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Plan For Electronic Discovery Now - And Avoid "Bet The Company" Mistakes

The Editor interviews Michael Prounis, Chief Executive Officer and Cofounder of Evidence Exchange, a New York City-based electronic data discovery solutions provider.

Editor: Tell us about your background.

Prounis: I have been involved in the legal systems support business since 1977. I was a partner at Arthur Andersen, but I left 12 years ago to form Prounis Consulting Group. Providing electronic discovery solutions had previously been a sub-speciality for us, but now it is almost 100 percent of what we do. We have been focusing on electronic discovery issues since the late '80s, but it has only been in the last few years that plaintiffs and regulators have been focusing on it.

Editor: Why should companies have digital discovery plans?

Prounis: It takes a shock to wake people up. The Andersen case provided that shock. An allegation of obstruction of justice triggered a chain of events that destroyed that organization.
Today, responding to discovery or a subpoena has become more challenging because we must deal with a proliferation of electronic records lodged in a multitude of different places. In many cases, these records are automatically deleted or overwritten on a regular basis. Systems need to be put in place that will quickly ferret out requested material before it is deleted. Failure to comply with a subpoena or a discovery request can easily be characterized as obstruction of justice.
It is therefore essential that a company develop a digital discovery plan so that when the request for information comes in the in-house lawyers know where to look and what actions to take. It is essential that the requested information be promptly found and preserved and removed from the possibility of inadvertent deletion. This permits normal backup and overwriting procedures to go forward without bringing company systems to halt.
Failure to have a digital discovery plan in place when the request for discovery or subpoena arrives may lead to mistakes that later may be characterized as criminal obstruction of justice or contempt. This can signal the beginning of an Andersen "bet the company" scenario. This is serious stuff requiring the attention of the general counsel and senior management.

Editor: Should having a digital discovery plan be a top priority?

Prounis: A recent American Bar Association survey showed that only a quarter of respondents had electronic records management programs and few actually implement these programs. Immense resources were dedicated to developing Y2K plans and now, with 9/11 in mind, major amounts are being dedicated to crisis management plans, but relatively little to digital discovery where the consequences for the individual company can also be devastating if not handled properly. I can count on my hands the number of companies that have robust digital discovery plans in place.

Editor: How should one go about putting a digital discovery plan in place?

Prounis: The first step should be to create a digital discovery unit staffed by your most technically sophisticated lawyer, best paralegal, most technically competent litigation support specialist and the IT liaison person. This group can then determine where digital records are generated, prepare a digital discovery plan and then oversee responses pursuant to the plan to discovery requests and subpoenas.

Editor: I gather that identifying where digital information is generated can be difficult?

Prounis: Buildings have systems that track who goes where. Global positioning satellites often track where you go in a car. And, companies often have many dozens of applications that store electronic information on spreadsheets, word processing documents and even voicemail messages. So it is important to think outside the box when you are served with a document request. If there are preservation orders in place, and you have not gone to all the potential sources of stored information, someone could suggest the oversight was malicious and deserves the full attention of the court.
I'm not certain that a lot of people making decisions for corporations are always properly versed on information retention and recovery. In a large enterprise with thousands of employees, the complexity of handling information requests reactively rather than proactively can lead to unnecessary expense, as well as some major flaws in the way in which the information is gathered. I just keep going back to a simple message: If corporations can lay out significant dollars for human resources, insurance, and risk management, I am surprised that records management has not received more attention from general counsel.

Editor: Wouldn't you have to do a complete inventory of the places where electronic information might reside before you can have a meaningful digital discovery plan?

Prounis: I think most corporations found themselves having to do much of that work a couple of years ago in connection with the year 2000 situation. It is an interdisciplinary undertaking. That is why a digital discovery unit should be created to do the spadework.

Editor: What is the role of the company records custodian?

Prounis: Federal rules provide for 30(b)6 depositions involving the official company records custodian. These individuals may be asked about what companies do about e-mail retention or applications retention. These kinds of depositions sometimes turn up holes in a records management process. For example, a company could find itself in an awkward position if it learned of litigation on January 1, but made really no effort to preserve records until March of that year.
It is very important that the official records custodian be prepped early by counsel and members of the digital discovery unit as to what they are likely to experience in these 30(b)6 depositions. When preservation orders are in place, the records custodian will need a historical perspective on matters such as how data was collected, how the information was processed, how viruses were treated, how passwords were treated - and on any kind of massaging of the data that might have been done. A good chain of custody is needed to establish that the data has not been altered.

Editor: How important is it to have programs that will quickly identify, extract and preserve requested records?

Prounis: These programs put a company in a position where it can effectively argue that the backup tapes need not be produced. If you can't make a convincing argument that your records management program has already done some filtering of data, then it becomes extremely difficult to get a court to be sympathetic with an approach that suggests backup tapes can be ignored.

Editor: What about the use of sweeping electronic discovery to intimidate the defendant into settling?

Prounis: It is an old litigator's trick to attack the process if the facts are weak. From the plaintiff's perspective, electronic discovery often is a wise strategy. Courts generally don't want to be brought into discovery disputes. But, if you are a defendant corporation, it is critical to involve the court at the earliest possible moment. Corporations with a well thought out digital discovery plan can take the initiative to propose how a meaningful response can be handled cost-effectively.
I am aware of at least one proposal to amend federal electronic discovery rules over a four-year period. So finding a safe harbor in rulemaking is not in the immediate future. Over the next four years, corporations could be dealing with thousands of matters where electronic discovery is a central issue. Just to survive this period of uncertainty, I think it makes good business sense for general counsel to put addressing digital discovery at the top of their to-do list.

Editor: How does a corporate counsel find the right consultant in this area?

Prounis: There are hundreds of companies that support the legal process. Since 93 percent of data created every year is digital, more of these providers are now offering some kind of electronic discovery solution. I think it is important that you share a philosophy with the consultant you ultimately work with. It is incumbent upon potential buyers of these services to do their homework and really focus on references.
We are somewhat unique in that we focus on the entrapment issue. Our focus is on preservation of electronic source materials. A major part of our process is being able to prove to the court and to your opponent that the source files have remained pristine during the obligation period. We do this by using technology that allows us to extract from files what I will compare to human DNA. If a single space bar is introduced or a character is removed from a file, the detection or the authentication software we employ would detect that in every instance.
Before you hand over raw source files to someone who has filed a lawsuit against you, you need a mechanism that will say: this is in fact how I started my filtering process, this is in fact what I gave to the other side, and be able to do it in such a way that you can prove to the court if you thought the other side altered a digital record. If they accuse you of altering your original source files, the mechanism should help you defend against that. Our emphasis is on preservation, chain of custody and being able to authenticate not only the source files but the files you ultimately produce to the other side. When companies have a systematized approach to electronic discovery, more often than not they will win their argument in court.

I. Evidence Exchange (212) 594-2500 or michael.prounis@evidenceexchange.com

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