Attorneys Face Nine Critical Challenges In Being Prepared For Legal Discovery

Monday, October 1, 2007 - 01:00

Douglas M. Bean

Océ Business Services' CaseData Division

A clear majority of corporate attorneys highly agree that having a records management program provides essential business benefits such as reduced legal discovery costs and risks. Yet while they recognize the benefits of records management, 92 percent of attorneys admitted that their company's program is vulnerable when it comes to electronically-stored-information (ESI) and preparedness for electronic discovery.

"Dawn Of The Discovery-Ready Enterprise"

These are just a few of the key findings highlighted in a comprehensive survey report underwritten by Oce Business Services' CaseData Division. "Dawn of the Discovery-Ready Enterprise"* takes a close look at nine critical challenges corporate and law firm attorneys are grappling with in order to deal with the growing tide of electronic discovery. Over 100 surveys were completed by legal professionals highly experienced in legal discovery and records management. The respondents consisted of 42 percent corporate counsel and legal department staff and 58 percent law firm attorneys.

The critical challenges examined in the report span a range of issues that include inadequate records management programs, changes to the Federal Rules of Civil Procedure, escalating costs of electronic discovery, effective outsourcing strategies, and more.

Inadequate Records Management

One of the nine critical challenges - inadequate records management - represents a major issue. Among surveyed attorneys at companies that have a fully-implemented records program, only eight percent say their program addresses electronically-stored-information (ESI) very well. Among attorneys at companies that lack a fully-implemented program, 26 percent say that their company has no plans to implement a program and 17 percent don't know whether or not their company has any plans.

Lack of a records program or an inadequate program can cause a company to fail to get a handle on its ESI, which in turn can profoundly affect litigation. Consider a 2005 court decision involving a lawsuit brought by Coleman Holdings against Morgan Stanley. In May 2003, in response to Coleman's discovery request that Morgan Stanley produce emails and other ESI, Morgan Stanley provided responsive data along with a certification that the response was complete. However, over the course of almost two years, Morgan Stanley continually and repeatedly supplemented its original, so-called "complete" response with additional data, claiming it had not been aware of the existence of all data at the time of the initial production.

Unimpressed with the delayed productions, the court (in not so many words) instructed the jury to infer that Morgan Stanley's conduct was akin to playing "hide the ball." Experts agree that the court's instruction was strongly influential in the subsequent $1.5 billion jury verdict against Morgan Stanley. It's important to note however that experts still debate whether Morgan Stanley's conduct was in fact malicious. That's an important point. Is it possible that Morgan Stanley innocently lost control of its data to the point that it couldn't comply with Coleman's discovery request? Assuming that this was the case, the moral of the story would be that judges aren't interested in determining who is "innocently unorganized." They simply want the evidence.

Confusion About The FRCP

Another major challenge revealed in the "Dawn of the Discovery-Ready Enterprise" survey centers on confusion about the Federal Rules of Civil Procedure. Only 10 percent of corporate counsels say they understand changes to the FRCP very well. Thirty-three percent frankly state that they do not understand the changes very well.

The new Rules are designed to assist parties to avoid hazards illustrated by Coleman-Morgan Stanley. The Rules contemplate that, if ESI is properly organized, the discovery process will be much smoother. Specifically, parties will be able to effectively communicate to the opposition (and the court) key details regarding their ESI and the surrounding data architecture and likewise be able to articulate discovery requests to the opposition.

In multiple contexts, the Rules require counsel to discuss the type of ESI available and disclose its location and accessibility. For instance, Rule 26(a) requires parties, at the outset of litigation, to provide opposing counsel with a detailed description of relevant ESI and where it can be found. Rule 16(b) authorizes the court to issue orders with regard to how ESI should be disclosed. Rule 34(a) allows parties to, in effect, initially sample the other party's relevant data. The key lesson to be learned is this: parties must understand and maintain access to their ESI before litigation begins - any time after that is too late.

The "Insource Versus Outsource" Predicament

In addition to inadequate records program and confusion around the FRCP, another challenge highlighted in the survey is the "insource vs. outsource" predicament. Enterprises and law firms understand that business process outsourcing is one of the components of an effective approach to conducting electronic discovery. Sixty percent of the enterprises surveyed plan to establish a mix of internal electronic discovery expertise and external expertise.

The prevalent law firm practice in managing client electronic discovery data is through a combination of corporate applications and outsourced processing services. Corporate counsels recognize the value of outsourcing certain processes and technologies associated with discovery to a neutral third party with specialized expertise.

Enterprises and law firms have five most commonly outsourced discovery activities: computer forensics, processing ESI, document imaging, coding, and database hosting.

The Proactive Challenge

A fourth, critical challenge is focused on being proactively prepared for electronic discovery by instituting a litigation readiness plan. With a plan in place, organizations can become discovery-ready by shifting from a largely reactive response to taking action to achieve superior improvements in discovery preparedness. To accomplish this, enterprises are implementing new methodologies such as a forward-thinking solution we term a Unified eDiscovery Platform. This unified approach recognizes the interconnectivity of records, paper and electronic discovery, and compliance processes.

Both corporate counsel and law firm attorneys agree on four key business benefits of being proactively prepared for electronic discovery. These benefits include: reducing the risks associated with discovery; shortening the time necessary to produce documents; reducing the costs of discovery; and minimizing potential business disruption.

In addition to agreeing on the business benefits of being proactive, both corporate and law firm counsel indicate a good general understanding of what it takes to respond effectively to discovery requests within this proactive framework. In this context, attorneys highly agreed that the following elements are important: having a functioning electronic discovery strategy in place; having a well-planned and complete records management program in place; knowing the IT structure of your company/client; being consistent in implementing discovery practices; and having a legal hold system in place.

Additionally, over 60 percent of corporate counsel surveyed indicated that their organization's goal over the next year includes implementing a unified methodology that recognizes records management, compliance and electronic and paper-based discovery as interdependent processes.

A Proactive Approach And Unified Platform

Clearly, both a proactive approach and Unified eDiscovery Platform concept are on the radar screens of corporate and law firm attorneys. This is being driven by the general consensus that today's electronic discovery and records governance efforts are largely reactive and limited in scope. As a result, there is a wide gap between what an organization requires to manage its business for discovery and what is now being done. Sound preparation in anticipation of these demands and an ongoing mindset of preparedness is crucial. Most enterprises report that they have set aggressive near-term goals to advance them toward proactive, managed discovery. The question is: how can they close the gap between intent and action?

It appears evident that enterprises will be under growing scrutiny and pressure to effectively manage retention and disposition of all forms of corporate records for compliance and discovery. Some companies consequently will act to better manage electronic documents and be ready for electronic discovery. Any enterprise that is not taking timely, effective action to reduce exposure and gain better control of its ESI will fall behind evolving best practices. A unified, proactive approach to discovery and records management no longer appears to be an option, but a critical element of unimpeachable corporate governance.

Some enterprises now understand that electronic discovery, compliance and records management are ultimately benchmarks of effective governance and that further delay, compromise or inattentiveness could damage an organization's reputation. Enterprises will be measured in this competency as they are on business performance. Accountability will reside at the senior executive level.

Conclusion

Proactive management of discovery includes adopting new policies, processes and technology. A documented, systematic and enforced records retention policy across all media, upheld by rules-based storage management and within an integrated platform for ESI, is a solid foundation. Archives in a central repository manage records throughout the full lifecycle. For ongoing records management, search, retrieval, production and to apply litigation holds, corporate counsels will need to coordinate internal external resources, including IT and skilled business process outsourcing partners.

The amended Federal Rules of Civil Procedure increase the urgency to act now. The changes mandate early discussion of electronic discovery issues and compel parties to produce an electronic discovery plan within 99 days of a lawsuit being filed. Since disputes rarely settle that quickly, companies must develop an electronic discovery plan for every matter. This will result in a significant increase in electronic discovery costs and workload. Corporate counsel should ensure that their firm properly manages ESI. It becomes imperative to interact closely with IT in order to understand precisely where and how ESI exists inside the company.

Douglas M. Bean, Esq., is Vice President and General Manager of Oce Business Services' CaseData Division. Oce Business Services Inc. is one of the world's leading providers of document process management services and technology to law firms, corporations and the public sector. CaseData is a division of Oce Business Services and one of the most experienced providers of electronic discovery, paper discovery, forensics, and Web-based review services for complex litigation and regulatory compliance matters. * The full report, "Dawn of the Discovery-Ready Enterprise" can be obtained by visiting www.obs-innovation.com or contacting Christi Scow at 801-951-5443 or christis@casedata.com.

Please email the author at dougb@casedata.com with questions about this article.