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Electronic Discovery Planning For Problem Cases - Part I

By Michael Prounis

This article is based on a speech to be delivered at the DRI Seminar on June 13, 2002 by the author. Part II of this article will follow in a subsequent issue of The Metropolitan Corporate Counsel.

I. Introduction

With Enron in flames and its accountants and lawyers under fire, the notion of planning for problem cases has entered a new dimension. Not only must you face the traditional challenges of problem cases, but the Enron matter has raised concerns of professional independence and objectivity that heretofore were not questioned. The “trust” issue has cometh forward from the oblivion to take center stage.

Until Enron, it was inconceivable that lawyers and accountants from the world’s most reputable firms would find themselves facing the threat of criminal charges over issues that involve spoliation, digital discovery and document preservation. With the exception of the BCCI matter, I am unaware of many instances where prominent firms have faced criminal charges concerning their digital discovery process.

II. A New Reality

So, in addition to a problem case, you have a problem environment, where it’s not too hard for plaintiffs to question the merits of your digital discovery process long before they question the merits of your case. If Andersen can be accused of such conduct, why couldn’t you be challenged? It may be an appropriate time to consider the notion of building “trust” into your digital discovery and production process. That means, building a trustworthy digital discovery and production system capable of withstanding great scrutiny, yet without placing you at some disadvantage.

III. A Good Defense Is A Good Offense

At the earliest possible point, on problem cases, it is wise to take the “trust” card away from your opponent. The “trust” card is used to exploit the current strain on the public’s trust bond with professionals; and specifically the trust that the Court places in lawyers. The Court trusts you to be professional and by and large, the plaintiffs and regulators have been relatively “lax” in this area. Most are ill equipped to deal with productions consisting of gigabytes of digital discovery data, so they accept paper or TIFF productions and rarely examine the precise filters used to retrieve responsive information.

But many plaintiffs have learned about the potential treasure chest of digital discovery and production. In the context of the big case, the problem case, many plaintiffs have “scored big” by emphasizing process and raising doubts about the completeness and quality of a digital document production. Remember that since December of last year, you must affirmatively produce electronic data as part of the initial discovery request. Even if the plaintiffs and/or regulators are accepting paper or TIFF today, don’t expect that to last.

IV. Be Honest With Yourself

While courts may still trust lawyers to be trustworthy, some glaring holes now exist in the digital discovery process of certain companies and outside law firms. Few organizations can withstand heightened scrutiny in the areas of document preservation, data collection and searching/filtering. Before Enron, the trust bond was already eroding by an astounding level of sloppiness or worse in many organizations’ digital discovery process. This coupled with an ever-widening gap between the reality of the immediate threat and senior practitioners’ awareness of the problem. Simply put, today, corporations face a great risk of being successfully challenged unless they “weave” a trust bond into their “problem case” digital discovery strategy! It’s a necessary part of problem case strategy.

V. Say What?

For the last twenty-four years, I’ve grown accustomed to hearing senior practitioners brag about their technological ignorance, often with zeal something akin to machismo. Yet I wonder how many field generals have lost touch with a key aspect of their trade? By not focusing early on digital discovery risk, former all-stars may have to play “catch-up” on a problem case, long before they get to use their great legal skills and talents.

Clearly, in the eyes of most senior practitioners, digital discovery and paper discovery have long since become ministerial tasks. But in the recent transformation of society’s information from paper source files to digital, dozens of new issues have emerged that can critically impact the responsiveness and completeness of your document production. Most of the 50+ year old lawyers running “the bet your company cases” have minions of paralegals or associates handling the documents. The filtered collection is presented to the experienced trial practitioner as gospel.

Yet, the senior practitioner probably knows little if any of the details of how this stack of paper or images was assembled. Yes, he may know how far back data was collected and for which individuals, but any of the details beyond, probably not. Yet, in those details are some of the most explosive strategic discovery weapons that have ever existed for plaintiffs and regulators!

Think about what e-discovery time bombs may wind-up costing Enron, Andersen and Vinson & Elkins. It has already cost billions for a select number of companies. Yet the existence of the potential risk seems to fly under the radar screens of most senior practitioners or has been categorized as being some trivial or gritty item that both sides should wish to ignore (i.e., don’t ask, don’t tell about electronic data). That is, until your digital discovery process becomes a key issue in the problem case!

Rule No. 1: Don’t Turn A Problem Case Into An Impossible Case

Impossible cases are always expensive and do not have budgets. Impossible cases are the worst type of losses, causing great loss to a company’s reputation and credibility or worse! The worst thing is to turn a problem case into an impossible case by completely botching the digital discovery component of the job. Andersen was in trouble before its Enron document destruction occurred! But the loss of standing, reputation and credibility after the acknowledgement has certainly converted a problem case into an impossible case or worse. At least that’s what it looks like from here, some 12 years after resigning from the Andersen Worldwide partnership.

Being admitted to the Andersen partnership has always been important to me, much like attaining some advanced business degree or better. Fortunately, I had an opportunity to experience first hand how a crackerjack Andersen legal team handled discovery during the period of 1982-1989. At that time, a problem case for Andersen might have involved the question of whether audits provide assurance versus insurance, with the accounting professionals often winning their day in court. Andersen’s discovery conduct was always impeccable! Andersen’s legal effort was first rate in every way!

In Enron, the document destruction acknowledgement by Andersen has opened it to an unimaginable level of exposure and to the potential risk of criminal prosecution. Lawyers may go to jail over this situation! So, how do you avoid turning a problem case into an impossible case? It’s easy! Always play it right down the middle in terms of taking digital discovery and production risks. Move quickly to “safe harbor” by preserving your digital archives, both from an authenticity standpoint as well as the physical security of those archives.

Carefully consider the many new places where discovery source data can wind up, whether it’s an Internet server provider’s site, or an ASP site or a Palm Pilot or home computer. Sometimes the shared server or the office desktop is not enough. Be extremely thorough in terms of filtering/searching. Many search engines do not search the entire digital file and such questions are going to be “fair-game” when plaintiffs and regulators catch on to their significance. For instance, some digital discovery solutions employed by major corporations only search the last print range selected and ignore “hidden” columns containing notes, comments or rows from a spreadsheet. Be certain to search the “raw” or “native” files and not a TIFF or PDF equivalent.

Document how you handle the electronic archive during discovery. Make sure that you can prove that you were complete in terms of data collection, filtering, searching and presentation. At the same time, take precautions and safeguards against any form of tampering with any of your produced electronic data (i.e. authentication of digital evidence).

Rule No. 2: Don’t Turn An Impossible Case Into A Bet The Company Case

It will be hard to suggest malicious conduct, if such precautions are taken with the digital discovery archives. In Enron, company lawyers and outside counsel are directly in the line of fire and at risk of criminal prosecution! In Linnen v. A. H. Robins Co., Massachusetts Superior Court, 1999, plaintiffs unsuccessfully attempted to ban Arnold & Porter from practicing law in the Court’s jurisdiction, but no lawyer faced the threat of criminal charges.

Heretofore, sanctions imposed have usually involved fines paid by the client or sanctions involving adverse inference jury instructions. Rarely before has the behavior of in-house counsel and outside counsel come into such question. Never has the crime involved the intentional destruction of source files by allegedly 80 staff members of Andersen. Andersen’s acknowledgement of spoliation may lead directly to its demise through criminal restitution and civil litigation. That would be another tragedy linked directly to the Enron debacle! It would hardly be a deserving fate for the many thousands of honest Andersen partners and employees.

Rule No. 3: Carefully Manage The Document Preservation Process

Document preservation is a huge risk area. Showcase a “pristine” digital discovery archive that is complete, secure and ready for long-term storage! This type of advocacy will matter in the post-Enron era! Increased information disclosure about the digital discovery & production process will “buy” producers greater credibility, introduce expense predictability and offer more flexibility/freedom of action. Move quickly upon anticipation of litigation to preserve your source digital files and document your actions. 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 NASA Viking CD-ROM based photo archive, CD archives can decay after only 7-years. Proactive steps need to be taken with preserved data to ensure complete source data integrity throughout the judicial order obligation period.

What steps are you taking to assure that preservation archives are well maintained?

While companies can lawfully destroy information they no longer need, such records management must be implemented carefully, and only with full regard to federal, state and local laws and regulations governing a variety of areas, such as tax, finance, human resources and intellectual property. Companies also have a duty to preserve information they believe is potentially responsive to a case or is likely to be requested during discovery. So it is important to act in a thoughtful, highly visible fashion. Policies implemented in bad-faith (i.e., to circumvent a company’s records management obligations) can certainly backfire on the company.

Michael Prounis is the Chief Executive Officer and Co-Founder of Evidence Exchange, a New York based Electronic Data Discovery solutions provider. Having worked in the legal systems technology and services sector since 1977, he founded Arthur Andersen LLP’s first offering in this area, joining the Andersen partnership. After working in this area under several corporate ownerships, he co-developed Evidence Exchange’s Secure Digital Photocopier(“SDP”), a new digital discovery and production methodology that streamlines and secures the electronic discovery process, emphasizing source document preservation, archive control, digital evidence authentication and detailed chain of custody documents. He can be reached at michael.prounis@evidence exchange.com.

Evidence Exchange (212) 594-2500

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