1
William M. LeRoy - Moderator
President & CEO
American Legal & Financial Network “ALFN”
Dean Kanellis, Esq. - Panelist
Associate Attorney
Keith D. Weiner & Associates Co., LPA
2




Introduction
What is e-discovery?
Civil Rule Amendments
Cost of Producing


Preservation



Zubulake I and III
Zubulake IV and V
Practical Considerations
“Hypothetical” Cases
3
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Why an eDiscovery Webinar?
Solutions guided by client expectations
Recognition of the obligations and challenges
Formulation and implementation of solutions
Discovery of ESI requires a new way of
thinking
It’s here now!
4

“Electronic discovery (or e-discovery) refers to
discovery in civil litigation which deals with
information in electronic format also referred to
as Electronically Stored Information (ESI).
Electronic information is different from paper
information because of its intangible form,
volume, [volatility]. Also, electronic information
is usually accompanied by metadata, which is
not present in paper documents.”
(http://en.wikipedia.org/wiki/Electronic_discover
y).
5

ESI refers to the format, not the object or its
content.
Discovery of data or information that is stored on
and/or created by electronic devices.
 Not the Note; the pdf file of the note, stored on the
file server, together with the associated metadata.

6

Example: RFP 1: Produce all documents and
electronically stored information that relate to, support,
contradict, evidence, in whole or in part, your allegation
that the Borrower signed the Note.


In the absence of an objection, or an agreement, Plaintiff must
allow the borrower to inspect and copy all physical instances of
the Note, and all electronic instances, including all pdf files,
together with all metadata created by a user or an electronic
device.
Why? Because the Civil Rules provide for it, and,
among other things, the ESI contains metadata.
7

ESI is different from physical documents or
objects
Intangible;
 Voluminous; and
 Volatile.

8



Content data is created by the user or key
player.
Artifact data is created by the electronic device.
All content and artifact information can be
categorized as:






File name data;
Content data;
Metadata;
File system data;
Application data; and
Operating system data.
9

File Allocation

In order for an electronic device to “see” data the
content must be linked to the file name.
 Content data linked to a specific file name is “allocated”
and is referred to as an “active file.”
 Traditional focus of preservation and production.

Content data that is no longer linked to a specific file
name is “unallocated.”
 When a file is “deleted”, the links between the content,
metadata, and file name data are broken. Although
unallocated data cannot be seen by the device, it they
still reside on it, can be recovered until overwritten.
10

Metadata






Metadata is electronically stored information that is a component of the
file’s structure.
May be created by an end user, such as the data in the “comment”
field linked to a Word document;
May be created by an application, such as the camera information
recorded by programs that transfer images from digital cameras; or
May be created by the file or operating system, such as creation dates
of content data.
The preservation of metadata from electronic documents creates
special challenges to prevent spoliation.
Metadata is sometimes plays an important part as evidence in
litigation.
“When did you send the notice of default and intent to accelerate to my
client?”
 “If that’s the case, why the file creation date on the pdf copy of the
Notice three months after the date you allege it was mailed?”

11




E-mail
Word processing documents
Spreadsheet documents
Case management databases
Collection notes
 Servicing notes
 Call logs


Accounting databases


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Payment histories
Photographs
Instant messaging chats
Websites
Any other ESI which could have relevant evidence in a lawsuit
Raw data which can be reviewed for hidden evidence
12

Volume

Exponential increase in volume of electronic evidence due to:
 Proliferation of inexpensive media capable of storing vast
amounts of data at little cost
 In 1990, a gigabyte of data (70,000 – 80,000 pages/35 – 40
banker boxes) could be stored for $20,000.00.
 Today, the same amount of data is stored electronically for less
than $1.00.
 Increase in file types in which data is stored.
 Types of electronic communications have increased.
 E-mail, instant messaging, voice-mail, “intercoms”, web pages,
etc.
 Use of electronic communications has dramatically increased
as they have become more and more informal.
 E-mail and IM are commonly used by “key players” in litigation as
a substitute for face-to-face or telephone communications.
13

Volatility



Electronic data is easily modified and/or destroyed,
unless properly preserved.
Turning on an electronic device can automatically
modify and alter thousands of files.
Volatile nature of electronic devices requires
preservation early in a case so that electronic
evidence is not lost due to on-going use .
14


The volatile nature of ESI and changes in the
Civil Rules mandate that preservation of ESI
occur much earlier than in the case of
traditional paper documents.
ESI must be preserved:


Before it is clear that matter will not settle;
At the beginning of the case when factual and legal
issues are not fully known.
15

Preservation of “electronic witnesses.”

Identification and preservation of relevant ESI, at the
onset of the case, is the most difficult and costly
method of preservation and production.
 Use of key players to identify ESI is disruptive.
Inefficient when issues, claims, and defenses may
change.
 Clients may not be willing to spend significant money to
search and find relevant ESI early in the case, when
the probability is unknown.
 Key players and clients may not be very good at
recognizing relevant information or searching electronic
devices.
16



Identify and preserve the electronic devices
that store and/or create the information that will
ultimately be relevant to the case.
Electronic devices are used by key players to
create electronic evidence.
Treat the electronic devices as “electronic
witnesses” in the case.
17

Electronic Devices
Desktop and notebook computers
 File servers
 Mail servers
 Smart phones and PDA’s
 External drives, flash drives, and optical disks



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Network infrastructure
Accessible vs. inaccessible ESI
Document retention policy
18
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
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
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Recognize when the duty to preserve has attached.
Inform the client of the duty; litigation hold.
Familiarize yourself with the clients information
infrastructure.
Identify the key players.
Identify the devices used by the key players.
Preserve the electronic witnesses; cloning.
Negotiate an agreement with opposing counsel
regarding scope, methods, and manner of production,
etc.
Focus on settling your client’s case.
19


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Formatting issues
ESI can be produced in a number of formats:
 Native file
 PDF formats
 JPEG
 Other
 Per agreement
“If a request does not specify the form or forms for producing
electronically stored information, a responding party may produce the
information in a form or forms in which the information is ordinarily
maintained if that form is reasonably useable, or in any form that is
reasonably useable.” Ohio R. Civ. P. 34(B)(3).
Production of e-mails in paper form, after converting to pdf, was
impermissible, and responding party was ordered to produce them again
in native format. “If the responding party ordinarily maintains the
information it is producing in a way that makes it searchable by electronic
means, the information should not be produced in a form that removes or
significantly degrades this feature.” White v. Graceland College, 2008 WL
3271924 (D.Kan.).
20

Document petrification involves the conversion
of native files into an image format that does
not require use of the native applications. This
is useful in the redaction of privileged or
sensitive information, since redaction tools for
images are traditionally more mature, and
easier to apply on uniform image types. Efforts
to redact similarly petrified PDF files have
resulted in the removal of redacted layers and
exposure of redacted information, such as
social security numbers and other private
information.
21
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
Federal
Ohio
Texas
Florida
New York
Arizona
California
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
Federal Rules of Civil Procedure


Amended in 2006 to expressly provide for discovery of ESI
Changes to the following rules:

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

Rule 16
Rule 26(a)
Rule 26(b)2
Rule 26(b)5
Rule 26(f)
Rule 33
Rule 34
Rule 37(e)
Rule 45
23

Civil Rule 16

Seeks to address eDiscovery issues early in the
litigation.

Gives the court discretion to adopt agreement
parties make regarding privilege or protection after
inadvertent production.
24

Civil Rule 26(a)


Substitutes ESI for data compilations
Civil Rule 26(b)(2)

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
Obligations of responding party to provide discovery of ESI
that is not readily accessible.
A party does not have to produce ESI that is not readily
accessible due to undue burden or cost.
A responding party must identify sources of potentially
responsive ESI that was not searched due to costs/burden.
However, Court can still order this ESI to be produced.
25

Civil Rule 26(b)5


Clarifies the procedure to use when a responding
party asserts claim of privilege or work product
protection after production.
The process
 responding party notifies requesting party of the
claim.
 requesting party must return, sequester, or destroy
ESI.
 requesting party may not disclose and must take
reasonable step to retrieve ESI if disclosed.
26

Rule 26(f)

Any issues regarding e-discovery should be
discussed at the parties’ conference




Topics to include
form of producing ESI
preservation issues
approaches to asserting claims of privilege or workproduct protection after inadvertent production in
discovery
27

Civil Rule 33

Allows a party to answer an interrogatory involving
review of business records by providing access to
the information if the interrogating party can find
the answer as readily as the responding party can
28

Civil Rule 34


Makes ESI a category subject to discovery distinct
from documents and things.
Authorizes a requesting party to specify the form of
production and allows the responding party to
object.
29

Civil Rule 37(e)


Safe Harbor
Some protection against sanctions for a party’s failure to
provide ESI



Absent exceptional circumstances, sanctions may not be
imposed if ESI sought is lost as result of routine operation of
electronic info system as long as that operation is in good
faith
If ESI is under duty to preserve (e.g. litigation hold) and it is
deleted then sanctions can be imposed
Civil Rule 45

Conforms the provisions for subpoenas to changes in other
discovery rules
30

Ohio Rules of Civil Procedure


Adopted e-discovery provisions in July 2008
Ohio made most of the same changes as the 2006
FRCP
31

Tracing Table





FRCP 26(a) is ORCP 26(A)
FRCP 26(b)2 is ORCP 26(B)(4)
FRCP 26(b)5 is ORCP 26(B)(6)
FRCP 26(f) isn’t in the ORCP
FRCP 33 is ORCP 33(C)
 This also requires that interrogatories be
served both electronically and in hard copy


FRCP 34 is ORCP 34
FRCP 37(e) is ORCP 37(F)
 Specific factors for the court to consider when deciding
whether to impose sanctions are listed
32

adopted e-discovery provisions in 1999

Rule 192.3
 A party may discover existence, description, nature, custody,
condition, location, and contents of documents and tangible things
 This includes electronic or videotape recordings, data and data
compilations

Rule 193.3(d)
 Allows a party to assert a claim of privilege to material or ESI
inadvertently produced without waiver of the privilege
 10 day notice period running from the party’s first awareness of the
mistake to assert claim
33

Rule 196.4
 Party must specifically request production of electronic or
magnetic data and the form in which it is to be produced
 Responding party must produce the ESI that is responsive
and reasonably available in the ordinary course of business
 If the responding party cannot produce it then the responding
party must state an objection
 The court can order the requesting party to pay the
reasonable expenses of any extraordinary step taken to
retrieve and produce the ESI
34

Has not changed its rules to specifically
address e-discovery
35
 NY has not changed its rules to specifically address e-discovery
 Trend is to require requesting party to pay for e-discovery, see
generally CPLR 3101
36


Adopted e-discovery rules in 2008
Tracing table

Rule 26.1(f)
 Corresponds to FRCP 26(b)5
 Rule 34(b)
 Corresponds to FRCP 34
 Rule 37(g)
 Corresponds to FRCP 37(f)
37
 Adopted e-discovery provisions in 2009 (with urgency)
 Had proposed changes to the rules in 2006
 Did not follow through with the 2006 changes as California was
waiting to see how the FRCP were changed
38

Zubulake I



Zubulake sued her former employer for gender
discrimination and illegal retaliation.
She claimed that key evidence was located in
various e-mails exchanged among employees that
now existed only on backup tapes and perhaps other
archived media.
The parties were unable to agree on who would bear
the $175,000.00 restoration cost (exclusive of
attorney time), and Zubulake moved for an order
compelling UBS to produce the e-mails at its
expense.
39

Who pays for the cost of ESI production?

Three-step analysis
 First, it is necessary to thoroughly understand the
responding party’s computer system, both with respect
to active and stored data.
 The usual rules of discovery apply to data that is kept in
an accessible format, and the responding party should
pay the costs of producing responsive data.
 Cost shifting is considered only when electronic data is
relatively inaccessible, such as in backup tapes.
40
 Second, because the cost-shifting analysis is so fact-intensive,
it is necessary to determine what data may be found on the
inaccessible media.
 Requiring the responding party to restore and produce
responsive documents from a small sample of the requested
backup tapes is a sensible approach in most cases.
41
 Third, in conducting the cost-shifting analysis, the following
factors should be considered, in order of importance:
 The extent to which the request is specifically tailored to discover
relevant information
 The availability of such information from other sources
 The total cost of production, compared to the amount in
controversy
 The total cost of production compared to the resources available
to the parties,
 The relative ability of each party to control costs and its incentive
to do so
 The importance of the issues at stake in the litigation and
 The relative benefits to the parties of obtaining information
42

Summary:



Generally the party from whom the ESI is requested
must pay for its production.
Cost-shifting should be considered when eDiscovery
imposes an undue burden or expense on the
responding party.
An undue burden is one in which the expense of
discovery outweighs its likely benefit when
considering the needs of the case, the amount in
controversy, the parties’ resources, the importance
of the issues at stake, and the importance of the
proposed discovery in resolving the issues.
43

Zubulake III
Decided on July 24, 2003
 The former employer produced a sample as required
in Zubulake I.
 Discoverable information was found on the
representative sample.
 Court applied 7 factor test.
 Zubulake was ordered to pay 25% of the cost of
restoring the remaining backup tapes.
 Cost-shifting does not apply to attorney fees.

44

Zubulake IV
Decided on October 22, 2003
 During restoration, the parties learned that certain
relevant backup tapes were missing.
 Zubulake moved for:

 An order requiring UBS to pay in full the costs of
restoring the remainder of the monthly backup tapes;
 An adverse inference instruction against UBS with
respect to the backup tapes that are missing;
 An order directing UBS to bear the costs of re-deposing
certain individuals.
45



Spoliation is “the destruction or significant
alteration of evidence, or the failure to preserve
property for another’s use as evidence in
pending or reasonably foreseeable litigation.”
Spoliation “can support an inference that the
evidence would have been unfavorable to the
party responsible for its destruction.”
Determination of the appropriate sanction “is
confined to the sound discretion of the trial
court.”
46

Three prong adverse inference test:





The party having control over the evidence had an obligation to
preserve it at the time it was destroyed.
The evidence was destroyed with a “culpable state of mind.”
The destroyed evidence was “relevant” to the party’s claim or
defense such that a reasonable trier of fact could find that it
would support that claim or defense.
Intentional destruction alone is sufficient to
demonstrate relevance.
Negligent, grossly negligent, or even reckless
destruction requires proponent to prove relevance.

Once duty to preserve attaches, any destruction is, at a
minimum, negligent.
47

Zubulake V



Decided on July 20, 2004
The responding party’s counsel failed to
communicate the litigation hold to all key people
therefore the party and the counsel had not taken
necessary steps to guarantee that relevant data was
preserved and produced.
Counsel must oversee compliance with litigation
holds after implementing one.
48

Zubulake’s motion for sanctions granted.
UBS ordered to pay for re-depositions;
 UBS ordered to restore and produce relevant
documents;
 UBS ordered to pay all “reasonable expenses,
including attorney fees….”
 Jury to be given adverse inference instruction.

49

Zubulake Revisited

“After a discovery duty is well established, the failure to adhere to
contemporary standards can be considered gross negligence. Thus,
after the final relevant Zubulake opinion in July, 2004, the following
failures support a finding of gross negligence, when the duty to
preserve has attached: to issue a written litigation hold; to identify all of
the key players and to ensure that their electronic and paper records
are preserved; to cease the deletion of email or to preserve the
records of former employees that are in a party’s possession, custody
or control; and to preserve backup tapes when they are the sole
source of relevant information or when they relate to key players, if the
relevant information maintained by those players is not obtainable from
readily accessible sources.” Pension Committee of the University of
Montreal Pension Plan, et al. v. Banc of America Securities LLC, et al.,
2010 U.S. Dist. LEXIS 4546 (S.D.N.Y. Jan. 15, 2010)
50

Preservation is the key to eDiscovery


Complete and accurate preservation early in the
case sets the foundation from which discovery
disputes and costs are minimized.
The effectiveness of ESI preservation is increased
and the cost of doing so is decreased by changing
the way counsel and their clients approach
discovery.
 Focus on electronic devices as “witnesses” not on the
data that is stored by them.
51

The duty to preserve


“The obligation to preserve evidence arises when the
party has notice that the evidence is relevant or
when a party should have known that the evidence
may be relevant to future litigation.” Zubulake v. USB
Warburg, 220 F.R.D. 212 (S.D.N.Y Oct. 22, 2003).
Duty arises before litigation.
52

Counsel is primarily responsible for preservation

“The obligation to preserve evidence runs first to counsel, who
has a duty to advise and explain the to the client its obligations
to retain documents and data that may be relevant to
litigation…[I]t is not acceptable to rely upon the client.” Telecom
Int’l Am., Ltd. v. AT&T Corp., 189 F.R.D. 76, 81 (S.D.N.Y 1999).

“[I]t is not sufficient to notify all employees of a litigation hold
and expect that the party will then retain and produce all
relevant information. Counsel must take affirmative steps to
monitor compliance so that all sources of discoverable
information is identified and searched. Zubulake v. USB
Warberg, LLC, 229 F.R.D. 422 (S.D.N.Y 2004).
53

Crawl vs. Clone

Preservation strategies can be classified in two
ways:
 Crawl: Relies on key players or other client personnel
to “crawl” through ESI.
 Clone: Uses technology to clone or duplicate the
electronic devices themselves.


While both methods are supported by case law, the
choice depends on the type of case, the cost, the
time available for preservation, and whether counsel
wants to and can defend the client filtering.
Generally, the crawl method tends to be inefficient,
disruptive, less effective, and ultimately more costly.
54

Crawl Method







Interview key players to identify sources of ESI within
the clients information architecture.
Initiate litigation hold.
Monitor compliance.
Reiterate the litigation hold regularly.
Rely on key players to identify and produce relevant
data.
Segregate and preserve other media, such as
backup tapes, etc.
Repeat the process when new issues or key players
are identified!
55

Clone Method
Interview key players to identify the electronic
devices within the clients information architecture
that are likely to contain discoverable ESI.
 Initiate litigation hold.
 Clone and preserve the electronic devices.
 Use search tools to identify responsive ESI.

56

Object, but produce something.


Responding party bears cost
“Unduly burdensome” objection is fact specific




Must be litigated
Client witness required
Court appearances required
Cost of litigating “unduly burdensome” objection may exceed cost of production
 Upon finding that plaintiffs had established the relevance of the material requested
and that defendant’s estimated costs of production were “greatly exaggerated,” the
court granted plaintiff’s motion to compel. Spieker v. Quest Cherokee, LLC, 2009 WL
2168892 (D. Kan. July 21, 2009).




Arrive at discovery stipulations early in the case.
Preserve objections, but produce enough to allow court to conclude you are
acting in good faith.
Client information infrastructure decisions must factor the issues and
costs of eDiscovery.
If effective information infrastructure is in place, eDiscvoery may actually
reduce the costs of discovery.
57

The Property Preservation Case








Borrower defaults on their loan
Lender initiates lawsuit
Borrower defaults and lender obtains judgment
Property is purchased by third-party
Third-party inspects property and informs the lender
that it is vacant and utilities may be turned off
Lender engages in preservation activity
The property is vandalized and/or damaged
The purchaser sues the lender and its attorney for
damages sustained by virtue of negligent
preservation
58

The Loan Modification Defense




Borrower defaults on their loan
Lender initiates lawsuit
Borrower applies for a HAMP modification, but is
denied
Borrower amends their answer to assert an
affirmative defense based on wrongful denial of a
HAMP modification
59
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61