. Landow Aviation, L.P., Kleen Products v. Packaging Corp. of America, EORHB, Inc. v. HOA Holdings and In Re: Biomet M2a Magnum Hip Implant Products Liability Litigation. Clearly, the past couple of years have provided several precedents for the use of predictive coding in litigation.

B. Information Governance and Analytics in the Era of Big Data (pages 15-20): This section provides definitions and important context for terms such as “big data”, “analytics” and “Information Governance”. It’s important to have the background on these concepts before launching into how analytics can be applied to optimize Information Governance.

C. Applying the Lessons of E-Discovery In Using Analytics for Optimal Information Governance: Some Examples (pages 21-31): With the background of sections A and B under your belt, the heart of the report then gets into the actual application of analytics in different scenarios, using “True Life Examples” that are “’ripped from’ the pages of the author’s legal experience, without embellishment”. These examples where analytics are used include:

A corporate client is being sued by a former employee in a whistleblower qui tam action;
A highly regulated manufacturing client decided to outsource the function of safety testing some of its products and a director of the department whose function was being outsourced, despite being offered a generous severance package, demanded four times the severance amount and threatened to go to the company’s regulator with a list of ten supposed major violations that he described in the email if he did not receive what he was asking for.
A major company received a whistleblower letter from a reputable third party alleging that several senior personnel were involved with an elaborate kickback scheme that also involved FCPA violations.
An acquisition agreement between parties contained a provision such that if the disclosures made by the target were found to be off by a certain margin within thirty days of the acquisition, the purchase price would be adjusted.

In each case, the use of analytics either resulted in a quick settlement, proved the alleged violations to be unfounded, or resulted in an appropriate adjustment in the purchase price of the acquired company. These real world examples truly illustrate how analytics can be applied beyond the document review stage of eDiscovery.

Conclusion (pages 31-32): While noting that the authors’ intent was to “merely scratch the surface” of the topic, they offer some predictions for the end of the decade and note “expected demand on the part of corporate clients for lawyers to be familiar with state of the art practices in the information governance space”. In other words, your clients are going to expect you to understand this.

The report is an easy read, even for novices to the technology, and is a must-read for anyone looking to understand more about applying analytics to Information Governance. Bennett and Jason are both with Drinker Biddle & Reath LLP and are also co-chairs of the Information Governance Initiative (here is our recent blog post about IGI).

So, what do you think? Has your organization applied analytics to big data to reduce or eliminate litigation costs? Please share any comments you might have or if you’d like to know more about a particular topic.

Smaller Law Firms Save Big with Cloud-Based eDiscovery – eDiscovery Trends

April 1, 2014

According to a new article in ABA Journal (Cloud-based e-discovery can mean big savings for smaller firms, written by Joe Dysart), if you are a smaller law firm, it may make more sense to “rent” your eDiscovery applications in the “cloud” rather than bring a full-fledged hardware and software solution in-house.

Dysart’s article quotes a couple of panelists from a panel session at the recent LegalTech (LTNY) conference, including panelist Alan Winchester, a partner at the New York City firm Harris Beach, who stated: “For firms without robust IT departments, it grants them the experts to manage the technology operations and security.”

The article also identifies some benefits of using cloud-based eDiscovery solutions, including:

No need for software updating: Updates to cloud software tend to evolve over time, with users easily absorbing smaller, steadier changes over a much longer time span.
Best practices are continually updated: eDiscovery cloud vendors learn to avoid the pitfalls with software much more quickly, given that they are working with multiple law firms at once. Essentially, the mistakes and misunderstandings that can happen with an eDiscovery software package tend to happen at a much faster rate.
No need for yearlong rollouts: With eDiscovery in the cloud, all the hardware and software installation logistics are sidestepped. Instead, firms can focus entirely on training staff and bringing them up to speed.
The return on investment can be very attractive: Smaller law firms may go months or even years before needing a robust eDiscovery package. Instead of spending major dollars – and then watching helplessly as the system grows obsolete – they can go to the cloud for eDiscovery on an ad hoc basis and often save handsomely.

As platform manager for CloudNine Discovery’s OnDemand® eDiscovery review application (shameless plug warning!), I can attest to the benefits above with some of our own clients. When we have software updates to apply, it’s a simple rollout (typically on a Saturday night for up to a couple of hours – our developers have no life!) for all users of the software. And, assisting various clients has enabled us to learn how the software can be modified to meet their needs (the priorities in our ever-changing development roadmap are largely influenced by our own clients’ requests).

If you’re a small firm shopping to “rent” an eDiscovery application, consider this:

Know where your data is stored: It’s your data, so you should be able to know where it’s stored and know that it’s secure. Is it stored in the US or internationally? You don’t want to have issues getting to your data when you need it most.
Try it before you buy it: The cloud provider should let you conduct a no risk trial with your own data before you have to make a purchasing decision (see the banner below if you want to check out CloudNine’s no-risk trial offer).
Training and support should be free: The application should be easy to use, but it still helps to get training as well as application support when questions arise. However, you shouldn’t have to pay for it.

As Dysart’s article concludes, “law firms do need to take a hard look at the technology both ways before taking the plunge”, so it’s always important to consider the pros and cons as it applies to your firm. Nonetheless, the benefits of cloud-based eDiscovery solutions make it an attractive option for many law firms today, especially small firms with limited budget and resources to manage the ESI in their cases effectively.

So, what do you think? Have you considered cloud-based solutions for your eDiscovery projects? Please share any comments you might have or if you’d like to know more about a particular topic.

Ruling on ESI Discovery Dispute Delayed as Court Requests Specific Information – eDiscovery Case Law

March 31, 2014

In Worley v. Avanquest North America Inc., No. C 12-04391 WHO (LB), 2013 U.S. Dist. (N.D. Cal. Dec. 13, 2013), a putative class action involving PC security software, California Magistrate Judge Laurel Beeler required the defendant to produce further information related to discovery disputes before a ruling would be issued.

Various discovery disputes arose in this case after the parties failed to agree on a discovery period. The applicable statute of limitations for this lawsuit was five years, and the defendant offered to preserve as evidence Electronically Stored Information (ESI) created during that five-year period. However, the plaintiffs requested an additional ten years added to the discovery period, as this would preserve “all relevant and discoverable information from the time the original versions of the software were developed to the present.”

According to the legal standard set by Rule 26, subsection (b)(1), parties may “obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense…” and relevant information “need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” Therefore, Judge Beeler sided with the plaintiffs regarding an extended discovery period, stating that relevant information “such as documents relating to the software’s design and purpose, could have pre-dated the statutory period.”

However, the defendant stated that adding ten years to the discovery period would result in an unduly burdensome obligation for preservation, and would be disproportionate to the litigation. This is also addressed in subsection (b)(2)(C) under Rule 26, which states that “the court must limit the frequency or extent of discovery otherwise allowed by these rules…” if it is determined that the discovery would be “unreasonably cumulative or duplicative,” or that “the burden or expense of the proposed discovery outweighs its likely benefit” to the case.

Judge Beeler noted that the argument could not be addressed without further information, specifically that the parties had identified neither potential custodians, nor the amount of information the defendant actually had in its possession, since the defendant’s company acquired the software at issue in 2005. These details would be required in order for the defendant’s technical expert “to specify the burdens associated with preserving relevant information (particularly of electronically-stored information).”

Therefore, the defendant was ordered to identify custodians who would be likely to hold relevant information with regard to the plaintiff’s discovery requests, and further to “consult a person with expertise (such as an IT employee) and specify any undue burden associated with preservation, and produce non-burdensome, relevant information” before a ruling would be given. If the technical expert identified any issues that would make production of documents unduly burdensome, both parties were to “comply with the court’s discovery procedures and submit a joint discovery letter that provides details about the problems and puts their dispute in context.” Meanwhile, Judge Beeler ordered the defendant to produce the agreed documents covered by the five-year statute of limitations, noting that further “discovery can be iterative.”

The final discovery dispute concerned the defendant’s request for the plaintiffs to produce mirror image copies of hard drives belonging to the plaintiffs and their experts, in order to test the software at issue. The plaintiffs argued against this, as the hard drives contained both personal and privileged information, including financial data, family photos, and private communications. They instead proposed allowing the defendant to choose a forensic expert, who would image the hard drives and provide the defendant with specifically requested data, including “recreate[d] computing environments.”

Judge Beeler deemed the proposal “not workable,” and permitted the imaging of the drives with the allowance that the plaintiffs could use a protective order to protect any private information, and would be able to review and remove any privileged information prior to remanding the images to the defendant.

So, what do you think? Should discovery periods be limited to the statute of limitations applicable to a given case? Are protective orders sufficient to protect private information when personal-use computers are involved in litigation? Please share any comments you might have or if you’d like to know more about a particular topic.

Electronic Discovery Dispute Sees Court Requesting Cooperation from Both Parties to Avoid “Court-Ordered Middle Ground” – eDiscovery Case Law

March 24, 2014

In Fort Worth Employees’ Retirement Fund v. J.P. Morgan Chase & Co., No. 09 Civ. 3701 (JPO) (JFC), 2013 U.S. Dist. (S.D.N.Y. Dec.16, 2013), a complex discovery dispute arose during the process of this securities action lawsuit revolving around the defendants’ loan products and offerings with regards to a specific consumer class, in which the plaintiffs filed a motion to compel an expanded discovery.

Prior to the motion, the defendants had used approximately 80,000 search terms to produce discovery documents, which had yielded around 875,000 hits. The documents had not been turned over, as they were being reviewed for production. However, the plaintiffs argued that the defendants’ search terms were “woefully deficient” in filing the motion to compel. The specific request was for more search terms, more custodians, and an extended discovery time period in order to receive all relevant information.

Search terms already in use by the defendants included the names of the 9 securities offerings at issue within the lawsuit, the loan numbers for roughly 35,000 loans under review, CUSIP numbers assigned to more than 300 underlying certificates for the securities offerings, names and dates assigned to loan transactions, and the lead plaintiffs’ names, as well as their advisors. The defendants also used several abbreviations and variations for each term to uncover relevant electronically stored information (ESI) in which actual terms might have been truncated or modified.

In response to the motion to compel, the defendants stated the search terms were comprehensive. However, the plaintiffs complained that the number of documents was “‘actually minimal’ for a case of this size” and that the names and numbers used would turn up “just a few specific, narrow categories of information,” while excluding “broad categories of documents that do not specifically reference ‘a particular loan, loan pool or securitization in the text of the documentor e-mail’ but instead address general practices or concerns, such as ‘widespread abandonment of underwriting guidelines.’” The plaintiffs further cited the March 30, 2011, Order of the Honorable John G. Koeltl, U.S.D.J., claiming that “documents do not need to be specifically related to the loans and offerings at issue in this case to be relevant.”

The request by the plaintiffs asked that the defendants add a search protocol to incorporate “combinations of terms aimed at discovering relevant documents that are not loan specific,” to include terms like “the names of loan originators, due diligence firms, rating agencies, and ‘descriptors’ (such as ‘awful’ and ‘toxic’).” The defendants objected to the additional 116,000 proposed search terms as too broad and unduly burdensome, since its sampling indicated that the expanded terms would “yield an unreviewable pool of over 11 million documents.”

Magistrate Judge James C. Francis IV, after hearing the positions of both parties, found some truth in each side’s argument. While the plaintiffs had “provided sufficient justification for expanding search terms beyond numbers and names to ensure that the ESI search captures all of the relevant documents pertaining to the loans and offerings at issue,” the defendants would face “an unreasonable burden of production” using the plaintiffs’ proposed search terms, as they would be required to “sift through voluminous irrelevant documents added to the search results.”

In such disputes regarding discovery, a court-ordered middle ground is often supplied as a remedy. However, Judge Francis did not issue an order, stating that it would be “impractical and inappropriate” due to the “nature of this request and the complexities of crafting a search protocol.” Instead, the parties were urged to “reexamine their positions and work together in good faith to create a mutually acceptable ESI search regime.” Failing a cooperative agreement by both parties, a special master would be appointed to the case in order to recommend an appropriate search protocol, with the costs to be split between plaintiffs and defendants.

So, what do you think? Should defendants expect to produce a higher volume of electronic discovery documents in cases that are larger in scope? Is the possibility of general relevance to the issues before the court enough to expand the burden of eDiscovery for defendants? Please share any comments you might have or if you’d like to know more about a particular topic.

Ralph Losey of Jackson Lewis, LLP – eDiscovery Trends

March 17, 2014

This is the tenth of the 2014 LegalTech New York (LTNY) Thought Leader Interview series. eDiscoveryDaily interviewed several thought leaders after LTNY this year (don’t get us started) and generally asked each of them the following questions:

What significant eDiscovery trends did you see at LTNY this year and what do you see for 2014?
With new amendments to discovery provisions of the Federal Rules of Civil Procedure now in the comment phase, do you see those being approved this year and what do you see as the impact of those Rules changes?
It seems despite numerous resources in the industry, most attorneys still don’t know a lot about eDiscovery? Do you agree with that and, if so, what do you think can be done to improve the situation?
What are you working on that you’d like our readers to know about?

Today’s thought leader is Ralph Losey. Ralph is an attorney in private practice with the law firm of Jackson Lewis, LLP, where he is a Shareholder and the firm’s National e-Discovery Counsel. Ralph is also a prolific author of eDiscovery books and articles, the principal author and publisher of the popular e-Discovery Team® Blog, founder and owner of an online training program, e-Discovery Team Training, with attorney and technical students all over the world, founder of the new Electronic Discovery Best Practices (EDBP) lawyer-centric work flow model. Ralph is also the publisher of LegalSearchScience.com and PreSuit.com on predictive coding methods and applications.

What significant eDiscovery trends did you see at LTNY this year and what do you see for 2014?

The presentation that I did at the show was called the “John Henry moment”, and I presented with Cliff Dutton, who is a technology expert at AIG (not an attorney, but an expert with technical processes in electronic discovery). The other panelist was Jason Baron (whose own thought leader interview from last week can be found here). Cliff, Jason and I were examining at LegalTech what comes next after predictive coding. What is the inevitable direction that technology is taking? That was really the theme behind the “John Henry moment”. A similar question was asked by other panels, but, and of course I’m prejudiced, I think our panel had some particularly good, unique insights.

Before I get into the answer that emerged from our panel, I will say that other panels were focusing on other parts of the technology world. They were talking about things like data breach and privacy – those are two big issues that we’ve seen in the past, but they seem to be emerging even stronger than before and were big issues in the keynote speech. It appears to be a surprise to some people that there is crime on the Internet. Many of us are quite aware of that – I had to change my credit card just a couple of months ago. So, data breaches, either on purpose by a hacker or unintentional through negligence, and data privacy are certainly big issues.

These were not the issues that Jason, Cliff and I talked about. Instead, we were talking about the advancement into the second machine age. This is something that has been discussed by the New York Times and also in a best-selling book called The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. It has to do with the application of ever more sophisticated computer algorithms that allow us to replicate what the human mind is capable of doing and to automate not just manual labor, but automate the mental labor of mankind. Of course, what we’re focused on is its application to lawyers – what we lawyers do that can now be improved, enhanced and automated.

Now, in the past, the big discussion has been on predictive coding and this is certainly an example of the application of advanced computers and what is being called “analytics” – taking big data and understanding the implications of big data. Examples outside the law include Netflix, that takes your viewing history and tells you about a new movie they have that you’re going to like, and Amazon who takes you buying history and suggests books that you’re going to like. They’ve both analyzed your data. So, what we were discussing is how this concept will impact the law. That’s really an important topic that our panel addressed that I had an opportunity to follow up on recently in my blog (that parodied the movie Minority Report, which had something called “pre-crime”), called “pre-suit”. Not “pre-crime”, but “pre-suit”. I’ve already (surprisingly) been able to get the URL for presuit.com and it discusses corporate counsel using what I call “smart data” to predict and prevent litigation before it happens. That’s what our panel discussed and I think that’s really the next big thing (with all due respect to people that are focused by privacy and data breach issues). So, I think the next big thing is to apply data analytics and the latest advancements in artificial intelligence to get a much better handle and control on litigation than we have today.

The idea behind “pre-suit” is essentially to win your next lawsuit before it’s even filed. Jason Baron also recently wrote an article about it in Law Technology News (Escape From the Island of E-Discovery), which I didn’t know about when I wrote my article – he showed it to me the day of our panel session. He talks about three examples of using data analytics for something other than predictive coding: the first two are data remediation for information governance purposes and records classification to, for example, classify and file your emails for you. The third one he calls “bad conduct detection” – I call it the use of smart data to predict and prevent a cause of action from occurring – basically, when employees within your company are doing something that could be a basis for a lawsuit.

He wrote about it in the article and, independently, I had the same idea I (at least I think I did – Jason is alleged to have mind control abilities!). In my blog, I wrote about how this “pre-suit” concept will work and this isn’t based on science fiction, it’s based on technology that’s available today. We have the technology to detect patterns of wrongful activity that are there. In corporate email and text messages, we can detect when an employee may be harassing another employee. It’s far more than just looking for certain words that should never be said in email, but also patterns so you can bring in an employee for counseling before damage is done, before a reputation is ruined or a lot of emotional harm happens and way before a complaint is filed by the victim.

So, this is really the next big thing – to stop lawsuits before they mature. In other words, why should we depend on plaintiff’s counsel to come to the door of corporate counsel to let them know that they’ve found this group of employees in the company that have been discriminated against or are receiving wrongful treatment? Find about it in advance and fix it yourself – much more effectively and much cheaper. It’s essentially good citizenship for corporations to police their own activities rather than having outside attorneys find it and air their “dirty laundry” in a courtroom. That’s the vision that our panel came articulated and that I think is the next big thing.

With new amendments to discovery provisions of the Federal Rules of Civil Procedure now in the comment phase, do you see those being approved this year and what do you see as the impact of those Rules changes?

I wrote a blog post about it and I did predict that they would pass this year, but the level of controversy seems to be heating up at the last minute. The commentary that Judge Scheindlin filed with the Rules Committee is just one indication that it’s escalating. It’s very intense and it may be a closer question than I thought. As I’ve written about it, my view is that some of these changes may not even be constitutional and that’s something that former Judge Ron Hedges believes – that some of the rules have gone too far in violating separation of powers, that the rules are going into substantive law. I’m concerned how political the Federal Rules have become. The judicial branch is supposed to be a separate branch of government, not part of the legislative branch. So, I must say that I share Judge Hedges’ concerns on that and, even though I still think it will be approved, I am not pleased by how politicized the whole process has become..

Having said all of that, the reason that I’m not having the same emotional reaction that Judge Scheindlin and other commentators have had – on both the right and the left (frankly, this has become a liberal vs. conservative issue) – is that I don’t think it will have the profound impact that some people fear. Ultimately, rules changes don’t change things as much as people expect them to do so. Certainly, the 2006 rules changes didn’t lead to a huge impact, and regardless of what gets passed here, I don’t think it will have a huge impact either. There is really a cultural change that is needed for eDiscovery to work right, rather than creating yet more rules that people can misunderstand and argue about. In my opinion, we’re going to get more of a change by focusing on education, doing the kind of thing that you do, bringing the word to people so that they can understand what’s going on. I think that does more good than creating more rules, especially when they’re particularly complicated rules.

One good result of the new rules is the emphasis on proportionality and cooperation. I think those are good things, it doesn’t hurt to have them in the rules and that will encourage people to do what the rules already require – cooperate with each other and always have proportionality in mind.

It seems despite numerous resources in the industry, most attorneys still don’t know a lot about eDiscovery? Do you agree with that and, if so, what do you think can be done to improve the situation?

You pointed out the resources that are already there. Do we need more and better resources? I suppose. And, I’ll still continue to work on that as, I’m sure, the other educational leaders that you’ve mentioned will do as well. I think one of the most important new efforts to come on the scene is the one started by another Losey, Adam Losey, and his foundation IT-Lex. That’s an educational foundation effort that is more oriented toward younger lawyers. That is ultimately the answer. Old fogies like me are going to retire and they just don’t want to learn. They’re closed minded and, frankly, they’re getting more and more irrelevant every day. We need to focus on the next generation and I’m really proud of Adam in how he’s doing a good job of carrying the torch on that.

I’m seeing this in my own family – first with my son Adam at Foley and now with his wife, my daughter-in-law, Catherine Losey who is now at Littler doing eDiscovery. I can tell you that the next generation gets it and the hope is in the future. I think you have to take a longer term view of things. I tried cajoling lawyers my age into doing it and it doesn’t work, honestly. In the book that I mentioned before, The Second Machine Age, delays like this in learning how to use technology have always been. This is nothing new and it’s not unique to the legal industry. It typically takes ten to twenty years for business or any general cultural activity to adapt to the new technology and figure out how to use it.

For people like me, it has been an exercise in patience because I’m ready to do everything yesterday. But, the reality is that it will catch up, it’s starting to catch up and those of us who do know the technology needn’t despair that 98% of the bar still doesn’t know what we do. That’s OK. The number of people who do know will grow rapidly, particularly as people retire. There are plenty of smart people my age who don’t get it, but they understand that they don’t get it, so they ask me to do it or they ask someone else who does get it to do it. That is a fundamental ethical responsibility that good lawyers get. Eventually, you’re going to have a field of specialists that focus on eDiscovery, especially complex artificial intelligence and other technology. That’s how we will get at the truth. There will be a specialty bar that other lawyers use who don’t do that. But, right now, we’re still in a shakedown period. We may see things speed up because of more eDiscovery malpractice cases – there have already been a few and there will be more. And, competition will force the people that don’t get it out and allow opportunities for the next generation and the few in my generation that do get it. Overall, I’m optimistic, because I don’t think there’s anything unique about lawyers to keep them from getting it; there are plenty of younger lawyers that do get it. They are our future and I’m optimistic for that future.

What are you working on that you’d like our readers to know about?

Well, my online training program (e-Discovery Team Training) is still alive and well. An encouraging sign is that we’re starting to have smaller firms signing up four, five or even six attorneys and paralegals. So, I will keep eDiscovery Team Training in place as a cheaper, intro level, A to Z, course about eDiscovery for people that can’t afford to take the more expensive courses. It’s an inexpensive alternative for people who do want to learn, that want to remain relevant and that understand that, in today’s world, it’s all about constant training, re-training and learning.

As for the more advanced training that I provide, I find that you can’t teach predictive coding just by writing and I’ve written maybe 35 essays on the subject. I find it’s much more effective for me to teach it the good-old fashioned way – the way that Abe Lincoln learned law – with a one-on-one apprenticeship. In other words, I show my attorneys by doing. With something as complicated as predictive coding, coming in and consulting and actually helping lawyers do it is more effective than writing about it. But, with the simple intros to eDiscovery, the writing is still effective, so I’ll keep on doing that too. I’ll keep writing on the advanced topics too, but with the understanding that many of the methods of predictive coding are too complex to teach my words alone.

Thanks, Ralph, for participating in the interview!

And to the readers, as always, please share any comments you might have or if you’d like to know more about a particular topic!

Federal Court Partially Reverses District Court’s Taxation of Electronic Discovery Costs – eDiscovery Case Law

March 11, 2014

In CBT Flint Partners, LLC v. Return Path, Inc., No. 2013-1036, 2013 U.S. App. (Fed. Circ. Dec. 13, 2013), the Federal Circuit Court of Appeals reversed in part and vacated in part an earlier decision by the Georgia district court to require the plaintiffs to pay the defendants’ costs relating to the production and duplication of electronically stored information (ESI) offered as eDiscovery, limiting taxation to only those costs which were directly related to copying.

Circuit Judges O’Malley and Taranto heard the appeals case, which was filed by the plaintiff after a district court ruled in favor of the defendants regarding the taxation of costs for eDiscovery. The initial case, a patent infringement lawsuit, was found in favor of the defendants, and the district court determined that the plaintiffs should pay the defendants’ costs, with two defendants asking for nearly $270,000 and nearly $50,000, respectively.

In filing for costs, the first defendant categorized $243,000 of the requested amount as “other” costs, stating that the fees were to cover expenses for the eDiscovery vendor that produced the ESI. The remaining $4,500 was characterized as the costs of making copies of the data. The second defendant did not identify any costs for making copies, and categorized $34,000 of the total cost as expenses for its eDiscovery vendor.

On appeal, Judges O’Malley and Taranto followed the leads of previous cases in the Third Circuit (Race Tires America, Inc. v. Hoosier Racing Tire Corp) and the Fourth Circuit (The Country Vintner of North Carolina, LLC v. E & J Gallo Winery, Inc.) with narrow interpretation of 28 U.S.C. § 1920, which is concerned with defining costs that are and are not recoverable regarding eDiscovery. The applicable law was noted as the scope of section 1920(4), which first defined as recoverable for costs “[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.” Section 1920(4), amended in order to address electronic evidence, now states that recovery costs for ESI are allowed only for “the reasonable costs of actually duplicating those documents, not for the cost of gathering those documents as a prelude to duplication.”

Observation and examination of the defendants’ discovery process found that the first stage performed by the vendor was the closest in scope to the process of making copies, and therefore was recoverable. This stage includes imaging hard drives and other source media, and then processing the resultant images to extract relevant individual documents. Judges O’Malley and Taranto noted that “the statute covers costs for steps, which commonly involve an initial reproduction, that necessarily precede the creation of a final production copy: converting electronic files to non-editable formats . . . and scanning paper documents.”

However, the taxation line was drawn at “costs incurred in preparing to copy,” such as the next stage of the vendor’s process, which involved organizing the extracted documents into a database to be “indexed, decrypted, and de-duplicated, and filtered, analyzed, searched, and reviewed to determine which were responsive to discovery requests and which contained privileged information.” The defendants asked for these costs to be subject to recovery, categorizing them as “project management, keyword searching, ‘statistical previews,’ ‘auditing and logging of files and ensuring compliance with Federal Rules,’ and ‘extraction of proprietary data,’ along with other characterizations. In addition, the defendants requested that the costs of convenience actions such as buying, installing, and configuring a data-host server be relegated to the plaintiffs. The judges dismissed these costs as unrecoverable, but did classify the costs of creating “load files” – scanned images that indicate breaks in documents – as recoverable and subject to taxation.

Finally, Judges O’Malley and Taranto limited recovery costs to only the subset of documents that was actually produced by the defendants’ eDiscovery vendor. The matter was then remanded to the district court, which will consider what format was required for ESI production, and which costs were appropriate to assign to the plaintiff.

So, what do you think? Should the entirety of eDiscovery production costs be subject to taxation and awarded to the prevailing party? Is there a broader interpretation of costs related to copying electronic documents that should be considered? Please share any comments you might have or if you’d like to know more about a particular topic.

Alon Israely, Esq., CISSP of BIA – eDiscovery Trends

March 5, 2014

This is the fifth of the 2014 LegalTech New York (LTNY) Thought Leader Interview series. eDiscoveryDaily interviewed several thought leaders after LTNY this year (don’t get us started) and generally asked each of them the following questions:

What significant eDiscovery trends did you see at LTNY this year and what do you see for 2014?
With new amendments to discovery provisions of the Federal Rules of Civil Procedure now in the comment phase, do you see those being approved this year and what do you see as the impact of those Rules changes?
It seems despite numerous resources in the industry, most attorneys still don’t know a lot about eDiscovery? Do you agree with that and, if so, what do you think can be done to improve the situation?
What are you working on that you’d like our readers to know about?

Today’s thought leader is Alon Israely. Alon is the Manager of Strategic Partnerships at Business Intelligence Associates, Inc. (BIA) and currently leads the Strategic Partner Program at BIA. Alon has over eighteen years of experience in a variety of advanced computing-related technologies and has consulted with law firms and their clients on a variety of technology issues, including expert witness services related to computer forensics, digital evidence management and data security. Alon is an attorney and a Certified Information Systems Security Professional (CISSP).

What significant eDiscovery trends did you see at LTNY this year and what do you see for 2014?

Once again, I did not see much differentiation between different exhibitors. There was nothing that stood out to me as being a groundbreaking differentiator. That said, it seemed a lighter show, less people. But, even though it was a lighter number of attendees, the caliber of attendees seemed a bit higher. This is all coming from my gut as I have no real numbers or metrics to back this up, but, the conversations we had at our booth seemed, on average to be a little more substantive than in previous years.

As for trends, there seems to be more discussion about the high-tech trends, such as cloud computing and analytic technologies. Instead of people talking about these technologies generally, it seemed as though people were talking about these technologies more specifically. Not to say that they were differentiated, they were still non-differentiated. But, there were more people talking about cloud technologies and there was a big CLE about it. And, more people were talking specifically about analytics, not just saying “you can do all of this culling”, but showing specific examples, with charts, graphics and other neat elements that indicate searching/analytics results. So, there seemed to be a bit more specificity around technology and, together with that, advanced technology. But, to be honest with you, there was nothing at the show that really blew my mind. Nothing that was groundbreaking, nothing that looked like it would initiate a shift in the industry. If anything, it felt like, other than the few specifics around high-tech, similar to previous years.

I will say that some of the attendees that I talked to, some of the GCs and outside counsel firm attorneys, said they spent more time inside the educational components at LegalTech instead of the exhibit hall. So, as an exhibitor, that doesn’t make me overly happy to see that, but, as a knowledge leader in the industry, I’m very happy to see that. I know that ALM has always tried to do a good job with the educational components. And, I think this year attendees took that part of it more seriously than in the past several years. It seemed that most of the networking that my BIA colleagues and I did was at the educational sessions, not necessarily on the floor. I think that’s a positive indicator for the people who made it to the show.

As for general trends in 2014, I think you will see corporations start to take control of their technology, not only for in-house solutions, but also for the solutions that outside counsel will be providing to them. Today, corporations tend to trust their outside counsel firms as to the review tools and other technologies that they use, but I think that it will be much more of a coordinated effort going forward. The level of maturity for corporations around eDiscovery is being raised. What the means in practical terms is that they will work more closely with their trusted vendors. I don’t believe that corporations are going to bring everything in-house and that vendors will be out of luck, though a lot of other people believe that will happen. I believe that services business for eDiscovery will remain strong for the next decade or longer and the dynamic of obtaining those services will morph into the corporation sitting side-by-side with the law firm making those services decisions.

That trend was evident at the show: you heard it from different vendor booths and the way that they were pitching their products and you heard it from actual in-house attorneys that were attending. I saw at least two cases where the GC and his outside counsel attorney were walking around the show together – hopefully, the GC wasn’t getting charged for that time! You’re starting to see corporations take more control of the reins, but not in the way we always thought where they dictate to the outside counsel what vendors to use. Instead, it’s much more of a collaborative effort and I think you’ll see much more of that over the next several years.

I see those being incredibly important. The more we can get specificity around what needs to happen early in a case and the more that specificity can be codified, the better off we will all be. If you look at all of the wasted money spent over the last few years, some of that is solved by the new rules, specifically in the area of preservation. We’re in the business of selling preservation software, so I’m excited about the potential changes.

But, if I step out of that personal perspective, the changes still make a lot of sense because, today, you still have a lot of effort being spent by parties figuring out legal hold and preservation issues. Who was put on hold, when were holds put in place, what data was and was not preserved. That usually happens when a problem occurs – you have a peak of expensive lawyering and legal maneuvering with motions practice, etc and typically when it’s already too late. So, some of these new rules which are focused on discussions early in the case with respect to preservation should nip a lot of that in the bud. Now, instead of fighting four months later after discovery closes whether some system was preserved or not, that should get covered early-on with some of the new rules that will hopefully go into effect. So, I’m very excited about the rules changes, not only as a vendor in the space, but also as a legal professional in general. The more efficiency that you can create early in the matter, the more money you can save and the more you can focus on the substantive issues and on the merits of the case.

I do wholeheartedly agree. Our industry is funny because the cost of goods sold for eDiscovery solutions and services is higher than for most other industries else because of the fact that we have to educate with almost every sale. There are a lot of resources out there, including efforts by many respected thought leaders and all of the great blogs out there, and many providers have an educational component to their website. So, you’re right that there are a lot of quality resources for attorneys at their fingertips, yet there are still so many attorneys that simply don’t understand it. Most of the small business and solo practitioners market doesn’t understand eDiscovery and many GCs of mid-sized corporations don’t either. And, frankly neither do many “corner office” partners at Amlaw200 firms. They know about it at a high level and understand that it’s important, but they don’t know enough detail. But, the good news is that with the advent of those educational resources and the fact that every eDiscovery provider and vendor teaches as they sell, those legal professionals don’t need to learn that much – even getting four or five feet “underneath the water” instead of thirty feet under would be helpful.

As to why they don’t know more, I don’t know. Maybe attorneys are so used to having experts to rely on and because they feel they know enough about eDiscovery, that they don’t need to know any more detail or process understanding unless a problem arises. I don’t have an explanation as to why, with all of these great resources available, that most legal professionals don’t have more knowledge. Unless it’s just that they have a “technology block” and are still afraid of the technology aspects of that knowledge base. To improve things, I believe that vendors will continue to have to sell in an educational manner, with one half of the sale educating the attorney and the other half focused on closing the deal. And, hopefully more law schools will continue to incorporate eDiscovery into their curriculum. But, I don’t see the issue of more knowledge across a wider audience of legal professionals getting a whole lot better anytime soon.

What are you working on that you’d like our readers to know about?

BIA continues to be focused on bringing the best technology and workflow that we can to the left side of the EDRM model – such as legal hold, preservation and ECA. Legal hold activities such as notifying and tracking employees, interviewing custodians and creating questionnaires to do so, and suspending practices such as email auto deletion, and collection of ESI is what we’re all about. We’ve been really integrating those areas of the left side of the EDRM into one another. Today, TotalDiscovery employs much more of a circular workflow than it did even a year ago. It used to be much more siloed – you would implement a legal hold and then do a custodian questionnaire and the collection. Now, we’ve integrated those steps a lot more. Hold flows into the questionnaire process, you can seed collections with data from the questionnaires, and so forth. We’re also continuing to serve up as much intelligence on the data as possible. You don’t have to wait until you get further down the right side of the model to understand the type of data you have or how much you have. Obviously, you still need to be able to have a good review tool to perform real hard core research and analysis, but to the extent we can help attorneys more knowledgeable about their data before they get to review, the better it will be for them. That’s our goal. So, a lot of that comes from integrating different parts of the process and not focusing on just one area of the process, but gleaning intel from all of them and summarizing at a high level for the attorney. Also, our enterprise features are really strong and not something we talk about a lot (but we probably should) – stuff like connecting to Active directory, Exchange and other systems – real simple to do as a default configuration.

Also, our flat fee pricing model is a source of pride for us and it’s been very successful. Flat-fee pricing, unlimited use of functionality and overall budget predictability are values we offer and guarantee – which is unique in the market. Also, one of the good things about BIA is that we’re a technology company and we’re always adding features – we’ve now moved to a tighter cycle with a new feature or function added every four to six weeks. Sometimes it’s a small feature, at other times, it’s a large feature we’ve been working on for a while. It keeps it very fresh and we’re able to do so because of the way we’ve built the product with the cloud and web technologies that we use So, BIA continues to focus on what we’re good at – improving the workflow and functionality for the tasks compelled by companies on the left side of the EDRM model, leading up to review.

Thanks, Alon, for participating in the interview!

And to the readers, as always, please share any comments you might have or if you’d like to know more about a particular topic!

eDiscovery Conference for Small to Medium Cases – eDiscovery Trends

March 4, 2014

Last week, I told you about a two-day program being hosted in my hometown of Houston by The Sedona Conference®. Here is another conference that you can attend no matter where you are, for a very reasonable price!

The Levin College of Law at the University of Florida and EDRM is hosting its second annual electronic discovery conference for the Small and Medium Case this year on March 14. As the registration page states:

“The University of Florida E-Discovery/EDRM Conference for the Small and Medium Case this year focuses on letting your data tell the winning litigation story. E-discovery is more than responding to production requests. At its heart, e-discovery is locating, parsing, and restructuring the voluminous and diverse case data – emails, texts, word processing docs, social media postings and messages, databases, digital photos, browsing history, computer logs, and more – into a coherent, winning story.”

The co-chairs of the program are William Hamilton, Executive Director, University of Florida E-Discovery Project; Partner, Quarles & Brady LLP; and Provost at Bryan University (other than that, he’s not busy) and George Socha, Co-Founder, EDRM; and President, Socha Consulting LLC (and perennial thought leader interviewee on this blog).

Presenters include attorneys from firms such as Stroock & Stroock & Lavan, Phelps Dunbar, Shook, Hardy & Bacon, Vorys, Sater, Seymour & Pease; vendors such as kCura, Nuix and Nextpoint and iConect and three Florida judges. The agenda starts at the Levin Advocacy Center at UF Law at 8:00am ET for breakfast and goes through the reception that ends at 6:30pm ET. Sessions are from 9:00am to 5:20pm ET. Here’s a tentative agenda and a complete list of presenters.

The conference costs $199 if you’re attending in person. But, you don’t have to be in Florida to participate. You can stream the entire conference for only $99. And, if you’re a full-time law student (or a member of the UF faculty or professional staff), it’s free to attend in person or stream online! Can’t beat that.

So, what do you think? Do you plan to attend the program? Please share any comments you might have or if you’d like to know more about a particular topic.

Proportionality