THREE E-DISCOVERY PRINCIPLES FOR INSURERS

Brian S. Jones

DATA CAPACITY IS EXPLODING

7,235 Exabytes

1 exabyte = 1,024 petabytes 1 petabyte = 1,024 terabytes 1 terabyte = 1,024 gigabytes 1 gigabyte = 1,024 megabytes

1,099,511,627,776
megabytes

By 2017:

2,651,655,542,319,787
pictures

E-DISCOVERY COSTS ARE GROWING

TEN YEARS AGO

ZUBULAKE V. UBS WARBURG, LLC

First landmark e-discovery opinion Gender discrimination case Zubulake: info needed to prove case was on UBS's computers and backup tapes Court ordered restoration of backup tapes and split costs between parties Certain backup tapes and emails were "missing"

"The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation."

Two questions: When does the duty attach? What must be preserved?

"When" was the easier question to resolve; case started through ling an EEOC complaint in April 2001 "What" was more difcult question:
Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a 'litigation hold' to ensure the preservation of relevant documents. As a general rule, that litigation hold does not apply to inaccessible backup tapes (e.g., those typically maintained solely for the purpose of disaster recovery), which may continue to be recycled on the schedule set forth in the company's policy. On the other hand, if backup tapes are accessible (i.e., actively used for information retrieval), then such tapes would likely be subject to the litigation hold.

But...
If a company can identify where particular employee documents are stored on backup tapes, then the tapes storing the documents of key players to the existing or threatened litigation should be preserved if the information contained on those tapes is not otherwise available. This exception applies to all backup tapes.

UBS's destruction of backup tapes was negligent, not willful Court denied giving adverse inference instruction because Zubulake couldn't show that lost evidence would have supported her claims

SEVEN YEARS LATER

"Zubulake Revisited"
! ! !

"By now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve recordspaper or electronicand to search in the right places ! for those records, will inevitably result in the spoliation of evidence." !
--Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., 685 F. Supp.2d 456 (S.D.N.Y. 2010)

RULES CHANGE; PRINCIPLES DONT USUALLY

THREE PRINCIPLES

Preservation Protection Production

PRESERVATION

DUTY TO PRESERVE
SEVENTH CIRCUIT: Duty to preserve is triggered when the party "knew or should have known that litigation was imminent" --Trask-Morton v. Motel 6 Operating L.P., 534 F.3d 672 (7th Cir. 2000) SECOND CIRCUIT: "The obligation to preserve evidence arises when [a] party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation. --Fujitsu Ltd. v. Fed. Exp. Corp., 247 F.3d 423 (2d Cir. 2001).

WHAT TO AVOID

ALLSTATE TEXAS LLOYD'S V. MCKINNEY

Insured's house destroyed by re Fire marshall: faulty breakers Allstate: Nope, it was arson

Allstate destroyed re samples and communications about those samples; senior adjuster ordered destruction Insured's claim was open Allstate knew insured had a lawyer Allstate has asserted work-product protection for documents that pre-dated the destroyed communications Testimony about samples was excluded

WHAT TO DO

LITIGATION HOLDS

SHOULD BE:
INSTRUCTIVE: You do/don't this Here's who to ask if have any questions BROAD: Go to all potential custodians Third-party providers, agents*, everyone in IT SENSITIVE: Issued when appears litigation might arise from a claim Look at grounds for denial

Haskins v. First Am. Title Ins. Co., 2012 WL 5183908 (D. N.J. Oct. 18, 2012):
!

Insurer had duty to issue a litigation hold to its independent agents because, even though the documents themselves were in the possession of the agents, the insurer had a legal right to them, so they were under the insurers care, custody, or control.

WRITTEN DOCUMENT RETENTION POLICY

RULE 37(E)
Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system. No sanctions for destruction of ESI before knew or should have known of litigation

OTHER TIPS
Keep Document Retention Policy updated Readily available to all employees (and outside counsel) Make sure IT applies policy uniformly Designate someone to be representative witness on retention policies and information storage and retrieval capabilities

PROTECTION

Attorney-Client Privilege Work Product Trade Secrets Condential and Proprietary Information

RULE 502
(b) INADVERTENT DISCLOSURE. When made in a federal proceeding or to a federal ofce or agency, the disclosure does not operate as a waiver in a federal or state proceeding if: (1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of CivilProcedure 26(b)(5)(B). (c) DISCLOSURE MADE IN A STATE PROCEEDING. When the disclosure is made in a state proceeding and is not the subject of a state-court order concerning waiver, the disclosure does not operate as a waiver in a federal proceeding if the disclosure: (1) would not be a waiver under this rule if it had been made in a federal proceeding; or (2) is not a waiver under the law of the state where the disclosure occurred. (d) CONTROLLING EFFECT OF A COURT ORDER. A federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the courtin which event the disclosure is also not a waiver in any other federal or state proceeding. (e) CONTROLLING EFFECT OF A PARTY AGREEMENT. An agreement on the effect of disclosure in a federal proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.

502(D) ORDERS
SHOULD BE A PART OF EVERY INSURER'S PRACTICES
Drafting tips:
State that order applies to information protected by the attorneyclient privilege, work-product doctrine, or any other privilege in the case and in any other federal or state proceeding or arbitrations Disclaim Rule 502(B)'s applicability Disclosure doesn't have to be inadvertent Don't have to take measures to prevent or rectify disclosure Refer to other condentiality agreements/protective orders, if any

502(D) ORDERS
More drafting tips: Contain "clawback" language requiring return or deletion of documents and prohibiting use in any form while preserving right to challenge privilege asserted Apply order to information already produced

PRODUCTION

How the process ends should be discussed at the very beginning.

BEFORE THE 26(F) CONFERENCE

Early discussion with outside counsel and IT Early identication of key IT witnesses What kinds of ESI exist? How ESI is maintained? How can ESI be produced? What forms of ESI do we need to receive?

RULE 26(F)(3)
(C) any issues about disclosure or discovery of electronically stored information, including the form or forms in which it should be produced; (D) any issues about claims of privilege or of protection as trial-preparation materials, including if the parties agree on a procedure to assert these claims after productionwhether to ask the court to include their agreement in an order;

RULE 34(B)(2)
(E) Producing the Documents or Electronically Stored Information. Unless otherwise stipulated or ordered by the court, these procedures apply to producing documents or electronically stored information: (i) A party must produce documents as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request; (ii) If a request does not specify a form for producing electronically stored information, a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms; and (iii) A party need not produce the same electronically stored information in more than one form.

CASE MANAGEMENT PLANS

Best places to set out forms of production Some courts requiring ESI language in CMPs See Seventh Circuit E-Discovery Principles E-discovery liasons Cost-sharing discussions

SAMPLE CMP LANGUAGE

The parties have discussed preservation and disclosure of electronically stored discovery information, including a timetable for making the materials available to the opposing party. Each party understands the need to preserve relevant electronic data. Potential items will be deduplicated on a custodian level and collected in a method which preserves the le location and custodian information. Bates numbered images will be created directly from the original electronic documents for all items excluding non-printable les, large drawings, les saved in a proprietary software and database tables. All document images will be provided in single page group IV black and white 300 dpi TIF format, unless it is necessary to produce these images in color to preserve information that would not be visible on a black and white image, with a DII or LFP import le (which is used for Summation, Concordance and other document management systems) and clearly dened document boundaries. The parties will each provide extracted text for their own electronic documents where applicable, which will be incorporated in the import les. All documents will be named by BegDoc#, and produced in a separate folder with a cross-reference le in delimited text format. The following metadata elds will be automatically extracted and provided (availability depending on document type): Begdoc#, Enddoc#, Custodian, FileName, FilePath, FileExtension, From, To, BCC, CC, DateSent, TimeSent, Subject (Email Topic), NumAttach, AttchIDs, AttchBegin, and AttchEnd. The parties will not provide extracted text or metadata for documents that contain redactions. While each party will initially produce documents in TIF and not native format, each party reserves the right to request documents in native format should a party demonstrate a need to obtain a particular document in such a format.

TECHNOLOGY ASSISTED REVIEW

Predictive Coding Gaining greater acceptance Northern District of Indiana approved use in In Re: Biomet M2a Hip Implant Prods. Liab. Litig.

Initial universe of 19.5 million documents Keyword culling trimmed that to 3.9 million documents (1.5 terabytes). De-duping cut that to 2.5 million. Using statistical sampling, 99% condence that .55% to 1.33% of unselected documents would be responsive;1.37% to 2.47% of the original 19.5 million were responsive.

Under predictive coding, the software learns a users preferences or goals; as it learns, the software identies with greater accuracy just which items the user wants, whether it be a song, a product, or a search topic. Biomet used a predictive coding service called Axelerate and eight contract attorneys to review a sampling of the 2.5 million documents. After one round of nd more like this interaction between the attorneys and the software, the contract attorneys (together with other software recommended by Biomets e-discovery vendor) reviewed documents for relevancy, condentiality, and privilege.

$1.07 million in e-discovery costs; $3.25 million more expected Plaintiffs Steering Committee felt initial keyword culling tainted the process; wanted Biomet to use predictive coding on the original 19.5 million documents Court approved Biomets e-discovery procedures:
What Biomet has done complies fully with the requirements of Federal Rules of Civil ProcedureIt might well be that predictive coding, instead of a keyword search, at Stage Two of the process would unearth additional relevant documents. But it would cost Biomet a million, or millions, of dollars to test the Steering Committees theory that predictive coding would produce a signicantly greater number of relevant documents. Even in light of the needs of the hundreds of plaintiffs in this case, the very large amount in controversy, the parties resources, the importance of the issues at stake, and the importance of this discovery in resolving the issues, I cant nd that the likely benets of the discovery proposed by the Steering Committee equals or outweighs its additional burden on, and additional expense to, Biomet.

Technology quickly replacing traditional document review procedures Expensive, but can result in signicant cost savings in large cases

SUGGESTED READING

Indianapolis Friends of E-Discovery

FOLLOW
insuranceblog.boselaw.com litigationblog.boselaw.com @brianjoneslaw