EDI 2009 Controlling E-Discovery Costs through Records Management

Controlling E-Discovery Costs through Records Management John Rosenthal Winston LLP Deirdre Brekke Pactiv Corporation Conor R. Crowley Law Offices of Conor R. Crowley Richard R. Roberts Federal Express November 2009 2009 Georgetown University Law Center’s E-Discovery Institute

Our Assignment
Controlling E-Discovery Costs through Records Management. An operational Records and Information Management (RIM) system is the foundation for ediscovery readiness, yet many companies have failed to take steps to link these processes in an effective manner. You will discuss how sound RIM practices and selective preservation of structured and unstructured documents and other data can prevent the accumulation of unnecessary data and ease the effort expended in the collection, processing, review and analysis of ESI. You will also learn how advanced RIM practices can help in early case assessment and the management of privileged ESI; how to successfully integrate an inter-company e-discovery team in RIM practices; how to obtain compliance with records retention schedules, privacy and other data protection requirements; and how to use RIM programs and processes to defend the reasonableness of search, retrieval and production efforts, including establishing the authenticity of ESI.

Amended Federal Civil Rules
December 2006, U.S. Federal Rules were amended, mandating e-discovery in all federal cases
Changes cover five areas:
Early attention to discovery issues
Discovery of electronically stored information that is not reasonably accessible
Clarify how electronically stored information is to be produced in litigation
Procedures for asserting privilege after production
Sanctions

Implications
Rules now in place for almost three years and the world has not ended, but :
44 federal courts have adopted local rules, guidelines or forms to supplement or go beyond the Amended Federal Rules
29 states have followed suit
Major regulatory agencies ( e.g ., DOJ, FTC, SEC) all reviewing the way they approach e-discovery
Amount of e-discovery required in the U.S. has doubled
E-discovery costs for corporations have risen dramatically
E-discovery risks have also increased

E-Discovery Risks & Costs Potential criminal exposure if not done correctly Increased legal and operating expenses Heightened legal risk to the company

E-Discovery = Increased Costs
Collection - $1,000 to $3,000 per custodian
Culling - $150 to $300 per GB
Processing - $250 to $500 per GB
Hosting - $20 to $50 per GB
Review:
Associates $150 to $350
Staff Attorneys $80 to $290
Contract attorneys $25 to $60
Off shore $15 to $20
Average custodian has 5-8 GB (1 GB = 60,000 pages)
Overall cost per GB can run as high as $40,000
Cost of e-discovery in a medium-sized case with 10 custodians can run $1.4M

E-Discovery = Increased Legal Risks
Courts are imposing a wide range of sanctions against corporations, including:
Spoliation instructions
Monetary fines
Default judgments
Referrals for criminal investigation
Case analysis:
Granted sanctions 65% of the time
Defendants being sanctioned four times (81%) as often as plaintiffs (19%)
Sanctioned behavior most often involved the non-production of documents (84%)

How Do We Mitigate the Risks and Expenses Relating to E-Discovery?
Many corporations and firms have simply attacked the issue from the e-discovery side:
Guidelines on e-discovery
Preferred vendor programs
E-discovery tools for search, collection, processing, hosting and review
Utilization of lower costs providers (e.g., LPOs)

Records & Information Management
Implementing e-discovery best practices, however, is treating the symptoms and not the actual problem
Reality is that the risk from and cost of e-discovery is directly related to:
How much electronically stored information we maintain
If and how we manage that information through its life cycle

Electronically Stored Information?
93% of new information is stored in digital form
7% Paper or other formats
http://www2.sims.berkeley.edu/research/projects

The Problem Will Only Get Worse ESI’s Growth Rate – 30% a Year

DuPont Case Study
Study:
9 key cases:
Total # pages reviewed: 75,450,000
Total # pages responsive: 11,040,000
Findings:
% pages past retention period: 50%
Unnecessary review fees: $11,961,000

Return on Investment

Records Management
Systematic process of keeping what we need to keep and getting rid of what we don’t need to keep

E-Discovery
Electronic discovery is the process of identifying, collecting, reviewing and producing electronic records
Source: Socha Consulting and Gelbmann & Associates. Copyright 2005-2006. All rights reserved. Used with permission. Volume Electronic Discovery Reference Model www.edrm.net Identification Records Management Relevance Production Presentation Analysis Analysis Review Processing Analysis Preservation Collection

Implications of An Ad Hoc or Absence of a Cohesive RIM program
Inability to easily access corporate information
Reduced employee productivity
Potential failure to adhere to regulatory retention requirements
Higher monetary costs:
Maintaining inventory of unnecessary records
Searching for and producing records in response to litigation

Implications of An Ad Hoc or Absence of a Cohesive RIM program
“ Office workers can waste up to two hours a day looking for misplaced paperwork--at total of 500 hours (62.5 days) per year ” (TN)
“ Computer users spend 7.5 percent of their time on a PC looking for misplaced files ” ( Information Week ).
“ Companies typically misfile 2% to 7% of their records ” (ARMA International)
“ 90% of records are never referred to again” (Secured Record Management)
“ Companies misfile between 3% to 5% of their records, with a cost of $180 per document to recreate it and annual losses of a million records per year at a cost of $5 million per year” ( Information Week )

Risks and Goals of E-Discovery and RIM Are Directly Related
Decrease volume of ESI:
Decrease storage costs
Decreased culling, processing and production costs
Decrease risk:
Retention policies and tools streamline compliance
Fewer unmanaged data sources and less information subject to discovery
Simplify retrieval:
Improves productivity
Ensures that business critical data is accessible and protected
Facilitates legal hold & collection

RIM Basics
Even in the U.S., corporations are not legally required to maintain extensive amounts of information unless provided for by:
Statutes;
Regulations; or
Critical business needs
May maintain their “official records” in any format deemed appropriate
Corporations will generally not be held liable for records discarded pursuant to a reasonable records retention program

U.S. Supreme Court on RIM
“ Document retention policies, which are created in part to keep certain information from getting into the hands of others, including the Government, are common in business * * * It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances.” Arthur Andersen LLP v. U.S., 125 S. Ct. 2129 (May 31, 2005)

Yet, Implementation Has Been So Difficult
Between 30% - 75% of CRM implementations fail to produce the expected ROI (LGH Consulting, L.P. )
70% of CRM implementations fail (Butler Group reports)
55% of all CRM projects failed to meet customers' expectations (Gartner)

Yet, Implementation Has Been So Difficult
Management has not made this a priority
Key stakeholders unwilling to take on the responsibility
Requires that different constituencies with different responsibilities and goals work together
Launched without defined metrics
Difficult to fund:
Not a sexy issue
Legal – not my problem
CIO – Happy to do if someone else says so
Compliance – not viewed as key compliance issue
Current economic environment has compounded funding issue

Why Companies Have Failed to Take the Necessary Steps
Costs of implementing effective RIM are immediate but the savings are not immediately realized
Company has not been subject to sanctions for spoliation
Costs of searching and reviewing unnecessarily retained ESI have not been tracked
Outside counsel have not encouraged the implementation of RIM best practices or do not understand how RIM and E-Discovery intersect

Retention In Practice Retaining little or no data Retaining most or all data Retain Only Important Data

Components of Modern Records Program
Senior Management Buy-In
Records Retention Team
Development of IT Map
Records Retention Policy & Schedule
General records policy
E-mail management policy
Legal Hold Policy
Records Management Tools
Education & Compliance Program
Legacy Retirement program

Senior Management Buy-In
How to get Management Buy-in?
Senior management must be supportive of enhancing your RIM practices in order for them to be successful
But it largely depends on your company’s culture
Do you have a cost reduction/efficiency focus (manufacturing model)?
Is your company one with more of a compliance culture (highly regulated, active in significant amounts of litigation, concerned about audits)?
Or, a little of both?

RIM Team
Who should be on the Team?
Legal Department Information Technology Business Conduct Compliance Traditional Records Management RIM

RIM Teams Role In E-Discovery
Building of data maps
Issuance and compliance with legal hold orders
Education, training and coordination re legal holds
30(b)(6) witness

Developing a Data Map
What kind of data does the company have?
Developing a data map or discovery roadmap is part of a RIM program
May be able to develop data storage/deletion practices that will be helpful in e-discovery context
Enables more accurate hold practices
Where does the data reside and for how long?
Comprehensive retention schedules--key to successful RIM and defensible response to e-discovery demands
How do we access data?
IT will be able to identify applications and data storage across all corporate functions
IT is key participant in RIM and E-Discovery teams

Focus On Areas Likely to Be the Target of E-Discovery Hard Drive C Loose Media Individual and Group Directories Outlook/Exchange Servers Other File Stores (e.g., SharePoint

Establishes the basic policies and practices regarding the management and retention of a company’s records:
Policy applies to all personnel
Requires all “records” must be managed in accordance with the Records Retention Schedule
Documents shall be retained according to the “Retention Period” specified therein
All records not subject to a Legal Hold Order must be retired at the end of their retention period
All documents subject to a Legal Hold shall be retained regardless of the Records Management Schedule
All personnel must perform a minimum of an annual review of their records for retirement purposes
Records Retention Policy

Record Management Schedule
A practical and tested Records Retention Schedule is the key to any Program
Schedule identifies corporate records by broad categories and indicates the number of years that records within those categories should be retained because of:
Statutory or Regulatory requirements requiring that records be held for a certain period
Business critical need (this factor is already built into the schedule)

E-Mail Management
Over 75% of all documents created in the enterprise circulate in e-mail (Gartner)
Majority of the documents produced by a company in litigation are e-mail or their attachments
Most e-mails have no useful business purpose after 90 days
Most e-mails are not “official records” of a company required to be maintained under a retention schedule

Why Records Management Tools
Key to successful records management is the classification of records (i.e., ability to identify records with applicable "records code" to a record)
Classification is the first step in records management
Tools can mandate and facilitate classification at the time of creation or identification
In absence of tools, it is difficult to mandate classification at time of the record's creation or identification, which makes records management compliance – not impossible – but difficult for your workforce

Classification Facts
Employees do a poor job in accurately classifying records
Employees find manual classification to be highly burdensome and 50% or more will not participate
Manual classification can impose substantial costs on the organizations

Classification Process Low High High Low Cost Savings Productivity Accuracy Manual Classification Authoring Templates Rules Based Classification Context Based Classification Multiple Methods Simple Rules Complex Policies Consistent Participation & Enforcement

Potential Types of EMC Tools
E-mail Archivers
Traditional Records Management Tools
Hybrid Type Tools (e.g., expanded archive)
Enterprise Content Approaches
Search and Retrieval/Indexing
Collaboration Work Spaces

Significant Product Attributes
Supports event and time based retention rules
Structured file plan organizes records and manages, enforces complex policies/rules
Enables legal holds, facilitates audit and electronic evidence discovery
All processes are audited and managed
Ensures record authenticity, integrity and contextual relationships
Ensures record access, retrieval and usefulness
Prevents unauthorized deletion
Ensures timely disposition and complete record expungement
Ensures privacy and record security policy management

1 st Generation E-mail Archiver Back-up Tapes Mailbox E-mail Archive

Capture Archive Organize and Classify Index Archive 2 nd Generation E-mail Archiver Operations Compliance Discovery Messaging Servers
Single central archive
Tools, reports and other diagnostics
Search and Discover Administer and Audit
User search from plug-in or Web
Administrator search for Discovery
Messages and attachments
Embedded messages
Secure
Compression
Container files
Tiered storage
In real time
User selection
De-duplication
Unique ID
Exclusion-collection rules
Retention and disposal
Content Mgmt

Implementation & Education
Implementation of any program is most difficult part
Phased implementation with pilot groups
Program will depend on educating and communicating the program to all employees
In person training sessions
Development of new section on company intranet for record retention program:
Power point
Retention schedule
Various communication
New employee orientation
Brown bag lunches
Periodic focused communications
Education & Compliance

Compliance
Program is not defensible in the long term unless it is associated with a compliance program
Compliance program cannot be implemented until program is developed and implemented
Employees, however, must understand that there are consequences for non-compliance
Compliance program should include:
Annual certifications of compliance
Compliance audits
Education & Compliance

Legacy Retirement
Most corporations are in possession of a tremendous backlog of ESI:
E-mail and MS Office stores
Legacy database information
Disaster recovery tapes
Existence of backlog of ESI raises risk:
Cost of conducting e-discovery
Potential smoking gun documents in the ESI
It is possible to design a legally defensible process to:
Identify and preserve ESI that remains “business critical” or subject to pending legal holds
Retire remainder of ESI

A legacy retirement program must be predicated upon setting up a reasonable and defensible process in order that records are retired taking into account:
legal hold requirements
tax hold requirements
existing records retention program
Important that the process be documented in a manner that it can be reasonably defended
Targets:
Tapes
Inactive paper records
Legacy databases
Legacy Retirement Process Legacy Retirement

Compile compressive listing of legal holds with categories for records subject to holds
Into Excel spreadsheet (key issue is whether the LHOs adequately describe categories of records to be held)
Compile listing of available index information of legacy inventory, including dates and related systems
Eliminate legacy information based upon:
Date ranges
Systems
Data exists on active systems

As to remaining legacy information:
Statistically evaluate information likely to have majority of the data
Target that information containing majority of data
For information likely to have little or no relevant information, statistically sample tapes to establish lack of relevance
For information likely to have some level of relevance, options include:
Retain until conclusion of relevant litigation
Conduct further sampling and review to mine out potentially relevant information

EDI 2009 Controlling E-Discovery Costs through Records Management

by Georgetown University Law Center Office of Continuing Legal Education

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EDI 2009 Controlling E-Discovery Costs through Records Management Presentation Transcript