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On the Frontlines of the Digital Discovery War: Is The Worst Yet To Come?

Michael Prounis, CEO
Evidence Exchange (www.evidenceexchange.com)
New York, NY

Little more than an interesting CLE topic five years ago, Digital Discovery has come "front and center" stage, particularly to legal professionals with litigation, M&A and regulatory specialties. Judicial sanctions for spoliation of e-mail, once amounting to minor slaps on the wrist, now have hit the million dollar plus level (i.e., imposed on a major insurance company), and, in the most striking instance, court imposed spoliation sanctions (i.e., that Jurors could draw an adverse inference) significantly influenced a multi-billion dollar products liability settlement. Less visible than high-profile court cases, in the deal-making world of M&A, sloppy digital discovery added eight figures to a certain telecommunications deal and in the process almost scuttled the deal with regulators..

The Gloves Have Come Off

Yet when is the Corporate World going to get its wake-up call? Digital Discovery is a time bomb for most companies, particularly those who don't move quickly to stabilize the situation! The risks are real, particularly for those companies that are professional litigants given their business profile (e.g., manufacturing, etc.) Not only do many companies ignore the growing risks associated with modern computer technology, but, there seems to be almost a "benign neglect" in terms of modern electronic records management ("ERM") practices. Even for the best managed companies, electronic records management is in the backwater of the pond. With focused Legal Department, IT and Records Management involvement, a modest investment can yield huge rewards!

Centralizing Digital Discovery Production Activities

The first focus of a Law Department should be on the basic "blocking & tackling" types of Digital Discovery issues. The key is management and organization. Develop a familiar process that is known to all constituencies, so that control can be exercised over the company's electronic archives. Carefully consider whether you can afford not to centralize all non-forensic electronic document production services. I'm familiar with quite a few corporate situations where there are hundreds of open file (investigation) / preservation orders in play. Even if the company has a 14 or 21-day e-mail retention policy and electronic extracts of the archives for preservation purposes are scattered around the country, does this free you from an obligation to search those archives in new cases? By centralizing this function, certain economies can be gained through standardized, refined process, as improved ERM controls are implemented system wide.

Avoid Over Relying On The Burden Argument

The old arguments of "burden" are sounding stale, particularly, if some moderation or precision is employed in an opponent's document request. Moreover, plaintiffs are continuing to note how a case can be "won" in discovery, by attacking the credibility of an opponent's electronic discovery process, long before ever getting to the merits of a case. It's a technique that can cost your company dearly and pay huge dividends for the plaintiffs, particularly if there is a simultaneous slip-up from an ERM standpoint. A company's inefficiency or incompetence in the ERM area is a major risk area and is no longer as effective a shield in litigation, government investigations or regulatory affairs. How is your company positioned to weather this trend? What is your fallback position going to be?

Carefully Manage Document Preservation Process

Document preservation is a huge risk area. In large corporations where electronic records are kept on open matters subject to preservation orders, the intersection of open files, retention limits and new document requests on new and existing cases presents an exposure point worthy of your most urgent consideration. Are the preservation archives stored centrally or scattered across law firms and/or service providers? Are they being searched on all open matters? Screw-ups here cost big either in terms of credibility, monetary sanctions, or worse! Process is important but so is the preservation storage medium. As demonstrated with the well-publicized decay after 7-years of the NASA Mariner CD-ROM based photo archive, proactive steps need to be taken with preserved data to ensure its complete integrity throughout the obligation period. What steps are being taken to assure that the preservation archives are well maintained?

Anticipate Document Requests For Native Files & Non-Textual Data

Today, the vast majority of e-mail and electronic data productions are amazingly paper-based. Plaintiffs often negotiate away their rights to the native files, often because they don't know what to do with the raw data and/or because they fear the double-edged nature of the Digital Discovery sword. Only in the current world of Digital Discovery can you take data born digital and produce it as paper or TIFF so that the other side has to rescan it and OCR it, before they can search it! Clearly, if you can get the other side to agree to that, take those terms every time. But, how long will this state of affairs continue? The idea that paper or TIFF is an equivalent to native format or some widely accepted file format (e.g., Portable Document Format ("PDF") is likely to be harder and harder to make, particularly as Courts begin to only accept PDF filings of pleadings, etc. There are major quality problems associated with the accuracy of the OCR text conversion of spreadsheets and other non-e-mail business documents where native files are first converted to TIFF instead of PDF. Without going too far a field, how will your company fare when faced with a successful request for native e-mail and digital data in a format other than paper and/or TIFF? Can you do it? At what risk to the Corporation? How will you reference those electronic files? How will you authenticate them? How will you deal with files that do not contain text (e.g., voicemail, digital video, etc.) or that can't be reduced to paper (e.g., CAD drawings, etc.)? It seems unbelievable that requestors will continue to accept paper or even TIFF, when the source materials were born digital and maintained digitally in the ordinary course of business.

Anticipate Increased Scrutiny Of Your Digital Discovery Production Process

Regulators and plaintiffs will continue to place heightened emphasis on not only production format (e.g., native file exchange, etc.) but also upon the specific process employed to comb the corporate archive of electronic records and produce the responsive information to which the requestor is entitled. How will your company hold up under increased scrutiny from a process standpoint? How good is the documentation? Which search engine and search terms were used? Did the software search e-mail attachments? Did you search the native files or the TIFF after it was OCR'd? Was the proper universe searched? How did you handle the metadata? What steps were taken to protect privileged data and trade secrets? How did you break up e-mail and attachment pairs? Did you make Electronic productions without first assigning/branding Document Control Numbers onto the produced files? How did you handle viruses encountered? How were redactions made? How did you process difficult to read file formats? What is the precise chain of custody? Isn't it time to expect this minimum level of detail be maintained by your IT Department, law firm or digital discovery service provider?

Impact Of New Business Tools

The move by many companies from private e-mail systems to ASP-based public infrastructure systems will also impose new obligations on the Company as well as the ASP in the area of Digital Discovery process. Will this trend to reduce the per seat cost of business communications erode or constitute a waiver of privilege? How about express warranties made on your Company's web site? Who is recording and/or tracking these as well as other web site modifications? As more and more technological choices become available, you will need to change the production process to accommodate new ways of conducting business. Likewise, as more Corporate assets become only electronic based, file / document verification and authentication will become pressing ERM issues.

People, Process & Technology: Authenticating the Digital Discovery Process

Fortunately, new solutions exist to help simplify and solve many of today's Digital Discovery problems. The "People" part comes from Law Department leadership. There is no substitute! The "Process" relies on solid communications and sustained vigilance through confirmation that an agreed path (i.e., a Digital Discovery & Production Plan) is being followed. Finally, the "Technology" component is a variable that clearly depend on the former (People & Process) and must be weighed in the context of current relationships and investments, etc. But, there are several new technologies that offer considerable promise. For instance, our company, Evidence Exchange has introduced a new service and evidence exchange format called the Secure Digital Photocopier ("SDP"). Although designed for Digital Discovery, in a sense, it's today's equivalent of a traditional photocopier. However, instead of duplicating paper, it is used to securely duplicate digital documents of disparate types, such that there is a cryptographically secure link between copy and original. SDP relies on encryption-based authentication technology to first extract DNA (i.e., Digital Notary Algorithm) from an original file and then brand that DNA string into a PDF rendering of the source file. In the normal course of processing files, the SDP process also wraps the metadata and provides a comprehensive set of documentation detailing the electronic data conversion methods used as well as the complete chain of custody.

The canonical format used to render electronic documents (i.e., PDF) is fully searchable, readable and printable. Using Evidence Exchange's SDP process, lawyers can fully automate the difficult task of finding and/or producing the e-mails, word processing files, spreadsheets, etc. that exist in compressed file formats on servers throughout today's enterprises. The SDP process also works with non-textual files (e.g., voicemail, photographs, etc.) Authorized users can use the service to prove that an original file has been unaltered (e.g., preserved without change during the obligation period, etc.). Selected files can be numbered with custom prefixes and references to protective orders, etc. branded into the document footer. The SDP exchange format (i.e., print ready branded PDF) supports high-speed printing (i.e., up to 180 pages per minute per machine); or, digital evidence can be exchanged via CD-ROM or the Web. Deposition or trial exhibits can be quickly authenticated, by the Court or by the individual parties, individually or in bulk via the World Wide Web, saving the Court valuable time in the process
The SDP processes digital documents directly from their original electronic formats, only rendering to paper when and if responsive documents must be produced in paper for a proceeding or filing. Otherwise, productions are made in a secure, tamperproof electronic format.

Summary Comment

The emerging technology will help to streamline the production process to a large extent, but organizations lacking the mettle and vision to tackle their ERM problem may become casualties. The wounds may be of a self-inflicted nature.

Michael Prounis is the CEO and co-founder of Evidence Exchange. He has worked in legal information systems since 1977. Evidence Exchange is located at 21 Penn Plaza, New York, NY 10001. The phone number is (212) 594-2500 and the e-mail address is michael.prounis@evidenceexchange.com.

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